Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090708a.jpg" width="353">
The Mortgage Bankers Association latest report on mortgage applications provided further evidence that home purchases are recovering but that the refinancing boom is most assuredly over. Overall, mortgage applications recovered 10.9% last week and recovered most of the prior week&#39;s decline. However, applications nevertheless remained near the lowest level since last November.
The interest in home buying has improved, in part due to distress sales. Purchase applications rose 6.7% last week to the highest level since they spiked in early April. Since the early-February low, purchase application have risen 21.1% as new and existing home sales have recovered.
The interest in refinancing an existing mortgage, conversely, has virtually dried up. Applications to refinance did rise 15.2% last week. However, that made up just half of the prior week&#39;s decline and left them at the lowest level since November. Since their peak in January, refinance applications have fallen by three quarters.
Since the beginning of this year, fixed-rate mortgage applications have fallen by slightly more than one half while adjustable-rate mortgages have doubled.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090708b.jpg" width="353">
The end of the refinancing boom can be traced, in part, to the rise in interest rates. The effective interest rate on a conventional 15-year mortgage slipped last week to 5.09% but that remained up from the April low of 4.69%. For a 30-year mortgage, the rate also slipped last week to 5.57% but remained up from the 4.81% low. Interest rates on 15- and 30-year mortgages are closely correlated (&gt;90%) with the rate on 10-year Treasury securities. Up also were adjustable 1-Year mortgage rates which remained stable at 6.61% versus the low near 6.0% during January. Nevertheless, the rate remained down from the 7.07% peak reached last fall.
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage. Moreover, during the last ten years there has been a 61% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
The figures for weekly mortgage applications are available in Haver&#39;s SURVEYW database.
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 covers roughly 50% of all U.S. residential mortgage applications processed each week by mortgage banks, commercial banks and thrifts. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.
IMF Moves to Boost Resources to Combat Global Crisis from the International Monetary can be found <a href="http://www.imf.org/external/pubs/ft/survey/so/2009/NEW070609A.htm"> 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/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">07/03/09</th>
<th scope="col">06/26/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>493.1</td>
<td>444.8</td>
<td>-4.0%</td>
<td>642.9</td>
<td>652.6</td>
<td>584.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>285.6</td>
<td>267.7</td>
<td>-21.9%</td>
<td>345.4</td>
<td>424.9</td>
<td>406.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,707.1</td>
<td>1,482.2</td>
<td>23.8%</td>
<td>2,394.1</td>
<td>1,997.9</td>
<td>1,634.0</td>
</tr>
</tbody>
</table>
</body>
</html>

The Mortgage Bankers Association latest report on mortgage applications provided further evidence that home purchases are recovering but that the refinancing boom is most assuredly over. Overall, mortgage applications recovered 10.9% [...]

U.S. Mortgage Applications For Purchase Rise But Applications To Refinance Remain Low

