Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060106a.jpg" width="353">
Challenger, Grey &amp; Christmas reported that job cut announcements in December rose for the fourth consecutive month. The 8.6% rise versus November to 107,822 pulled the three month average of job cut announcements up to 96,134 (-8.6% y/y).
For the year, job cut announcement rose 3.1%, the first annual increase since 2001.
An increased level of job cuts in government dominated the December report. Declines in layoff announcements were widespread throughout other industries.
During the last ten years there has been an 84% (inverse) correlation between the three month moving average of announced job cuts and the three month change payroll employment.
Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.
Challenger also reported a sharp m/m drop in announced hiring plans (102.1% y/y).

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
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<td class="firstcol">Announced Job Cuts</td>
<td>107,822</td>
<td>99,279</td>
<td>-1.3%</td>
<td>1,072,054</td>
<td>1,039,935</td>
<td>1,236,426</td>
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Challenger, Grey & Christmas reported that job cut announcements in December rose for the fourth consecutive month. The 8.6% rise versus November to 107,822 pulled the three month average of job cut announcements up to 96,134 (-8.6% [...]

Challenger Layoffs Up Again in December

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Tian Yong Woon

This week, we dive deeper into developments concerning India and China, while noting the recently improving relationship between the world’s two most populous countries. In India, market sentiment understandably soured (chart 1) after US President Trump followed through on earlier threats to raise additional tariffs to 50%, in response to its purchases of Russian oil. While these tariffs would render much of its exports to the US uncompetitive, a small source of interim relief comes from current exemptions, such as for pharmaceuticals and electronics, India’s major export categories to the US (chart 2).

Turning to China, overcapacity remains a concern for many of its major Western trading partners. Persistently rising export volumes amid falling export prices can signal overcapacity, though they are not definitive evidence. Nonetheless, indications of overcapacity — for example, in China’s transportation exports (chart 3) — continue to raise concerns. Europe has responded with significant tariffs on Chinese EVs, but Chinese producers have offset these by onshoring production in Europe or switching to hybrid vehicles, while continuing to expand export volumes despite declining prices (chart 4).

Amid rising US trade pressure, China and India have drawn closer as partners of circumstance despite their often-thorny history. Prime Minister Modi’s attendance at China’s Shanghai Cooperation Organization (SCO) summit, starting Sunday — his first visit to China in seven years — is a strong signal of improving ties. While this engagement may help foster trade and investment between the two countries, underlying challenges remain. India’s substantial trade deficit with China (chart 5) could worsen if imports increase, and mutual direct investment — which has been subdued in recent years, perhaps due to previously frosty relations — may require further policy support to rebound (chart 6).

**India**
President Trump followed through on his earlier threats by imposing an additional 25% tariff on India, raising the total additional tariff rate to 50% as of last week and in response to India’s purchases of Russian oil. Indian markets reacted sharply, with equities falling and the rupee weakening, as shown in chart 1. Given the scale of the new tariffs — which render much of India’s exports to the US uncompetitive — calls for government and monetary policy support have intensified. Authorities are already bracing for the immediate impact, including first-round effects such as rushed efforts to re-route trade, seek alternative markets, and limit losses through layoffs. On the fiscal side, Prime Minister Modi announced consumption tax cuts last week to cushion the blow, and the crisis may also present an opportunity to finally reform India’s notoriously complex tax system.

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Given India’s heavy reliance on the US for export revenue — and with US importers already pressuring Indian producers to cut prices — profits on both sides are likely to suffer under the newly imposed tariffs. As a partial reprieve, the US has temporarily exempted pharmaceuticals and electronics, two of India’s major export categories, as shown in chart 2. Moreover, significant front-loading of shipments ahead of the tariff hike may temporarily buoy trade data and near-term growth, though India’s longer-term prospects now face renewed headwinds.

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**China**
Moving on to China, the economy remains under scrutiny for signs of industrial overcapacity, a concern raised by several Western trading partners. While not conclusive on their own, some common hallmarks of industrial overcapacity include persistently falling prices — often driven by price wars — and a turn to higher exports as producers offload surplus output when domestic demand cannot absorb it. In this context, chart 3 compares year-to-date changes in both export volumes and unit values across major goods categories, offering suggestive — though not definitive — evidence of overcapacity. Notably, sectors such as transportation stand out, which we examine in greater detail in the next section.

