Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041109e.jpg" width="353">
Optimists among German institutional investors and analysts were hard to find in November. The ZEW index that shows the balance of those expecting improved conditions during the next six months over those expecting worse conditions fell to 13.9% from 31.3% in October. This was the lowest value since January, 2003. The rise in the euro and the price of oil were cited as the principal causes of worry about the outlook.
The quarterly survey of employment conducted by the Federal Statistical Office, reported the third quarter-to-quarter increase in seasonally adjusted employment in the third quarter. These increases in employment are the first since late 2001. In its press release, the FSO noted that the increased use of temporary workers and the subsidization of single person or family companies -- labor reforms, known as Hartz I and II that became effective in 2003--played a positive role in the rise in employment.
The harmonized index of consumer prices was 107.0 in October, up 0.38% from September and 2.00% above October 2003. The details are not yet available for October, but the high and rising price of oil during the month was likely a major cause of the rise in the overall index.
The year-to-year changes in employment and prices are shown in the attached chart.

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<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Nov 04</th>
<th scope="col">Oct&nbsp;04</th>
<th scope="col">Nov 03</th>
<th scope="col">M/M Dif</th>
<th scope="col">Y/Y Dif</th>
<th scope="col">&nbsp;2003&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2002&nbsp;</th>
<th scope="col">&nbsp; 2001&nbsp; &nbsp;</th>
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</thead>
<tbody>
<tr class="odd">
<td class="firstcol">ZEW (Percent balance)</td>
<td>13.9</td>
<td>31.3</td>
<td>67.2</td>
<td>-17.2</td>
<td>-53.3</td>
<td>36.4</td>
<td>45.3</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
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<td class="firstcol">&nbsp;</td>
<td>Oct 04</td>
<td>Sep 04</td>
<td>Oct 03</td>
<td>M/M %&nbsp;</td>
<td>Y/Y %&nbsp;</td>
<td>&nbsp;2003&nbsp;&nbsp;</td>
<td>&nbsp;2002&nbsp;</td>
<td>&nbsp; 2001&nbsp; &nbsp;</td>
</tr>
<tr>
<td class="firstcol">Harmonized CPI (2000=100)</td>
<td>107.0</td>
<td>106.6</td>
<td>104.9</td>
<td>0.38</td>
<td>2.00</td>
<td>104.5</td>
<td>103.4</td>
<td>103.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
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<tr>
<td class="firstcol">&nbsp;</td>
<td>Q3 04</td>
<td>Q2 O4</td>
<td>Q3 04</td>
<td>Q/Q Dif</td>
<td>Y/Y Dif</td>
<td>&nbsp;2003&nbsp;&nbsp;</td>
<td>&nbsp;2002&nbsp;</td>
<td>&nbsp; 2001&nbsp; &nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Employment&nbsp; (Thousands)</td>
<td>38390</td>
<td>38371</td>
<td>38294</td>
<td>15</td>
<td>96</td>
<td>38316</td>
<td>38699</td>
<td>38923</td>
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Optimists among German institutional investors and analysts were hard to find in November. The ZEW index that shows the balance of those expecting improved conditions during the next six months over those expecting worse conditions [...]

A Mixed Bag of Data from Germany: The ZEW Index of Expectation Down Sharply, Employment and Prices Higher

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Tom Moeller

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The Industrial Materials Price Index from the Foundation for International Business and Economic Research (FIBER) jumped 2.3% (0.2% y/y) during the four weeks ended July 4, 2025. The improvement followed declines since early spring.

Prices in the Metals group surged 4.0% (-2.3% y/y) over the most recent four weeks. Price strength was broad-based. Tin prices jumped 7.9% (2.2% y/y) while aluminum costs surged 5.6% (4.2% y/y). Copper scrap prices rose 3.8% (5.0% y/y) in four weeks as lead prices surged 3.4% in four weeks (-7.4% y/y). The cost zinc rose 3.0% (-6.0% y/y) and steel scrap rose 1.4% (-11.4% y/) in four weeks.

Crude Oil & Benzene group prices moved 3.1% higher (-15.7% y/y) in the latest four week period. The cost of West Texas Intermediate crude oil rose 5.2% higher to $65.86 per barrel and remained 20.6% lower y/y. It fell to a low of $58.50 per barrel in the second week of May. The cost of the petrol-chemical benzene, used for making plastics & synthetic fibers, strengthened 6.0% (-35.3% y/y). Excluding crude oil, the industrial commodity price index rose 2.1% (1.6% y/y) during the last four weeks.