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090708a.jpg" align="left" border="0" height="265" width="353">
The Mortgage Bankers Association latest report on mortgage
applications provided further evidence that home purchases are
recovering but that the refinancing boom is most assuredly over.
Overall, mortgage applications recovered 10.9% last week and recovered
most of the prior week's decline. However, applications nevertheless
remained near the lowest level since last November.
The interest in home buying has improved, in part due to
distress sales. Purchase applications rose 6.7% last week to the
highest level since they spiked in early April. Since the
early-February low, purchase application have risen 21.1% as new and
existing home sales have recovered.
The interest in refinancing an existing mortgage, conversely,
has virtually dried up. Applications to refinance did rise 15.2% last
week. However, that made up just half of the prior week's decline and
left them at the lowest level since November. Since their peak in
January, refinance applications have fallen by three quarters.
Since the beginning of this year, fixed-rate mortgage
applications have fallen by slightly more than one half while
adjustable-rate mortgages have doubled.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090708b.jpg" align="right" border="0" height="265" width="353">
The end of the refinancing boom can be traced, in part, to the
rise in interest rates. The effective interest rate on a conventional
15-year mortgage slipped last week to 5.09% but that remained up from
the April low of 4.69%. For a 30-year mortgage, the rate also slipped
last week to 5.57% but remained up from the 4.81% low. Interest rates
on 15- and 30-year mortgages are closely correlated (&gt;90%) with
the rate on 10-year Treasury securities. Up also were adjustable 1-Year
mortgage rates which remained stable at 6.61% versus the low near 6.0%
during January. Nevertheless, the rate remained down from the 7.07%
peak reached last fall.
During the last ten years there has been a (negative) 79%
correlation between the level of applications for purchase and the
effective interest rate on a 30-year mortgage. Moreover, during the
last ten years there has been a 61% correlation between the y/y change
in purchase applications and the change in new plus existing single
family home sales.
The figures for weekly mortgage applications are available in
Haver's SURVEYW database.
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 covers roughly 50% of
all U.S. residential mortgage applications processed each week by
mortgage banks, commercial banks and thrifts. Visit the Mortgage
Bankers Association site <a href="http://www.mbaa.org">here</a>.
IMF Moves to Boost Resources to Combat Global Crisis
from the International Monetary can be found <a href="http://www.imf.org/external/pubs/ft/survey/so/2009/NEW070609A.htm">
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/@S5/@S5.HTM">MBA
Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">07/03/09</th>
<th scope="col">06/26/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>493.1</td>
<td>444.8</td>
<td>-4.0%</td>
<td>642.9</td>
<td>652.6</td>
<td>584.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>285.6</td>
<td>267.7</td>
<td>-21.9%</td>
<td>345.4</td>
<td>424.9</td>
<td>406.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,707.1</td>
<td>1,482.2</td>
<td>23.8%</td>
<td>2,394.1</td>
<td>1,997.9</td>
<td>1,634.0</td>
</tr>
</tbody>
</table>
 German IP Follows Orders
Higher 
by <a href="/comment/Brusca.html">Robert
Brusca&nbsp;</a> July 8, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090708c.jpg" align="left" border="0" height="265" width="353">
German industrial production rose by 3.7% in May from April.
It has risen in two of the last three-months. IP is accelerating,
rising at a 5.4% annual rate over three-months compared to a rate of
minus 22.2% over six-months and minus 18.1% over twelve-months. Still in the quarter to date IP is
contracting at a pace of 6.1%. Two months into the second quarter,
despite the stirring in the industrial sector, IP is still a
subtraction from growth. 
Construction is showing a steady acceleration and positive
growth rates over 3-months, 6-months and 12-months. Manufacturing is up
at a strong 10% annual rate over three-months but still falling at a
6.6% pace in the current quarter.
Industrial orders are rising on a much more explosive path
over this period. But orders are a precursor to increases in output.
Among large EMU countries Spain and the UK also have reported
industrial output measures for May. For each of them the May result for
MFG output was negative. But MFG output in Spain and in the UK had
risen in April. In the UK
output is falling at a 0.9% pace in Q2. In Spain output is dropping at
a 3% pace in Q2. 
These trends have the trappings of a bottoming in progress but
not here yet. The German chemicals industry reported that it had made a
recession bottom already. For Germany , as a whole, capital goods
orders are leading the way out. In May these orders surged by 8.3%
compared to April, but that was after a 6.9% plunge in April output
itself. Intermediate goods output was up by 4.3% in May. The consumer
is not a major factor in the rebound. Output from consumer goods
industries is up by 0.6% in May, the second monthly rise in a row, but
it is still falling at a pace of 5.4% in Q2. Capital goods output is
declining at an 11.5% pace in Q2 and intermediate goods output is
falling at a 2.1% pace. There
are signs of stirring but no evidence that the real positive thrust is
here yet.
Overall there is evidence of the drop in output and the
decline in GDP slowing or of a bottom forming and tentative signs of a
rise from the lows being put in place for industrial output. The UK reported consumer sentiment
rose in June as another sign of optimism in Europe . The G-8 is getting
ready to meet and tell us that we have not turned the corner yet. The
message from that is for countries not to reverse the stimulus that is
in place but a further subtle message is not to commence any new
stimulus either.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7">Total German IP </th>
<th>Quarter</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar exept m/m</td>
<td>May-09</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>to-Date</td>
</tr>
<tr>
<td class="firstcol">IP total</td>
<td>3.7%</td>
<td>-2.6%</td>
<td>0.3%</td>
<td>5.4%</td>
<td>-22.2%</td>
<td>-18.1%</td>
<td>-8.1%</td>
</tr>
<tr>
<td class="firstcol">Consumer</td>
<td>0.6%</td>
<td>0.5%</td>
<td>-1.0%</td>
<td>0.4%</td>
<td>-5.7%</td>
<td>-5.0%</td>
<td>-5.4%</td>
</tr>
<tr>
<td class="firstcol">Capital</td>
<td>8.3%</td>
<td>-6.9%</td>
<td>3.7%</td>
<td>19.1%</td>
<td>-31.2%</td>
<td>-22.6%</td>
<td>-11.5%</td>
</tr>
<tr>
<td class="firstcol">Intermed</td>
<td>4.3%</td>
<td>-1.0%</td>
<td>-1.7%</td>
<td>6.4%</td>
<td>-23.5%</td>
<td>-21.8%</td>
<td>-2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Memo</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>-3.2%</td>
<td>0.0%</td>
<td>6.0%</td>
<td>11.2%</td>
<td>5.0%</td>
<td>1.3%</td>
<td>14.8%</td>
</tr>
<tr>
<td class="firstcol">MFG IP</td>
<td>4.9%</td>
<td>-3.1%</td>
<td>0.8%</td>
<td>10.1%</td>
<td>-24.6%</td>
<td>-19.5%</td>
<td>-6.6%</td>
</tr>
<tr>
<td class="firstcol">MFG Orders</td>
<td>4.4%</td>
<td>0.1%</td>
<td>0.0</td>
<td>38.4%</td>
<td>-17.4%</td>
<td>-28.8%</td>
<td>19.4%</td>
</tr>
</tbody>
</table>
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U.S. Mortgage Applications ForPurchase Rise But Applications To Refinance Remain Low

