Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041104c.jpg" width="353">
Unit sales of light vehicles dropped 3.1% m/m in October to a 16.96M selling rate. Consensus expectations had been for sales of 16.7M.
Sales of light trucks gave back all of September&#39;s gain with a 7.3% m/m drop as sweetened sales incentives were scaled back and also as gasoline prices breeched $2.00 per gallon. Domestic light truck sales dropped 9.2% m/m but imported light truck sales rose 6.9%.
Total auto sales rose 2.8% m/m for the second consecutive monthly gain on the strength of a 19.4% rise in imported auto sales. Sales of domestic autos fell 3.7%.
Imports&#39; share of the US market for new vehicles ballooned to 22.1%, the highest since early 1991.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED09/@ED0901/@ED0901.HTM"> Light Vehicle Sales (SAAR, Mil.Units)</a></th>
<th scope="col"> Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>16.96</td>
<td>17.51</td>
<td>3.1%</td>
<td>16.69</td>
<td>16.81</td>
<td>17.26</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>7.53</td>
<td>7.33</td>
<td>-3.9%</td>
<td>7.63</td>
<td>8.07</td>
<td>8.48</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Trucks</td>
<td>9.43</td>
<td>10.18</td>
<td>8.9%</td>
<td>9.06</td>
<td>8.74</td>
<td>8.78</td>
</tr>
</tbody>
</table>
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Unit sales of light vehicles dropped 3.1% m/m in October to a 16.96M selling rate. Consensus expectations had been for sales of 16.7M. Sales of light trucks gave back all of September's gain with a 7.3% m/m drop as sweetened sales [...]

U.S. Light Vehicle Sales Fell As Truck Rebates Ended

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041104e.jpg" width="353">
In 3Q04, non-farm labor productivity growth slowed to 1.9% but growth in 2Q was revised up to 3.9% from 2.5% estimated earlier. Consensus expectations had been for 2.0% growth in 3Q.
The slowdown reflected improvement in the labor market where growth in hours worked by all persons (employment times hours) accelerated to 2.1% (1.5% y/y) from 0.3% in 2Q. Output grew at a 4.1% rate (4.7% y/y), roughly the same as in 2Q.
Unit labor cost growth accelerated to 1.6% from 1.0% in 2Q due to the productivity slowdown even though compensation also slowed to 3.6% (3.7% y/y) from 4.9%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041104d.jpg" width="353">
Productivity in the manufacturing sector slipped sharply to 4.3% (4.6% y/y) from 8.3% in 2Q which was pegged earlier at 6.9%. Unit labor costs in the factory sector grew 0.1% (-2.1% y/y), the first quarterly increase this year.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EC/@EC02/@EC02.HTM">Non-farm Business Sector</a> (SAAR)</th>
<th scope="col"> 3Q &#39;04</th>
<th scope="col"> 2Q &#39;04 (Revised)</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Output per Hour</td>
<td>1.9%</td>
<td>3.9%</td>
<td>3.1%</td>
<td>4.4%</td>
<td>4.4%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">Compensation</td>
<td>3.6%</td>
<td>4.9%</td>
<td>3.7%</td>
<td>4.1%</td>
<td>3.3%</td>
<td>4.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor Costs</td>
<td>1.6%</td>
<td>1.0%</td>
<td>0.6%</td>
<td>-0.4%</td>
<td>-1.1%</td>
<td>1.5%</td>
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</tbody>
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In 3Q04, non-farm labor productivity growth slowed to 1.9% but growth in 2Q was revised up to 3.9% from 2.5% estimated earlier. Consensus expectations had been for 2.0% growth in 3Q. The slowdown reflected improvement in the labor [...]

