Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060620e.jpg" width="353">
The International Council of Shopping Centers (ICSC)-UBS reported that chain store sales were stable last week following a 1.2% surge during the prior week.
Sales so far 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 recovered another 1.0% (-2.2% y/y), up for the third week after several consecutive weeks of decline.
Retail gasoline prices fell four cents last week to an average $2.87 per gallon and reversed most of the increase during the prior two weeks. In spot market trading gasoline prices fell a nickel yesterday to $1.93 per gallon and were down a bit more than that from last week&#39;s average $1.99.
The just-released 2006 International Energy Outlook from the U.S. Energy Information Administration is available <a href="http://www.eia.doe.gov/oiaf/ieo/index.html"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">06/17/06</th>
<th scope="col">06/10/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>473.6</td>
<td>473.6</td>
<td>3.9%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>


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The International Council of Shopping Centers (ICSC)-UBS reported that chain store sales were stable last week following a 1.2% surge during the prior week. Sales so far in June are 0.2% below the May average which fell 0.4% from [...]

Chain Store Sales Stable As Gas Prices Fell

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060620d.jpg" width="353">
The National Association of Home Builders&#39; (NAHB) reported that the June Composite Housing Market Index at 45 fell another 8.7% from May to the lowest level since April 1995. The figure matched Consensus expectations.
During the last twenty years there has been a 75% correlation between the y/y change in the Composite Index and the change in single family housing starts.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060620c.jpg" width="353">
The sub indexes covering current sales of single family homes (-39.0% y/y) and sales in the next six months (-37.5% y/y) were both down sharply m/m.
An index of the traffic of prospective home buyers dried up and fell 12.1% m/m (-47.3% y/y).
Housing markets around the country again were weak in June with the index for the Northeast off 14.9% (-43.7% y/y), in the Midwest off 13.8% (-51.9% y/y), out West down 1.6% (-31.5% y/y) and in the South off 3.9% (-36.4% y/y).
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions as good than poor.
Visit the <a href="http://www.nahb.org">National Association of Home Builders</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a> </th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Housing Market Index</td>
<td>45</td>
<td>51</td>
<td>70</td>
<td>67</td>
<td>68</td>
<td>64</td>
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</tbody>
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The National Association of Home Builders' (NAHB) reported that the June Composite Housing Market Index at 45 fell another 8.7% from May to the lowest level since April 1995. The figure matched Consensus expectations. During the last [...]

NAHB Housing Market Index Down Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060620a.jpg" width="353">
Housing starts rebounded 5.0% last month to 1.957M units and recovered about all of the April decline that was revised slightly shallower. The rise by far exceeded Consensus expectations for stability at 1.869M starts.
Total housing starts nevertheless remained 13.6% below the peak this past January.
Most of the surprise last month was due to a 19.7% m/m jump in multi family starts which reversed a sharp April decline. For the first five months of this year multi family starts averaged 362M units, equal to the first five months of 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060620b.jpg" width="353">
Single-family starts recovered just a piece of the prior months&#39; weakness and rose 2.1% to 1.586M units after three months of decline. During the first five months of this year single family starts were 1.5% below the first five months of 2005 and in May were 12.6% below the January peak.
By region, single family housing starts were weakest in the Midwest and posted a 15.6% (-25.4% y/y) decline. In the Northeast starts also slipped by 0.7% (-1.5% y/y) but in the South single family starts rose 8.2% (1.3% y/y). Out West starts rose 4.6% (-12.1% y/y).
Building permits fell for the fourth consecutive month. The 2.1% decline lowered permits 13.8% below the peak last September and reflected a 2.1% (-12.2% y/y) drop in permits to build single family homes. Single family permits in May were down 17.5% from the peak last September.
A Supervisor&#39;s Perspective on Mortgage Markets and Mortgage Lending Practices from Federal Reserve Governor Susan Schmidt Bies is available <a href="http://www.federalreserve.gov/boarddocs/speeches/2006/20060614/default.htm"> here</a>.