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090707d.jpg" align="right" border="0" height="265" width="353">The volume
of new orders in German Manufacturing rose 4.4% in May after a small
rise of 0.1% in April and a 3.7% rise in March.&nbsp; The three
month rise has brought the level of new orders to 84.5
(2005=100).&nbsp; This is still 33% below the peak of 126.1
recorded in November, 2007.&nbsp; Sales of German Manufacturing and
Mining product rose 4.5% in May after a decline of 2.0% in April and a
1.6% rise in March. Sales are now at an index level of 91.8, 21% below
the peak of 115.7 reached in January, 2008.&nbsp; To put the recent
improvements in perspective, the volume of new orders and sales over
the 8 plus years are shown in the first chart. 
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090707e.jpg" align="right" border="0" height="265" width="353">Much of the
improvement in both orders and sales was due to a jump in foreign
sales.&nbsp; While domestic new orders rose 3.9% in May, new orders
from the Euro Area countries rose, 5.2% and from the non Euro Area
countries, 8.2%.&nbsp; The comparable figures for sales were 2.9%,
3.9% and 9.4%.&nbsp;&nbsp; The month to month percent changes
in domestic new orders, Euro Area countries new orders and Non Euro
Area countries new orders are shown in the second chart.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090707f.jpg" align="right" border="0" height="265" width="353">Signs of
recovery in new orders and sales in the manufacturing sector are
particularly important for Germany as manufacturing plays such an
important role in the German economy.&nbsp; Manufacturing accounts
for about 25% of Germany's GDP in contrast to the United States where
manufacturing accounts for about 14% of the economy.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">GERMAN
MANUFACTURING ORDERS AND SALES (2005=100)</th>
<th scope="col">May 09</th>
<th scope="col">Apr&nbsp; 09</th>
<th scope="col">May 08</th>
<th scope="col">M/M% Chg&nbsp;</th>
<th scope="col">Y/Y % Chg</th>
<th scope="col">2008 </th>
<th scope="col">2007 </th>
<th scope="col"> 2006 </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">New Orders,&nbsp;</td>
<td>84.5</td>
<td>80.9</td>
<td>118.6</td>
<td>4.45</td>
<td>-28.75</td>
<td>111.3</td>
<td>119.7</td>
<td>108.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Domestic</td>
<td>86.2</td>
<td>83.0</td>
<td>113.8</td>
<td>3.86</td>
<td>-24.25</td>
<td>108.3</td>
<td>114.8</td>
<td>106.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Euro Area Countries</td>
<td>83.1</td>
<td>79.0</td>
<td>122.8</td>
<td>5.19</td>
<td>-32.33</td>
<td>113.9</td>
<td>124.0</td>
<td>110.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non Euro Area
Countries</td>
<td>88.5</td>
<td>81.8</td>
<td>124.8</td>
<td>8.19</td>
<td>-29.09</td>
<td>118.0</td>
<td>125.0</td>
<td>113.4</td>
</tr>
<tr class="even">
<td class="firstcol">Sales</td>
<td>91.8</td>
<td>87.8</td>
<td>113.1</td>
<td>4.56</td>
<td>-18.83</td>
<td>111.2</td>
<td>111.6</td>
<td>105.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Domestic</td>
<td>92.2</td>
<td>89.6</td>
<td>107.7</td>
<td>2.90</td>
<td>-14.39</td>
<td>106.7</td>
<td>106.4</td>
<td>102.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Euro Area Countries</td>
<td>88.5</td>
<td>85.2</td>
<td>116.8</td>
<td>3.87</td>
<td>-24.23</td>
<td>113.6</td>
<td>116.1</td>
<td>107.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non Euro Area
Countries</td>
<td>93.8</td>
<td>85.7</td>
<td>122.8</td>
<td>9.45</td>
<td>-23.62</td>
<td>121.1</td>
<td>119.9</td>
<td>110.9</td>
</tr>
</tbody>
</table>

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The volume of new orders in German Manufacturing rose 4.4% in May after a small rise of 0.1% in April and a 3.7% rise in March. The three month rise has brought the level of new orders to 84.5 (2005=100). This is still 33% below the [...]

German Manufacturing Orders And Sales Recovering From Their Steep Declines

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090707c.jpg" width="353">
The Fourth of July seems to have prompted consumer spending this year. During the latest week, chain store sales ticked up all of 0.1%. That, however, was enough to pull the y/y change up to +0.5% after a y/y gain of 0.6% last week. Maybe the consumer is finding his footing? These are the first positive comparisons since late last year. But the consumer definitely isn&#39;t spending with wild abandonee. The latest gains fall well short of the three-to-seven percent growth rates logged during the last several years.
During the last ten years there has been a 69% correlation between the year-to-year growth in chain store sales and the growth in general merchandise sales. The weekly figures are available in Haver&#39;s SURVEYW database.
The ICSC-Goldman Sachs 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.
In tandem with the idea that the consumer isn&#39;t yet spending freely, the leading indicator of sales ticked up all of 0.1% during the latest week. That uptick left the indicator down 2.5% y/y and it has been flat-to-lower all this year.
Exit Strategies for the Federal Reserve from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/econ/bullard/PhiladelphiaGIC28june2009FINAL653pm.pdf">here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">07/04/09</th>
<th scope="col">06/27/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>493.8</td>
<td>493.4</td>
<td>0.5%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>


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The Fourth of July seems to have prompted consumer spending this year. During the latest week, chain store sales ticked up all of 0.1%. That, however, was enough to pull the y/y change up to +0.5% after a y/y gain of 0.6% last week. [...]

Weekly Chain Store Sales Recover Around The Holiday

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<body>
 



<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090707a.jpg">
The energy markets continued to reflect the recent and developing worry that forward momentum in the U.S. economy has faded. Yesterday, the cash market price for a gallon of regular gasoline fell to $1.71 versus the daily high of $2.04 reached in the middle of June. For the full week, the average price fell to $1.84. Retail gas prices have followed these declines, but to a lesser extent. The pump price for regular gasoline fell last week to an average $2.61 per gallon, down eight cents from the high. Nevertheless prices remained up by one dollar from the December low and were at the highest level since late-October. The figures are reported by the U.S. Department of Energy and can be found in Haver&#39;s WEEKLY &amp; DAILY databases.
Lower crude oil prices have led the decline in refined product prices. Yesterday the one-month futures price for light sweet crude oil dropped to $64.05 from an average $69.36 last week. Prices had reached a daily high of $72.68.<img align="right" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090707b.jpg">
The weakness in energy prices is against the backdrop of soft demand. The ongoing recession reduced the demand for motor gasoline by 1.8% y/y during the last four weeks. There is good news, however. The rate of decline has moderated from the 4.8% shortfall this past autumn. Demand for distillate also is off sharply though residual fuel oil demand has moved higher. Finally, oil remains plentiful as evidenced by a 13.5% y/y rise in inventories of crude oil &amp; petroleum products. Inventories of gasoline are flat y/y but crude oil inventories less the SPR are up by 16.8%. The figures on crude oil production and inventories are available in Haver&#39;s OILWKLY database.
Finally, natural gas prices did recover during the last two weeks, but the trend since April has definitely been sideways. Last week&#39;s average price of $3.69 per mmbtu (-72.1% y/y) was down from a recent high of $4.02. Current prices are down by two-thirds from the high reached in early-July of $13.19/mmbtu.
Time variation in the inflation passthrough of energy prices from the Federal Reserve Bank of Kansas City can be found <a href="http://www.kansascityfed.org/PUBLICAT/RESWKPAP/PDF/RWP09-06.pdf">here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">07/06/09</th>
<th scope="col">06 /29/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per Gallon, Regular)</td>
<td>2.61</td>
<td>2.64</td>
<td>-36.5%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; ($ per bbl.)</td>
<td>69.36</td>
<td>68.76</td>
<td>-51.3%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
</body>
</html>

