Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080508e.jpg" align="left" border="0" height="265" width="353">
The chart on top shows that German growth trends are decaying
across the array of 3-Mo 6-Mo and 12-Mo rates. They are stratified so
that the they do point to some further decelerations but only barely.
Each growth rate series has a declining profile coming into the current
month. Even so on each horizon the rate of growth is still close to
4.0%, which for real output is still a fairly strong result.

Underneath the headlines we find that the trends and
underpinnings are notas bullet-proof. The trend for the output of
consumer goods is withering steadily with a three-month rate of growth
that is -1.1%. Capital goods output trends are accelerated with a
3-month growth rate 0f 7.5%. But intermediate goods growth has been
decelerating steadily. The capital goods result, while quite
solid-looking on its own should be looked upon with some suspicion
since the rate of the E-zone is slowing and capital goods investment
generally gets cut back in economic slowdowns. Clearly German IP trends
tell us that the consumer that Germany sells to are being less than
resilient.

Short term, however, trends are still quite bright. In 2008-Q1
all main (annualized) sector growth rates are at 3% or higher. Moreover
the quarter shows growth accelerations from the previous quarter for
output in consumer goods, capital goods and intermediate goods. Growth
rates per se are strong in the quarter: For capital goods the q/q
annualized rate of growth is 11.7% and for intermediate goods it is
9.2%. These figures exceed their current trend values and imply that Q1
GDP might overstate the developing trend.

Construction is up at a 49% pace in the quarter MFG IP is up
at a 9% pace but MFG orders are falling by 5.3%, one of the ominous
signals for growth ahead &#8211; but ahead of 2008Q1.


<table border="0" cellspacing="0" width="100%">
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col"> Total German IP</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar exept m/m</td>
<td>Mar-08</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Quarter-to-Date</td>
</tr>
<tr>
<td class="firstcol">IP total</td>
<td>-0.5%</td>
<td>0.2%</td>
<td>1.4%</td>
<td>4.4%</td>
<td>4.1%</td>
<td>4.6%</td>
<td>9.6%</td>
</tr>
<tr>
<td class="firstcol">Consumer goods</td>
<td>0.5%</td>
<td>-0.8%</td>
<td>0.0%</td>
<td>-1.1%</td>
<td>-1.3%</td>
<td>0.5%</td>
<td>3.0%</td>
</tr>
<tr>
<td class="firstcol">Capital goods</td>
<td>-1.8%</td>
<td>-0.7%</td>
<td>4.5%</td>
<td>7.5%</td>
<td>5.9%</td>
<td>6.4%</td>
<td>11.7%</td>
</tr>
<tr>
<td class="firstcol">Intermediate goods</td>
<td>1.1%</td>
<td>1.2%</td>
<td>-1.3%</td>
<td>3.8%</td>
<td>6.4%</td>
<td>6.3%</td>
<td>9.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Memo</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>-12.3%</td>
<td>3.1%</td>
<td>11.4%</td>
<td>2.9%</td>
<td>2.4%</td>
<td>-4.0%</td>
<td>49.1%</td>
</tr>
<tr>
<td class="firstcol">MFG IP</td>
<td>-0.2%</td>
<td>0.0%</td>
<td>1.2%</td>
<td>4.2%</td>
<td>4.8%</td>
<td>5.2%</td>
<td>9.0%</td>
</tr>
<tr>
<td class="firstcol">MFG Orders</td>
<td>-0.6%</td>
<td>-0.6%</td>
<td>-0.7%</td>
<td>-7.2%</td>
<td>6.0%</td>
<td>5.1%</td>
<td>-5.3%</td>
</tr>
</tbody>
</table>
</body></html>

The chart on top shows that German growth trends are decaying across the array of 3-Mo 6-Mo and 12-Mo rates. They are stratified so that the they do point to some further decelerations but only barely. Each growth rate series has a [...]

