Tom Moeller

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<p><img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040607a.jpg"></p>
<p>The average price for unleaded regular gasoline in NY has fallen sharply the last three weeks to $1.15 on Friday from a peak of $1.40. Retail gasoline prices have yet to show much downward movement from the peak of $2.06 in the third week of May.</p>
<p>Lower spot crude oil prices have led the decline with the price of West Texas Intermediate crude at $38.60 on Friday versus its peak of $41.88 on May 24th.</p>
<p>Wholesale natural gas prices moved higher last week to $6.39/mmbtu (+2.1% y/y), up 26% versus the daily low in February of $5.08/mmbtu.</p>
<p>For the latest Short Term Energy Outlook from the US Department of Energy click <a href="http://www.eia.doe.gov/emeu/steo/pub/contents.html">here</a>.</p>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/daily/@D3/@D306/@D306.HTM">Energy Prices</a></th>
<th scope="col"><u><b>06/04/04</b></u></th>
<th scope="col"><u><b>12/31/03</b></u></th>
<th scope="col"><b><u>Y/Y</u></b></th>
<th scope="col"><u><b>2003</b></u></th>
<th scope="col"><b><u>2002</u></b></th>
<th scope="col"><u><b>2001</b></u></th>
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<td class="firstcol">Unleaded Regular Gasoline, NY ($/Gal.)</td>
<td>$1.15</td>
<td>$0.96</td>
<td>39.2%</td>
<td>$0.88</td>
<td>$0.72</td>
<td>$0.74</td>
</tr>
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<td class="firstcol">Domestic Spot Market Price: West Texas Intermediate ($/Barrel)</td>
<td>$38.60</td>
<td>$32.55</td>
<td>35.1%</td>
<td>$31.10</td>
<td>$26.17</td>
<td>$25.97</td>
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The average price for unleaded regular gasoline in NY has fallen sharply the last three weeks to $1.15 on Friday from a peak of $1.40. Retail gasoline prices have yet to show much downward movement from the peak of $2.06 in the third [...]

Gasoline & Crude Oil Prices Down

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Andrew Cates

**Uncertainty and market volatility** 
Our first chart this week illustrates how both market volatility and economic policy uncertainty have started to ease following the sharp spikes seen earlier in 2025. The VIX has steadily declined in recent weeks, returning to levels closer to its long-term average as investors take comfort from stronger-than-expected US data, a steady disinflation trend, and renewed optimism around global trade. While the news-based policy uncertainty index remains elevated compared with historical norms, it too appears to be trending down, suggesting that the initial shock from tariff hikes and trade policy shifts is beginning to settle.

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**The US dollar, US yields and Fed independence**
This next chart highlights the marked decline in the broad nominal effective exchange rate of the US dollar since early 2025, alongside a modest drift lower in 10-year Treasury yields. While Treasury yields remain elevated by historical standards—hovering just above 4.3%—they have failed to sustain the highs seen earlier this year, partly perhaps because inflation has continued to moderate. At the same time, the dollar has depreciated steadily, partly reflecting growing market unease around the Federal Reserve’s policy credibility and institutional independence. Recent comments by President Trump, openly criticising Chair Jerome Powell, have reinforced investor concerns about political pressure on the Fed at a time when policy decisions are finely balanced.

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**Japan’s trade with the US** 
While the recent US–Japan trade agreement has helped soothe immediate tensions, the underlying economic relationship remains fragile. As this next chart shows, trade policy uncertainty in Japan has spiked sharply in recent months—reaching levels not seen since the height of global trade disruptions in 2020—even as exports to the US have begun to soften again. Though the agreement offered short-term relief for Japan’s auto and machinery sectors, many key details remain vague, especially surrounding the much-publicised $550 billion investment commitment.

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**Credit growth in the euro area**
Latest data for June published this week show a clear slowdown in euro area M3 growth, with a notably softer contribution from private sector lending. After supporting the recovery over the past year, credit to households and firms is now losing momentum. This comes despite recent upside surprises in Q2’s GDP (and the broader dataflow), suggesting the recovery may be less credit-driven than before.