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Focusing on a more concrete case of China’s overcapacity, electric-vehicle (EV) exports to Europe remain a key flashpoint. Export volumes continue to climb even as unit prices fall year-on-year (chart 4), suggesting that overcapacity persists, with low-cost Chinese EVs pressuring European automakers. This surge has continued despite EU tariffs of up to 45% on battery EVs. Chinese carmakers have offset the impact by promoting plug-in hybrids and onshoring production in Europe to sidestep duties and defend market share. Beijing, however, is not standing idle. Measures to rein in excess capacity and curb destructive price competition — or “break involution” — are underway. These include crackdowns on price wars across multiple sectors and even a dedicated fund to acquire and shutter roughly one-third of China’s loss-making polysilicon industry. Early signs of traction appear in China’s latest industrial profits data, where year-on-year declines narrowed to 1.7% in July as cut-throat pricing eased.

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**China & India relations**
China and India, facing rising trade pressure from the US, have drawn closer together as partners of circumstance despite their often-thorny history. A clear sign of warming ties was Prime Minister Modi’s attendance at the Shanghai Cooperation Organization (SCO) summit, which began on Sunday in Tianjin — his first visit to China in seven years after skipping last year’s meeting in Kazakhstan. Following talks at the summit, President Xi and Prime Minister Modi affirmed that China and India are partners rather than rivals, pledging to improve trade ties while easing tensions over their Himalayan border dispute. Modi also announced that direct India-China flights will resume after a five-year suspension. Even so, it remains uncertain how much India can expand imports from China without worsening its already sizable trade deficit, as shown in chart 5.

250901T5.jpg

The Xi-Modi meeting also raised prospects for renewed investment flows between the two countries. In recent years, mutual direct investment has slowed sharply, likely reflecting strained relations and caution. Stronger political engagement — including Foreign Minister Wang Yi’s earlier visit to India, a precursor to the summit — could help reverse this trend. As shown in chart 6, cross-border investment remains subdued. However, improving ties could pave the way for new projects, joint ventures, and deeper economic integration, potentially unlocking the combined economic potential of both countries given their large populations and other significant factors.

250901T6.jpg

Asia

Economic Letter from Asia: A Friend in Need

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The **PCE chain price index** increased 0.2% (2.6% y/y) after rising an unrevised 0.3% in June and an unrevised 0.2% in May. The y/y gain steadied at 2.6%. It was increased from 2.2% y/y in April. Energy prices fell 1.1% (-2.7% y/y) after rising 0.9%, while food & beverage prices eased 0.1% (+1.9% y/y) following a 0.3% rise. The price index excluding food & energy rose a steady 0.3%, after two straight 0.2% increases. The y/y gain edged up to 2.9% last month from 2.8% in June. It was increased from a low of 2.6% in April.

Durable goods prices eased 0.1% (+1.1% y/y) in July, after rising 0.5% in June. Home furnishings & appliance prices edged 0.1% higher (2.5% y/y), after increasing 1.3%. Recreational goods & vehicle costs declined 0.9% (-0.3% y/y) and reversed the 0.9% June strengthening. Motor vehicle & parts prices rose 0.2% (1.6% y/y), after a 0.4% June decline.

Prices of nondurable goods eased 0.1% (+0.2% y/y) last month after rising 0.4% in June. Clothing prices held steady both m/m and y/y after rising 0.3% in June. Food & beverage prices eased 0.1% (+1.9% y/y), following a 0.4% June increase. Gasoline & other energy prices fell 1.7% (-9.6% y/y), after rising 0.9% in June.

Services prices in July rose 0.3% (3.6% y/y), after four straight 0.2% increases. Housing & utility prices rose 0.2% (4.3% y/y), after two consecutive 0.3% increases, and services prices excluding energy & healthcare gained 0.4% (3.7% y/y) after two 0.2% gains. Healthcare prices rose 0.2% (2.7% y/y), after rising 0.4%. The cost of financial services & insurance jumped 1.2% (5.5% y/y) after rising 0.4% in June. Recreation services costs rose 0.3% (3.2% y/y) after rising 0.1%. Transportation prices gained 0.2% (4.4% y/y), following a 0.1% rise, while hotel & restaurant prices improved 0.1% (2.8% y/y) after a slight June decline.

**Personal consumption expenditures (PCE)** rose 0.5% (4.7% y/y) last month after increasing 0.4% in June, revised from 0.3%, after holding steady in May. The July rise matched expectations in the Action Economics Forecast Survey. When adjusted for price changes, PCE improved 0.3% in July (2.1% y/y) after rising 0.1% in June.