IP Trends in Germany Begin to Decay

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080508c.jpg" width="353">
Consumer credit outstanding rose $15.3B during March after an upwardly revised $6.6B February increase. The gain was more than twice the rise that was generally expected.
On a percentage basis, the change in consumer credit over the last three months averaged 5.5% (AR), about the same as during all of 2007.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080508d.jpg" width="353">
Revolving credit outstanding rose $6.3B, nearly twice the February increase. The three month growth rate, however, fell slightly to 6.9% from 7.5% last year.
Non-revolving credit, which accounts for nearly two thirds of total consumer credit, increased more sharply last month by $9.0B after an upwardly revised $2.6B February gain. The three month annualized average growth rate, however, was stable with last year&#39;s 4.7% increase though that was up from a 1.2% low at the end of last year.
These figures are the major input to the Fed&#39;s Flow of Funds accounts for the household sector, released quarterly.
The Recession Dating Procedure from the National Bureau of Economic Research (NBER) can be found <a href="http://www.nber.org/cycles/recessions.html">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Consumer Credit (m/m Chg, SAAR)</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&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>$15.3B</td>
<td>&nbsp;$6.6B</td>
<td>5.9%</td>
<td>5.7%</td>
<td>4.5%</td>
<td>4.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revolving</td>
<td>$6.3B</td>
<td>$3.9B</td>
<td>7.9%</td>
<td>7.5%</td>
<td>6.1%</td>
<td>3.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-revolving</td>
<td>$9.0B</td>
<td>$2.6B</td>
<td>4.7%</td>
<td>4.7%</td>
<td>3.6%</td>
<td>4.9%</td>
</tr>
</tbody>
</table>
</body>
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Consumer credit outstanding rose $15.3B during March after an upwardly revised $6.6B February increase. The gain was more than twice the rise that was generally expected. On a percentage basis, the change in consumer credit over the [...]

U.S. Consumer Credit Growth Up in March, Stable With 2007

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080508a.jpg" width="353">
Last week&#39;s initial claims for unemployment insurance continued the recent up/down pattern, with an upward drift, of the last several periods. They fell by 18,000 to 365,000 after an upwardly revised 38,000 increase during the prior week. Consensus expectations had been for claims to total 375,000 last week.
The four week moving average of initial claims rose slightly week-to-week to 367,000 (17.0% y/y) after claims averaged 365,000 during April.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080508b.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 fell 10,000 after an upwardly revised 84,000 worker increase during the prior week. The latest level was near 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.
Initial claims for the week ended April 26 increased the most in Massachusetts, New York, Kentucky, New Jersey and Michigan. The largest decreases occurred in Texas, Rhode Island, California, Pennsylvania and Connecticut.
The insured rate of unemployment held steady at 2.3% for the second week. The latest also was the highest since 2004.
Mitigating the Impact of Foreclosures on Neighborhoods is yesterday&#39;s speech by Fed Governor Randall Kroszner and it is available <a href="http://www.federalreserve.gov/newsevents/speech/kroszner20080507a.htm"> here</a>.

<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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">05/03/08</th>
<th scope="col">04/26/08</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;365</td>
<td>383</td>
<td>22.9%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,020</td>
<td>19.4%</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>


</html>

Last week's initial claims for unemployment insurance continued the recent up/down pattern, with an upward drift, of the last several periods. They fell by 18,000 to 365,000 after an upwardly revised 38,000 increase during the prior [...]

