Tom Moeller

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<div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080501g.jpg" width="353">
The value of construction put in place in March fell a more-than-expected 1.1% but February&#39;s level was revised up. The latest decline was the fifth in the last six months and the March level was 8.4% below the peak two years ago.
The value of residential building activity cratered 4.6% in March led by a 5.3% (-36.1% y/y) decline in building of single family units. That was similar to the decline in the prior several months. Building activity on multi-family units also slipped 0.5% (-17.0% y/y) and spending on improvements reversed nearly all of the prior month&#39;s jump and fell 4.8% (+10.4% y/y).
During the last twenty years there has been an 84% correlation between the q/q change in the value of residential building and its contribution to growth in real GDP.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080501h.jpg" width="353">
The value of nonresidential building activity jumped 1.9% but three month growth of 9.5% is down from an 18.0% rise last year. A decline in multi-retail building of 2.7% (AR) during the last three months compared with a 14.5% rise last year. A 1.6% 3-month gain in commercial building was down from 13.4% growth last year. Growth in office building remained firm at 13.3% versus 19.6% growth last year.
Growth in public construction over the last three months of 5.0% compared to a 12.2% rise last year. Construction on highways &amp; streets rose at a 10.1% rate during the last three months after last year&#39;s rise of 7.4%. (The value of construction on highways &amp; streets is nearly one third of the value of total public construction spending.) Building activity of educational facilities fell at a 3.8% rate after last year&#39;s 12.6% rise.
The more detailed categories of construction represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.
Maps and data that illustrate subprime and alt-A mortgage loan conditions across the United States, from the Federal Reserve, can be found <a href="http://www.federalreserve.gov/newsevents/press/other/20080401a.htm">here</a>.</div>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E907/@E907.HTM">Construction</a></th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-1.1%</td>
<td>0.4%</td>
<td>-3.4%</td>
<td>-2.7%</td>
<td>5.6%</td>
<td>10.7%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>-1.7%</td>
<td>0.3%</td>
<td>-6.7%</td>
<td>-6.8%</td>
<td>4.7%</td>
<td>12.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>-4.6%</td>
<td>0.2%</td>
<td>-19.9%</td>
<td>-18.1%</td>
<td>0.5%</td>
<td>13.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonresidential</td>
<td>1.9%</td>
<td>0.6%</td>
<td>15.4%</td>
<td>18.0%</td>
<td>15.2%</td>
<td>7.8%</td>
</tr>
<tr>
<td class="firstcol">Public</td>
<td>0.6%</td>
<td>0.4%</td>
<td>7.0%</td>
<td>12.2%</td>
<td>9.2%</td>
<td>6.2%</td>
</tr>
</tbody>
</table>
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The value of construction put in place in March fell a more-than-expected 1.1% but February's level was revised up. The latest decline was the fifth in the last six months and the March level was 8.4% below the peak two years ago. The [...]

U.S. Construction Spending Off Sharply

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080501i.jpg" width="353">
According to the Challenger, Grey &amp; Christmas survey, job cut announcements in April surged to 90,015 from 53,579 in March. The three month average of announcements drifted to its highest level since November 2006.
The three month average of job cut announcements in services, consumer goods, and government sectors led the upward drift.
During the last ten years there has been a 76% (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 that announced hiring plans rose sharply m/m but that the three month average was little changed.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</a></th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>90,015</td>
<td>53,579</td>
<td>27.4%</td>
<td>768,264</td>
<td>839,822</td>
<td>1,072,054</td>
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According to the Challenger, Grey & Christmas survey, job cut announcements in April surged to 90,015 from 53,579 in March. The three month average of announcements drifted to its highest level since November 2006. The three month [...]

Challenger Layoffs Surged

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080501c.jpg" width="353">
Initial claims for unemployment insurance claims reversed the prior period&#39;s decline and rose 35,000 last week to 380,000. Consensus expectations had been for claims to total 360,000 last week.
The four week moving average of initial claims, however, fell to 363,750 (13.1% y/y), its lowest level in over a month.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080501d.jpg" width="353">
A claims level below 400,000 typically has been associated with growth in nonfarm payrolls. During the last ten years there has been a (negative) 76% correlation between the level of initial claims and the m/m change in nonfarm payroll employment.
Continuing claims for unemployment insurance rose 74,000 and also reversed the prior week&#39;s decline. The latest level was its highest since early 2004 and it provides some indication of workers&#39; ability to find employment.
The continuing claims numbers lag the initial claims figures by one week.
The insured rate of unemployment rose to 2.3% after four weeks at 2.2%. The latest also was the highest since 2004.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">04/25/08</th>
<th scope="col">04/18/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;380</td>
<td>345</td>
<td>23.0%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,019</td>
<td>20.9%</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
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Initial claims for unemployment insurance claims reversed the prior period's decline and rose 35,000 last week to 380,000. Consensus expectations had been for claims to total 360,000 last week. The four week moving average of initial [...]