U.S. Productivity Growth Slowed From Strengthened 2Q Pace

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041104e.jpg" width="353">
In 3Q04, non-farm labor productivity growth slowed to 1.9% but growth in 2Q was revised up to 3.9% from 2.5% estimated earlier. Consensus expectations had been for 2.0% growth in 3Q.
The slowdown reflected improvement in the labor market where growth in hours worked by all persons (employment times hours) accelerated to 2.1% (1.5% y/y) from 0.3% in 2Q. Output grew at a 4.1% rate (4.7% y/y), roughly the same as in 2Q.
Unit labor cost growth accelerated to 1.6% from 1.0% in 2Q due to the productivity slowdown even though compensation also slowed to 3.6% (3.7% y/y) from 4.9%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041104d.jpg" width="353">
Productivity in the manufacturing sector slipped sharply to 4.3% (4.6% y/y) from 8.3% in 2Q which was pegged earlier at 6.9%. Unit labor costs in the factory sector grew 0.1% (-2.1% y/y), the first quarterly increase this year.

<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/@EC/@EC02/@EC02.HTM">Non-farm Business Sector</a> (SAAR)</th>
<th scope="col"> 3Q &#39;04</th>
<th scope="col"> 2Q &#39;04 (Revised)</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Output per Hour</td>
<td>1.9%</td>
<td>3.9%</td>
<td>3.1%</td>
<td>4.4%</td>
<td>4.4%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">Compensation</td>
<td>3.6%</td>
<td>4.9%</td>
<td>3.7%</td>
<td>4.1%</td>
<td>3.3%</td>
<td>4.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor Costs</td>
<td>1.6%</td>
<td>1.0%</td>
<td>0.6%</td>
<td>-0.4%</td>
<td>-1.1%</td>
<td>1.5%</td>
</tr>
</tbody>
</table>
U.S. Light Vehicle Sales Fell As Truck Rebates Ended 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 4, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041104c.jpg" width="353">
Unit sales of light vehicles dropped 3.1% m/m in October to a 16.96M selling rate. Consensus expectations had been for sales of 16.7M.
Sales of light trucks gave back all of September&#39;s gain with a 7.3% m/m drop as sweetened sales incentives were scaled back and also as gasoline prices breeched $2.00 per gallon. Domestic light truck sales dropped 9.2% m/m but imported light truck sales rose 6.9%.
Total auto sales rose 2.8% m/m for the second consecutive monthly gain on the strength of a 19.4% rise in imported auto sales. Sales of domestic autos fell 3.7%.
Imports&#39; share of the US market for new vehicles ballooned to 22.1%, the highest since early 1991.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED09/@ED0901/@ED0901.HTM"> Light Vehicle Sales (SAAR, Mil.Units)</a></th>
<th scope="col"> Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>16.96</td>
<td>17.51</td>
<td>3.1%</td>
<td>16.69</td>
<td>16.81</td>
<td>17.26</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>7.53</td>
<td>7.33</td>
<td>-3.9%</td>
<td>7.63</td>
<td>8.07</td>
<td>8.48</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Trucks</td>
<td>9.43</td>
<td>10.18</td>
<td>8.9%</td>
<td>9.06</td>
<td>8.74</td>
<td>8.78</td>
</tr>
</tbody>
</table>
Initial Jobless Insurance Claims Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 4, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041104f.jpg" width="353">
Last week, initial claims for unemployment insurance again reversed the prior period&#39;s change with a 19,000 decline to 332,000.The Consensus expectation had been for 340,000 claims.
Back and forth weekly gyrations of this order were the rule during October and the average level of initial claims for the month settled at 341,000, down slightly from 344,000 in September.
During the last ten years there has been a (negative) 73% correlation between the level of initial claims and the m/m change in payroll employment.
Continuing claims for unemployment insurance dropped 20,000 and reversed most of the prior week&#39;s gain.
The insured rate of unemployment remained at 2.2% for the fourth week.