Real spending on durable goods increased 2.0% (3.2% y/y) in July, after falling for three straight months. Real spending on motor vehicles jumped 4.5% (3.5% y/y), after falling sharply in both June and May. Real outlays on furnishings & appliances improved 0.2% (0.9% y/y), after falling in each of the prior month. Real spending on recreational goods & vehicles increased 1.5% (4.9% y/y) last month, after falling 0.4% in June. Spending on “other” durable goods improved 0.4% (2.6% y/y) after rising 0.2% in June.

Nondurable goods spending in real terms rose 0.3% (2.7% y/y) in July after gaining 0.6% in June. Real clothing & footwear purchases rose 0.6% (4.9% y/y) last month, following a 0.5% rise during June. Real food & beverage purchases strengthened 0.7% (1.7% y/y) after rising 0.4%. Real outlays on gasoline & other energy products fell 1.3% (-1.5% y/y), after rising 1.5%. Real spending on “other” nondurable goods edged 0.1% higher (4.1% y/y) last month, following a 0.6% rise in June.

Real spending on services improved 0.1% (1.7% y/y) in July for the second straight month. Real spending on housing & utilities rose 0.1% (1.1% y/y) in July, for a second consecutive month, while real health care spending also rose 0.1% (3.9% y/y) after rising 0.2%. Real spending on food services & accommodations eased 0.2% (+1.7% y/y), after rising 0.4% in June. Real spending on financial services & insurance rose 0.2% (2.4% y/y) after increasing 0.4% in June. Real spending on transportation services rose 0.3% (-0.0% y/y) in July, after falling 0.6% in June. Recreation spending slipped 0.1% (+1.0% y/y), the same as in June. Spending on “other” services rose 0.3% (2.7% y/y) for the second straight month.

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**Personal income** rose 0.4% last month (5.0% y/y) after increasing 0.3% in June. A 0.5% gain was expected. Wages & salaries moved 0.6% higher (5.3% y/y), following a 0.1% increase during June. Rental income increased 0.5% (4.0% y/y) in July, after falling for three straight months. Proprietors’ income improved 0.7% (2.3% y/y), after a minimal 0.1% increase. Income from assets rose 0.1% (1.4% y/y), after holding steady in June, and current transfer receipts were unchanged (8.3% y/y) following a 1.1% June increase.

Disposable personal income increased 0.4% (4.6% y/y) during July following a 0.3% June rise. After adjusting for price changes, disposable income improved 0.2% (2.0% y/y) after holding steady in June.

The personal saving rate held steady in July at 4.4%, after falling from 5.0% in April. It still stands well above low of 3.5% in December of last year. Personal saving fell 1.7% (+5.8% y/y) in July, after declining 0.9% in June.

The personal income and consumption figures are available in Haver’s **USECON** database with detail in the **USNA** database. The Action Economics forecasts are in **AS1REPNA**.

**Let’s Get On with It** from Fed Governor Christopher J. Waller is available [here](https://www.federalreserve.gov/newsevents/speech/waller20250828a.htm).

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- Core price increase y/y matches highest since February.
- Real spending moderation centers on services.
- Real disposable income improves; personal savings rate steadies.

U.S. Core PCE Price Inflation Up in July; Real Spending Slows Y/Y 

Winnie Tapasanun

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The advance estimate of the U.S. international trade deficit in goods widened to a larger-than-expected $103.57 billion in July after narrowing to $84.85 billion in June, data from the U.S. Census Bureau showed. The July reading, the second widening in the goods trade deficit in three months, was slightly smaller than a $103.92 billion shortfall in July 2024. A deficit of $90.2 billion for July had been expected by the Action Economics Forecast Survey. The deficit reached a record $161.95 billion in March. In Q2'25, the goods trade deficit narrowed to $266.96 billion, the smallest since Q4'23, after ballooning to a record $465.035 billion in Q1'25; the monthly deficit averaged $88.99 billion in Q2'25, down from a record $155.01 billion in Q1'25.

Total goods exports dipped 0.1% m/m (+3.0% y/y), the third consecutive monthly decline, to $177.97 billion in July, the lowest level since January, after a 0.7% decrease to $178.08 billion in June. April registered a record high of $190.08 billion. Exports were up 9.6% from a June 2023 low but down 2.1% from a July 2022 high. The m/m decline in exports in July reflected exports m/m drops of 2.4% (+16.3% y/y) in other goods, 0.9% (+5.1% y/y) in nonfood consumer goods excluding autos, and 0.8% (-1.2% y/y) in industrial supplies & materials. To the upside, exports for the following end-use categories rose m/m in July: automotive vehicles & parts (2.2%; -4.0% y/y), capital goods excluding autos (0.7%; 7.0% y/y), and foods, feeds & beverages (0.5%; 1.4% y/y).