Miscellaneous group prices increased 1.5% (9.8% y/y) in the latest period. The price of tallow (used in the soap industry) rose 5.9% (15.7% y/y) in four weeks. Framing lumber prices gained 4.3% (38.3% y/y) while natural rubber prices improved 0.3% (12.5% y/y) in four weeks.


Prices in the Textile group edged 0.8% higher (1.7% y/y) during the last four weeks. Cotton prices rose 4.4% and also 4.4% y/y. Burlap costs rose 1.3% in four weeks and 10.1% y/y.

The Foundation for International Business and Economic Research (FIBER) develops economic measurement techniques as applied to business cycles and inflation in the U.S. and other market economies. The commodity price data can be found in Haver's **DAILY**, **WEEKLY**, **USECON** and **CMDTY** databases.

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- Prices increase broadly after earlier declines.
- Metals prices lead upturn.
- Textile price rise but rubber prices are little changed.

FIBER: Industrial Commodity Prices Surge in Latest Four Weeks

Tian Yong Woon

This week, we look at the latest US trade developments and their implications for Asia, as the US’ 90-day tariff pause expires on Wednesday (July 9). Market sentiment had already turned cautious ahead of the deadline, reflecting heightened uncertainty around US trade policy (chart 1). This unease was reinforced by President Trump’s announcement that tariff notices would be sent to trading partners, starting with 12 to 15 to be sent on Monday. A modest source of relief came from US Treasury Secretary Bessent, who indicated that some countries could be granted an extra three weeks to negotiate. However, any resulting tariffs are still set to take effect on August 1. Bessent also confirmed that around 100 economies will now face a baseline 10% tariff. If this is upheld—and if 10% remains the floor—it implies that more than 20 economies have lost their previous preferential treatment, further worsening their trade position (chart 2).

In contrast, Vietnam reached a deal last week, cutting its tariff rate from 46% to 20%, though the agreement includes a 40% tariff on “transshipments.” In return, the US secured tariff-free access to Vietnamese markets. While 20% is a clear improvement, it remains high relative to the current 10% reprieve and could feed through to higher US consumer prices—particularly given Vietnam’s key role in electronics exports (chart 3). Japan, meanwhile, is under pressure to open its rice market or face tariffs of up to 35%. However, any concessions would be politically sensitive, particularly with upper house elections approaching. In the meantime, Japan has already ramped up rice imports to help ease domestic shortages (chart 4). All this comes as central banks in Australia, New Zealand, South Korea, and Malaysia meet this week. The Reserve Bank of Australia is widely expected to cut rates amid easing inflation to further support growth (chart 5), while South Korea’s central bank is seen likely to hold steady, wary of rising home prices and mortgage growth (chart 6).

**Latest US tariff developments**
Market sentiment turned cautious late last week as the US’ tariff pause neared its end. Understandably, this unease was reinforced by President Trump’s announcement that tariff notices would be sent to trading partners, starting with 12 to 15 to be sent on Monday. The earlier sense of relief—when tariffs appeared to have been delayed—has faded, giving way to renewed uncertainty. As this shift in sentiment takes hold, equity performance across advanced Asia has weakened in recent days, as shown in chart 1. Amid the resurfacing uncertainty, there is a modest point of reprieve. While this Wednesday (July 9) marks the end of the US' 90-day tariff pause, US Treasury Secretary Scott Bessent has indicated that some countries may be granted an additional three weeks to continue negotiations. Furthermore, any new resulting tariff rates will only take effect on August 1. The extension offers more time to talk—but not a delay in implementation. That said, progress on trade discussions with the US has been limited for most Asian economies—and may even have deteriorated for some, such as Japan, which will be addressed in a later section.