<table border="0" cellspacing="0" width="100%">
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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></th>
<th scope="col"> 10/30/04</th>
<th scope="col"> 10/23/04</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>332</td>
<td>351</td>
<td>-9.0%</td>
<td>402</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,800</td>
<td>-19.1%</td>
<td>3,531</td>
<td>3,570</td>
<td>3,018</td>
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</tbody>
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Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041103e.jpg" width="353">
Employment in both Germany and Italy is inching forward, according to reports for August issued in the last two days. German employment, according to its labor force survey, has edged ahead each month this year and in August was 0.3% above its year-earlier level. While this appears to be a trivial amount, the accompanying graph suggests that it is a distinct relative improvement from the recent 27-month-long stretch of year-on-year shrinkage in the number of people employed in Germany.
The miniscule employment increases in Germany are, however, not enough to help the unemployment side of this economy. The number of people unemployed continued to rise in October and the unemployment rate remained at the 5-1/2 year high of 10.7% that it reached in September.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041103f.jpg" width="353">
In Italy, employment is still below year-ago levels, but looks over the last several months to be stabilizing and is already growing in some sectors. The employment measure reported yesterday by Istat is a kind of &quot;establishment&quot; concept, an index of employment at large businesses. The total index was unchanged in August at 87.6 on a base where 2000=100. This level is off from 89.6 a year ago, but up 0.2 percentage point from a low in April. Details indicate a distinct, non-trivial improvement in the manufacturing sector, up 1.8 percentage points since its low in April. Services are up from a February low, by 0.7 point. Utilities and construction jobs continue to decline, holding back the advance in total private sector employment at large firms. Our discussion here highlights the data &quot;excluding c.i.g.&quot;, the government-supported positions at these firms which absorb workers who would otherwise be laid off. A measure including those workers is still declining, but at 88.3 in August, has been somewhat steadier in the last few years than the actual number of active workers. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Oct 2004</th>
<th scope="col">Sept 2004</th>
<th scope="col">Aug 2004</th>
<th scope="col">Jul &nbsp;2004</th>
<th scope="col">Year Ago</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Germany:&nbsp; Employment (millions)</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>38.394</td>
<td>38.389</td>
<td>38.286</td>
<td>38.316</td>
<td>38.699</td>
<td>38.750</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>10.7</td>
<td>10.7</td>
<td>10.6</td>
<td>10.6</td>
<td>10.5</td>
<td>10.5</td>
<td>9.8</td>
<td>9.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployed Persons (millions)</td>
<td>4.457</td>
<td>4.445</td>
<td>4.417</td>
<td>4.391</td>
<td>4.377</td>
<td>4.38</td>
<td>4.071</td>
<td>3.858</td>
</tr>
<tr>
<td class="firstcol">Italy: 2000=100</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Employment (SA)</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>87.6</td>
<td>87.6</td>
<td>89.6</td>
<td>90.5</td>
<td>93.5</td>
<td>97.6</td>
</tr>
<tr>
<td class="firstcol">Manufacturing (NSA)</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>89.6</td>
<td>89.2</td>
<td>91.3</td>
<td>91.3</td>
<td>94.3</td>
<td>98.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Services (SA)</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>99.7</td>
<td>99.6</td>
<td>98.7</td>
<td>98.7</td>
<td>98.5</td>
<td>99.4</td>
</tr>
</tbody>
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Employment in both Germany and Italy is inching forward, according to reports for August issued in the last two days. German employment, according to its labor force survey, has edged ahead each month this year and in August was 0.3% [...]

Employment Situation Shows Signs of Stabilization in Major European Economies

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041103b.jpg" width="353">
Mortgage applications jumped 8.2% last week following a slight decline the week earlier, according to the Mortgage Bankers Association (MBA). For the full month of October, applications rose 2.2% from the September average.
Purchase applications surged 12.6% but the monthly average nevertheless fell 1.2% from September. During the last ten years there has been a 60% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
Applications to refinance rose a moderate 3.1% w/w but jumped 6.7% for the month.
The effective interest rate on a conventional 30-year mortgage rose to 5.90% from 5.81% the prior week and averaged 5.92% in October. The effective rate on a 15-year mortgage rose to 5.31%.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org"> here</a>.

<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/SURVEYW/@S5/@S5.HTM"> MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">10/29/04</th>
<th scope="col">10/22/04</th>
<th scope="col"> Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>761.7</td>
<td>703.9</td>
<td>11.2%</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>496.5</td>
<td>440.9</td>
<td>22.8%</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,303.9</td>
<td>2,233.8</td>
<td>-0.7%</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
</table>
</body>
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Mortgage applications jumped 8.2% last week following a slight decline the week earlier, according to the Mortgage Bankers Association (MBA). For the full month of October, applications rose 2.2% from the September average. Purchase [...]

