Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040708a.jpg" width="353">
Initial claims for jobless insurance fell sharply last week to 310,000 versus the prior week of 349,000 claims which was revised down. Consensus expectations had been for 340,000 claims.
The decline in claims may have been exaggerated by errant seasonal seasonal adjustment factors which anticipated the regular layoff of autoworkers due to assembly plant closings to prepare for the new model year. Closings this year likely will begin this week. Unadjusted initial claims rose 32,700 in the latest week after falling 4,100 the prior period.
The 4-week moving average of initial claims fell to 336,000 (-20.0% y/y).
Continuing claims for unemployment insurance fell 85,000 following a 5,000 increase the prior week which was revised down.
The insured rate of unemployment was stable at 2.3% for the fifth straight week.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">7/03/04</th>
<th scope="col">6/26/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;&nbsp; 310</td>
<td>349</td>
<td>-27.4%</td>
<td>403</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>&nbsp;&nbsp; --</td>
<td>2,872</td>
<td>-22.4%</td>
<td>3,533</td>
<td>3,573</td>
<td>3,023</td>
</tr>
</tbody>
</table>
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Initial claims for jobless insurance fell sharply last week to 310,000 versus the prior week of 349,000 claims which was revised down. Consensus expectations had been for 340,000 claims. The decline in claims may have been exaggerated [...]

Initial Claims For Jobless Insurance Dropped Sharply

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/040707c.jpg" width="353">
Orders received by German factories were strong again in May, extending a sharp rebound into a second month. Total orders rose 1.8% month-to-month, after 2.0% in April; February and March had had modest increases. In the table below, we show these monthly changes at annual rates to make them comparable with the year-ago and annual average data. There, the relative strength of the last two months is readily apparent.
Two specific aspects of the geographical distribution of this overall performance stand out. Orders from domestic Germany customers fell in May by 0.5%. Clearly, orders are erratic by nature, so nothing substantive should be made of a one-month decrease. But throughout the period in our table below, domestic orders have been noticeably weaker than orders from foreign customers. German manufacturing is expanding because of demand abroad, not particularly from demand at home.
Further, orders at firms in the old &quot;West&quot; Germany have tended to be less vigorous than total orders at all German firms. That is, old &quot;East&quot; Germany is growing faster and continues to succeed at an effort to catch up. Orders for that section of the nation are not available separately, but until last November, industrial production data were still published separately for the East and the West. With a base of 1995=100, the East German index for mining and manufacturing was 186.2 in November 2003, while that in West Germany was 119.0. Thus, output in the Eastern sector has been much more vigorous than in the West. Recent trends in orders, particularly foreign orders, suggest this pattern of production will continue.
Thus, world recovery and the motivation to extend the development of the eastern sector economy appear to be combining to boost activity in that former communist zone. At the same time, orders are far from weak at firms in western Germany, as export demand lifts manufacturing activity in the nation as a whole.

<table border="0" cellspacing="0" width="100%">
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<tr>
<th scope="col" class="firstcol">% Change, Annual Rate</th>
<th scope="col">May 2004</th>
<th scope="col">Apr 2004</th>
<th scope="col">Mar 2004</th>
<th scope="col">Year Ago</th>
Annual Averages
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>24.1</td>
<td>27.5</td>
<td>2.4</td>
<td>11.7</td>
<td>0.7</td>
<td>-0.1</td>
<td>-1.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West Germany</td>
<td>18.9</td>
<td>29.5</td>
<td>4.9</td>
<td>11.3</td>
<td>0.3</td>
<td>-0.5</td>
<td>-2.2</td>
</tr>
<tr>
<td class="firstcol">Domestic Orders</td>
<td>-5.9</td>
<td>8.9</td>
<td>6.3</td>
<td>4.7</td>
<td>0.0</td>
<td>-3.1</td>
<td>-2.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West Germany</td>
<td>-8.3</td>
<td>9.1</td>
<td>10.6</td>
<td>4.1</td>
<td>-0.6</td>
<td>-3.5</td>
<td>-2.8</td>
</tr>
<tr>
<td class="firstcol">Foreign Orders</td>
<td>66.9</td>
<td>52.8</td>
<td>-2.2</td>
<td>20.1</td>
<td>1.5</td>
<td>3.7</td>
<td>-0.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West Germany</td>
<td>54.4</td>
<td>55.1</td>
<td>1.1</td>
<td>19.3</td>
<td>1.3</td>
<td>3.1</td>
<td>-1.4</td>
</tr>
</tbody>
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Orders received by German factories were strong again in May, extending a sharp rebound into a second month. Total orders rose 1.8% month-to-month, after 2.0% in April; February and March had had modest increases. In the table below, [...]

German Factory Orders Gain Further, Pushed by Foreign Demand

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040707b.jpg" width="353">
During last week, chain store sales recouped 0.9% of the steep 1.2% fall of the prior period, according to the International Council of Shopping Centers (ICSC)-UBS.
The recovery moderated the decline for the full month of June to -0.2% versus the May average.
During the last ten years there has been a 59% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart. 