U.S. Initial Claims for Unemployment Insurance Back Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080501e.jpg" width="353">
For April, the Institute of Supply Management (ISM) reported its Composite Index of Manufacturing Sector Activity remained unchanged from March at 48.6. That was slightly better than Consensus expectations for a decline to 48.0 but the index remained below the break even level for activity of 50 for the fourth month in the last five.
The index&#39;s average level of 49.0 so far this year was its lowest since early 2003.
During the last twenty years there has been a 64% correlation between the level of the Composite Index and the three month growth in factory sector industrial production.
It is appropriate to correlate the ISM index level with factory sector growth because the ISM index is a diffusion index. It measures growth by being constructed using all of the absolute positive changes in activity added to one half of the no change in activity measures.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080501f.jpg" width="353">
The new orders index also was unchanged m/m and remained below the break even level. It was near the lowest level since the recession year of 2001. Production rose very slightly but remained low at 49.1. The inventory component rose sharply to its highest level since January.
The new export orders sub-series rose slightly to a better-than-break even 57.5 and so far this year it is up slightly from the last two years.
The employment index fell sharply m/m to 45.4 which was its lowest level since mid 2003. During the last twenty years there has been a 67% correlation between the level of the ISM employment Index and the three month growth in factory sector employment.
The prices paid index surged to its highest level since early 2004. During the last twenty years there has been a 77% correlation between the price index and the three month change in the PPI for intermediate goods.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S2/@S201/@S201.HTM">ISM Mfg</a></th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">April &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Index</td>
<td>48.6</td>
<td>48.6</td>
<td>52.8</td>
<td>51.1</td>
<td>53.1</td>
<td>54.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>46.5</td>
<td>46.5</td>
<td>58.1</td>
<td>54.3</td>
<td>55.4</td>
<td>57.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Employment Index</td>
<td>45.4</td>
<td>49.2</td>
<td>52.3</td>
<td>50.5</td>
<td>51.7</td>
<td>53.6</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>84.5</td>
<td>83.5</td>
<td>73.0</td>
<td>64.6</td>
<td>65.0</td>
<td>66.4</td>
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For April, the Institute of Supply Management (ISM) reported its Composite Index of Manufacturing Sector Activity remained unchanged from March at 48.6. That was slightly better than Consensus expectations for a decline to 48.0 but [...]

ISM Factory Sector Index Unchanged, Prices Surged

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<div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080501a.jpg" width="353">
Disposable personal income grew 0.3% in March, but adjusted for a 0.3% increase in prices, income was flat. During February, however, real income rose 0.3%. As a result, the 1.9% three month growth rate in real DPI was up slightly from the negative growth during the end of last year, but still that was down from the 3.1% rise during all of 2006 and 2007.
Nominal personal income grew 0.3% during March which was slightly lower than the 0.4% Consensus expectation. The gain left the three-month growth in income at 4.4% which was down from the 6.2% rise during all of last year.
Wage &amp; salary income rose 0.5% (3.3% y/y) after a 0.3% February increase. Three month growth in wages amounted to 5.5% which has been stable of late but well reduced from the 10% rates of growth early in 2007 and late in 2006. Factory sector wages rose 0.3% (-0.2% y/y), the same as in February, and wages &amp; salaries in the private service-providing industries rose 0.5% (3.6% y/y). These two annual rates of growth are well off the growth rates posted during the middle of 2007. Wages in the government sector rose 0.3% (5.0% y/y) and three month growth rose to 7.4%. That was up from the 4.6% rise during 2007.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080501b.jpg" width="353">
Lower interest rates caused the sixth straight monthly decline in interest income (+2.4% y/y) after a 5.0% gain last year and 8.0% growth during 2006. Dividend income rose another firm 0.6% (10.9% y/y), though that annual rate of growth is down from 13.8% last year and from 16.3% in 2006.
Personal consumption expenditures grew 0.4% during March though, when adjusted for price inflation, real spending rose just 0.1% and it grew at a 1.0% annual rate over the last three months. That&#39;s after 2.9% growth in 2007 and less than the 3.0% growth in each of the prior two years.
Real spending on discretionary items continued weak. Motor vehicle &amp; parts purchases fell 0.5% last month and three month growth cratered to -10.3%. Real spending on household furniture &amp; appliances fell 0.4% in March and three month growth was 0.2% after a 7.8% rise last year. Real spending on apparel increased 0.8% and three month growth actually picked up to 10.3% after an abysmal December last year. These and other detailed spending figures are available in Haver&#39;s USNA database.
The PCE chain price index rose 0.3% after the 0.1% uptick in February. The 0.2% rise in the core PCE price index beat expectations for a 0.1%. The three month growth in prices rose to 2.9% but that was up slightly from 2.5% in 2007 and 2.8% in 2006. The core price index rose 0.2% but the three month rate of growth fell slightly to 2.0% from 2.1% last year and 2.2% in 2006.
The personal savings rate remained barely positive at 0.2%, down just a bit from prior years.</div>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a> (%)</th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.3</td>
<td>0.5</td>
<td>4.0</td>
<td>6.2</td>
<td>6.6</td>
<td>5.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Disposable Personal Income</td>
<td>0.3</td>
<td>0.5</td>
<td>4.1</td>
<td>5.7</td>
<td>5.9</td>
<td>4.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption</td>
<td>0.4</td>
<td>0.1</td>
<td>5.3%</td>
<td>5.5</td>
<td>5.9</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>0.2</td>
<td>0.4</td>
<td>1.5 (Mar. 07)</td>
<td>0.4</td>
<td>0.4</td>
<td>0.5</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>0.3</td>
<td>0.1</td>
<td>3.2</td>
<td>2.5</td>
<td>2.8</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.2</td>
<td>0.1</td>
<td>2.1</td>
<td>2.1</td>
<td>2.2</td>
<td>2.2</td>
</tr>
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Disposable personal income grew 0.3% in March, but adjusted for a 0.3% increase in prices, income was flat. During February, however, real income rose 0.3%. As a result, the 1.9% three month growth rate in real DPI was up slightly [...]