Mortgage Applications Jumped

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041103a.jpg" width="353">
Reported job cut announcements in October remained high according to Challenger, Gray &amp; Christmas. At 101,840, announcements were at the third highest level of the year and off just 5.6% from September when they surged 45.5% m/m.
The three month moving average of job cut announcements rose to 94,618 (-13.5% y/y), the highest since February.
During the last ten years there has been an 86% (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.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
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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">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>101,840</td>
<td>107,863</td>
<td>-40.7%</td>
<td>1,236,426</td>
<td>1,431,052</td>
<td>1,956,876</td>
</tr>
</tbody>
</table>
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Reported job cut announcements in October remained high according to Challenger, Gray & Christmas. At 101,840, announcements were at the third highest level of the year and off just 5.6% from September when they surged 45.5% m/m. The [...]

Challenger Layoffs Remained High

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Factory orders fell 0.4% after a 0.3% August decline. Durable goods orders rose 0.2% and that was unrevised from the advance report. The advance report of a 2.6% rise in nondefense capital goods orders less aircraft was revised up slightly to a 2.8% (9.0% y/y).
Shipments out of the US manufacturing sector tumbled 1.1% in September due to broad based industry declines. Shipments of computers &amp; electronic products plunged 3.5% (+8.3% y/y) and electrical equipment shipments skid 3.3% (+5.1% y/y).
Unfilled orders rose another 0.8% and the ratio of unfilled orders to shipments for durables rose sharply suggesting that supply bottlenecks started to emerge.
Factory inventory accumulation moderated to 0.3% following an upwardly revised 0.7% August gain. The inventory to sales ratio in the factory sector rose to its highest since February.

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<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM"> Factory Survey</a> (NAICS)</th>
<th scope="col">Sept</th>
<th scope="col">Aug</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>0.3%</td>
<td>0.7%</td>
<td>5.7%</td>
<td>-1.3%</td>
<td>-1.8%</td>
<td>-6.1%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>-0.4%</td>
<td>-0.3%</td>
<td>10.3%</td>
<td>3.7%</td>
<td>-1.9%</td>
<td>-6.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>-1.1%</td>
<td>0.9%</td>
<td>10.0%</td>
<td>2.6%</td>
<td>-2.0%</td>
<td>-5.4%</td>
</tr>
<tr>
<td class="firstcol">Unfilled Orders</td>
<td>0.8%</td>
<td>0.3%</td>
<td>9.6%</td>
<td>4.2%</td>
<td>-6.1%</td>
<td>-5.9%</td>
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Factory orders fell 0.4% after a 0.3% August decline. Durable goods orders rose 0.2% and that was unrevised from the advance report. The advance report of a 2.6% rise in nondefense capital goods orders less aircraft was revised up [...]

US Factory Orders & Shipments Down

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The Institute for Supply Management reported that the October Business Activity Index for the non-manufacturing sector rebounded 3.1 points to 59.8 following a 1.5 point decline in September. Consensus expectations had been for a more moderate gain to 58.0.
Despite the latest rise, the index remained well below its April high of 68.4.
Since the series&#39; inception in 1997 there has been a 55% correlation between the Business Activity Index and the q/q change in GDP services plus construction.
The employment sub index rose again to 55.8, the highest level since June. Since the series&#39; inception in 1997 there has been a 60% correlation between the level of the ISM non-manufacturing employment index and the m/m change in payroll employment in the service producing plus the construction industries.
The new orders index also rose to 60.5, the highest since July and the seasonally adjusted prices index rose to 74.1.
ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The non-manufacturing survey dates only to July 1997, therefore its seasonal adjustment should be viewed tentatively.
Business Activity Index for the non-manufacturing sector reflects a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index is a weighted average five components.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Oct &#39;03</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Business Activity Index</td>
<td>59.8</td>
<td>56.7</td>
<td>63.3</td>
<td>58.1</td>
<td>55.1</td>
<td>48.9</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>74.1</td>
<td>67.1</td>
<td>58.9</td>
<td>56.7</td>
<td>53.9</td>
<td>51.5</td>
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The Institute for Supply Management reported that the October Business Activity Index for the non-manufacturing sector rebounded 3.1 points to 59.8 following a 1.5 point decline in September. Consensus expectations had been for a more [...]