U.S. Initial Jobless Insurance Claims Dip

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080508c.jpg" align="left" border="0" height="265" width="353">
Consumer credit outstanding rose $15.3B during March after an
upwardly revised $6.6B February increase. The gain was more than twice
the rise that was generally expected.
On a percentage basis, the change in consumer credit over the
last three months averaged 5.5% (AR), about the same as during all of
2007.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080508d.jpg" align="right" border="0" height="265" width="353">
Revolving credit outstanding rose $6.3B, nearly twice the
February increase. The three month growth rate, however, fell slightly
to 6.9% from 7.5% last year.
Non-revolving credit, which accounts for nearly two thirds of
total consumer credit, increased more sharply last month by $9.0B after
an upwardly revised $2.6B February gain. The three month annualized
average growth rate, however, was stable with last year's 4.7% increase
though that was up from a 1.2% low at the end of last year.
These figures are the major input to the Fed's Flow of Funds
accounts for the household sector, released quarterly.
The Recession Dating Procedure from the
National Bureau of Economic Research (NBER) can be found <a href="http://www.nber.org/cycles/recessions.html">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Consumer
Credit (m/m Chg, SAAR)</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&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>$15.3B</td>
<td>&nbsp;$6.6B</td>
<td>5.9%</td>
<td>5.7%</td>
<td>4.5%</td>
<td>4.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revolving</td>
<td>$6.3B</td>
<td>$3.9B</td>
<td>7.9%</td>
<td>7.5%</td>
<td>6.1%</td>
<td>3.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-revolving</td>
<td>$9.0B</td>
<td>$2.6B</td>
<td>4.7%</td>
<td>4.7%</td>
<td>3.6%</td>
<td>4.9%</td>
</tr>
</tbody>
</table>
U.S. Initial Jobless Insurance
Claims Dip 
by <a href="/comment/Moeller.html">Tom
Moeller</a> May 8, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080508a.jpg" align="left" border="0" height="265" width="353">
Last week's initial claims for unemployment insurance
continued the recent up/down pattern, with an upward drift, of the last
several periods. They fell by 18,000 to 365,000 after an upwardly
revised 38,000 increase during the prior week. Consensus expectations
had been for claims to total 375,000 last week.
The four week moving average of initial claims rose slightly
week-to-week to 367,000 (17.0% y/y) after claims averaged 365,000
during April.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080508b.jpg" align="right" border="0" height="265" 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 fell 10,000 after
an upwardly revised 84,000 worker increase during the prior week. The
latest level was near its highest since early 2004 and it provides some
indication of workers' ability to find employment.
The continuing claims numbers lag the initial claims figures
by one week.
Initial claims for the week ended April 26 increased the most
in Massachusetts, New York, Kentucky, New Jersey and Michigan. The
largest decreases occurred in Texas, Rhode Island, California,
Pennsylvania and Connecticut.
The insured rate of unemployment held steady at 2.3% for the
second week. The latest also was the highest since 2004.
Mitigating the Impact of Foreclosures on
Neighborhoods is yesterday's speech by Fed Governor Randall
Kroszner and it is available <a href="http://www.federalreserve.gov/newsevents/speech/kroszner20080507a.htm">
here</a>.

<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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment
Insurance (000s)</a>&nbsp;</th>
<th scope="col">05/03/08</th>
<th scope="col">04/26/08</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;365</td>
<td>383</td>
<td>22.9%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,020</td>
<td>19.4%</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
IP Trends in Germany Begin to Decay 
by <a href="/comment/Brusca.html">Robert
Brusca</a> May 8, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080508e.jpg" align="left" border="0" height="265" width="353">
The chart on top shows that German growth trends are decaying
across the array of 3-Mo 6-Mo and 12-Mo rates. They are stratified so
that the they do point to some further decelerations but only barely.
Each growth rate series has a declining profile coming into the current
month. Even so on each horizon the rate of growth is still close to
4.0%, which for real output is still a fairly strong result.

Underneath the headlines we find that the trends and
underpinnings are notas bullet-proof. The trend for the output of
consumer goods is withering steadily with a three-month rate of growth
that is -1.1%. Capital goods output trends are accelerated with a
3-month growth rate 0f 7.5%. But intermediate goods growth has been
decelerating steadily. The capital goods result, while quite
solid-looking on its own should be looked upon with some suspicion
since the rate of the E-zone is slowing and capital goods investment
generally gets cut back in economic slowdowns. Clearly German IP trends
tell us that the consumer that Germany sells to are being less than
resilient.

Short term, however, trends are still quite bright. In 2008-Q1
all main (annualized) sector growth rates are at 3% or higher. Moreover
the quarter shows growth accelerations from the previous quarter for
output in consumer goods, capital goods and intermediate goods. Growth
rates per se are strong in the quarter: For capital goods the q/q
annualized rate of growth is 11.7% and for intermediate goods it is
9.2%. These figures exceed their current trend values and imply that Q1
GDP might overstate the developing trend.

Construction is up at a 49% pace in the quarter MFG IP is up
at a 9% pace but MFG orders are falling by 5.3%, one of the ominous
signals for growth ahead &#8211; but ahead of 2008Q1.