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**The UK consumer**
This week’s latest CBI Distributive Trades Survey also paints a worrying picture for the UK consumer outlook. As shown in the next chart below, the balance of retailers reporting higher sales volumes compared to a year ago has fallen sharply, reaching levels consistent with past periods of economic stress. This sustained weakness in retail activity points to downside risks to UK growth, particularly given signs of slowing wage growth and softening labour market conditions.

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**The US housing market**
Finally, the latest reading from the S&P CoreLogic Case-Shiller Home Price Index shows a negative three-month change, marking a clear reversal in US house price momentum. As the chart below highlights, past periods of falling home prices have often coincided with or preceded recessions, as indicated by the shaded areas. This pattern underscores the housing market’s broader significance for the economy, particularly through its impact on household wealth, credit conditions, and construction activity. While other macro indicators remain solid, the recent downturn in prices is a potential early warning sign that housing-related pressures could weigh more heavily on the outlook in the months ahead.

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Financial markets have performed well in recent weeks, lifted by stronger data, moderating inflation, and renewed soft landing hopes. Equities have pushed higher, volatility has eased, and credit markets have firmed. While economic policy uncertainty remains elevated, it is showing signs of normalising alongside greater clarity on US trade policy (chart 1). The US dollar, however, remains under pressure amid concerns about Fed independence and broader policy credibility (chart 2). The Fed’s decision on July 30th to leave policy on hold, despite two dissenting votes in favour of a cut, arguably did little to ease those concerns. Recent US trade agreements—particularly with Japan and Europe—have boosted sentiment, though questions linger over implementation. In Japan, trade policy uncertainty has surged amid vague deal terms, even as exports to the US have weakened (chart 3). In the euro area, M3 growth slowed in June as private credit softened, casting doubt on the durability of recent upside surprises (chart 4). UK retail data signal a sharp drop in consumer activity, consistent with past recessions (chart 5), and the change in US house prices has turned negative on a three-month basis—often a warning sign of broader economic weakness (chart 6). Overall, while market sentiment has improved, risks tied to credit, demand, and housing persist.

Charts of the Week: Markets Rally, Risks Linger

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**Price Index Strengthens**
The PCE chain price index increased 0.3% (2.6% y/y) during June after rising 0.2% in May and 0.2% in April, both revised up from 0.1%. The y/y gain rose to 2.6% after a 2.4% increase in May. It was the strongest rise in four months, up from 2.2% in April. Energy prices rose 0.9% (-1.6% y/y) after falling 1.0% in May, while food prices rose 0.3% (2.2% y/y) following a 0.2% rise. The price index excluding food & energy rose 0.3%, after two straight 0.2% increases. The y/y increase held steady at 2.8% last month, and remained near the slowest since March 2021.

Durable goods prices rose 0.5% (0.9% y/y) in June, after holding steady in May. Home furnishings & appliance prices jumped 1.3% (2.1% y/y), after increasing 0.6%. Recreational goods & vehicle costs strengthened 0.9% (0.8% y/y) following a slight easing in May. Motor vehicle & parts prices slipped 0.4% (+0.7% y/y), after a 0.1% May decline.

Prices of nondurable goods rose 0.4% (0.5% y/y) last month after a 0.1% May improvement. Gasoline & other energy prices increased 0.9% (-8.0% y/y), after falling 2.2% in May. Clothing prices rose 0.4% (-0.3% y/y) after falling 0.4% in May. Food & beverage prices rose 0.3% (2.2% y/y) following a 0.2% May increase.

Services prices in June rose 0.2% (3.5% y/y) in June for the fourth straight month. Housing & utility prices rose 0.3% (4.4% y/y), the same as in May, and services prices excluding energy & healthcare gained 0.2% (3.7% y/y) for the second straight month. Healthcare prices strengthened 0.4% (2.4% y/y), after a 0.1% uptick. The cost of financial services & insurance rose 0.4% (5.1% y/y) after falling 0.2% in May. Recreation services costs edged 0.1% higher (3.7% y/y) after falling 0.3%. Transportation prices eased 0.1% (+4.3% y/y), after holding steady In May, while hotel & restaurant prices eased slightly (+2.9% y/y) after rising 0.3% in May.

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**Personal Spending Firms**
Personal consumption expenditures (PCE) rose 0.3% (+4.7% y/y) in June after holding steady in May, revised from -0.1%. The rise compared to expectations for a 0.4% increase in the Action Economics Forecast Survey. When adjusted for price changes, PCE improved 0.1% in June (2.1% y/y) after falling 0.2% in May.