U.S. Real DPI Flat in March, Trend Growth Reduced

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080430h.jpg" align="left" border="0" height="265" width="353">
If they were ski runs, they&#8217;d be black diamonds.

The EU sentiment index fell sharply in April with declines in
all sectors and with all sector readings south of zero except services.
Ironically the service sector is the weakest of the lot in terms of its
standing as a percentile of its range. That standing is the 31st
percentile Consumer confidence is the next weakest measure in its 51st
percentile followed by retailing in the 55th percentile. The industrial
sector for which we get the most data is in its 73rd range percentile,
the strongest of the lot. Overall the EU index is in its 57th
percentile and above its average and range midpoint.

Percentiles give us an idea of the relative standing of each
sector since each has a different intrinsic range and variability.
Looking at percentiles helps us to see where the weakness is hitting
the hardest.

EMU is in the 54.6th percentile of its range. Within EMU among
the large countries France ranks in its 67th percentile, Germany is in
its 60th, Italy is in the 41st, and Spain is in the weakest of these,
27th percentile of its range.

The chart shows that the pace of the slide is as yet,
unabated.

For industrial production expectations and order volumes are
still firm in their respective 65th and 77th range percentiles. Among
large EMU countries Germany and France are in league unto themselves as
their respective 78th and 71st percentile standings are high; Italy and
Spain are at lower rankings in percentile terms.

The consumer situation is best in Germany where consumer
sentiment still in the 75th percentile of its range; in France
confidence is down to the 50th percentile Italy&#8217;s consumer sentiment is
in the 37th percentile and for Spain its the 27th percentile. For the
UK the confidence measure is in its 42nd percentile.

Notwithstanding these results the French retail sector is in
the 80th percentile of its range in April followed by Italy in the 75th
percentile &#8211; despite a sour consumer. Germany, with the most upbeat
consumer, finds retail confidence in the 40th percentile. Spain&#8217;s
consumers are weak with retailing in the bottom 4 percent of its range.
The UK retail sector reading fell sharply in April to -17 from -1 in
March marking a 28th percentile reading in its range.

The services sector rankings show France&#8217;s service sector is
in the 58th percentile, and Germany&#8217;s in the 41st percentile. For Italy
the service sector is much worse off, in the bottom 6% of it range near
Spain&#8217;s reading that is at an all time low reading in April. Spain&#8217;s
service sector shed 6 points to drop from -8 to -14 in raw terms in one
month. UK services also fell hard to -6 from +13 and to a 29 percentile
ranking.

On balance the EMU and EU readings show a great deal of
distress and some of it quite recent. The country by country findings
are revealing. What remains curious is that amid all the concern about
the strong euro the service sector is getting hit so hard. Some of that
may be financial turbulence. In any event the extent of financial
sector weakness is striking. It seems a good time to put Europe on a
weakness watch. For the industrial sector even selling price
expectations have been reduced somewhat to the 61st percentile they are
not one of the stronger industrial components anymore. Does that mean
that inflation is not so much of a risk?