The energy markets continued to reflect the recent and developing worry that forward momentum in the U.S. economy has faded. Yesterday, the cash market price for a gallon of regular gasoline fell to $1.71 versus the daily high of [...]

Gasoline Prices Decline As Economic Momentum Fades Further

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090707a.jpg" align="left" border="0">
The energy markets continued to reflect the recent and
developing worry that forward momentum in the U.S. economy has faded.
Yesterday, the cash market price for a gallon of regular gasoline fell
to $1.71 versus the daily high of $2.04 reached in the middle of June.
For the full week, the average price fell to $1.84. Retail gas prices
have followed these declines, but to a lesser extent. The pump
price for regular gasoline fell last week to an average
$2.61 per gallon, down eight cents from the high. Nevertheless prices
remained up by one dollar from the December low and were at the highest
level since late-October. The figures are reported by the U.S.
Department of Energy and can be found in Haver's WEEKLY
&amp; DAILY databases.
Lower crude oil prices have led the
decline in refined product prices. Yesterday the one-month futures
price for light sweet crude oil dropped to $64.05 from an average
$69.36 last week. Prices had reached a daily high of $72.68.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090707b.jpg" align="right" border="0">
The weakness in energy prices is against the backdrop of soft
demand. The ongoing recession reduced the demand for motor gasoline by
1.8% y/y during the last four weeks. There is good news, however. The
rate of decline has moderated from the 4.8% shortfall this past autumn.
Demand for distillate also is off sharply though residual fuel oil
demand has moved higher. Finally, oil remains plentiful as evidenced by
a 13.5% y/y rise in inventories of crude oil &amp; petroleum
products. Inventories of gasoline are flat y/y but crude oil
inventories less the SPR are up by 16.8%. The figures on crude oil
production and inventories are available in Haver's OILWKLY database.
Finally, natural gas prices did recover during the last two
weeks, but the trend since April has definitely been sideways. Last
week's average price of $3.69 per mmbtu (-72.1% y/y) was down from a
recent high of $4.02. Current prices are down by two-thirds from the
high reached in early-July of $13.19/mmbtu.
Time variation in the inflation passthrough of energy
prices from the Federal Reserve Bank of Kansas City can be
found <a href="http://www.kansascityfed.org/PUBLICAT/RESWKPAP/PDF/RWP09-06.pdf">here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly
Prices</a></th>
<th scope="col">07/06/09</th>
<th scope="col">06 /29/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per
Gallon, Regular)</td>
<td>2.61</td>
<td>2.64</td>
<td>-36.5%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil,
WTI&nbsp; ($ per bbl.)</td>
<td>69.36</td>
<td>68.76</td>
<td>-51.3%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
Weekly Chain Store Sales Recover
Around The Holiday 
by <a href="/comment/Moeller.html">Tom
Moeller</a> July 7, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090707c.jpg" align="left" border="0" height="265" width="353">
The Fourth of July seems to have prompted consumer spending
this year. During the latest week, chain store sales ticked up all of
0.1%. That, however, was enough to pull the y/y change up to +0.5%
after a y/y gain of 0.6% last week. Maybe the consumer is finding his
footing? These are the first positive comparisons since late last year.
But the consumer definitely isn't spending with wild abandonee. The
latest gains fall well short of the three-to-seven percent growth rates
logged during the last several years.
During the last ten years there has been a 69% correlation
between the year-to-year growth in chain store sales and the growth in
general merchandise sales. The weekly figures are available
in Haver's SURVEYW database.
The ICSC-Goldman
Sachs 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.


In tandem with the idea that the consumer isn't yet spending
freely, the leading indicator of sales ticked up all of 0.1% during the
latest week. That uptick left the indicator down 2.5% y/y and it has
been flat-to-lower all this year.
Exit Strategies for the Federal Reserve
from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/econ/bullard/PhiladelphiaGIC28june2009FINAL653pm.pdf">here.</a>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS
(SA, 1977=100)</a></th>
<th scope="col">07/04/09</th>
<th scope="col">06/27/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain
Store Sales</td>
<td>493.8</td>
<td>493.4</td>
<td>0.5%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>
German Manufacturing Orders And
Sales Recovering From Their Steep Declines 
by <a href="/comment/Curley.html">Louise
Curley</a> July 7, 2009