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<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM"> ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">07/03/04</th>
<th scope="col">06/26/04</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
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<tr>
<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>438.5</td>
<td>434.7</td>
<td>4.4%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
Mortgage Applications Jumped As Rates Fell 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 7, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040707a.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association jumped 19.5% (-49.0% y/y) last week.
The rise may have been spurred by a decline in interest rates. The effective interest rate on a conventional 30-Year mortgage fell to 6.24% from 6.47% the week earlier. The effective rate on a 15-year mortgage also fell to 5.72%, down 24 basis points.
Applications to refinance mortgages led the gain with a 27.7% rise last week (-73.9% y/y).
Purchase applications jumped 15.0% (21.0% y/y) during the week. For the month purchase applications nevertheless fell 4.7% versus May.
During the last ten years there has been a 63% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM"> MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">07/02/04</th>
<th scope="col">06/25/04</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>687.0</td>
<td>575.0</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>500.9</td>
<td>435.4</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,769.7</td>
<td>1,386.9</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
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During last week, chain store sales recouped 0.9% of the steep 1.2% fall of the prior period, according to the International Council of Shopping Centers (ICSC)-UBS. The recovery moderated the decline for the full month of June to [...]

Chain Store Sales Firmed

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040706c.jpg" width="353">
Consumer price rises are beginning to accelerate in the Pacific Rim. The pace of acceleration is varied, but the general trend is upward.
China, Hong Kong and Taiwan--all of whom had been experiencing deflation--are beginning to show increasing rates of price rises and, except for Hong Kong, are now showing positive rates of price changes.
In 2003, Indonesia reduced the rate of increase in consumer prices to 6.62% from 11.92 in 2002, but the trend is once more upward. Similarly, the Philippines, which had reduced its inflation rate to 2.88% in 2003 from 3.10% in 2002 and 6.12% in 2001, is now showing a rising trend.
Consumer prices were relatively steady in both South Korea and Thailand during the first five months of this year, but stepped up their rates of increase in June.

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<th scope="col" class="firstcol">&nbsp;</th>
Year over Year % Change&nbsp;
<th scope="col">&nbsp;</th>
<th scope="col">&nbsp;</th>
<th scope="col">&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Price Indexes (NSA)</td>
<td>Jun 04</td>
<td>May 04</td>
<td>Apr&nbsp; 04</td>
<td>Mar&nbsp; 04</td>
<td>Feb&nbsp; 04</td>
<td>&nbsp;Jan 04</td>
<td>2003 %</td>
<td>2002 %</td>
<td>&nbsp;2001 %</td>
</tr>
<tr>
<td class="firstcol">Taiwan&nbsp;</td>
<td>1.75</td>
<td>0.89</td>
<td>0.91</td>
<td>0.89</td>
<td>0.65</td>
<td>0.01&nbsp;</td>
<td>-0.28</td>
<td>-0.20</td>
<td>-0.00</td>
</tr>
<tr class="odd">
<td class="firstcol">Hong Kong</td>
<td>n.a.</td>
<td>-0.86</td>
<td>-1.49</td>
<td>-2.13</td>
<td>-1.93</td>
<td>-1.39&nbsp;</td>
<td>-2.58</td>
<td>-3.04</td>
<td>-1.60</td>
</tr>
<tr>
<td class="firstcol">China</td>
<td>n.a.</td>
<td>4.4</td>
<td>3.8</td>
<td>3.0</td>
<td>2.1</td>
<td>3.2&nbsp;</td>
<td>1.2</td>
<td>-0.8</td>
<td>0.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Indonesia&nbsp;</td>
<td>7.23</td>
<td>6.47</td>
<td>6.11</td>
<td>5.24</td>
<td>4.62</td>
<td>4.82</td>
<td>6.62</td>
<td>11.92</td>
<td>11.46</td>
</tr>
<tr>
<td class="firstcol">Philippines&nbsp;</td>
<td>5.13</td>
<td>4.47</td>
<td>4.06</td>
<td>3.77</td>
<td>3.42</td>
<td>3.43</td>
<td>2.88</td>
<td>3.10</td>
<td>6.12</td>
</tr>
<tr class="odd">
<td class="firstcol">Thailand&nbsp;</td>
<td>&nbsp;3.02</td>
<td>2.45</td>
<td>2.46</td>
<td>2.27</td>
<td>2.18</td>
<td>1.23</td>
<td>1.82</td>
<td>0.60</td>
<td>1.66</td>
</tr>
<tr>
<td class="firstcol">South Korea&nbsp;</td>
<td>3.63</td>
<td>3.35</td>
<td>3.25</td>
<td>3.07</td>
<td>3.28</td>
<td>3.39</td>
<td>3.51</td>
<td>2.76</td>
<td>4.07</td>
</tr>
</tbody>
</table>
</body>
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Consumer price rises are beginning to accelerate in the Pacific Rim. The pace of acceleration is varied, but the general trend is upward. China, Hong Kong and Taiwan--all of whom had been experiencing deflation--are beginning to show [...]