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<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, 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</td>
<td>1,957</td>
<td>1,863</td>
<td>-3.8%</td>
<td>2,073</td>
<td>1,950</td>
<td>1,854</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,586</td>
<td>1,553</td>
<td>-7.6%</td>
<td>1,719</td>
<td>1,604</td>
<td>1,505</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>371</td>
<td>310</td>
<td>17.0%</td>
<td>354</td>
<td>345</td>
<td>349</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>1,932</td>
<td>1,973</td>
<td>-8.5%</td>
<td>2,144</td>
<td>2,057</td>
<td>1,8 88</td>
</tr>
</tbody>
</table>
</body>
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Housing starts rebounded 5.0% last month to 1.957M units and recovered about all of the April decline that was revised slightly shallower. The rise by far exceeded Consensus expectations for stability at 1.869M starts. Total housing [...]

Housing Starts Rebound

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060620a.jpg" width="353">
Housing starts rebounded 5.0% last month to 1.957M units and recovered about all of the April decline that was revised slightly shallower. The rise by far exceeded Consensus expectations for stability at 1.869M starts.
Total housing starts nevertheless remained 13.6% below the peak this past January.
Most of the surprise last month was due to a 19.7% m/m jump in multi family starts which reversed a sharp April decline. For the first five months of this year multi family starts averaged 362M units, equal to the first five months of 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060620b.jpg" width="353">
Single-family starts recovered just a piece of the prior months&#39; weakness and rose 2.1% to 1.586M units after three months of decline. During the first five months of this year single family starts were 1.5% below the first five months of 2005 and in May were 12.6% below the January peak.
By region, single family housing starts were weakest in the Midwest and posted a 15.6% (-25.4% y/y) decline. In the Northeast starts also slipped by 0.7% (-1.5% y/y) but in the South single family starts rose 8.2% (1.3% y/y). Out West starts rose 4.6% (-12.1% y/y).
Building permits fell for the fourth consecutive month. The 2.1% decline lowered permits 13.8% below the peak last September and reflected a 2.1% (-12.2% y/y) drop in permits to build single family homes. Single family permits in May were down 17.5% from the peak last September.
A Supervisor&#39;s Perspective on Mortgage Markets and Mortgage Lending Practices from Federal Reserve Governor Susan Schmidt Bies is available <a href="http://www.federalreserve.gov/boarddocs/speeches/2006/20060614/default.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a> </th>
<th scope="col">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</td>
<td>1,957</td>
<td>1,863</td>
<td>-3.8%</td>
<td>2,073</td>
<td>1,950</td>
<td>1,854</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,586</td>
<td>1,553</td>
<td>-7.6%</td>
<td>1,719</td>
<td>1,604</td>
<td>1,505</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>371</td>
<td>310</td>
<td>17.0%</td>
<td>354</td>
<td>345</td>
<td>349</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>1,932</td>
<td>1,973</td>
<td>-8.5%</td>
<td>2,144</td>
<td>2,057</td>
<td>1,8 88</td>
</tr>
</tbody>
</table>
NAHB Housing Market Index Down Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 20, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060620d.jpg" width="353">
The National Association of Home Builders&#39; (NAHB) reported that the June Composite Housing Market Index at 45 fell another 8.7% from May to the lowest level since April 1995. The figure matched Consensus expectations.
During the last twenty years there has been a 75% correlation between the y/y change in the Composite Index and the change in single family housing starts.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060620c.jpg" width="353">
The sub indexes covering current sales of single family homes (-39.0% y/y) and sales in the next six months (-37.5% y/y) were both down sharply m/m.
An index of the traffic of prospective home buyers dried up and fell 12.1% m/m (-47.3% y/y).
Housing markets around the country again were weak in June with the index for the Northeast off 14.9% (-43.7% y/y), in the Midwest off 13.8% (-51.9% y/y), out West down 1.6% (-31.5% y/y) and in the South off 3.9% (-36.4% y/y).
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions as good than poor.
Visit the <a href="http://www.nahb.org">National Association of Home Builders</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a> </th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Housing Market Index</td>
<td>45</td>
<td>51</td>
<td>70</td>
<td>67</td>
<td>68</td>
<td>64</td>
</tr>
</tbody>
</table>
Chain Store Sales Stable As Gas Prices Fell 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 20, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060620e.jpg" width="353">
The International Council of Shopping Centers (ICSC)-UBS reported that chain store sales were stable last week following a 1.2% surge during the prior week.
Sales so far 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 recovered another 1.0% (-2.2% y/y), up for the third week after several consecutive weeks of decline.