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090707d.jpg" align="right" border="0" height="265" width="353">The volume
of new orders in German Manufacturing rose 4.4% in May after a small
rise of 0.1% in April and a 3.7% rise in March.&nbsp; The three
month rise has brought the level of new orders to 84.5
(2005=100).&nbsp; This is still 33% below the peak of 126.1
recorded in November, 2007.&nbsp; Sales of German Manufacturing and
Mining product rose 4.5% in May after a decline of 2.0% in April and a
1.6% rise in March. Sales are now at an index level of 91.8, 21% below
the peak of 115.7 reached in January, 2008.&nbsp; To put the recent
improvements in perspective, the volume of new orders and sales over
the 8 plus years are shown in the first chart. 
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090707e.jpg" align="right" border="0" height="265" width="353">Much of
the
improvement in both orders and sales was due to a jump in foreign
sales.&nbsp; While domestic new orders rose 3.9% in May, new orders
from the Euro Area countries rose, 5.2% and from the non Euro Area
countries, 8.2%.&nbsp; The comparable figures for sales were 2.9%,
3.9% and 9.4%.&nbsp;&nbsp; The month to month percent changes
in domestic new orders, Euro Area countries new orders and Non Euro
Area countries new orders are shown in the second chart.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090707f.jpg" align="right" border="0" height="265" width="353">Signs of
recovery in new orders and sales in the manufacturing sector are
particularly important for Germany as manufacturing plays such an
important role in the German economy.&nbsp; Manufacturing accounts
for about 25% of Germany's GDP in contrast to the United States where
manufacturing accounts for about 14% of the economy.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">GERMAN
MANUFACTURING ORDERS AND SALES (2005=100)</th>
<th scope="col">May 09</th>
<th scope="col">Apr&nbsp; 09</th>
<th scope="col">May 08</th>
<th scope="col">M/M% Chg&nbsp;</th>
<th scope="col">Y/Y % Chg</th>
<th scope="col">2008 </th>
<th scope="col">2007 </th>
<th scope="col"> 2006 </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">New Orders,&nbsp;</td>
<td>84.5</td>
<td>80.9</td>
<td>118.6</td>
<td>4.45</td>
<td>-28.75</td>
<td>111.3</td>
<td>119.7</td>
<td>108.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Domestic</td>
<td>86.2</td>
<td>83.0</td>
<td>113.8</td>
<td>3.86</td>
<td>-24.25</td>
<td>108.3</td>
<td>114.8</td>
<td>106.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Euro Area Countries</td>
<td>83.1</td>
<td>79.0</td>
<td>122.8</td>
<td>5.19</td>
<td>-32.33</td>
<td>113.9</td>
<td>124.0</td>
<td>110.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non Euro Area
Countries</td>
<td>88.5</td>
<td>81.8</td>
<td>124.8</td>
<td>8.19</td>
<td>-29.09</td>
<td>118.0</td>
<td>125.0</td>
<td>113.4</td>
</tr>
<tr class="even">
<td class="firstcol">Sales</td>
<td>91.8</td>
<td>87.8</td>
<td>113.1</td>
<td>4.56</td>
<td>-18.83</td>
<td>111.2</td>
<td>111.6</td>
<td>105.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Domestic</td>
<td>92.2</td>
<td>89.6</td>
<td>107.7</td>
<td>2.90</td>
<td>-14.39</td>
<td>106.7</td>
<td>106.4</td>
<td>102.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Euro Area Countries</td>
<td>88.5</td>
<td>85.2</td>
<td>116.8</td>
<td>3.87</td>
<td>-24.23</td>
<td>113.6</td>
<td>116.1</td>
<td>107.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non Euro Area
Countries</td>
<td>93.8</td>
<td>85.7</td>
<td>122.8</td>
<td>9.45</td>
<td>-23.62</td>
<td>121.1</td>
<td>119.9</td>
<td>110.9</td>
</tr>
</tbody>
</table>

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Gasoline Prices Decline AsEconomic Momentum Fades Further

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090706f.jpg" align="left" border="0" height="265" width="353">
Special programs to incentivize new car purchases are having
success in spurring new passenger car registrations in Europe. European
Commission President Jose Manuel Barroso said Monday that the recession
in Europe will extend throughout 2009. Yet the auto sector is doing
much better now. 
 

These key large European economies show momentum building from
12-months to six months to three-months. Although most of retails sales
is languishing, the special incentives have prompted auto sales to
revive. In Germany the strongest growth is over six months as the three
month growth rate has backed off. France exhibits the same sort of
pattern but with much less strength over six months and three months. 
 

Sales in Spain over three-months are exploding despite the
ongoing crash in the housing market there. Sales in the UK have finally
showing some growth over three-months buts sales there are still lower
on six months and 12-months. 
 

Auto sales alone will not be enough to turn around the sagging
European economy. Much of Europe depends on export sales reviving; that
will require a more balanced rebound and for recovery to spread to the
surrounding area in Eastern Europe as well. For now, sales inventive
plans seem to be working for autos and that will help to spread some
optimism and growth and should combine with other programs to help to
get growth back on track in 2010. 


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col><col></colgroup><thead><tr>
<th scope="col" class="firstcol" colspan="10">E
Area Car Registrations</th>
</tr>
</thead>
<tbody>
<tr>
<td style="padding-left: 0.25em; padding-right: 0.25em;"></td>
<td colspan="3" style="padding-left: 0.25em; padding-right: 0.25em;"></td>
<td colspan="2" style="padding-left: 0.25em; padding-right: 0.25em;">3-Mo
Trend 
From</td>
<td colspan="2" style="padding-left: 0.25em; padding-right: 0.25em;">6-Mo
Trend 
From</td>
<td colspan="2" style="padding-left: 0.25em; padding-right: 0.25em;">12-Mo
Trend 
From</td>
</tr>
<tr class="odd">
<td style="padding-left: 0.25em; padding-right: 0.25em;">All Seasons
 