ISM Non-manufacturing Index Rebounded

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

US tariff revenues nearly doubled in April

Even with expected tariff-induced increases in inflation, BCFF forecasters look for a more aggressive round of monetary easing

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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Mortgage applications increased 3.1% (17.8% y/y) in the week ending August 1, after declining 3.8% in the prior week, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications for loan refinancing jumped 5.2% (17.5% y/y) last week, following three straight weeks of decline. Applications for loans to purchase a home rose 1.5% (18.0% y/y) last week, following a 5.8% decline in the week of July 25.

The effective interest rate on a 30-year fixed-rate loan slipped to 6.94% in the week ending August 1, from 7.00% in the prior week. It was the lowest rate since the first week of April. The rate on 15-year fixed-rate mortgages declined to 6.19% in the latest week from 6.28% in the week of July 25. The rate on 30-year Jumbo loans dropped to 6.82% last week from 6.89% one week earlier. The rate on a 5-year ARM dropped to 6.25% in the week of August 1 after rising to 6.40% in the prior week. It was above a low of 5.84% in the week of September 13, 2024.

The share of applications for refinancing an existing loan rose to 41.5% of total applications in the week ending August 1, from 40.7% in the prior week. The adjustable-rate mortgage (ARM) share of activity rose to 8.50% in the latest week from 8.30% in the week of July 25.

The average size of a mortgage loan rose 1.9% (0.6% y/y) to $381,400 in the week of August 1, following a 0.7% rise in the prior week. The average size of a purchase loan rose 0.7% (1.3% y/y) to $432,300 in the latest week after gaining 0.6% in the week ending July 27. The average size of a loan to refinance a mortgage rose 5.2% (-0.8% y/y) to $309,800 last week, after rising 2.3% in the prior week.

The Mortgage Bankers Association Survey covers 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver’s **SURVEYS** database.

- Loan refinancing jumps as purchase applications edge higher.
- Effective fixed-interest rate eases on 30-year loans. 
- Average loan size increases again.

U.S. Mortgage Applications Rise Last Week as Interest Rates Slip

Robert Brusca

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German orders expressed in real terms fell by 1% in June after falling by 0.8% in May. Foreign orders fell by 3% month-to-month after rising 3.8% in May. Domestic orders came back to life rising by 2.2% in June but only after a sharp 7.5% drop in May; that drop had been preceded by a 2.8% increase in April. The gyration and trend performance of orders is still choppy and, for the most part, weak.

**Order trends**
Sequential growth rates show that overall orders for Germany (still expressed in real terms) rose by 0.6% over 12 months; however, they fall at 4.7% annual rate over six months and fall at a 0.5% annual rate over three months. Foreign orders rise by 7.4% over 12 months; over six months the gain is at a 13.7% annual rate, and over three months that pace is reduced to a 7.3% annual rate. German domestic orders fall by 8.6% over 12 months, then decline at an extremely rapid 26.1% annual rate over six months, and continue to decline at 11.1% annual rate over three months. For the time being, orders have been propped up by strength in the international market while domestic orders continue to languish and to contract.

**Real sales**
Sector sales, expressed in real terms, rose by 1% and those across all the components after seeing widespread contractions in May that had followed an uneven performance in April. Real sales for manufacturing fall by 1.5% over 12 months, fall at a 1.9% annual rate over six months, and fall at an annual rate of 9.2% over three months. Real sales trends are not reassuring.

**European Surveys on Industry**
Survey results for the largest economies in the European Monetary Union show slippages in June compared to May as three of the four large economies weaken (with Italy being the exception). Over three months France logged a weaker reading compared to six-months, Germany improved, Italy's performance is unchanged; Spain reports a result that's better by a single tick on the survey index comparing 3-months to 6-months. Comparing the 12-month to averages to 3-month averages for the four large European economies, shows deterioration that's across the board with the slight exception of Italy.

**Quarter-to-date (completed Q2)**
The quarter-to-date (QTD) performance in Germany for orders are strong, rising at a 13.1% annual rate. Sector sales show deteriorated real sector sales across most sectors on QTD basis; manufacturing sales fall at a 2.9% annual rate.