Retail gasoline prices fell four cents last week to an average $2.87 per gallon and reversed most of the increase during the prior two weeks. In spot market trading gasoline prices fell a nickel yesterday to $1.93 per gallon and were down a bit more than that from last week&#39;s average $1.99.
The just-released 2006 International Energy Outlook from the U.S. Energy Information Administration is available <a href="http://www.eia.doe.gov/oiaf/ieo/index.html"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">06/17/06</th>
<th scope="col">06/10/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>473.6</td>
<td>473.6</td>
<td>3.9%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>
 Employment Situation in Italy Improves: Foreign New Orders up Sharply  
by <a href="/comment/Curley.html">Louise Curley</a> June 20, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060620f.jpg" width="353">
Italy&#39;s labor force survey for the first quarter shows commendable improvement in the employment situation throughout the country. Total employment rose almost 1% to 22.8 million in the first quarter from the last quarter of 2005 and was 1.2% above the first quarter or 2005. Employment in the North, where more than half the work force is employed, increased 1.2% over a year ago, while employment in the Central Region, where about 20% of the work force is employed, increased 1.9% over a year ago. Even in the depressed South, where almost 30% of the work force is employed, employment increased 0.6% above a year ago. Employment in the North and Central Regions has grown virtually steadily over the past five years while employment in the south has, more or less, stagnated. The first chart contrasts the trends in employment in the North and the South.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060620g.jpg" width="353">
The unemployment rate for the country as a whole was 7.4%, the lowest rate during the period for which data are available (Fourth quarter of 1992 to date). In the North the unemployment rate was 4.1%, in the central region, 6.1% and in the depressed south region, 13.6%. This last figure is also the lowest rate during the period for which data are available and is down from a peak of 19.7% in the second quarter of 1988.
Industrial orders for April rose 6.8% in the month and were 15.5% above a year ago. The big rise took place in export orders which rose 15.6% in the month and were 29.0% above a year ago. The increases in domestic orders were more subdued, 2.2% and 8.7%, respectively. The second chart shows the indexes (2000=100) for domestic and export orders.
Industrial sales declined in April from March, but were 5.7% above April, 2005. Domestic sales were 4.6% and foreign sales, 8.2% above their respective April, 2005 values. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Italy</th>
<th scope="col">Apr&nbsp; 06</th>
<th scope="col">Mar 05</th>
<th scope="col">Apr 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">Industrial Orders (2000=100)&nbsp;</td>
<td>115.0</td>
<td>107.7</td>
<td>99.6</td>
<td>6.78</td>
<td>15.46</td>
<td>102.0</td>
<td>98.9</td>
<td>95.4</td>
</tr>
<tr>
<td class="firstcol">Domestic</td>
<td>105.</td>
<td>102.7</td>
<td>96.6</td>
<td>2.24</td>
<td>8.70</td>
<td>98.9</td>
<td>96.8</td>
<td>93.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign</td>
<td>137.5</td>
<td>119.0</td>
<td>106.6</td>
<td>15.55</td>
<td>25.99</td>
<td>111.6</td>
<td>103.6</td>
<td>98.7</td>
</tr>
<tr>
<td class="firstcol">Industrial Sales (2000=100)&nbsp;</td>
<td>112.8</td>
<td>115.0</td>
<td>106.7</td>
<td>-1.91</td>
<td>5.72</td>
<td>107.6</td>
<td>104.1</td>
<td>101.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic</td>
<td>110.9</td>
<td>112.8</td>
<td>106.0</td>
<td>-1.68</td>
<td>4.62</td>
<td>106.4</td>
<td>104.1</td>
<td>101.9</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>117.7</td>
<td>120.8</td>
<td>108.8</td>
<td>-2.57</td>
<td>8.18</td>
<td>110.8</td>
<td>104.1</td>
<td>101.4&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td>Q1 06</td>
<td>Q4 05</td>
<td>Q1 05</td>
<td>Q/Q</td>
<td>Y/Y</td>
<td>20 05</td>
<td>2004</td>
<td>2003</td>
</tr>
<tr>
<td class="firstcol">Employment (thousands)</td>
<td>22,814</td>
<td>22,598</td>
<td>22,549</td>
<td>0.96</td>
<td>1.18</td>
<td>22,571</td>
<td>22,404</td>
<td>22,240</td>
</tr>
<tr class="odd">
<td class="firstcol">North</td>
<td>11,687</td>
<td>11,601</td>
<td>11,546</td>
<td>0.74</td>
<td>1.22</td>
<td>11,591</td>
<td>11,433</td>
<td>11,364</td>
</tr>
<tr>
<td class="firstcol">Central</td>
<td>4,655</td>
<td>45-,594</td>
<td>4,567</td>
<td>1.32</td>
<td>1.93</td>
<td>4,577</td>
<td>4,539</td>
<td>4,424</td>
</tr>
<tr class="odd">
<td class="firstcol">South</td>
<td>6,472</td>
<td>6,403</td>
<td>6,436</td>
<td>1.08</td>
<td>0.56</td>
<td>6,414</td>
<td>6,431</td>
<td>6,452</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate</td>
<td>7.4</td>
<td>7.7</td>
<td>7.8</td>
<td>-0.3</td>
<td>-0.4</td>
<td>7.7</td>
<td>8.8</td>
<td>8.4</td>
</tr>
<tr class="odd">
<td class="firstcol">North</td>
<td>4.1</td>
<td>4.3</td>
<td>4.3</td>
<td>-0.2</td>
<td>-0.2</td>
<td>4.2</td>
<td>4.3</td>
<td>4.1</td>
</tr>
<tr>
<td class="firstcol">Central</td>
<td>6.1</td>
<td>6.6</td>
<td>6.3</td>
<td>-0.5</td>
<td>-0.2</td>
<td>6.4</td>
<td>6.5</td>
<td>6.9</td>
</tr>
<tr class="odd">
<td class="firstcol">South</td>
<td>13.6</td>
<td>14.0</td>
<td>14.5</td>
<td>-0.4</td>
<td>-0.9</td>
<td>14.3</td>
<td>14.9</td>
<td>16.1</td>
</tr>
</tbody>
</table>