<table border="0" cellspacing="0" width="100%">
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Total
German IP</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar exept m/m</td>
<td>Mar-08</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Quarter-to-Date</td>
</tr>
<tr>
<td class="firstcol">IP total</td>
<td>-0.5%</td>
<td>0.2%</td>
<td>1.4%</td>
<td>4.4%</td>
<td>4.1%</td>
<td>4.6%</td>
<td>9.6%</td>
</tr>
<tr>
<td class="firstcol">Consumer goods</td>
<td>0.5%</td>
<td>-0.8%</td>
<td>0.0%</td>
<td>-1.1%</td>
<td>-1.3%</td>
<td>0.5%</td>
<td>3.0%</td>
</tr>
<tr>
<td class="firstcol">Capital goods</td>
<td>-1.8%</td>
<td>-0.7%</td>
<td>4.5%</td>
<td>7.5%</td>
<td>5.9%</td>
<td>6.4%</td>
<td>11.7%</td>
</tr>
<tr>
<td class="firstcol">Intermediate goods</td>
<td>1.1%</td>
<td>1.2%</td>
<td>-1.3%</td>
<td>3.8%</td>
<td>6.4%</td>
<td>6.3%</td>
<td>9.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Memo</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>-12.3%</td>
<td>3.1%</td>
<td>11.4%</td>
<td>2.9%</td>
<td>2.4%</td>
<td>-4.0%</td>
<td>49.1%</td>
</tr>
<tr>
<td class="firstcol">MFG IP</td>
<td>-0.2%</td>
<td>0.0%</td>
<td>1.2%</td>
<td>4.2%</td>
<td>4.8%</td>
<td>5.2%</td>
<td>9.0%</td>
</tr>
<tr>
<td class="firstcol">MFG Orders</td>
<td>-0.6%</td>
<td>-0.6%</td>
<td>-0.7%</td>
<td>-7.2%</td>
<td>6.0%</td>
<td>5.1%</td>
<td>-5.3%</td>
</tr>
</tbody>
</table>
German Order Trends are Mostly
Cycling Lower 
by <a href="/comment/Brusca.html">Robert
Brusca</a> May 8, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080508f.jpg" align="left" border="0" height="265" width="353">
German orders have taken some time to weaken since the euro
began climbing strongly. Arguably it is now a plethora of factors that
are dogging the trend including the strong euro but also the fallout
from the financial turmoil and the transmission of weakness from
faltering growth in the US and elsewhere &#8211; to extent that theses things
are different.

Orders both domestic and foreign have eased their pace from
their year ago growth rate and also sequentially through six-month and
three-month growth rates as well. Both domestic and foreign orders have
decelerated their pace. The quarterly readings show negative growth
rates for both domestic and foreign orders in 2008-Q1.

But this slowing has yet to hit the pace of sales. Sales
growth rates are still largely rising except for consumer goods &#8211;long
the Achilles Heel of this expansion. Capital goods sales have slowed
but are still strong in the Q1 period. Intermediate goods sales remain
relatively robust.

On balance the orders figure that tend to lead the cycle show
that he boom days in MFG are coming to a close. Since they are slowing
sharply and since growth rates have turned negative, they hint that the
slowdown could be severe.


<table border="0" cellspacing="0" width="100%">
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">German
Orders and Sales By Sector and Origin </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Real and SA</td>
<td colspan="3">% M/M</td>
<td colspan="5">% Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Mar-08</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
<td>QTR-2-Date</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>-0.6%</td>
<td>-0.6%</td>
<td>-0.7%</td>
<td>-7.2%</td>
<td>-3.6%</td>
<td>5.1%</td>
<td>11.5%</td>
<td>-5.3%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>-0.4%</td>
<td>-1.1%</td>
<td>-0.4%</td>
<td>-7.6%</td>
<td>-3.9%</td>
<td>6.8%</td>
<td>12.7%</td>
<td>-9.6%</td>
</tr>
<tr>
<td class="firstcol">Domestic</td>
<td>-0.9%</td>
<td>0.0%</td>
<td>-0.9%</td>
<td>-6.6%</td>
<td>-3.4%</td>
<td>3.3%</td>
<td>10.4%</td>
<td>-0.2%</td>
</tr>
<tr class="even">
<td class="firstcol" colspan="9">Sector
Sales</td>
</tr>
<tr>
<td class="firstcol">MFG/Mining</td>
<td>-0.5%</td>
<td>-0.2%</td>
<td>2.1%</td>
<td>5.9%</td>
<td>2.9%</td>
<td>4.6%</td>
<td>9.3%</td>
<td>9.2%</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods</td>
<td>0.2%</td>
<td>-1.8%</td>
<td>1.0%</td>
<td>-2.3%</td>
<td>-1.1%</td>
<td>-0.7%</td>
<td>5.6%</td>
<td>-1.0%</td>
</tr>
<tr>
<td class="firstcol">Consumer Durables</td>
<td>-0.9%</td>
<td>-0.3%</td>
<td>0.8%</td>
<td>-1.6%</td>
<td>-0.8%</td>
<td>0.4%</td>
<td>5.1%</td>
<td>4.3%</td>
</tr>
<tr>
<td class="firstcol">Consumer Nondurables</td>
<td>0.4%</td>
<td>-2.0%</td>
<td>1.1%</td>
<td>-2.2%</td>
<td>-1.1%</td>
<td>-0.9%</td>
<td>5.9%</td>
<td>-2.0%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>-2.7%</td>
<td>-0.8%</td>
<td>4.2%</td>
<td>2.7%</td>
<td>1.3%</td>
<td>5.4%</td>
<td>9.7%</td>
<td>10.9%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>1.9%</td>
<td>1.6%</td>
<td>0.2%</td>
<td>15.5%</td>
<td>7.5%</td>
<td>6.7%</td>
<td>11.2%</td>
<td>13.2%</td>
</tr>
<tr>
<td class="firstcol">All Manufacturing Sales</td>
<td>-0.5%</td>
<td>-0.2%</td>
<td>2.1%</td>
<td>5.7%</td>
<td>2.8%</td>
<td>4.1%</td>
<td>9.3%</td>
<td>9.1%</td>
</tr>
</tbody>
</table>
</body></html>