Price Rises Beginning to Accelerate in Pacific Rim Countries

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040706a.jpg" width="353">
The Business Activity Index for the Non-manufacturing Sector, reported by the Institute for Supply Management, fell last month to 59.9 from 65.2 in May. Consensus expectations had been for little change at 64.0.
Since the series&#39; inception in 1997 there has been a 60% correlation between the Business Activity Index and the q/q change in GDP services plus construction.
The employment index added to prior gains and rose to 57.4, a record high. Higher employment was reported by 27% of firms versus 17% last year and 12% in 2002.
Since the series&#39; inception in 1997 there has been a 60% correlation between the level of the ISM non-manufacturing employment index and the m/m change in payroll employment in the service producing and construction industries.
The new orders index rose to 62.4 from 61.3 in May.
Business activity for the non-manufacturing sector is a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index is a weighted average five components.
The seasonally adjusted prices index ticked higher to another record high of 74.6.
ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The non-manufacturing survey dates only to July 1997, therefore its seasonal adjustment should be viewed tentatively. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
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<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM Non-manufacturing Survey</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June &#39;03</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Business Activity Index</td>
<td>59.9</td>
<td>65.2</td>
<td>59.5</td>
<td>58.1</td>
<td>55.1</td>
<td>48.9</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>74.6</td>
<td>74.4</td>
<td>52.7</td>
<td>56.7</td>
<td>53.9</td>
<td>51.5</td>
</tr>
</tbody>
</table>
Challenger Layoffs Lowest In A Year 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 6, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040706b.jpg" width="353">
Challenger, Gray &amp; Christmas reported that announced job cuts in June fell 12.3% m/m to 64,343, the lowest level in a year.
The three month moving average of job cut announcements fell to its lowest level since late 2000 (-23.6% y/y).
During the last ten years there has been an 86% (inverse) correlation between the three month moving average of announced job cuts and the three month change payroll employment.
Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S3/@S301/@S301.HTM"> Challenger, Gray &amp; Christmas</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>64,343</td>
<td>73,368</td>
<td>7.8%</td>
<td>1,236,426</td>
<td>1,431,052</td>
<td>1,956,876</td>
</tr>
</tbody>
</table>


</html>

The Business Activity Index for the Non-manufacturing Sector, reported by the Institute for Supply Management, fell last month to 59.9 from 65.2 in May. Consensus expectations had been for little change at 64.0. Since the series' [...]

ISM Non-Manufacturing Index Down, Employment At Record High

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040702d.jpg" width="353">
After a sharp acceleration during much of 2003, manufacturing growth around the [statistically known] world seems to be stabilizing. In the purchasing managers surveys compiled by NTC Research in London in collaboration with JPMorgan, growth eased in June to a 56.5% reading from May&#39;s 57.6% level. These data begin in 1998. The May level was a record high; the lowest was 41.6 in October 2001. In this most recent few months, the European region has had the greatest acceleration, but the US has the strongest readings, i.e., the strongest sustained growth pace.
The consolidation process is possibly fostered by high energy prices. Their impact is seen in the accompanying graph series on &quot;input prices&quot;. Last time those prices ran up, in early 2000, world manufacturing entered a marked slump. It&#39;s clearly too soon to tell what the response will be in the current episode, and with such a short data history, it&#39;s also premature to assert a hard and fast conclusion about whether another slump would follow now, on the basis of just one previous example. Various regions also behave differently, as noted in the table below. Russia&#39;s slump, for instance, had occurred in the late 1990s, and it did not participate in the 2001 recession. Japan, by contrast, was weaker than other regions during that recession, so its recent rebound looks quite optimistic. So perhaps the present manufacturing consolidation will lead, not to renewed slump, but to a more sustained expansion.

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<th scope="col" class="firstcol">%, &gt;50 = Expansion,&nbsp; &nbsp;&nbsp;&nbsp; &lt;50 = Contraction</th>
<th scope="col">June 2004</th>
<th scope="col">May 2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Global Overall Index</td>
<td>56.5</td>
<td>57.6</td>
</tr>
<tr>
<td class="firstcol">Japan Overall Index</td>
<td>54.3</td>
<td>56.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro-Zone Overall Index</td>
<td>54.4</td>
<td>54.7</td>
</tr>
<tr>
<td class="firstcol">Russia Overall Index</td>
<td>54.2</td>
<td>54.1</td>
</tr>
<tr class="odd">
<td class="firstcol">US ISM Index</td>
<td>61.1</td>
<td>62.8</td>
</tr>
</tbody>
</table>
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After a sharp acceleration during much of 2003, manufacturing growth around the [statistically known] world seems to be stabilizing. In the purchasing managers surveys compiled by NTC Research in London in collaboration with JPMorgan, [...]