Adjusted</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">Jun-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">May-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">Apr-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">Jun-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">May-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">Jun-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">May-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">Jun-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">May-09</td>
</tr>
<tr>
<td class="firstcol" style="padding-left: 0.25em; padding-right: 0.25em;">Germany:</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">6.5%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-6.2%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">15.8%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">79.1%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">2.2%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">128.3%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">125.9%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">40.7%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">39.4%</td>
</tr>
<tr>
<td class="firstcol" style="padding-left: 0.25em; padding-right: 0.25em;">France
(&amp;WDA)</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-10.6%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">17.7%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-2.4%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">11.2%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">123.3%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">19.3%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">48.9%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">6.6%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">14.6%</td>
</tr>
<tr>
<td class="firstcol" style="padding-left: 0.25em; padding-right: 0.25em;">Italy</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">20.3%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-12.3%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">9.7%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">79.9%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">34.3%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">12.8%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">20.8%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">11.5%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-9.4%</td>
</tr>
<tr>
<td class="firstcol" style="padding-left: 0.25em; padding-right: 0.25em;">Spain</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">25.9%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-9.3%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">15.9%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">206.5%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-12.4%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">22.1%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-9.3%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-16.0%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-39.1%</td>
</tr>
<tr>
<td class="firstcol" style="padding-left: 0.25em; padding-right: 0.25em;">UK</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">9.6%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-6.6%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">10.2%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">62.5%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-20.2%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-9.8%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">17.5%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-16.7%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-25.5%</td>
</tr>
<tr class="odd">
<td class="firstcol" style="padding-left: 0.25em; padding-right: 0.25em;">Base
Month of
Calculation</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">May-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">Apr-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">Mar-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">Mar-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">Feb-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">Dec-08</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">Nov-08</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">Jun-08</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">May-08</td>
</tr>
</tbody>
</table>
</body></html>

Special programs to incentivize new car purchases are having success in spurring new passenger car registrations in Europe. European Commission President Jose Manuel Barroso said Monday that the recession in Europe will extend [...]

Auto Registrations Lead Recovery In Europe

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090706e.jpg" align="left" border="0" height="265" width="353">
The accompanying chart makes the point that US rate of
unemployment has risen a lot and Europe&#8217;s has risen by a little. Still
the higher US rate of unemployment will fall sharply in recovery
whereas Europe&#8217;s history suggests that its rate will remain above the
rate of unemployment in America even when it falls. Europe&#8217;s labor
markets are more insulated and less flexible. That will be the next
challenge for Europe. 
 

In Europe a few statistics show us how disparate conditions
can be even within the EMU portion of Europe. German unemployment is up
by just 0.3% points over the last 12 months. French unemployment is up
by 1.7 percentage points. Spain&#8217;s unemployment is up by 8.2 percentage
points, accounting for the bulk of the rise of the rate of unemployment
in EMU over the past year. Over the same period the US rate is up by
3.9 percentage points, and Japan&#8217;s rate is up by 1.2 percentage points.
While there are regional disparities in most large countries,
especially in the US and in Japan. But because of its single monetary
structure and split fiscal structure, regional disparities of the sort
EMU is bearing put a great deal more pressure on the system than would
be the case in a true single independent nation. 
 

For the US, a period like this offer the economy the
opportunity to reinvent itself as old businesses are killed off and new
opportunities and needs reveal themselves. Of course, in this cycle
some old US industries were bailed out because the government thought
they were still worthwhile. Europe has had same the same experience. 
 

Both Europe and the US will be leaving this episode of
recession with much higher levels of debt. This will be a challenge for
the period ahead. The US has showed an ability to get strong growth and
rebuild tax revenues in recoveries. Europe has not showed that same
sort of dynamism. Certain European countries, EMU members (plus the UK)
have the added burden of Maastricht criterion that quantitatively
restricts their debt levels relative to GDP. As recovery sets in, most
EMU nations will be in violation of this rule and it is not clear how
much time the authorities will allow for the rule to be put back in
force. An early imposition of the rule will lead to fiscal contraction
and could hamper recovery. 
 

That will be an extra problems facing Europe once we turn the
corner into recovery. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th scope="col" colspan="7" class="firstcol">Unemployment
rate and changes</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Level</td>
<td colspan="3">Simple Changes</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>May-09</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
</tr>
<tr>
<td class="firstcol">EU-Urate</td>
<td>8.9</td>
<td>8.7</td>
<td>8.5</td>
<td>0.6</td>
<td>1.4</td>
<td>2.1</td>
</tr>
<tr>
<td class="firstcol">EMU-Urate</td>
<td>9.5</td>
<td>9.3</td>
<td>9.0</td>
<td>0.7</td>
<td>1.5</td>
<td>2.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">m/m%</td>
<td colspan="3">% changes (ar)</td>
</tr>
<tr>
<td class="firstcol">EU-U 000s</td>
<td>1.8%</td>
<td>2.6%</td>
<td>3.2%</td>
<td>7.8%</td>
<td>19.8%</td>
<td>31.3%</td>
</tr>
<tr>
<td class="firstcol">EMU-U 000s</td>
<td>1.9%</td>
<td>2.8%</td>
<td>3.0%</td>
<td>7.9%</td>
<td>18.6%</td>
<td>29.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">U-Rates</td>
<td colspan="3">Level</td>
<td colspan="3">Simple Changes</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>7.7</td>
<td>7.7</td>
<td>7.5</td>
<td>0.3</td>
<td>0.6</td>
<td>0.3</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>9.3</td>
<td>9.1</td>
<td>9</td>
<td>0.5</td>
<td>1.1</td>
<td>1.7</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>18.7</td>
<td>18</td>
<td>17.3</td>
<td>2.2</td>
<td>4.7</td>
<td>8.2</td>
</tr>
<tr>
<td class="firstcol">USA</td>
<td>9.4</td>
<td>8.9</td>
<td>8.5</td>
<td>1.3</td>
<td>2.6</td>
<td>3.9</td>
</tr>
<tr>
<td class="firstcol">Japan</td>
<td>5.2</td>
<td>5</td>
<td>4.8</td>
<td>0.8</td>
<td>1.2</td>
<td>1.2</td>
</tr>
</tbody>
</table>
</body></html>

The accompanying chart makes the point that US rate of unemployment has risen a lot and Europe’s has risen by a little. Still the higher US rate of unemployment will fall sharply in recovery whereas Europe’s history suggests that its [...]