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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060619c.jpg" width="353">
The Euro Zone reported a deficit for April of 870 million euros in its trade in goods with the rest of the world. This was more than double the March figure of 350 million euros, and was in sharp contrast to the surplus of 3,167 million euros of April, 2005.
The deterioration in the Euro Zone&#39;s trade balance over the past year is largely the result of the increasing cost of fuel imports. The import category--mineral fuels and lubricants--is compared with the import category of manufactured products in the first chart. The data are plotted on a log scale so that the rates of change in the two series can be compared. It is apparent that imports of petroleum products have been rising at a much faster rate than those of manufactured products.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060619d.jpg" width="353">
The impact of rising oil prices is also reflected in the Euro Zone&#39;s trade balances with Russia and with OPEC, as can be seen in the second chart. The deterioration in trade with Russia from April of last year to April of this year was 1,408.2 million euros and that in trade with OPEC was 1,379.5 million euros. Together these two deficits accounted for about two thirds of the total deficit of 4,036.6 million euros.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060619e.jpg" width="353">
The final chart compares the prices of mineral fuels, lubricants and related products with the prices of all imports. Once again the data have been presented on a log scale to facilitate the comparison of rates of change. Over the past year, the prices of mineral fuels, lubricants and related product have risen 35.8% or more than three times as fast as the prices of all imports.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/EUROSTAT/EUROSTAT.htm">Euro Zone Trade in Goods</a> &nbsp;(SA &amp; WDA--Million Euros)</th>
<th scope="col">April&nbsp; 06</th>
<th scope="col">April 05</th>
<th scope="col">Y/Y Difference</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Exports&nbsp;</td>
<td>113,735.5</td>
<td>99,919.8</td>
<td>17,872.4</td>
</tr>
<tr>
<td class="firstcol">Imports</td>
<td>114,625.4</td>
<td>96,753.0</td>
<td>13,835.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Balance</td>
<td>-869.9</td>
<td>3,166.8</td>
<td>-4,036.6</td>
</tr>
<tr>
<td class="firstcol">Balance of Mineral Fuels and Lubricants</td>
<td>-20,037.5</td>
<td>-15,215.7</td>
<td>-4,821.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Balance on Manufactured Products</td>
<td>20,843.1</td>
<td>19,328.9</td>
<td>1,514.2</td>
</tr>
<tr>
<td class="firstcol">Balance with Russia</td>
<td>-3,747.6</td>
<td>-2,339.4</td>
<td>-1,408.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Import Price of Mineral Fuels, Lubricants &nbsp;and related Products (2000=100)</td>
<td>125.10</td>
<td>101.2</td>
<td>11.6*</td>
</tr>
<tr>
<td class="firstcol">Import Price of Total Imports</td>
<td>169.90</td>
<td>125.10</td>
<td>35.8*</td>
</tr>
</tbody>
</table>
</body>
</html>

The Euro Zone reported a deficit for April of 870 million euros in its trade in goods with the rest of the world. This was more than double the March figure of 350 million euros, and was in sharp contrast to the surplus of 3,167 [...]