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080507c.jpg" width="353">
The National Association of Realtors reported that the level of pending sales of existing homes fell an expected 1.0% after a deepened 2.8% February decline. Sales during 1Q08 were down 11.9% from the average sales level in 2007.
These figures are analogous to the new home sales data from the Commerce Department in that they measure existing home sales when the sales contract is signed, not at the time the sale is closed.
Sales in the West fell by 1.4% for the second month following a 13.0% spurt in January. That improvement was accompanied by a 12.5% surge in sales in the Northeast. Sales in the South ticked lower by 0.1% but sales are down 38.8% from their 2005 peak. In the Midwest March sales collapsed 10.4% m/m after a 3.7% February drop.
The Realtors also indicated in an earlier report that the number of homes on the market &amp; available for sale rose 1.0% in March (6.6% y/y). At the current sales rate there was a 9.9 months&#39; supply of homes on the market versus an 8.9 months&#39; average during all of last year, a 6.5 months&#39; supply in 2006 and a 4.5 months&#39; supply in 2005.
The pending home sales data are available in Haver&#39;s PREALTOR database and the number of homes on the market are in the REALTOR database.

<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/WEEKLY/@W5/@W507/@W507.HTM">Pending Home Sales (2001=100)&nbsp;</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&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>83.0</td>
<td>&nbsp;83.8</td>
<td>&nbsp;&nbsp; -20.1%</td>
<td>95.7</td>
<td>112.1&nbsp;</td>
<td>124.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>80.8</td>
<td>71.8</td>
<td>-15.4</td>
<td>85.6</td>
<td>98.5</td>
<td>108.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>74.1</td>
<td>82.7</td>
<td>-22.3</td>
<td>89.6</td>
<td>102.0</td>
<td>116.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>84.9</td>
<td>85.0</td>
<td>-26.8</td>
<td>107.3</td>
<td>127.3</td>
<td>134.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>91.2</td>
<td>92.5</td>
<td>-9.4</td>
<td>92.1</td>
<td>109.5</td>
<td>128.6</td>
</tr>
</tbody>
</table>
</body>
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The National Association of Realtors reported that the level of pending sales of existing homes fell an expected 1.0% after a deepened 2.8% February decline. Sales during 1Q08 were down 11.9% from the average sales level in 2007. [...]