Global Manufacturing Growth Plateaus in June

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040702a.jpg" width="353">
Non-farm payrolls rose just 112,000 last month, half the downwardly revised May gain of 235,000. Job growth also fell short of Consensus expectations for a 240,000 rise.
Renewed decline in factory sector payrolls accounted for some of last month&#39;s weakness as they fell 11,000 for the first m/m decline in five. Prior month&#39;s gains were downwardly revised. The breadth of hiring in the factory sector fell sharply as indicated by a one-month diffusion index of 45.8% versus readings over 50% during the prior four months.
Hiring in the construction sector also cooled, showing no increase after three months of solid increase (2.9% y/y).
Private service producing payrolls increased just 127,000 (0.1% m/m, 1.6% y/y) following three months of gain between 0.2% and 0.3%. Outright m/m declines were widespread, offset by firm growth in the transportation sector. Temporary help services employment rose 12,100 (0.5% m/m, 10.3% y/y), down sharply from recent rates of gain.
The breadth of increase amongst private non-farm payrolls fell to 57.0% versus 64.6% in May. That pulled the three-month diffusion index down to 66.4% from 74.8%.
The index of aggregate hours worked (employment times hours worked) fell 0.6% following an upwardly revised 0.7% May gain. For 2Q, aggregate hours rose at a 2.0% annual rate versus 1Q which rose at a 2.3% rate from 4Q03.
Average hourly earnings rose just 0.1% following 0.3% increases in the prior two months. The slowdown reflected slower gains in service industries. Factory sector earnings rose 0.2% (2.5% y/y) following an upwardly revised no-change in May.
From the separate household survey the unemployment rate held steady at an expected 5.6%. Employment rose for the third consecutive month, up 259,000 (1.0% y/y). The labor force grew 305,000 (+0.2% y/y). The labor force participation rate ticked slightly higher to 66.0% following four months at 5.9%.

<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/@EB/@EB01/@EB01.HTM"> Employment</a></th>
<th scope="col"> June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>112,000</td>
<td>235,000</td>
<td>1.1%</td>
<td>-0.3%</td>
<td>-1.1%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-11,000</td>
<td>24,000</td>
<td>-0.9%</td>
<td>-4.8%</td>
<td>-7.2%</td>
<td>-4.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.6</td>
<td>33.8</td>
<td>33.7</td>
<td>33.7</td>
<td>33.8</td>
<td>34.0</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.1%</td>
<td>0.3%</td>
<td>2.0%</td>
<td>2.7%</td>
<td>2.9%</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>5.6%</td>
<td>5.6%</td>
<td>6.3%</td>
<td>6.0%</td>
<td>5.8%</td>
<td>4.8%</td>
</tr>
</tbody>
</table>
U.S. Light Vehicle Sales Weak Last Month 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 2, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040702c.jpg" width="353">
Unit sales of light vehicles gave back all of the gain in May and fell 13.4% last month to the lowest level since December 2000. Sales of 15.44M (-6.5% y/y) compared to Consensus expectations for sales of 16.8M.
Sales of light trucks flopped 14.8% to 8.37M. Car sales fell 11.7% to 7.08M.
The weakness in truck sales pulled sales of domestic light vehicles 15.0% lower to 12.13M (-8.0% y/y). Imported vehicle sales faired somewhat better with only a 7.1% m/m decline to 3.31M (-0.1% y/y). (US sales of light trucks totaled 7.84M last year while imported truck sales totaled 1.20M.)
Imports&#39; share of the US market for new vehicles in June surged to 21.5%, the highest since 1991.

<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/@ED09/@ED0901/@ED0901.HTM"> Light Vehicle Sales (SAAR, Mil.Units)</a></th>
<th scope="col"> June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>15.44</td>
<td>17.84</td>
<td>-6.5%</td>
<td>16.69</td>
<td>16.81</td>
<td>17.26</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>7.08</td>
<td>8.01</td>
<td>-6.9%</td>
<td>7.63</td>
<td>8.07</td>
<td>8.48</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Trucks</td>
<td>8.37</td>
<td>9.82</td>
<td>-6.1%</td>
<td>9.06</td>
<td>8.74</td>
<td>8.78</td>
</tr>
</tbody>
</table>
Factory Inventory Accumulation Hitting a Stride 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 2, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040702b.jpg" width="353">
Factory inventories rose 0.5% last month and the increase pulled the y/y comparison to its strongest in three years.
Factory orders slipped a less than expected 0.3% following a 1.1% drop in April. Durable goods orders fell 1.8%, revised from the advance report of a 1.6% drop.
Non-durable goods orders (which equal shipments) rose 1.5% (13.0% y/y) due to across the board strength.
Factory shipments rose 0.3%. Excluding the transportation sector shipments rose 0.4% (13.0% y/y).