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="12" scope="col"> EU
Sectors and Country level Overall Sentiment</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td style="font-weight: bold;" class="firstcol">EU</td>
<td style="font-weight: bold;">Apr 
08</td>
<td style="font-weight: bold;">Mar 
08</td>
<td style="font-weight: bold;">Feb 
08</td>
<td style="font-weight: bold;">Jan 
08</td>
<td style="font-weight: bold;">%tile</td>
<td style="font-weight: bold;">Rank</td>
<td style="font-weight: bold;">Max</td>
<td style="font-weight: bold;">Min</td>
<td style="font-weight: bold;">Range</td>
<td style="font-weight: bold;">Mean</td>
<td style="font-weight: bold;">R-SQ 
w/ 
Overall</td>
</tr>
<tr class="odd">
<td class="firstcol">Overall</td>
<td>98.1</td>
<td>101.9</td>
<td>100.3</td>
<td>103.3</td>
<td>57.9</td>
<td>122</td>
<td>116</td>
<td>73</td>
<td>43</td>
<td>100</td>
<td style="font-weight: bold;">1.00</td>
</tr>
<tr class="odd">
<td class="firstcol">Industrial</td>
<td>-2</td>
<td>0</td>
<td>0</td>
<td>2</td>
<td>73.5</td>
<td>64</td>
<td>7</td>
<td>-27</td>
<td>34</td>
<td>-7</td>
<td style="font-weight: bold;">0.88</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Confid</td>
<td>-12</td>
<td>-11</td>
<td>-11</td>
<td>-10</td>
<td>51.7</td>
<td>124</td>
<td>2</td>
<td>-27</td>
<td>29</td>
<td>-10</td>
<td style="font-weight: bold;">0.83</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail</td>
<td>-6</td>
<td>1</td>
<td>1</td>
<td>-3</td>
<td>55.6</td>
<td>100</td>
<td>6</td>
<td>-21</td>
<td>27</td>
<td>-6</td>
<td style="font-weight: bold;">0.47</td>
</tr>
<tr class="odd">
<td class="firstcol">Construction</td>
<td>-11</td>
<td>-9</td>
<td>-7</td>
<td>-4</td>
<td>68.9</td>
<td>75</td>
<td>3</td>
<td>-42</td>
<td>45</td>
<td>-17</td>
<td style="font-weight: bold;">0.43</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>6</td>
<td>11</td>
<td>6</td>
<td>11</td>
<td>31.6</td>
<td>105</td>
<td>32</td>
<td>-6</td>
<td>38</td>
<td>17</td>
<td style="font-weight: bold;">0.81</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td style="font-weight: bold;" colspan="3">%
m/m&nbsp;</td>
<td style="font-weight: bold;">Apr 
08</td>
<td style="font-weight: bold;" colspan="2">Based on Level</td>
<td style="font-weight: bold;" colspan="4">Level</td>
<td style="font-weight: bold;">&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">EMU</td>
<td style="color: red;">-2.5%</td>
<td style="color: red;">-0.6%</td>
<td style="color: red;">-1.5%</td>
<td>97.1</td>
<td>54.6</td>
<td>124</td>
<td>117</td>
<td>73</td>
<td>44</td>
<td>99</td>
<td style="font-weight: bold;">0.95</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td style="color: red;">-1.2%</td>
<td>0.3%</td>
<td>0.6%</td>
<td>102.8</td>
<td>60.0</td>
<td>85</td>
<td>119</td>
<td>79</td>
<td>40</td>
<td>99</td>
<td style="font-weight: bold;">0.70</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td style="color: red;">-2.4%</td>
<td>0.0%</td>
<td style="color: red;">-1.3%</td>
<td>103.1</td>
<td>67.1</td>
<td>97</td>
<td>119</td>
<td>72</td>
<td>47</td>
<td>100</td>
<td style="font-weight: bold;">0.79</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td style="color: red;">-1.7%</td>
<td style="color: red;">-1.3%</td>
<td style="color: red;">-3.7%</td>
<td>92.1</td>
<td>41.6</td>
<td>167</td>
<td>121</td>
<td>71</td>
<td>50</td>
<td>100</td>
<td style="font-weight: bold;">0.78</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td style="color: red;">-3.8%</td>
<td style="color: red;">-4.1%</td>
<td style="color: red;">-3.4%</td>
<td>80.7</td>
<td>27.2</td>
<td>193</td>
<td>118</td>
<td>67</td>
<td>51</td>
<td>100</td>
<td style="font-weight: bold;">0.63</td>
</tr>
<tr class="odd">
<td class="firstcol">Memo: UK</td>
<td style="color: red;">-8.5%</td>
<td>10.7%</td>
<td style="color: red;">-8.7%</td>
<td>95.8</td>
<td>54.7</td>
<td>147</td>
<td>118</td>
<td>69</td>
<td>50</td>
<td>101</td>
<td style="font-weight: bold;">0.43</td>
</tr>
<tr class="odd">
<td colspan="5" class="firstcol">Since 1990
except Services (Oct
1996): 208</td>
<td>-Count</td>
<td>Services:</td>
<td>126</td>
<td>-Count</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td colspan="9" class="firstcol">Sentiment is
an index, sector
readings are net balance diffusion measures</td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>
</body></html>