Worse Vs Much Worse...

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

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

Policy uncertainty has surged since the US national elections.

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

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

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

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

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

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

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Nonfarm payrolls increased 177,000 (1.2% y/y) during April after rising 185,000 in March, revised from 228,000, and 102,000 in February, revised from 117,000. Expectations had been for a 130,000 rise in the Action Economics Forecast Survey. The latest figure left the three-month average change at 155,000 in April, down from 232,000 in January.

Average hourly earnings rose 0.2% during April after unrevised increases of 0.3% in March and 0.2% in February. Earnings growth of 3.8% y/y was below the 5.9% high in March 2022.

The unemployment rate, measured in the household survey, held m/m at an expected 4.2% in April, and compared to 4.1% in February and 4.0% in January. It reached a low of 3.4% in April 2023. The unemployment rate, including employees working part-time for economic reasons plus all marginally-attached workers, eased to 7.8% in April from 7.9% in March.

In the **establishment survey**, private-sector employment rose 167,000 (1.2% y/y) after a 170,000 March increase. Factory sector jobs edged 1,000 lower (-0.7% y/y) following a 3,000 gain. Construction sector employment increased 11,000 (1.7% y/y), after rising 7,000 in March.

Private service-producing sector employment increased 156,000 (1.4% y/y) in April after improving 161,000 in March. Increases varied greatly amongst service sector categories. Private education & health sector employment rose 70,000 (3.4% y/y) last month following a 74,000 March increase. Leisure & hospitality employment rose 24,000 (1.3% y/y) after a 38,000 gain. Trade, transportation & utilities rose 32,000 (0.9% y/y) in April following a 25,000 March increase. Professional & business services employment rose 17,000 (-0.1% y/y) following a 3,000 rise while temporary help employment rose 3,600 (-3.9% y/y) following a 2,700 decline. Financial activities employment improved 14,000 (1.2% y/y) after a 6,000 gain. The number of information sector jobs held steady (-0.4% y/y) last month after falling 2,000 in March.

Government sector payrolls rose 10,000 (1.3% y/y) last month after increasing 15,000 in March. The number of local government jobs increased 13,000 (1.4% y/y) following a 17,000 gain. State government employment rose 6,000 (1.8% y/y) following a 2,000 March increase but federal government payrolls fell 9,000 (-0.3% y/y), the third consecutive monthly decline.

Private-sector average hourly earnings rose 0.2% (3.8% y/y) in April after increasing 0.3% in March. Earnings in the goods-producing sector eased 0.1% (+4.0% y/y) following a 0.6% gain. Earnings in construction rose 0.3% (3.6% y/y), after a 0.2% rise but factory sector earnings declined 0.3% (+4.3% y/y) after surging 0.8% in March. In the private services-sector, earnings rose 0.2% (3.7% y/y) in April for the third straight month. Information sector pay increased 1.0% (5.2% y/y) last month after easing 0.1%, and financial activities earnings rose 0.5% (4.3% y/y) for the second straight month. Trade, transportation & utilities sector pay increased 0.4% (3.4% y/y) after 0.6%. Professional & business sector earnings increased 0.1% (4.4% y/y) after 0.2% in March. Leisure & hospitality earnings held steady (+3.8% y/y) following a 0.6% March increase.

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The length of the average workweek held steady at 34.3 hours in April. The workweek in the goods-producing sector eased to 39.8 hours from 40.0 hours. The construction sector average workweek eased to 39.0 hours from 39.3 hours while the factory sector workweek moved lower to 40.0 hours from 40.2. The average workweek in the private service sector held at 33.2 hours. Professional & business service hours fell to 36.3 hours from 36.4 while trade, transportation & utilities hours improved to 34.3 from 34.0 hours. Private education hours rose slightly to 32.8, but leisure & hospitality held steady at 25.5 hours.

In the **household survey**, the unemployment rate held at 4.2% in April as employment rose 436,000 and the size of the labor force increased 518,000. The labor force participation rate edged up to 62.6% last month from 62.5% in March. It remained below the high of 63.3% early in 2020. The rate for teenagers declined to 36.9%. For workers aged 20-24, the rate held steady at 72.1%, up from 71.8% six months earlier. For workers aged 25-54 the rate rose to 83.6%, a five-month high. For individuals 55 and over, the rate improved to 38.4% in April.

The employment/population ratio for all workers in April rose to 60.0%. It remained below the peak reading of 61.1% in February, 2020 just prior to the pandemic.

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's **USECON** database. Detailed figures are in the **EMPL** and **LABOR** databases. The expectations figures are in the **AS1REPNA** database.

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- Job growth spreads across most sectors.
- Earnings growth trend decelerates.
- Jobless rate holds steady.

U.S. Job Growth Is Firm in April but March Gain Is Lessened

Winnie Tapasanun

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Total factory orders rose a slightly less-than-expected 4.3% m/m in March after rises of 0.5% in February and 1.8% in January, data from the U.S. Census Bureau showed. A 4.5% m/m March increase had been expected in the Action Economics Forecast Survey. The March reading was the third successive monthly rise and the largest since July 2024. The year-on-year rate accelerated to 6.0% in March, the highest since November 2022, from 2.3% in February. Notably, orders for nondefense aircraft & parts soared 139.0% in March following a 7.4% drop in February and a 92.9% surge in January. Factory orders excluding defense rose 4.8% (5.9% y/y), the largest of three straight m/m/ rises, after a 0.4% February increase. Factory orders excluding the transportation sector fell 0.2% (+1.1% y/y), the first m/m fall since August, after rising 0.3% in February, January and December.