Euro Zone Trade Deficit Increases in April: Rising Cost of Petroleum Imports the Culprit

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060619b.jpg" width="353">
The June Empire State Mfg. Index of General Business Conditions, reported by the Federal Reserve Bank of New York, surged 16.07 points to 29.01 and recovered all of the declines during the prior two months. Consensus expectations had been for a slight m/m decline to 11.0.
Since the series&#39; inception in 2001 there has been a 75% correlation between the index level and the three month change in U.S. factory sector industrial production.
New orders &amp; shipments both surged to near the series&#39; recent highs while the index indicating the number of employees slipped to its lowest level of the year.
Pricing pressure rose to a level near the year&#39;s high. Since 2001 there has been an 88% correlation between the index of prices paid and the three month change in the core intermediate materials PPI.
Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question; it is not a weighted combination of the components.
The Empire State index of expectations for business conditions in six months for June recovered just a piece of the prior month&#39;s sharp decline as expected new orders fell and pricing pressure surged to the highest level of this year.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060619a.jpg" width="353">
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/research/regional_economy/empiresurvey_overview.html">here</a>.
The rise in the Empire State Manufacturing index ran somewhat counter to the decline in Philadelphia Fed&#39;s index reported Friday. The Federal Reserve Bank of Richmond will report its June Mfg. Survey index later this week. The reading will follow a sharp fall-off in the May figure, notably for orders, shipments and jobs The data will be available in the Haver SURVEYS database.
During the last ten years there has been a 39% correlation between the Richmond survey index level and the one month change in U.S. factory sector industrial production. The latest Richmond Fed Mfg. Survey is available <a href="http://www.richmondfed.org/research/regional_conditions/manufacturing_conditions/index.cfm">here</a>.
The Richmond Fed also publishes indexes of conditions in the Service Sector and the latest release is available <a href="http://www.richmondfed.org/research/regional_conditions/service_sector/index.cfm">here</a>.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a> </th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June &#39;05 </th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions (diffusion index)</td>
<td>29.01</td>
<td>12.94</td>
<td>10.18</td>
<td>15.56</td>
<td>28.79</td>
<td>15.98</td>
</tr>
</tbody>
</table>
</body>
</html>

The June Empire State Mfg. Index of General Business Conditions, reported by the Federal Reserve Bank of New York, surged 16.07 points to 29.01 and recovered all of the declines during the prior two months. Consensus expectations had [...]