**Longer term evaluations** 
The two right hand columns evaluate the growth and level performance of these various metrics on real sector sales and on a level basis and well as on annual growth rates. Total orders and foreign orders ranked on levels are well above their 50% mark, which puts them above their median on data back to 1994. Domestic sales levels have only a 21.8 percentile standing, extremely weak. Rankings on growth rates show total orders at a 45.9 percentile ranking, below the median growth rate (which occurs at a ranking of 50%). However, foreign orders’ growth ranks in the 70th percentile, quite firm, while the domestic growth rate queue ranking resides in the lower 10.7 percentile of its range. Growth rates for real sector sales are mostly below their 50-percentile mark except for consumer nondurables and consumer goods sales overall (which, of course, are boosted by the sales of consumer nondurables). The industrial confidence indicators for European economies that are from diffusion surveys are evaluated relative to historic levels only. All of them score weak results. The best queue standing is Spain with a 37.5 percentile standing, followed by Italy at a 24.8 percentile standing. France has a 14.6 percentile standing, while Germany has a 7.4 percentile standing. These range from weak, and below median, to very weak.

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**Summing up**
On balance, German performance in June is poor. The trends are poor, and far from reassuring. Sector sales performance is poor. Performance across Europe continues to be poor as captured by survey results- that performance continues, for the most part, to deteriorate. However, German quarter-to-date growth rates for orders are strong in Q2 compared to Q1, but that is only on the back of strength in foreign orders. German domestic orders are still behaving badly. All-in-all, it's a disappointing report on the manufacturing sector for Germany and for what we survey of Europe.

Germany

German Orders Fall Again, Unexpectedly

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The U.S. ISM Services PMI declined to 50.1 during July, after rising to 50.8 in June from 49.9 in May, according to the Institute for Supply Management. The index hit a recent high of 55.8 in October of last year, and remains below the all-time high of 67.5 in November 2021. The Action Economics Forecast Survey expected a reading of 51.5 for July.

The composite index combines the services index and the manufacturing index released last Friday. This index fell to 49.8 in July from 50.6 in June. The latest figure is the lowest since June 2024, down from the November 2024 high of 54.7.

Amongst the services component series, the business activity index fell to 52.6 last month from 54.2 in June. Twenty-four percent (NSA) of respondents reported improved activity while 14.4% reported a decline. The new orders index fell to 50.3 in July from 51.3 in June. Twenty percent (NSA) of respondents reported improved orders while a higher 18.7% reported a decline. The employment series weakened to 46.4, its lowest level in four months, from 47.2 in June. An increased 12.3% (NSA) of respondents reported increased employment while a higher 18.1% reported a decline. Working higher, the supplier delivery series edged up to 51.0 in July after falling to 50.3 in June, but remained below a high of 56.4 in October of last year. A reduced 4.3% of respondents (NSA) reported faster delivery speeds while a higher 6.3% reported a slowing.

On the inflation front, the prices index surged to 69.9 in July after easing to 67.5 in June. It was the highest level since October 2022. An increased 42.1% (NSA) of respondents reported higher prices while an increased 4.0% reported lower prices. The index was increased from its March 2024 low 53.5 and stood at its highest level since October 2022.

Additionally, the new export orders index fell sharply to 47.9 (NSA) in October following a rise to 51.1 in June. Just 10.4% of survey respondents reported higher exports while an increased 14.7% reported a decline. The imports index fell sharply to 45.9 last month from 51.7 in June. A greatly lessened 4.1% of respondents reported higher imports while a higher 12.4% reported a decline. The inventory change index weakened to 51.8. The order backlog index rose to 44.3 in July after falling to 42.4 in June. A higher 8.3% of respondents reported higher backlogs while a fewer 19.7% reported a decline. These series are not seasonally adjusted and not included in the ISM Services PMI total.

The ISM Services PMI is a composite index consisting of four equally weighted diffusion indexes: Business Activity, New Orders, Employment, and Supplier Deliveries. A reading above 50 indicates expansion in the services sector, while below 50 suggests contraction. Supplier Deliveries is the only ISM index that is inversed; a reading above 50 indicates slower deliveries.

The ISM figures are available in Haver's **USECON** database, with additional detail in the **SURVEYS** database. The expectations figure from Action Economics is in the **AS1REPNA** database.