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Digging deeper into the details, Bessent also noted that around 100 economies and territories will now face a baseline tariff of 10%. If this is accurate—and if the 10% rate remains the floor—it suggests that many of the economies and territories originally assigned that baseline rate, roughly 20 or more, have now been excluded. In effect, their relative position has worsened. In the Asia-Pacific region, key economies to watch in this context include Australia, New Zealand, and Singapore, among others, as shown on chart 2. Notably, these countries have not been actively engaged in substantive trade negotiations with the US—perhaps understandably so. Furthermore, based on recent messaging from the US, it appears that the original “Liberation Day” tariff schedule may no longer apply. This raises a broader and more consequential question: Will the new rates be grounded in a clear justification or mechanism—and if so, what might that be?

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**Vietnam**
While trade deals with the US have been few and far between since the beginning of the tariff pause, Vietnam has stood out following the announcement of a new trade agreement with the US late last week. Originally facing a reciprocal tariff rate of 46%, Vietnam has reached a deal to reduce that rate to 20%. However, the agreement also includes a 40% tariff on so-called “transshipments”—a measure aimed at addressing US concerns that goods may be routed through Vietnam from other economies, possibly China, to circumvent higher tariffs or trade restrictions. In return, the US has secured tariff-free access to Vietnamese markets. While the 20% rate is a significant improvement over the initially proposed 46%, it remains relatively high—especially compared to the 10% reprieve level. This will likely translate into higher costs for American consumers unless the increase is absorbed by producers or suppliers. On the positive side, tariff-free access to Vietnam offers some offset, particularly for US input goods sent to Vietnam for further processing, which would avoid additional tariffs on that leg of trade. That said, there is still uncertainty around how the “transshipment” clause will be defined and enforced in practice. Given Vietnam’s role as a major supplier of electronics—including smartphones—to the US (chart 3), the increase from the 10% pause rate to 20% is significant. If the added costs are passed through the supply chain, it could lead to a noticeable impact on US consumer prices.

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**Japan**
Turning to Japan, the country is walking a tightrope between avoiding the economic fallout of renewed US tariffs and being seen as capitulating to US trade demands. Among those demands is a push for Japan to open up its market further—particularly for US rice. President Trump has criticized Japan as being “spoiled” for resisting such moves and has threatened tariffs of 30–35%, significantly higher than the 24% “Liberation Day” rate. Complying with US demands could be politically costly for the Japanese government. Any concession on rice would likely be viewed as a blow to Japanese farmers—a key part of Prime Minister Ishiba’s political base. The issue is especially sensitive with upper house elections approaching. At the same time, Japan is grappling with a domestic rice shortage that has been driving prices higher. Given rice’s central role in the Japanese diet, the shortage is a major cost-of-living concern. In response, Japan has already ramped up rice imports, as shown in chart 4, including by bringing forward a tariff-free tender—originally scheduled for September—for 30,000 tons from the US, Australia, and Thailand. However, relative to Japan’s actual consumption needs, this incremental supply is just a drop in the bucket.

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**Central bank decisions this week**
This week’s renewed US trade uncertainty threatens to complicate a series of central bank decisions across the region. The central banks of Australia, New Zealand, South Korea, and Malaysia are all set to announce policy rate decisions just as the US’ 90-day tariff pause expires. If the so-called “Liberation Day” tariffs are reinstated, they could pose fresh downside risks to regional trade and growth, forcing policymakers to reassess their outlooks. Some central banks already have a clear easing bias. For example, the Reserve Bank of Australia is widely expected to cut rates this week—its third cut in the current cycle—as inflation continues to moderate (chart 5) and domestic growth remains sluggish.

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Lastly, turning to South Korea, the central bank (BoK) has already lowered rates four times since beginning its easing cycle last October and maintained a dovish tone at its most recent meeting in response to weakening growth momentum. However, the BoK is widely expected to hold rates steady this week. It is aiming to strike a balance between supporting growth—particularly with the potential reinstatement of US tariffs looming—and avoiding overheating in segments of the domestic economy. In particular, the BoK remains concerned about the property market, where housing prices have resumed their upward trend, and the household loan sector—especially mortgage lending—where loan growth has once again accelerated, as shown in chart 6.

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Asia

Economic Letter from Asia: The Final Countdown?

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Nonfarm payrolls increased 147,000 (1.1% y/y) during June after rising 144,000 in May, revised from 139,000, and 158,000 in April, revised from 147,000. Expectations had been for a 113,000 rise in the Action Economics Forecast Survey. The three-month average change of 150,000 in June compared to 232,000 in January.