Real spending on durable goods declined 0.5% (+3.5% y/y) in June, after dropping 1.8% in May. Real spending on motor vehicles eased 0.4% (+7.1% y/y), after falling 5.5% in May. Real outlays on furnishings & appliances eased 0.7% (+1.1% y/y), off for the third straight month. Real spending on recreational goods & vehicles fell 0.6% (+2.2% y/y) last month, after rising 1.1% in May. Spending on “other” durable goods eased 0.1% (+1.8% y/y) after rising 0.7% in May.

Nondurable goods spending in real terms rose 0.4% (2.7% y/y) in June after falling 0.3% in May. Real clothing & footwear purchases rose 0.3% (4.2 y/y) last month, following a 1.2% jump during May. Real food & beverage purchases rose 0.2% (1.3% y/y) and reversed the 0.2% decline in the prior month. Real outlays on gasoline & other energy products rose 1.9% (1.7% y/y), after falling 2.6%. Real spending on “other” nondurable goods improved 0.2% (3.7% y/y) last month, following two straight months of 0.3% decline.

Real spending on services roughly improved 0.1% (1.7% y/y) in June for the third straight month. Real spending on housing & utilities rose 0.1% (1.0% y/y) in June, for a second consecutive month, while real health care spending also rose 0.1% (4.7% y/y) after rising 0.2%. Real spending on food services & accommodations increased 0.2% (1.5% y/y), after falling 0.2% in May. Real spending on financial services & insurance rose 0.2% (2.5% y/y) after falling 0.3%. Real spending on transportation services weakened 0.3% (-2.3% y/y) in June, after edging 0.1% higher in May. Recreation spending fell 0.7% (-0.3% y/y), after rising 0.9% in May. Spending on “other” services held steady (+2.3% y/y) for the second straight month.

**Income Growth Improves**
Personal income rose 0.3% last month (4.7% y/y) after falling 0.4% in May. A 0.2% gain was expected. Wages & salaries edged 0.1% higher (4.8% y/y), following a 0.3% increase during May. Rental income declined 0.4% (+3.8 y/y) in June, after falling 0.5% in May. Proprietors’ income improved 0.2% (2.3% y/y), after tumbling 2.6%. Income from assets held steady (+1.0% y/y), after rising 0.2% during May, and current transfer receipts rose 1.0% (8.6% y/y) following a 2.0% May decline.

Disposable personal income increased 0.3% (4.3% y/y) during June following a 0.5% May decline. After adjusting for price changes, disposable income eased slightly (+1.7% y/y) after falling 0.7% in May.

The personal saving rate held steady in June at 4.5%, after falling from 5.0% in April. It still stands well above low of 3.5% in December of last year. Personal saving fell 0.8% (-2.2% y/y) in June, after declining 9.8% in May.

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**.

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- Core price increase is strongest in four months.
- Real spending moves slightly higher.
- Real disposable income holds steady along with personal savings rate.

U.S. Core PCE Price Inflation Moves Up in June; Real Spending Improves

Sandy Batten

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The employment cost index (ECI) for civilian workers, arguably the most accurate measure of labor compensation in the United States, rose 0.9% q/q (3.6% y/y) in Q2, the same quarterly increase as in Q1 and in last year’s Q4, according to the Bureau of Labor Statistics. The quarterly gains have fluctuated between 0.8% and 1.0% for the past seven quarters. The Action Economics Forecast Survey had expected a 0.8% q/q increase and a 3.5% y/y gain.

Wages and salaries for civilian workers rose 1.0% q/q (3.6% y/y) in Q2, up from a 0.8% q/q (3.5% y/y) gain in Q1. Benefits growth retreated to 0.7% q/q (3.6% y/y) following a 1.2% q/q (3.9% y/y) surge in Q1. In general, employment cost gains remain above the pace observed prior to the pandemic and are not yet consistent with the Fed’s 2% inflation target.

Private industry workers’ compensation rose 1.0% q/q (3.5% y/y), up from 0.8% q/q (3.4% y/y) in Q1. The quarterly gain in Q2 was the largest since Q1 2024. Wages and salaries for private industry workers also increased 1.0% q/q (3.6% y/y) in Q2 versus 0.8% q/q (3.4% y/y) in Q1. Benefits for private industry workers slowed to 0.7% q/q (3.4% y/y) in Q2 after having jumped 1.2% q/q (3.6% y/y) in Q1, which was the largest quarterly gain since Q2 2022.