U.S. Pending Home Sales Again Fell in March, As Expected

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080507a.jpg" width="353">
Nonfarm labor productivity rose 2.2% last quarter after 1.8% growth during 4Q07. The latest gain was slightly stronger than the expected 1.8% figure and at 3.2%, the year-to-year rise in productivity was the firmest since early 2004.
Productivity&#39;s strength stemmed from a 1.8% (-0.6% y/y) decline in total hours worked which was the fourth decline in the last five quarters. That decline was accompanied by a 0.4% (2.6% y/y) rise in output which was hardly improved from the 0.2% increase during 4Q07.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080507b.jpg" width="353">
Compensation per hour rose a firm 4.4% rate last quarter. The year-to-year growth decelerated, however, to 3.4% from 4.9% during all of last year. Outsized quarterly growth in compensation late in &#39;06 and early in &#39;07, between 6% and 12%, drove the growth in 2007 compensation up.
Unit labor costs growth was contained, as a result of the firm productivity gain, to 2.2% versus 2.8% growth during 4Q&#39;07. Year-to- year, the growth in costs fell to a meager 0.2%, the slowest rate of growth since a slight decline early in 2004. Unit nonlabor payments (which account for roughly one third of total costs) did rise 2.2% (3.5% y/y) after a slight decline in 4Q.
In the factory sector, productivity rose at a steady 4.1% (4.1% y/y) rate. Unit labor costs did rise 2.5% on a quarterly basis but earlier quarterly declines held the annual change to a negative -1.3%.
Productivity, Energy Prices, and the Great Moderation: a New Link is from the Federal Reserve Bank of Atlanta and it can be found <a href="http://www.frbatlanta.org/filelegacydocs/wp0811.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"><a href="http://www.haverselect.com/dlx/USECON/@EC/@EC02/@EC02.HTM">Nonfarm Business Sector</a> (SAAR, %)</th>
<th scope="col">Q1 &#39;08</th>
<th scope="col">Q4 &#39;07</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">Output per Hour</td>
<td>2.2</td>
<td>1.8</td>
<td>3.2</td>
<td>1.8</td>
<td>1.0</td>
<td>1.9</td>
</tr>
<tr>
<td class="firstcol">Compensation per Hour</td>
<td>4.4</td>
<td>4.6</td>
<td>3.4</td>
<td>4.9</td>
<td>3.9</td>
<td>4.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor Costs</td>
<td>2.2</td>
<td>2.8</td>
<td>0.2</td>
<td>3.1</td>
<td>2.9</td>
<td>2.0</td>
</tr>
</tbody>
</table>
</body>
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Nonfarm labor productivity rose 2.2% last quarter after 1.8% growth during 4Q07. The latest gain was slightly stronger than the expected 1.8% figure and at 3.2%, the year-to-year rise in productivity was the firmest since early 2004. [...]

U.S. Productivity Growth Firm, Unit Labor Costs Contained

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080507a.jpg" width="353">
Nonfarm labor productivity rose 2.2% last quarter after 1.8% growth during 4Q07. The latest gain was slightly stronger than the expected 1.8% figure and at 3.2%, the year- to- year rise in productivity was the firmest since early 2004.
Productivity&#39;s strength stemmed from a 1.8% (-0.6% y/y) decline in total hours worked which was the fourth decline in the last five quarters. That decline was accompanied by a 0.4% (2.6% y/y) rise in output which was hardly improved from the 0.2% increase during 4Q07.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080507b.jpg" width="353">
Compensation per hour rose a firm 4.4% rate last quarter. The year- to- year growth decelerated, however, to 3.4% from 4.9% during all of last year. Outsized quarterly growth in compensation late in &#39;06 and early in &#39;07, between 6% and 12%, drove the growth in 2007 compensation up.
Unit labor costs growth was contained, as a result of the firm productivity gain, to 2.2% versus 2.8% growth during 4Q&#39;07. Year- to- year, the growth in costs fell to a meager 0.2%, the slowest rate of growth since a slight decline early in 2004. Unit nonlabor payments (which account for roughly one third of total costs) did rise 2.2% (3.5% y/y) after a slight decline in 4Q.
In the factory sector, productivity rose at a steady 4.1% (4.1% y/y) rate. Unit labor costs did rise 2.5% on a quarterly basis but earlier quarterly declines held the annual change to a negative -1.3%.
Productivity, Energy Prices, and the Great Moderation: a New Link is from the Federal Reserve Bank of Atlanta and it can be found <a href="http://www.frbatlanta.org/filelegacydocs/wp0811.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"><a href="http://www.haverselect.com/dlx/USECON/@EC/@EC02/@EC02.HTM">Nonfarm Business Sector</a> (SAAR, %)</th>
<th scope="col">Q1 &#39;08</th>
<th scope="col">Q4 &#39;07</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">Output per Hour</td>
<td>2.2</td>
<td>1.8</td>
<td>3.2</td>
<td>1.8</td>
<td>1.0</td>
<td>1.9</td>
</tr>
<tr>
<td class="firstcol">Compensation per Hour</td>
<td>4.4</td>
<td>4.6</td>
<td>3.4</td>
<td>4.9</td>
<td>3.9</td>
<td>4.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor Costs</td>
<td>2.2</td>
<td>2.8</td>
<td>0.2</td>
<td>3.1</td>
<td>2.9</td>
<td>2.0</td>
</tr>
</tbody>
</table>
U.S. Pending Home Sales Again Fell in March, As Expected 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 7, 2008