Total goods imports rebounded 7.1% m/m (1.7% y/y), the first monthly increase since March, to a four-month-high $281.54 billion in July following a 4.6% drop to $262.94 billion in June. March registered a record high of $344.59 billion. Imports were up 11.9% from a June 2023 low but down 2.6% from a March 2022 high. The m/m rebound in imports in July reflected m/m rises in most imports end-use categories. These included a 25.4% surge (the first m/m increase and the largest since January; 4.9% y/y) in industrial supplies & materials as well as rises of 11.5% (23.5% y/y) in other goods, 4.8% (14.7% y/y) in capital goods excluding autos, 2.4% (4.9% y/y) in foods, feeds & beverages, and 2.1% (-12.2% y/y) in nonfood consumer goods excluding autos. In contrast, imports of automotive vehicles & parts, the only end-use category with a monthly decline in July, fell 3.2% (-14.1% y/y), the third m/m fall in four months, on top of a 3.6% June decrease.

The advance international trade data can be found in Haver's **USECON** database. The expectation figure is from the Action Economics Forecast Survey, which is in **AS1REPNA**.

- Deficit: $103.57 bil. in July, jumping 22.1% from June’s $84.85 bil.
- Exports -0.1%, down for the third straight month, led by a 2.4% decline in exports of other goods.
- Imports +7.1%, up for the first time since March, led by a 25.4% surge in imports of industrial supplies & materials.

U.S. Goods Trade Deficit Balloons in July; Largest Since March’s Record High

Robert Brusca

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Inflation in the monetary union was tepid across the large, early-reporting, economies in August. The HICP rose by 0.2% on the month in Germany, rose by 0.1% in France, while it was flat in both Italy and Spain. However, these outstanding readings followed several months of stronger inflation; in particular in July German prices rose by 0.2%, in Italy the gauge rose by 0.3%, in France by 0.4%, and in Spain by 0.5%.

As a result, over three months, inflation is running hot on the headline gauge, over 2% in France, Italy, and Spain, and just below it, at a 1.8% annual rate in Germany. Over 12 months, inflation is well behaved, but that headline is up 0.8% in France, rises by 1.7% over 12 months in Italy, by 2.1% in Germany, and at a 2.6% pace in Spain. That is a bit more mixed but still quite solid set of results. The EMU-wide HICP for July – on a one-month lag- rises by 2.1% over 12 months with a core at 2.3%.

Core inflation is not well reported on an early basis. The Italian core rate rose 0.2% in August with Spain at 0.3%; both Italy and Spain logged increases of 0.3% in July and in June and as a result the 3-month inflation rate on the core for Italy and Spain runs at 2.7% in Italy and at 3.8% for Spain. These, of course, are much higher and more disturbing numbers for inflation. The 6-month inflation rate for core Italy and Spain runs at 2.9% and 3.1%, respectively, while over 12 months the Italian core is up by only 2.1% and the Spanish core is up by only 2.4%. The kick up and inflation for the core is a relatively recent phenomenon.

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These statistics give the ECB some room and some time to maneuver, since headline inflation is in pretty good shape and the inflation issues are scattered and have emerged more recently from the core and with growth still weak and with rising unemployment in Germany where it just topped 3 million for the first time in a decade. There may not be any impetus to have to raise rates to cool inflation. The European Central Bank, like the Federal Reserve, is likely playing a watch and wait game with the economic statistics, and this month the watch and wait game turned pretty much in its favor with very good headline figures although still having some difficult core figures. It will take a little time before we get the core numbers for the rest of the monetary union members to fill in to understand exactly where those trends sit.

However, based on the early returns, the ECB is probably relatively happy with how inflation is sitting even with the core rates slightly excessive and varied. There doesn't appear to be any burgeoning inflation problem; there's some kind of a modest core inflation issue building in Italy and Spain and we'll have to watch that in the coming months. For now, the ECB should be relatively content.

Challenger Layoffs Up Again in December

Summary

Tom Moeller

More Economy in Brief

Economic Letter from Asia: A Friend in Need

U.S. Core PCE Price Inflation Up in July; Real Spending Slows Y/Y

U.S. Goods Trade Deficit Balloons in July; Largest Since March’s Record High

EMU Large Country Inflation Runs Cold – Over Tepid Cores