If they were ski runs, they’d be black diamonds. The EU sentiment index fell sharply in April with declines in all sectors and with all sector readings south of zero except services. Ironically the service sector is the weakest of the [...]

EU Indices in Steady State Decline…

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080430g.jpg" width="353">
The Federal Open Market Committee again lowered the Federal funds rate today by 25 basis points to 2.00% in a move that was widely expected. The funds rate was last this low in December, 2004.
The discount rate was lowered another 25 basis points to 2.25%.
The Fed indicated &quot;Recent information indicates that economic activity remains weak. Household and business spending has been subdued and labor markets have softened further.&quot;
Regarding price inflation it was stated &quot;Although readings on core inflation have improved somewhat, energy and other commodity prices have increased, and some indicators of inflation expectations have risen in recent months.&quot;
Voting against taking the action was Richard W. Fisher, President of the Federal Reserve Bank of Dallas and Charles I. Plosser, President of the Philadelphia Fed, who preferred no change in rates.
For the complete text of the Fed&#39;s latest press release please follow this <a href="http://www.federalreserve.gov/newsevents/press/monetary/20080430a.htm"> link</a>.
Are Global Imbalances Due to Financial Underdevelopment in Emerging Economies? from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2008/el2008-12.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">&nbsp;</th>
<th scope="col">Current</th>
<th scope="col">Last</th>
<th scope="col">March</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Federal Funds Rate, % (Target)</td>
<td>2.00</td>
<td>2.25</td>
<td>2.64</td>
<td>5.05</td>
<td>4.96</td>
<td>3.19</td>
</tr>
<tr>
<td class="firstcol">Discount Rate, %</td>
<td>2.25</td>
<td>2.50</td>
<td>3.17</td>
<td>5.88</td>
<td>5.95</td>
<td>4.18</td>
</tr>
</tbody>
</table>
</body>
</html>

The Federal Open Market Committee again lowered the Federal funds rate today by 25 basis points to 2.00% in a move that was widely expected. The funds rate was last this low in December, 2004. The discount rate was lowered another 25 [...]

FOMC Lowers Fed Funds Rate by 25 Basis Points

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

US productivity growth has been significantly faster than in other major economies

Consumers' short-term US inflation expectations still elevated while longer-term expectations of financial markets are steady

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

Job openings less than the number unemployed in July for first time since 2021

Reaccelerating goods price inflation along with sticky services inflation clouds the outlook

Falling oil prices aren't pulling down inflation expectations, pointing to a boost from increased tariffs

Equity market exuberance outpacing macroeconomic data

Apart from Japan, Blue Chip forecasters expect further sizable monetary easing

US production rebounded in Q2, but demand continued to slow

US leader, Germany trailer for real GDP growth over past 3 years

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

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Initial claims for unemployment insurance rose 9,379 during the week ended November 1 to 228,899 (3.4% y/y) and mostly reversed the prior week’s 12,643 decline to 219,520. The four-week moving average of initial claims eased to 225,213 from 226,766. The four-week average hit a low of 200,323 in January 2024.

Federal government employees filed 7,482 initial jobless insurance claims last week after 9,435 in the prior week. These figures are increased from 588 at the end of September.

Continuing claims for unemployment insurance rose to 1.964 million (4.4% y/y) in the week ended October 25 from 1.957 million in the prior week. The four-week moving average rose to 1.949 million from 1.940 million. It was the highest level since the last week of August.

Federal government employees continuing benefits rose to 30,649 in the week ended October 25 from 23,188 in the prior week. These figures are increased from 8,676 at the end of September.

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.

- Increase in initial claims reverses most of earlier decline.
- Continuing claims continue to increase.