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- Total index trending lower for nine months.
- Business activity, new orders & employment weaken.
- Prices Index strengthens to highest level since 2022.

U.S. ISM Services PMI Declines in July; Price Index Increases

Winnie Tapasanun

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The U.S. trade deficit in goods and services (BOP basis) narrowed to $60.18 billion in June after widening to $71.66 billion in May ($71.52 billion originally), according to the U.S. Census Bureau. This was the second month in three in which the deficit had narrowed. The June deficit was the smallest since September 2023 and much smaller than the $73.89 billion in June 2024. A deficit of $61.6 billion had been expected in the Action Economics Forecast Survey. Exports declined 0.5% m/m (+3.3% y/y) in June following a 4.1% drop in May (-4.0% previously) and four successive m/m increases. Imports fell 3.7% (-1.4% y/y) after an unrevised 0.1% downtick in May, registering the third consecutive m/m fall and the fourth in five months.

The real (inflation-adjusted) goods trade deficit (customs value; chained 2017 dollars) narrowed to $84.61 billion in June after widening to $93.32 billion in May; it was smaller than the $92.82 billion in June 2024. The $87.43 billion average monthly real trade deficit in Q2'25 was the smallest since Q4'23 and significantly smaller than the record $143.28 billion in Q1'25. A trade balance (net exports) added 4.99%-points to Q2'25 real GDP growth after subtracting 4.61%-points in Q1'25.

The deficit in goods trade (BOP basis) narrowed to $85.88 billion in June, the smallest since September 2023, after widening to $97.30 billion in May; it was much smaller than the $99.56 billion in June 2024. Goods exports fell 0.7% (+3.3% y/y) in June following a 5.9% drop in May and four straight m/m rises. Imports of goods decreased 4.5% (-2.9% y/y), down for the fourth month in five, after a 0.1% May easing.

The customs value goods trade deficit fell to $84.85 billion in June, the smallest since September 2023, after widening to $96.21 billion in May; it was much smaller than the $98.81 billion in June 2024. The latest figure was slightly smaller than an $85.99 billion deficit in the advance report released on July 29. Custom value exports fell 0.7% (+3.5% y/y) in June following a 5.6% drop in May and four consecutive m/m gains. This reflected m/m falls of 7.4% (+0.7% y/y) in industrial supplies & materials and 2.6% (+22.8% y/y) in other goods. To the upside, exports for the following end-use categories rose m/m in June: nonfood consumer goods excluding autos (4.6%; 4.3% y/y), foods, feeds & beverages (4.4%; 1.2% y/y), capital goods excluding autos (3.4%; 9.7% y/y), and automotive vehicles, parts & engines (1.6%; -15.8% y/y).

Customs value imports slid 4.6% (-2.9% y/y) in June, the third straight m/m slide and the fourth in five months, after a 0.1% downtick in May. This reflected m/m drops of 12.7% (-13.3% y/y) in nonfood consumer goods excluding autos, 5.2% (-12.4% y/y) in industrial supplies & materials, 4.9% (+7.8% y/y) in other goods, 3.6% (-12.2% y/y) in automotive vehicles, parts & engines, and 1.5% (+3.8% y/y) in foods, feeds & beverages. In contrast, imports of capital goods excluding autos, the only end-use category with a monthly increase in June, rose 0.7% (14.0% y/y), the seventh m/m rise in eight months, on top of a 0.3% May rebound. Meanwhile, petroleum imports fell 3.8% (-24.7% y/y) in June, the fourth m/m fall in five months, reversing a 1.5% rise in May. Nonpetroleum imports slid 4.6% (-1.1% y/y), the third straight m/m slide, after a 0.2% May decline.