Average hourly earnings rose 0.2% during June after an unrevised 0.4% May gain, and a 0.2% April increase. Earnings growth of 3.7% y/y is down from a high of 4.2% last November, and has been trending lower from the 5.9% high in March 2022. A 0.3% increase expected for June.

The unemployment rate, measured in the household survey, fell m/m to 4.1%. It compared to 4.2% in May where it had been for three straight months. A rise to 4.3% was expected. 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 7.7% last month from 7.8% In May. It was 6.6% in April 2023.

In the **establishment survey**, private-sector employment in June rose 74,000 (1.0% y/y) after a 137,000 May increase. Factory sector jobs declined 7,000 (-0.7% y/y) for the second consecutive month. Construction sector employment increased 15,000 (1.4% y/y), after rising 6,000 in May.

Private service-producing sector employment increased 68,000 (1.2% y/y) in June after improving 141,000 in May. Increases varied greatly amongst service sector categories. Private education & health sector employment rose 51,000 (3.3% y/y) last month while leisure & hospitality employment rose 20,000 (1.4% y/y). Trade, transportation & utilities employment gained 3,000 (0.6% y/y) and financial activities employment improved 3,000 (1.0% y/y).

Government sector payrolls strengthened 73,000 (1.5% y/y) last month following a 7,000 rise in May. State government employment increased 47,000 (2.8% y/y) while the number of local government jobs rose 33,000 (1.7% y/y). Federal government payrolls fell 7,000 (-2.1% y/y), the fifth straight monthly decline.

Private-sector average hourly earnings rose 0.2% (3.7% y/y) in June following unrevised increases of 0.4% in May and 0.2% in April. Earnings in the goods-producing sector edged 0.1% (3.6% y/y) higher. In construction earnings rose 0.4% (3.9% y/y) but factory sector earnings eased 0.1% (+3.5% y/y). In the private services-sector, earnings rose 0.2% (3.7% y/y) in June.

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The length of the average workweek shortened to 34.2 hours in June from 34.3 hours in May. The workweek in the goods-producing sector was unchanged at 39.8 hours. The construction sector average workweek eased to 38.9 hours while the factory sector workweek held steady at 40.1 hours. The average workweek in the private service sector eased to 33.1 hours.

In the **household survey**, the unemployment rate dipped to 4.1% in June from 4.2% in May as employment rose 96,000 and the size of the labor force declined 130,000, off for the second straight month. The labor force participation rate eased to 62.3% last month and remained below the high of 63.3% early in 2020. The rate for teenagers plunged to 35.1%, a five-year low. For workers aged 20-24, the rate declined to 71.0%. For workers aged 25-54, the participation rate edged up to 83.5%. For individuals 55 and over, the rate eased to nearly a 20-year low of 38.0% in June.

The employment/population ratio for all workers held steady at 59.7% last month. 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 improves with strength in state & local gov’t hiring.
- Earnings gain decelerates.
- Jobless rate falls to four-month low.

U.S. Employment Growth Firms in June, While Earnings Growth & Jobless Rate Decline

Sandy Batten

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The U.S. trade deficit in goods and services (BOP basis) widened to $71.5 billion in May from a downwardly revised $60.3 billion in April (previously -$61.6 billion), according to the U.S. Census Bureau. The actual widening met the Action Economics Forecast Survey expectation. Exports fell 4.0% m/m (+5.3% y/y), the first monthly decline in five months, led by a 5.7% m/m decline in goods exports. Imports edged down 0.1% m/m (+3.3% y/y) in May after a 16.3% m/m plunge in April. Imports of goods have cooled markedly in the past two months after surging during Q1 as importers attempted to front run expected increases in tariffs.

The real (inflation adjusted) goods trade deficit widened to $92.5 billion (2017$) in May from $84.4 billion in April. The real trade deficit had widened to record levels during the first quarter with net exports subtracting 4.6%-points from Q1 GDP. The April/May figures put the real balance on course to narrow by roughly $150 billion in Q2 (at a quarterly rate), which would mean that net exports in the national accounts could add 2-1/2 to 3%-points to Q2 GDP.