Empire State Index Recovered in June

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060619b.jpg" width="353">
The June Empire State Mfg. Index of General Business Conditions, reported by the Federal Reserve Bank of New York, surged 16.07 points to 29.01 and recovered all of the declines during the prior two months. Consensus expectations had been for a slight m/m decline to 11.0.
Since the series&#39; inception in 2001 there has been a 75% correlation between the index level and the three month change in U.S. factory sector industrial production.
New orders &amp; shipments both surged to near the series&#39; recent highs while the index indicating the number of employees slipped to its lowest level of the year.
Pricing pressure rose to a level near the year&#39;s high. Since 2001 there has been an 88% correlation between the index of prices paid and the three month change in the core intermediate materials PPI.
Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question; it is not a weighted combination of the components.
The Empire State index of expectations for business conditions in six months for June recovered just a piece of the prior month&#39;s sharp decline as expected new orders fell and pricing pressure surged to the highest level of this year.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060619a.jpg" width="353">
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/research/regional_economy/empiresurvey_overview.html">here</a>.
The rise in the Empire State Manufacturing index ran somewhat counter to the decline in Philadelphia Fed&#39;s index reported Friday. The Federal Reserve Bank of Richmond will report its June Mfg. Survey index later this week. The reading will follow a sharp fall-off in the May figure, notably for orders, shipments and jobs The data will be available in the Haver SURVEYS database.
During the last ten years there has been a 39% correlation between the Richmond survey index level and the one month change in U.S. factory sector industrial production. The latest Richmond Fed Mfg. Survey is available <a href="http://www.richmondfed.org/research/regional_conditions/manufacturing_conditions/index.cfm">here</a>.
The Richmond Fed also publishes indexes of conditions in the Service Sector and the latest release is available <a href="http://www.richmondfed.org/research/regional_conditions/service_sector/index.cfm">here</a>.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a> </th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June &#39;05 </th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions (diffusion index)</td>
<td>29.01</td>
<td>12.94</td>
<td>10.18</td>
<td>15.56</td>
<td>28.79</td>
<td>15.98</td>
</tr>
</tbody>
</table>
 Euro Zone Trade Deficit Increases in April: Rising Cost of Petroleum Imports the Culprit 
by <a href="/comment/Curley.html">Louise Curley</a> June 19, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060619c.jpg" width="353">
The Euro Zone reported a deficit for April of 870 million euros in its trade in goods with the rest of the world. This was more than double the March figure of 350 million euros, and was in sharp contrast to the surplus of 3,167 million euros of April, 2005.
The deterioration in the Euro Zone&#39;s trade balance over the past year is largely the result of the increasing cost of fuel imports. The import category--mineral fuels and lubricants--is compared with the import category of manufactured products in the first chart. The data are plotted on a log scale so that the rates of change in the two series can be compared. It is apparent that imports of petroleum products have been rising at a much faster rate than those of manufactured products.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060619d.jpg" width="353">
The impact of rising oil prices is also reflected in the Euro Zone&#39;s trade balances with Russia and with OPEC, as can be seen in the second chart. The deterioration in trade with Russia from April of last year to April of this year was 1,408.2 million euros and that in trade with OPEC was 1,379.5 million euros. Together these two deficits accounted for about two thirds of the total deficit of 4,036.6 million euros.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060619e.jpg" width="353">
The final chart compares the prices of mineral fuels, lubricants and related products with the prices of all imports. Once again the data have been presented on a log scale to facilitate the comparison of rates of change. Over the past year, the prices of mineral fuels, lubricants and related product have risen 35.8% or more than three times as fast as the prices of all imports.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/EUROSTAT/EUROSTAT.htm">Euro Zone Trade in Goods</a> &nbsp;(SA &amp; WDA--Million Euros)</th>
<th scope="col">April&nbsp; 06</th>
<th scope="col">April 05</th>
<th scope="col">Y/Y Difference</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Exports&nbsp;</td>
<td>113,735.5</td>
<td>99,919.8</td>
<td>17,872.4</td>
</tr>
<tr>
<td class="firstcol">Imports</td>
<td>114,625.4</td>
<td>96,753.0</td>
<td>13,835.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Balance</td>
<td>-869.9</td>
<td>3,166.8</td>
<td>-4,036.6</td>
</tr>
<tr>
<td class="firstcol">Balance of Mineral Fuels and Lubricants</td>
<td>-20,037.5</td>
<td>-15,215.7</td>
<td>-4,821.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Balance on Manufactured Products</td>
<td>20,843.1</td>
<td>19,328.9</td>
<td>1,514.2</td>
</tr>
<tr>
<td class="firstcol">Balance with Russia</td>
<td>-3,747.6</td>
<td>-2,339.4</td>
<td>-1,408.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Import Price of Mineral Fuels, Lubricants &nbsp;and related Products (2000=100)</td>
<td>125.10</td>
<td>101.2</td>
<td>11.6*</td>
</tr>
<tr>
<td class="firstcol">Import Price of Total Imports</td>
<td>169.90</td>
<td>125.10</td>
<td>35.8*</td>
</tr>
</tbody>
</table>
</body>
</html>