The services trade surplus rose to $25.70 billion in June after narrowing to $25.64 billion in May; it was in line with $25.67 billion in June 2024. Services exports fell 0.2% (+3.3% y/y) in June, the fifth m/m fall in six months, on top of a 0.6% decline in May. This reflected m/m drops of 4.8% (-11.3% y/y) in government goods & services, 2.1% (+30.8% y/y) in maintenance & repair services, and 1.1% (-0.02% y/y) in travel services, while exports for construction services (0.9%; -5.7% y/y), insurance services (0.7%; 18.9% y/y) and charges for the use of intellectual property (0.5%; 7.0% y/y) increased m/m in June. Services imports fell 0.3% (+4.5% y/y) after a 0.3% May fall and two successive m/m increases. This reflected m/m drops of 1.9% (+48.0% y/y) in maintenance & repair services, 1.5% (+2.9% y/y) in travel services, and 1.3% (-1.3% y/y) in transport services, while imports for construction services (2.0%; 82.3% y/y), charges for the use of intellectual property (0.8%; 1.3% y/y) and financial services (0.5%; 4.9% y/y) rose m/m in June.

The U.S. goods trade deficit with China narrowed to a seasonally adjusted $9.38 billion in June, the smallest on record, after falling to $13.97 billion in May. Exports surged 45.4% (-16.6% y/y) following a 19.9% May slump, while imports fell 6.9% (-45.6% y/y) on top of a 26.3% May plunge. The goods trade deficit with the European Union narrowed markedly to $9.52 billion in June, the smallest since June 2013, after widening to $22.54 billion in May, with exports up 6.8% (16.6% y/y) and imports down 19.2% (-8.2% y/y). The trade shortfall with Japan narrowed marginally to $5.72 billion in June, the smallest since February, from $5.77 billion in the previous month, reflecting declines of 3.4% (-7.5% y/y) in exports and 2.3% (-0.4% y/y) in imports.

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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- $60.2 bil. trade deficit, reflecting $85.9 bil. goods deficit & $25.7 bil. services surplus.
- Exports -0.5% m/m, down for the second consecutive month.
- Imports -3.7% m/m, down for the third straight month.
- Real goods trade deficit narrows to $84.6 bil. after May’s widening.
- Goods trade deficits w/ China at a record low, w/ EU at a June ’13 low, and w/ Japan at a 4-month low.

U.S. Trade Deficit Narrows in June; the Smallest Since Sept. ’23

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The S&P Global PMI indexes once again showed mixed performance in July. Most large economies continue to do better, and the total PMI services sectors continue to make up for shortcomings in manufacturing.

**Stability on a low growth path**
In July, 24% of the reporting countries showed activity was slowing; that's down from 48% in both June and May and indicates some progress. Only five of the reporting jurisdictions have PMI values below 50 indicating economic contraction in July; that July figure compares to five in June and seven in May. Declining activity continues to be an unusual event. Medians and average readings for the group of 25 countries or regions show extreme stability in the recent months as well as across sequential averages.

**Growth moderately improves**
Comparing period averages from 12-months to six-months to three-months, unweighted readings of the U.S., the U.K., and European monetary union show extremely flat PMI values oscillating between values of 51.2 to 51.7 on those period averages; over three months, six months, and 12 months. The jurisdictions in the table show PMI readings below 50 are rare; once again declining activity is an unusual event. The proportion of reporters slowing over three months is 34.8% compared to 52.2% over six months and 30.4% over 12 months. Once again, we see these statistics tilted toward improving growth rather than towards slowing

**Summing up**
The queue percentile standings for the group in July have an average value at 48.4% which is below the 50% mark that coincides with the median for the period. This tells us the growth is largely worse than what its median has been over the past 4 1/2 years. On a queue ranking basis, the largest economies consistently perform better with readings above the 50% mark for the U.S. and for the European Monetary System including each of its four largest EMU economies (Germany, France, Italy, and Spain). Japan has a queue standing in its 57th percentile. However, China’s percentile standing is in its 26th percentile and the U.K. is at its 40.5 percentile. Not all large economies are in the catbird seat, but most are faring well despite the moderate growth track globally.

Economy in Brief: November 2004

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U.S. Light Vehicle Sales Fell As Truck Rebates Ended

U.S. Productivity Growth Slowed From Strengthened 2Q Pace

U.S. Productivity Growth Slowed From Strengthened 2Q Pace

Employment Situation Shows Signs of Stabilization in Major European Economies

Mortgage Applications Jumped

Challenger Layoffs Remained High

US Factory Orders & Shipments Down

ISM Non-manufacturing Index Rebounded