<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/@ED01016/@ED01016.HTM"> Factory Survey</a> (NAICS)</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>0.5%</td>
<td>0.5%</td>
<td>1.1%</td>
<td>-1.3%</td>
<td>-1.8%</td>
<td>-6.1%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>-0.3%</td>
<td>-1.1%</td>
<td>12.6%</td>
<td>3.7%</td>
<td>-1.9%</td>
<td>-6.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>0.3%</td>
<td>-0.1%</td>
<td>12.2%</td>
<td>2.6%</td>
<td>-2.0%</td>
<td>-5.4%</td>
</tr>
<tr>
<td class="firstcol">Unfilled Orders</td>
<td>0.4%</td>
<td>0.7%</td>
<td>7.7%</td>
<td>4.2%</td>
<td>-6.1%</td>
<td>-5.9%</td>
</tr>
</tbody>
</table>
</body>
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Non-farm payrolls rose just 112,000 last month, half the downwardly revised May gain of 235,000. Job growth also fell short of Consensus expectations for a 240,000 rise. Renewed decline in factory sector payrolls accounted for some of [...]

U.S. Job Growth Took A Breather In June

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040701b.jpg" width="353">
The Bank of Japan today released the TANKAN Survey for the second quarter, and once again, conditions came out better than forecast three months ago. The actual result for large manufacturing firms was, at +22, a full 10 points higher than the forecast of +12. Favorable readings were widespread across all parts of the survey, with every major sector showing improvement from March, even if just to a smaller negative reading. Most notably perhaps, &quot;small&quot; manufacturers shifted from negative to positive readings.
Among individual industries, iron and steel and machinery had substantial gains in the manufacturing sector for all three size categories of firms. There was more variation in non-manufacturing firms. Information services, business and personal services showed visible improvements at medium-size firms, but only modest gains at large companies. And the retailing industry actually deteriorated, in all size groups, weakening from the first quarter&#39;s result, missing the second quarter forecast and even dropping back into negative territory.
In the Haver databases, we present the TANKAN data two ways. Owing to the restructuring of the survey classification scheme and new sampling in March, we have segregated the recent detail data into new series in the &quot;Japan&quot; database. In summary data in the &quot;G10&quot; database, we link the all industry-all enterprise data with the history that uses the old methodology. This broad aggregate is less affected by the Bank of Japan&#39;s reorganization of the categories. By this special, linked measure, the actual result for the second quarter came in at zero, its first non-negative reading since 1997.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Business Conditions:&nbsp; % Favorable minus % Unfavorable</th>
June 2004
March 2004
December 2003
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Actual</td>
<td>Forecast for Sept</td>
<td>Actual</td>
<td>Forecast for June</td>
<td>Actual</td>
<td>Forecast for March</td>
</tr>
<tr>
<td class="firstcol">All Firms</td>
<td>0</td>
<td>-1</td>
<td>-5</td>
<td>-6</td>
<td>-11</td>
<td>-12</td>
</tr>
<tr class="odd">
<td class="firstcol">Large Firms*</td>
<td>16</td>
<td>16</td>
<td>9</td>
<td>9</td>
<td>4</td>
<td>5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>22</td>
<td>21</td>
<td>12</td>
<td>12</td>
<td>7</td>
<td>6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-manufacturing</td>
<td>9</td>
<td>11</td>
<td>5</td>
<td>7</td>
<td>0</td>
<td>4</td>
</tr>
<tr>
<td class="firstcol">Medium-sized Firms**</td>
<td>3</td>
<td>1</td>
<td>-2</td>
<td>-2</td>
<td>-8</td>
<td>-9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>11</td>
<td>7</td>
<td>5</td>
<td>1</td>
<td>-3</td>
<td>-4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non-manufacturing</td>
<td>-1</td>
<td>-3</td>
<td>-7</td>
<td>-6</td>
<td>-12</td>
<td>-11</td>
</tr>
<tr class="odd">
<td class="firstcol">Small Firms***</td>
<td>-10</td>
<td>-10</td>
<td>-13</td>
<td>-15</td>
<td>-19</td>
<td>-20</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>2</td>
<td>2</td>
<td>-3</td>
<td>-3</td>
<td>-10</td>
<td>-11</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-manufacturing</td>
<td>-18</td>
<td>-18</td>
<td>-20</td>
<td>-21</td>
<td>-25</td>
<td>-27</td>
</tr>
</tbody>
</table>
</body>
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The Bank of Japan today released the TANKAN Survey for the second quarter, and once again, conditions came out better than forecast three months ago. The actual result for large manufacturing firms was, at +22, a full 10 points higher [...]

Japanese Industry Improves Further in Q2

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

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

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

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

Policy uncertainty has surged since the US national elections.