U.S. Initial Claims for Unemployment Insurance Rise in Latest Week

251110E.jpg

Industrial production for the European Monetary Union (EMU) is not yet available for the union as a whole; however, a number of European countries have reported production, and they give us a good sense of what's happening. In September, among the 13 European countries that reported in the table, all but four of them showed increases in industrial production. Declines were posted in Ireland where production fell by 9.4% in one month, Luxembourg where it fell by 6.1%, Malta where it fell by 1.7%, and in Finland where it fell by 0.4%. In the remaining nine countries, production increased. The median increase for monetary union members in the table was a rise of 0.8% month-to-month. 45.5% of the reporters in the monetary union showed production acceleration.

In August, there were 5 European members with production decreasing. Among European Monetary Union members, the median was a decline of 0.5% with 46.2% of the reporters showing output accelerating on the month. July had been a much worse month with 8 reporting European countries showing declines and with the monetary union median showing a decline of 0.3% and only 38.5% of the reporting EMU members showing output accelerating month-to-month.

There has been gradual moderate improvement in these monthly statistics both in terms of improvement in the median and improvement in the breadth as output has accelerated, with a step back in August.

Looking at the sequential data that compare three-month results to six-month results to 12-month results, we see a median annualized increase of 2.9% for output across monetary union members over three months; that's up from 0.8% over six months and compares to a 2.1% increase for monetary union members over twelve months. The breadth of increase over the period is above 50% on all the horizons and it's fairly steady over three months and six months at about a 54-percentile standing.

September data conclude the results for the third quarter. In this quarter-to-date calculation, 6 of the 13 reporters in the table shows output declining in the third quarter. Monetary Union members generate a median increase of 0.3% in terms of annualized quarter-to-quarter industrial output changes. The pattern and the monthly data seem to be slightly stronger than what we see in the quarter-to-date.

The final column of the table presents the queue standings that calculate the positioning of the year-over-year growth rates across country-reporters among growth rates back to late-2007. Ranked among this cluster of growth rates, only five of the current year-over-year rates stand at levels that are below their median growth rate for the period. Countries with below median growth rates (below a standing of 50%) for industrial production growth are Austria, Germany, Finland, Luxembourg, and Malta. Among these, only one belongs to the four largest economies in the monetary union—Germany, which is also the largest of them. Germany has the standing only its 39th percentile. The unweighted median ranking for the group of monetary union economies is at 57.3%, above the 50% mark and therefore above the historic median.

The industrial production data for the monetary union in September is somewhat encouraging but certainly not crystal clear. There continues to be a lot of weaknesses displayed in the data. While the aggregate ranking is above its historic median, it's not above it by very much and clearly the growth rates are still relatively weak. There still is not a clear trend of acceleration in the group. However, what's lacking in the data is any sign of real deterioration. There clearly is weakness across countries but not a sense of deterioration. The best news in the report may be that there's not any really bad news.

251110.jpg

Europe

Production in a Gradual Recovery in Europe Despite Recent Setbacks

Tian Yong Woon

This week, we review key developments across several Asian economies as the year nears its close. On balance, many of investors’ and policymakers’ worst fears did not materialize. Despite US tariffs, regional exports have shown resilience (chart 1), partly supported by stronger intra-Asia trade, even as exports to the US declined in some cases.

In China, factors including importer front-loading, stronger exports to non-US markets, and government efforts to boost consumption—albeit with potentially one-off effects—have kept the economy on track to meet its 5% growth target this year (chart 2), barring a substantial slowdown in Q4. In Japan, political uncertainty has eased following Prime Minister Takaichi’s rise, though her pro-growth, pro-loose monetary stance has contributed to further yen weakness (chart 3). India, while still likely Asia’s fastest-growing major economy this year, has seen trade setbacks (chart 4) as US–India discussions continue, though recent progress suggests a deal may be near.

However, not all developments in Asia have avoided worst-case outcomes. For example, the Philippines, which has already been hit by a string of storms this year, continues to reel from the effects of Typhoons Fung-wong and Kalmaegi. These storms have highlighted corruption in the Philippines’ flood control systems, rattling investors and pressuring the peso (chart 5), in a manner reminiscent of the rupiah’s decline during Indonesia’s political turmoil earlier this year. In Thailand, political uncertainty continues ahead of general elections eyed at next March, while the expected full return of Chinese tourists has yet to materialize (chart 6).