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060616e.jpg" width="353">
The Index of General Business Conditions in the manufacturing sector during June from the Philadelphia Fed dipped to 13.1 from an unrevised 14.4 during May. The decline was less than the Consensus expectation for a drop to 11.5.
During the last ten years there has been a 65% correlation between the level of the Philadelphia Fed Business Conditions Index and three month growth in factory sector industrial production. There has been a 49% correlation with q/q growth in real GDP.
The index reflected declines in the sub indexes of delivery time and inventories. New orders and shipments recovered all or most of the sharp declines in May while employment recovered moderately. During the last ten years there has been a 75% correlation between the employment index and the three month growth in factory payrolls.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060616f.jpg" width="353">
The business conditions index reflects a separate survey question, not the sub indexes.
The prices paid index gave back a piece of the May surge but remained quite elevated . During the last ten years there has been a 76% correlation between the prices paid index and the three month growth in the intermediate goods PPI. There has been an 85% correlation with the change in core intermediate goods prices.
The separate index of expected business conditions in six months fell sharply to its lowest level since January of 2001 although expectations for employment improved.
The latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found <a href="http://www.phil.frb.org/files/bos/bos0606.html">here</a>.
The Effects of Globalization on Inflation and Their Implications for Monetary Policy is yesterday&#39;s speech by Federal Reserve Board Governor Donald L. Kohn and it is available <a href="http://www.federalreserve.gov/boarddocs/speeches/2006/20060616/default.htm">here</a>l

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S504/@S504.HTM">Philadelphia Fed Business Outlook</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>13.1</td>
<td>14.4</td>
<td>0.0</td>
<td>12.4</td>
<td>28.0</td>
<td>10.5</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>48.7</td>
<td>55.3</td>
<td>28.2</td>
<td>43.5</td>
<td>51.2</td>
<td>16.8</td>
</tr>
</tbody>
</table>
</body>
</html>

The Index of General Business Conditions in the manufacturing sector during June from the Philadelphia Fed dipped to 13.1 from an unrevised 14.4 during May. The decline was less than the Consensus expectation for a drop to 11.5. [...]

Philadelphia Fed Business Activity Dipped

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.

260513Z1.jpg

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

260513Z2.jpg

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

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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.

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**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.

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

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

Charts of the Week: The Tug of War

Sandy Batten

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

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

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

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

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


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


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

Kathleen Stephansen, CBE

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

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

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

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


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

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

Robert Brusca

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UK GDP grew by 2.5% in 2026-Q1. GDP growth quarterly was last this strong in 2024-Q2 and last stronger in 2024-Q1. This is the strongest quarterly growth in about two years. Private consumption surged in 2026-Q1, rising at a 2.4% annual rate. Capital formation and housing each backed off in the last two quarters. This is the opposite form the US where investment is strongly pushing growth ahead.

On the international side of the ledger, UK exports rose at a 0.4% annualized rate in the quarter while imports rose by a strong 2.6% annual rate, still, viewed on its own, domestic demand rose at a 3.2% annual rate.

Domestic demand growth has picked up to over 1% at 1.5% on a year-over-year basis. That is a good development. However, it is still a weak showing. Over the last 26 years domestic demand’s Year-on-year gain ranks at its 30th-percentiel; it has been weaker than this only about 30% of the time. But over the last nearly four-years the 1.5% gain is just below its median. This gives some indication of how weak growth has been in the post-Covid period. The UK was still in a post Brexit environment, when it had to deal with Covid, the invasion of Ukraine, and now the Middle East. At the same time, it has had a considerable amount of its own political turmoil and still does. 

The chart above shows the snake crawl of GDP that continues to depict growth in the EMU area. That is a continuing weak environment- one of the UK’s important export markets. Europe’s fixation on social welfare spending and the need to tax to pay for it has robbed the economy of its dynamism. Still, both the UK and the Euro-Area continue to have lingering inflation issues. And both show current inflation in an upswing. 

**Central bankers' inflation and growth** 
Central banks are playing a waiting game, the best that they can. Major money center country central banks have been consistently overshooting their inflation targets since Covid. And despite excess inflation banks have been reluctant to hike rates and have instead pursued a strategy of persisting slow rate reduction. It has been a curious period in which central banks have kept their inflation target goals but simply have been content to miss their targets in the short run and promise to thit them in the long run. This is clearly a policy of only temporary usefulness because it is bound to blow up, the longer inflation fails to be controlled at its targeted pace. For now, UK interest rates remain higher than in Europe, closer to the level in the US and with a monetary policy committee that seems determined to stop the overshoot as oil prices flare. We’ll see if the BOE MPC members are really ready to pull the trigger on higher rates as UK GDP growth looks firmer. 



United Kingdom

UK Q1 GDP Growth Steps Up  

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%


Economy in Brief: 2006

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