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

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Andrew Cates

**Geopolitical risks and trade policy uncertainty** 
Geopolitical tensions have risen sharply following the recent escalation of instability in the Middle East. As shown in Chart 1, the Caldara-Iacoviello Global Geopolitical Risk Index has surged to its highest level in over a year, reflecting mounting fears of broader regional conflict and potential disruption to critical global energy supply routes. In contrast, the US Trade Policy Uncertainty Index has eased in recent weeks, reflecting a temporary de-escalation in tariff rhetoric and signs of diplomatic engagement with key trading partners. This divergence underscores the shifting risk landscape: while the trade policy narrative has stabilised somewhat, geopolitical volatility has returned as a dominant force, complicating the outlook for global coordination, capital flows, and supply chain resilience.

250618Z1.jpg

**Oil process and global growth surprises** 
The most obvious and immediate channel for these shocks has been oil. As shown in Chart 2, the global oil price has risen sharply in recent days, with the rebound leading a broader repricing of growth and inflation risks. The oil price in chart 2 below with a seven-week lead and has lately been tightly correlated with the inverted Citigroup global growth surprise Index. Notably, the correlation remains strongly negative, indicating that rising energy costs could sap global economic momentum.

250618Z2.jpg

**Global shipping costs** 
Freight rates have also surged in response to the Middle East conflict. Chart 3 shows the Baltic Dry Index and the Capesize Index, both of which have jumped materially in recent days. These indices, which capture the cost of transporting bulk goods such as metals, grains, and energy, are sensitive to perceived risk in major shipping lanes—including the Red Sea and Strait of Hormuz. As insurance premia rise and some routes are avoided altogether, freight costs are climbing.

250618Z3.jpg

**Global oil reserves**
The strategic significance of the Middle East—particularly Iran—can be seen clearly in chart 4. Iran specifically accounts for over 9% of global proven oil reserves, and the broader Middle East (excluding Iran) holds nearly 40%. That means nearly half of the world’s known oil reserves sit in one of the most geopolitically volatile regions on the planet.

250618Z4.jpg

**Energy costs and economic growth** 
The role of energy as a key driver of economic growth is arguably often underappreciated. However, its influence over economic performance is evident in the chart below. High real energy prices tend to discourage energy consumption, which in turn can suppress per capita GDP growth—unsurprising given energy’s central role in virtually all forms of economic activity, from manufacturing and transportation to household consumption. This dynamic has been particularly pronounced in the Euro area. Major economies such as Germany, France, and Italy have experienced sharp increases in real energy prices, accompanied by relatively subdued per capita GDP growth. In Germany’s case, this has been exacerbated by the rapid shift away from nuclear and Russian gas toward renewables—a transition that, while essential for long-term sustainability, has introduced near-term supply bottlenecks and cost volatility. More broadly, these energy price spikes are partly attributable to supply-side disruptions, many of which stem from geopolitical tensions and instability.

250618Z5.jpg

**Natural capital** 
Beneath the surface of these immediate geopolitical shocks lies a deeper, slower-moving erosion: the decline of natural capital. As Chart 6 shows, renewable natural capital per capita has been falling steadily for over two decades, while non-renewable natural capital has stagnated. In contrast, produced capital has surged, and human capital has only modestly increased. This imbalance reflects a global economy that has continued to accumulate physical and financial assets while depleting its ecological foundation. The result is a structurally less resilient growth model, more exposed to shocks like climate volatility, resource scarcity, and geopolitical conflict over critical inputs like water, minerals, and land.

250618Z6.jpg

Financial markets have been jolted over the past week by a sharp escalation in geopolitical risk. The sudden intensification of hostilities between Israel and Iran—marked by missile strikes and retaliatory air operations—has reignited fears of a broader regional conflict with global consequences. This flare-up has driven a visible spike in geopolitical risk indicators (Chart 1), unsettling investor sentiment at a moment when markets were still digesting the implications of US protectionist trade policies. As tensions mount, the economic shockwaves have been rippling outward: oil prices have rebounded sharply (Chart 2), global shipping costs have climbed sharply along key maritime routes (Chart 3), and capital markets are once again grappling with an unpredictable macro landscape. Iran’s strategic importance—both as a holder of nearly 10% of global oil reserves and as a key player in energy shipping lanes such as the Strait of Hormuz—underscores the vulnerability of global energy security (Chart 4). But the implications are not just immediate. Over the medium term, higher real energy prices have already been weighing on living standards and growth outcomes across many advanced economies (Chart 5), with the data pointing to a clear inverse relationship between real energy costs and gains in per capita GDP. Compounding this is the slow, structural erosion of natural capital—soils, forests, water systems—which continues to undermine long-run economic resilience and productive potential (Chart 6).

Charts of the Week: Conflict, Energy and Constraints

250618F12.jpg

250618G12.jpg

Total housing starts weakened 9.8% (-4.6% y/y) during May to 1.256 million units (SAAR) after rising 2.7% to 1.392 million in April, revised from 1.361 million and falling 9.1% to 1.355 million in March, revised from 1.339 million, according to the U.S. Census Bureau. Total starts in May were 31.0% below their peak of 1.820 million units reached in April 2022, and at their lowest level in five years. The Action Economics Forecast Survey expected 1.36 million starts in May.