The trade deficit in goods widened to $97.5 billion in May from $86.3 billion in April. Goods exports fell 5.7% m/m, the first monthly decline in five months. Exports of nonmonetary gold fell $5.5 billion (-56.4% m/m) while exports of finished metal shapes (which includes other forms of nonmonetary gold) fell $1.0 billion (-10.0% m/m). Both of these had surged in April, reflecting re-exports of previous nonmonetary gold imports that had risen markedly in Q1 in an attempt to front run expected tariff increases. More generally, exports of industrial supplies and materials slumped 13.3% m/m in May after a 16.1% m/m jump in April. Capital goods ex autos declined 3.1% m/m, and food exports fell 2.5% m/m, the fifth monthly decline in the past six months. In contrast, auto exports rebounded, rising 3.6% m/m, but failed to come close to reversing the 21.5% plunge in April. Exports of nonfood consumer goods ex autos posted a solid 6.9% monthly gain after having declined in each of the preceding two months.

Imports of goods edged down 0.1% m/m (+2.8% y/y) in May on top of a 19.9% monthly plunge in April, indicating that the surge in imports in Q1 ahead of expected tariff hikes has run its course. Auto imports jumped 10.3% m/m after a 19.9% monthly decline in April. Imports of “other” goods rebounded 8.4% m/m in May following a 3.3% m/m decline in April. In contrast, imports of industrial supplies and materials fell 1.8% m/m, the fourth consecutive monthly decline. Imports of nonfood consumer goods ex autos fell 5.7% m/m on top of a 32.0% drop in April. Food imports posted a small monthly decline while imports of capital goods ex autos posted a small increase.

The services trade surplus narrowed marginally to $25.99 billion in May from $26.05 billion in April. Exports of services slid 0.2% m/m after a 2.2% monthly increase in April. Exports of transport services fell 2.0% m/m, the third monthly decline in the past four months. Travel exports declined 1.8% m/m, the fourth monthly decline in the past five months. In contrast, maintenance services exports rose 2.1% m/m; exports of insurance services increased 1.5% m/m; exports of intellectual property rose 0.9% m/m; and construction service exports gained 1.4% m/m. Services imports declined 0.2% m/m in May, the first monthly decline in three months. Imported transport services fell 3.3% m/m, the fourth monthly decline in the past five months. Travel imports declined 1.0% m/m, also the fourth monthly decline in the past five months. In contrast, imported construction services jumped 3.9% m/m and imported intellectual property rose 1.6% m/m.

The U.S. goods trade deficit with China narrowed markedly to a seasonally adjusted $14.0 billion from $19.7 billion in April and $24.2 billion March. This is the smallest monthly deficit with China in the history of the series, which dates back to 2009. Exports to China plunged 19.9% m/m while imports from China plummeted 26.3% m/m. The trade deficit with the European Union widened to $22.5 billion from $17.9 billion in April. The trade deficit with Japan narrowed marginally to $5.77 billion in May from $5.81 billion in April.

The international trade data, including relevant data on oil prices, can be found in Haver’s **USECON** database. Detailed figures on international trade are available in the **USINT** and **USTRADE** databases. The expectations figures are from the Action Economics Forecast Survey in **AS1REPNA**.

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- Trade deficit widened in May on decline in goods exports.
- Still, the real deficit in April/May points to net exports making a meaningful positive contribution to Q2 GDP.
- Both exports and imports declined in May.
- Series low trade deficit with China.

	Nov 04	Oct 04	Nov 03	M/M Dif	Y/Y Dif	2003	2002	2001
ZEW (Percent balance)	13.9	31.3	67.2	-17.2	-53.3	36.4	45.3	2.8

	Oct 04	Sep 04	Oct 03	M/M %	Y/Y %	2003	2002	2001
Harmonized CPI (2000=100)	107.0	106.6	104.9	0.38	2.00	104.5	103.4	103.0

	Q3 04	Q2 O4	Q3 04	Q/Q Dif	Y/Y Dif	2003	2002	2001
Employment (Thousands)	38390	38371	38294	15	96	38316	38699	38923

A Mixed Bag of Data from Germany: The ZEW Index of Expectation Down Sharply, Employment and Prices Higher

Summary

Louise Curley

More Economy in Brief

FIBER: Industrial Commodity Prices Surge in Latest Four Weeks

Economic Letter from Asia: The Final Countdown?

U.S. Employment Growth Firms in June, While Earnings Growth & Jobless Rate Decline

U.S. Trade Deficit Widened in May