**Trade in Asia**
For Asia, the year has ultimately not played out as bleakly as investors once feared, particularly on the trade front. Despite US President Trump’s tariffs and a persistent backdrop of uncertainty, export performance in several Asian economies has proven more resilient than expected. This is most clearly reflected in export growth readings for China and key Southeast Asian economies (chart 1), which have remained firm—and at times exceeded expectations—even as China’s shipments to the US fell sharply. Much of this resilience reflects a redirection of exports toward other markets, often within the region. India, however, has seen more limited gains, with exports in US dollar terms struggling to materially surpass last year’s levels.

251110T1.jpg

**China**
Among the main investor concerns earlier this year was China, which once again came under close scrutiny as President Trump sought to address issues ranging from the large US–China trade imbalance to intensifying AI competition and perceived overcapacity. Yet China’s growth—particularly on the export front—has proven more resilient than expected, with increased shipments to other markets more than offsetting reduced trade with the US. Earlier front-loading by importers ahead of anticipated tariff hikes also temporarily supported export figures. Domestically, government initiatives to stimulate consumption led to a brief lift in retail spending, though signs suggest these effects may be fading, indicating their largely one-off nature. Even so, China has maintained year-to-date growth above its 5% annual target (chart 2), keeping that goal within reach provided momentum does not weaken significantly in Q4. Meanwhile, the more conciliatory tone in recent US–China discussions, including the halving of US fentanyl-related tariffs, offers a modest further relief. That said, longer-term structural issues still loom, including the difficult shift toward a more consumption-led economy, demographic pressures, and questions around sustained overcapacity in key industries.

251110T2.jpg

**Japan**
In Japan, the political uncertainty that followed the Liberal Democratic Party’s weak election performances earlier in the year has largely eased with Takaichi’s appointment as the country’s first female Prime Minister. Attention now turns to her supplementary budget—reported to be around $65 billion—which aims to address the rising cost of living while also bolstering defence and diplomatic capabilities. Investors, however, are already contemplating the policy implications. In particular, expectations that Takaichi’s agenda could make it harder for the Bank of Japan to pursue further significant tightening have added renewed pressure on the yen, pushing it to multi-year lows (chart 3). And while a weaker yen could, in theory, support tourism, forthcoming measures to curb overtourism—such as Kyoto’s planned 900% increase in accommodation taxes—may act as offsetting factors.

251110T3.jpg

**India**
Turning to India, the economy remains on track to be the region’s fastest-growing major economy. Growth forecasts were downgraded earlier in the year by the IMF and Blue Chip survey panellists, but these revisions were later reversed. These early-year downgrades reflected India’s heavy exposure to US trade, a concern that materialized when the US raised its reciprocal tariff rate on India from 25% to 50%. This contrasts with the situation of many other Asian economies, who successfully negotiated lower rates below the “Liberation Day” baseline. Although India managed to expand exports to other trading partners, this gain resulted in only a muted net impact on overall exports and, in turn, GDP growth. That said, US–India discussions have made some progress over the year, particularly on previously contentious issues such as India’s purchases of Russian crude. While these developments bring India closer to a potential trade deal, the benefits are likely to materialize beyond this year, meaning current growth readings still largely reflect the impact of the steep US tariffs in place today.

251110T4.jpg

**The Philippines**
Moving to the Philippines, the country is grappling with the impact of Typhoon Fung-wong, which struck the northern regions on Sunday, forcing over a million people to evacuate and causing widespread landslides and damaged roads. Fung-wong follows a string of storms this year, including Typhoon Kalmaegi, which also inflicted substantial damage just a few days ago. The disasters have reignited concerns over longstanding corruption in the country’s flood control systems, spooking investors and prompting capital outflows, which have weighed on the Philippine peso (chart 5). The currency’s weakness has been compounded by the central bank’s ongoing easing, which has cut the policy rate from last year’s peak of 6.5% to 4.75%—nearly 200 basis points—and with markets still pricing in further cuts.

251110T5.jpg

**Thailand**
Lastly, Thailand’s economy continues to struggle to regain the footing it had before the pandemic, weighed down by both domestic and external factors. Politically, the country remains in a transitional phase, with new Prime Minister Anutin under scrutiny to deliver on his pledge to hold general elections soon. Deputy Prime Minister indications suggest March 29, 2026 as a likely date, leaving a period of uncertainty in the meantime, as the durability of policies enacted during this interim phase remains unclear. Externally, tourism—which should have been a key growth driver—has underperformed, as the return of Chinese visitors to pre-pandemic levels did not materialize, partly due to tourism-related scares. In contrast, Vietnam appears to have captured a larger share of Chinese tourists this year (chart 6).

251110T6.jpg

Asia

Economic Letter from Asia: As the Dust Settles

251107F5.jpg

251107G5.jpg

Consumer credit outstanding increased $13.1 billion (2.3% y/y) in September after rising $3.1 billion in August, revised from $0.4 billion, and $17.7 billion in July, revised from $18.1 billion. A $10.0 billion rise had been expected in the Action Economics Forecast Survey.