Single-family starts edged 0.4% higher (-7.3% y/y) to 924,000 after falling 3.0% to 920,000 in April, revised from 927,000, and declining 13.7% to a minimally revised 948,000 in March. Multi-family starts dropped 29.7% (+4.1% y/y) to 332,000, after rising 16.0% to 472,000 in April, and increasing 3.8% to 407,000 in March. It was their lowest level since November.

Starts declined in May in three of the four major regions of the country. Starts fell 40.0% (+6.1% y/y) in the Northeast to 105,000, following an 18.2% April increase. In the South, starts weakened 10.5% (-7.2% y/y) to 693,000 after rising 11.2% in April. Starts in the Midwest declined 10.2% (+26.0% y/y) to 184,000 after declining 8.1% in April. Countering these declines, starts in the West increased 15.1% (-15.4% y/y) to 274,000 after falling 17.4% in April.

Building permits declined 2.0% (-1.0% y/y) last month to 1.393 million after falling 4.0% to 1.422 million in April, revised from 1.412 million. Single-family permits fell 2.7% (-6.4% y/y) in May to 898,000 after weakening 5.0% in April. Multi-family permits eased 0.8% (+10.5% y/y) after declining 2.0% in April. Building permits fell 8.8% (+3.3% y/y) in the Northeast and were off 5.2% (-3.1% y/y) in the West. In the South, building permits declined 2.5% (-4.9% y/y), but in the Midwest building permit increased 9.8% (16.4% y/y).

The housing starts and building permits figures can be found in Haver’s **USECON** database. The expectations figure is contained in the **AS1REPNA** database.

250618H12.jpg

250618I12.jpg

- Single-family starts edge higher; multi-family drops to six-month low.
- Starts decline in most of the country.
- Building permits move down as well, led by single-family weakness.

U.S. Housing Starts Slump in May as Multi-Family Plummets

Kathleen Stephansen, CBE

250618A1.jpg

250618B1.jpg

Initial claims for unemployment insurance were 245,000 in the week ending June 14, a decrease of 5,000 from 250,000 in the week ending June 7, revised up from 248,000. The Action Economics Forecast Survey had expected 245,000. These data are seasonally adjusted by the Department of Labor. The 4-week moving average was 245,500, an increase of 4,750 from the previous week’s average of 240,750, revised up from 240,250. It also is the highest level for this average since August 19, 2023, when it was 246,000.

The total number of unemployment insurance beneficiaries – also known as “continuing claims” – in the week ended June 7 was 1.945 million, down 6,000 from 1.951 million in the prior week, revised from 1.956 million. The 4-week moving average was 1.926 million, an increase of 13,000 from the previous week’s average of 1.913 million. This is the highest level for this average since November 20, 2021, when it was 2.004 million.

The insured unemployment rate for the week ending June 7, that is, the number of unemployment beneficiaries as a % of covered employment, was unchanged at 1.3% from the prior week.

Economic conditions vary widely across states and territories. In the week ended May 31, the highest unemployment rates were in New Jersey (2.30%), California (2.20%), Massachusetts and Washington (both 2.10%), and Rhode Island (2.00%). The lowest rates were in South Dakota (0.30%), Florida (0.40%), and Alabama, Iowa, North Carolina and Virginia (all at 0.50%). Rates in other notable states include Illinois and New York (both 1.60%), Pennsylvania (1.50%) and Texas (1.20%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986. The expectations figure is from the Action Economics Forecast Survey in the **AS1REPNA** database.

250618C1.jpg

250618D1.jpg

- Initial claims for unemployment insurance eased in the week ended June 14.
- Total beneficiaries decreased by 6,000 in the June 7 week.
- The insured unemployment rate was unchanged at 1.3%.

U.S. Initial Jobless Claims Eased in Latest Week

250618A8.jpg

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Mortgage applications declined 2.6% (+17.9% y/y) in the week ending June 13, after gaining 12.5% (22.1% y/y) in the week ending June 6, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications for loans to purchase a house fell 3.0% (+13.6% y/y) in the June 13 week after the rebound of 10.3% (18.9% y/y) in the June 6 week. Applications for loan refinancing fell 2.1% (+25.3% y/y) in the latest week after surging 15.6% (27.5% y/y) in the June 6 week.