Compensation in private goods-producing industries increased 0.9% q/q (3.6% y/y) in Q2 versus a 1.0% q/q (3.2% y/y) increase in Q1. The y/y increase in Q2 was the largest since Q1 2024. Manufacturing compensation rose 1.0% q/q, the largest quarterly gain since Q1 2024. Construction compensation slowed to a 0.8% q/q increase in Q2 following a 1.3% q/q jump in Q1. Compensation in private service-producing industries gained 1.0% q/q (3.5% y/y) in Q2, up from 0.8% q/q increase in Q1. The Q2 rise in compensation in service-producing sectors was led by a 1.4% q/q increase in information compensation, the largest quarterly increase since Q2 2022, and a 1.1% q/q gain in healthcare and social assistance compensation. In contrast, leisure compensation edged up 0.4% q/q, its smallest quarterly gain since Q3 2015.

The employment cost index measures the change in the cost of labor, free from the influence of employment shifts across occupations and industries. It is provided by the Bureau of Labor Statistics and is available in Haver’s **USECON** database. Consensus estimates from the Action Economics Forecast Survey are in Haver’s **AS1REPNA** database.

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- Compensation grew 0.9 q/q in Q2, the same pace as in both Q1 and Q4 2024.
- Wage growth picked up to 1.0% q/q while benefits slowed to 0.7% q/q after Q1 surge.

Growth of U.S. Employment Cost Index Unchanged in Q2

Kathleen Stephansen, CBE

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Initial claims for unemployment insurance edged up by 1,000 to 218,000 (-12.1% y/y) in the week ended July 26, from the unrevised level of 217,000 (-8.1% y/y) in the week ended July 19. The small weekly rise is the first one following six consecutive weekly declines. The Action Economics Forecast Survey expected 222,000 initial claims for last week. The four-week moving average of initial claims declined by 3,500 to 221,000 from the previous week’s unrevised average of 224,500. It was the lowest level since the second week of April.

In the week ended July 19, the total number of unemployment insurance beneficiaries – also known as “continuing claims” – was 1.946 million (+3.8% y/y), unchanged from the prior week's level, which was revised down by 9,000. The four-week moving average was 1.949 million, a decline of 3,000 from 1.952 million, revised from 1.954 million.

In the week ending July 19, the insured rate of unemployment (the number of beneficiaries as a percent of covered employment) was unchanged at 1.3% for the eighth straight week. It had increased from 1.2% since the beginning of 2023 and 1.0% in November 2022.

The insured unemployment rate varied greatly across individual states and territories. In the week ended July 12, the highest unemployment rates were in New Jersey (2.76%), Puerto Rico (2.70%), Rhode Island (2.65%), Minnesota (2.21%), California (2.15%), Massachusetts (2.13%), and District of Colombia and Washington (both 2.08%). The lowest were in South Dakota (0.30%), Florida (0.39%), and North Carolina (0.47%). Rates in other notable states include Pennsylvania (1.89%), Illinois (1.78%), New York (1.74%), and Texas (1.29%). These state data are not seasonally adjusted.

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

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- Initial claims edged up in the July 26 week after six consecutive declines.
- Continuing claims were unchanged in the July 19 week.
- Insured unemployment rate was unchanged for the eighth consecutive week.

Gasoline & Crude Oil Prices Down

Summary

Tom Moeller

More Economy in Brief

Charts of the Week: Markets Rally, Risks Linger

U.S. Core PCE Price Inflation Moves Up in June; Real Spending Improves

Growth of U.S. Employment Cost Index Unchanged in Q2

U.S. Initial Unemployment Insurance Claims Edge Up in Latest Week

Energy Prices	06/04/04	12/31/03	Y/Y	2003	2002	2001
Unleaded Regular Gasoline, NY ($/Gal.)	$1.15	$0.96	39.2%	$0.88	$0.72	$0.74
Domestic Spot Market Price: West Texas Intermediate ($/Barrel)	$38.60	$32.55	35.1%	$31.10	$26.17	$25.97