Nonrevolving credit outstanding rose $11.4 billion (2.1% y/y) in September after increasing $9.2 billion in August, revised from $6.3 billion, and increasing $6.7 billion in July, revised from $6.9 billion. Nonrevolving credit held by depository institutions declined 6.8% y/y in September after falling 7.4% y/y in August. Finance company debt holdings fell 1.5% y/y after declining 1.3%, while credit union holdings rose an increased 12.8% y/y in September, the quickest growth since in two years. Nonrevolving debt of the federal government rose 3.6% y/y in September, the same as in August.

In September, revolving credit outstanding, which includes credit cards, rose $1.7 billion (2.6% y/y) after falling $6.1 billion in August, revised from a $6.0 billion decline, and rising $11.0 billion in July, revised from $11.2 billion. Revolving credit outstanding held by depository institutions fell 3.0% y/y. Revolving credit held by finance companies fell a steady 14.7% y/y in September, while credit union debt rose 4.5% y/y in September, up from 3.7% y/y in August.

The consumer credit figures from the Federal Reserve Board are break-adjusted and calculated by Haver Analytics. The breaks in the series in 2005, 2010 and 2015 are the result of the incorporation of data from the Census and the Survey of Finance Companies, as well as changes in the seasonal adjustment methodology. The consumer credit data are available in Haver’s **USECON** database. The Action Economics forecast figures are contained in the **AS1REPNA** database.

**AI and the Economy** is the title of today’s speech by Federal Reserve Vice Chair Philip N. Jefferson and it can be found [here](https://www.federalreserve.gov/newsevents/speech/jefferson20251107a.htm).

251107H5.jpg

251107I5.jpg

- Notable gain in credit usage follows prior month’s slowdown.
- Nonrevolving credit usage strengthens and revolving turns positive.

U.S. Consumer Credit Strengthens in September

251107A2.jpg

251107D2.jpg

The Industrial Materials Price Index from the Foundation for International Business and Economic Research (FIBER) eased 0.1% during the four weeks ended November 7, 2025 after improving 0.3% in the prior four-week period. The index increased 0.5% y/y following a 0.8% y/y gain at the end of October.

Prices in the **Textile** group increased 2.5% during the last four weeks and rose 3.3% y/y. The cost of burlap increased 23.8% in the last four weeks while surging 48.1% over the last year. Showing modest improvement, cotton prices rose 0.9% in four weeks but declined 5.6% y/y.

**Metals** group prices increased 1.5% (5.9% y/y) in the last four weeks as the cost of aluminum rose 4.9	% (10.3% y/y). Zinc prices moved up 3.6% (5.4% y/y) and the cost of steel scrap rose 1.4% (-5.9% y/y). Lead prices increased 1.1% (-0.2% y/y) in four weeks and the cost of copper scrap rose 0.6% (13.9% y/y). Working lower, tin prices declined 2.2% (+13.8% y/y) in four weeks.

**Miscellaneous** group prices weakened 2.9% in the last four weeks and were off 1.0% y/y, as framing lumber prices fell 11.3% (-4.3% y/y). The cost of tallow, used for frying & baking, declined 9.0% (+10.5% y/y) in four weeks. Offsetting this weakness, natural rubber prices rose 2.0% in four weeks, but were off 6.6% y/y.

Prices in the **crude oil & benzene** group declined 1.6% (-10.8% y/y) in the last four weeks. The cost of West Texas Intermediate crude oil fell 2.2% in four weeks to $60.31 per barrel and declined 15.6% y/y. The price was increased from a low of $58.47 in the third week of last month. The price of the petro-chemical benzene fell 3.8% (-23.2% y/y) in four weeks.

**Excluding crude oil**, the industrial commodity price index was unchanged (+1.5% y/y) over the last four weeks after rising 0.5% during the prior four weeks.

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.

251107C2.jpg

251107B2.jpg

- Textile and metals prices strengthen.
- Framing lumber costs plummet.
- Crude oil prices weaken.

Economy in Brief: 2008

Jump to:

U.S. Construction Spending Off Sharply

Challenger Layoffs Surged

U.S. Initial Claims for Unemployment Insurance Back Up

ISM Factory Sector Index Unchanged, Prices Surged

U.S. Real DPI Flat in March, Trend Growth Reduced

U.S. Real DPI Flat in March, Trend Growth Reduced

EU Indices in Steady State Decline…

FOMC Lowers Fed Funds Rate by 25 Basis Points