The effective interest rate on a 30-year fixed-rate loan fell 9bps to 7.03% in the week ending June 13 from 7.12% in the week ending June 6; The recent low was 6.29% in the September 20 week, while the peak of 8.12% was reached in the week of October 20, 2023. The rate on 15-year fixed-rate mortgages eased 2bps to 6.31% in the week ending June 13 from 6.33% in the June 6 week; a low of 5.60% was reached in the September 20 week, while the high of 7.44% was reached in the week of October 27, 2023. The rate on 30-year jumbo loans declined 12bps to 6.99% in the latest week from 7.11% in the June 6 week; the low of 6.57% was reached in the September 13 week and the high of 7.99% in the week of October 27, 2023. The rate on a 5-year ARM eased 3bps to 6.31% in the week ending June 13 from 6.34% in the June 6 week; the low of 5.84% was in the September 13 week and the high of 7.31% was in the week of October 27, 2023.

The share of applications for refinancing an existing loan rose to 37.3% of total applications in the week of June 13 from 36.7% in the week ending June 6. The adjustable-rate mortgage (ARM) share of activity dropped to 7.1% in the June 13 week from 7.2% in the June 6 week.

The average size of a mortgage loan eased 0.9% (+2.1% y/y) to $380,200 in the June 13 week, after a rise of 0.4% (2.8% y/y) to $383,700 in the June 6 week. The average size of a purchase loan declined by 0.7% (+2.0% y/y) to $439,000 in the June 13 week, after a rise of 0.8% (3.1% y/y) to $441,900 in the June 6 week. The average size of a loan to refinance a mortgage eased 0.6% (+6.1% y/y) to $281,600 in the June 13 week after a rise of 2.0% (4.5% y/y) to $283,400 in the June 6 week.

The Mortgage Bankers Association Survey covers 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver’s **SURVEYS** database.

- Purchase and refinancing loan applications fell.
- Effective interest rate on 30-year fixed-rate loans fell to 7.03%.
- Average loan size eased.

U.S. Mortgage Applications Decline in the June 13 Week

Robert Brusca

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Inflation in the United Kingdom measured by the CPI-H measure rose by 0.1% in May as the core excluding energy, food, alcohol, and tobacco also decelerated by increasing 0.1% on the month. These slower May increases follow accelerated increases in April for both the headline and core and more modest increases in March. The sequential growth rates in the headline CPI-H show a gain of 4% over 12 months, a rise at a 4.3% annual rate over 6 months, and a 3.4% annual rate rise over 3 months. The core for the CPI-H shows a 4.2% increase over 12 months, a 4.1% annual rate increase over 6 months and another slight deceleration to 3.6% at an annual rate over 3 months. These data for the headline and the core both show that U.K. inflation has plateaued and begun to edge lower; however, the deceleration is quite slight for both the headline and for the core measures.

Inflation diffusion that measures the breadth of inflation shows a reading of 54.5% over both 12 months and 6 months, with 3-month diffusion much lower at 36.4%. Diffusion readings of 50% show inflation accelerating and decelerating with equal tendencies from period-to-period. Diffusion above 50% shows more accelerating inflation while diffusion below 50% finds more deceleration for inflation. Diffusion readings show that for 3-months compared to 6-months diffusion is significantly lower but that diffusion over 6 months (compared to 12-months) and for 12-months (compared to 12-months ago) is slightly accelerating.

The HICP measure parallels the results for the headline CPI-H with a slight inflation bulge over 6 months and significant slowing of inflation over 3 months. The agreement across the headline, and core CPI-H measures compared to the HICP is reassuring that these trends are true and not simply mercurial or the results of a particular inflation weighting scheme (since CPI-H and HICP use different weights).

Meanwhile unemployment in the U.K. has risen only slightly over the past 12 to 24 months. The recent U.K. monthly GDP reading showed a sharp slowing, but year-over-year growth is still positive headline.

The sequential chart that depicts the growth rates sequentially for timeseries of 3-month, 6-month and 12-month inflation (above) shows that part from a one month slice of those rates (which is what the table provides) the timeseries reveal that the tendency for inflation peaked across these three frequencies back in January and has since been reduced to its lowest pace since October 2024 for both 6-month and 12-month CPI-H core inflation. For the 3-month version, inflation at 3.6% is the slowest since January 2024. Three-month core inflation has slowed without increasing for four months in a row as has 12-month core inflation.

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Inflation in the United Kingdom is still broadly overshooting its 2% target. But the economy has slowed, and the labor market is softening, both signs that inflation pressures - in all likelihood - are not accumulating. Slack conditions usually create more upward price pressures. And we see downward pressures are in train. Still, U.K. headline inflation is at 4% and the core is at 4.2% over 12 months. The best performing statistic is over 3 months, a less trustable reading and that horizon only has the headline at 3.4% and the core at 3.6%. These may still be rates that are too high to give the BOE true comfort about hitting its target, but these nonetheless are signs of inflation progress underway. It may still not be enough to prompt rate cutting but rate cutting may now seem a more viable option in the months ahead. However, the months ahead are a fog for forecasters because of international tariff disputes, growth uncertainties, warfare, the risk to oil prices and changing geopolitical defense burdens that a spurring economic activity ahead faster in Europe, especially in Germany.

Economy in Brief: July 2004

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