Durable goods orders jumped 9.2% (11.9% y/y) in March, the third consecutive m/m gain and the biggest since July 2024, on top of a 0.8% increase in February (matching +9.2% m/m in the advance report on April 24). The March jump reflected m/m orders increases of 27.1% (the largest m/m surge since July 2024; 31.2% y/y) in transportation equipment, 1.1% (4.9% y/y) in primary metals, 0.5% (-0.4% y/y) in furniture & related products, 0.1% (2.5% y/y) in fabricated metal products, and 0.1% (0.9% y/y) in machinery. To the downside, durable goods orders for computers & electronic products (-1.3%; +2.7% y/y) and electrical equipment, appliances & components (-1.0%; +4.2% y/y) declined m/m in March.

Nondurable goods orders, which equal nondurable goods shipments, fell 0.3% (+0.4% y/y) in March, the first m/m fall since September, after a 0.1% uptick in February. The March fall reflected m/m drops of 2.4% (-9.3% y/y) in petroleum & coal products and 0.9% (-1.2% y/y) in apparel. To the upside, the following nondurable goods shipments rose m/m in March: leather & allied products (1.5%; 8.6% y/y), beverage & tobacco products (0.7%; 5.8% y/y), paper products (0.6%; 2.3% y/y), printing (0.3%; 3.8% y/y), textile mills (0.3%; 0.8% y/y), chemical products (0.2%; 5.4% y/y), plastics & rubber products (0.2%; 0.4% y/y), food products (0.1%; 1.8% y/y), and textile products (0.1%; 2.1% y/y).

Total shipments slipped 0.1% (+2.0% y/y) in March, the first m/m easing since October, after a 0.7% increase in February. Excluding transportation, shipments were virtually unchanged m/m (+1.1% y/y) in March following six straight m/m gains. Shipments of durable goods industries inched up 0.1% (3.8% y/y) in March, the smallest of four consecutive m/m increases, after a 1.3% advance in February. This reflected m/m durable goods shipments rises of 1.2% (5.6% y/y) in primary metals, 0.9% (0.1% y/y) in furniture & related products, 0.8% (-0.2% y/y) in nonmetallic mineral products, 0.4% (0.0% y/y) in machinery, 0.3% (1.8% y/y) in fabricated metal products, 0.2% (4.5% y/y) in computers & electronic products, 0.2% (-2.1% y/y) in wood products, and 0.1% (3.0% y/y) in electrical equipment, appliances & components. In contrast, durable goods shipments for transportation equipment (-0.5%; +7.3% y/y) and miscellaneous durable goods (-0.1%; +2.9% y/y) fell m/m in March following three successive m/m increases.

Unfilled orders rose 2.0% (2.3% y/y) in March, up for the eighth month in nine, after a 0.1% uptick in February. Excluding transportation, unfilled orders dipped 0.1% (+0.7% y/y) in March, the first m/m easing since May 2024, after holding steady in February. Backlogs of durable goods rose 2.0% (2.3% y/y) in March, reflecting m/m rises of 3.1% (3.1% y/y) in transportation equipment and 0.2% (2.4% y/y) in electrical equipment, appliances & components.

Inventories edged up 0.1% (0.9% y/y) in March, the fifth straight m/m increase, after rising at the same pace in the prior two months. Excluding transportation, inventories were up 0.1% (0.5% y/y) in March, the fifth consecutive m/m rise. Durable goods inventories ticked up 0.1% (1.0% y/y) in March after holding steady in February and January; nondurable goods inventories edged up 0.1% (0.8% y/y), the fifth successive m/m increase.

The factory sector data are available in Haver’s **USECON** database. The Action Economics Forecast Survey is in the **AS1REPNA** database.

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- March manufacturers’ new orders +4.3% m/m; +6.0% y/y, highest since Nov. ’22.
- Durable goods orders (+9.2%) jump m/m, while nondurable goods orders (-0.3%) and shipments (-0.1%) decline m/m.
- Transportation equipt. orders +27.1% m/m, w/ a 139.0% m/m surge in nondefense aircraft & parts orders.
- Unfilled orders +2.0%, the eighth m/m rise in nine months.
- Inventories +0.1%, the fifth consecutive m/m increase.

U.S. Factory Orders Increase for the Third Straight Month in March

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The global manufacturing data showed broad weakening in April as conditions weakened across more than half of the contributing early reporters in the S&P survey of manufacturing. Of the 18 early reporting countries, more than half of them showed deceleration over six months and 12 months. Over three months, only 8 of 18 showed deterioration and that's about as good as it got in this report. In the current month, month-to-month changes showed more than half of the survey contributors showing weaker results than the month before. In the S&P framework, manufacturing improved month-to-month for the U.S.; however, looking at sequential averages for the U.S., U.K., European monetary union, Canada, and Japan, we see a steady weakening and results over 12 months, over six months versus 12 months, and for three months versus 6 months. The highly developed countries are not doing particularly well.

Asian economies are also showing slight deterioration but doing a little better than the developed countries in general.

Only five of the 18 reporting countries have queue percentile standings in their data back to January 2021 that are above their medians. Readings at or above the 50% mark are at or above the median standing. Canada is showing the weakest manufacturing result on record over this span, in terms of its queue percentile standing which is at 0 in the current month.

I showed the graphic for the Baltic dry goods index in this report rather than statistics on the manufacturing PMI data because the Baltic data, which reflect shipping volume for dry goods - that is excluding things like oil - is weak but it's only in the neighborhood where it's been for some time. There has been a great deal of talk about how tariffs may have impacted trade flows, expected trade flows, shipping, shipping rates, and the like. However, according to the Baltic dry goods index, there isn't much evidence that this is occurring right now and affecting the current data. That may still lie ahead but for now it's not baked in the cake.

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Globally Manufacturing Weakens

Andrew Cates

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

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

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

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

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

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

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

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Charts of the Week: Tariff Truce, Tenuous Trust

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

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

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

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

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

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

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

Economy in Brief: July 2009

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