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080507c.jpg" width="353">
The National Association of Realtors reported that the level of pending sales of existing homes fell an expected 1.0% after a deepened 2.8% February decline. Sales during 1Q08 were down 11.9% from the average sales level in 2007.
These figures are analogous to the new home sales data from the Commerce Department in that they measure existing home sales when the sales contract is signed, not at the time the sale is closed.
Sales in the West fell by 1.4% for the second month following a 13.0% spurt in January. That improvement was accompanied by a 12.5% surge in sales in the Northeast. Sales in the South ticked lower by 0.1% but sales are down 38.8% from their 2005 peak. In the Midwest March sales collapsed 10.4% m/m after a 3.7% February drop.
The Realtors also indicated in an earlier report that the number of homes on the market &amp; available for sale rose 1.0% in March (6.6% y/y). At the current sales rate there was a 9.9 months&#39; supply of homes on the market versus an 8.9 months&#39; average during all of last year, a 6.5 months&#39; supply in 2006 and a 4.5 months&#39; supply in 2005.
The pending home sales data are available in Haver&#39;s PREALTOR database and the number of homes on the market are in the REALTOR database.

<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/WEEKLY/@W5/@W507/@W507.HTM">Pending Home Sales (2001=100)&nbsp;</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&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>83.0</td>
<td>&nbsp;83.8</td>
<td>&nbsp;&nbsp; -20.1%</td>
<td>95.7</td>
<td>112.1&nbsp;</td>
<td>124.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>80.8</td>
<td>71.8</td>
<td>-15.4</td>
<td>85.6</td>
<td>98.5</td>
<td>108.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>74.1</td>
<td>82.7</td>
<td>-22.3</td>
<td>89.6</td>
<td>102.0</td>
<td>116.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>84.9</td>
<td>85.0</td>
<td>-26.8</td>
<td>107.3</td>
<td>127.3</td>
<td>134.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>91.2</td>
<td>92.5</td>
<td>-9.4</td>
<td>92.1</td>
<td>109.5</td>
<td>128.6</td>
</tr>
</tbody>
</table>
</body>
</html>

Nonfarm labor productivity rose 2.2% last quarter after 1.8% growth during 4Q07. The latest gain was slightly stronger than the expected 1.8% figure and at 3.2%, the year- to- year rise in productivity was the firmest since early [...]

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080506g.jpg" align="left" border="0" height="265" width="353">
The Euro Area is an unwieldy beast&#8230;but it&#8217;s getting weaker.
The Euro
Area is a complex beast to follow because it has some many moving parts
to follow. Its data are a mish-mash of new indicators constructed to
help us better understand the Zone while competing with the legacy
reports on a country by country basis. This framework fights against
the notion that the EMU is truly one region. If the EMU wanted to
enhance its sense of being one zone it might construct specific
REGIONAL indices and submerge the ones that preserve nationalistic
boundaries or issue those with a delay. The US, for example issues a
broad mix of data on a state by state basis but these breakdowns often
are not timely and are not headline reports and you have to dig a bit
to find them. They do not come in advance of national data. By
contrast, in EMU, the thing that makes national-source data headline
data is timeliness. Some countries&#8217; reports are available ahead of the
EMU-wide reports by nearly a month in some cases. The US does have
other indicators that feature chopped up geographical bits ranging from
the four quadrant US presentation (NE, MW, S, &amp; W) to something
a
bit more esoteric that is offered up by the Conference Board, for
example when it reports consumer confidence. Even the Federal Reserve
district banks split states in some cases. Of course, in the case of
the ECB, it is central bank membership that gets you a seat on the
council and every country wants a council seat&#8230; By definition the
regional bank area is a country.

In any event the EMU issues data in these forms and we are
left to
try and make sense of it. We are happy to have country by country data
because we have certain prior knowledge of these countries and their
capabilities - we think we can make some sense of this added input.

The EMU/EU Service Sector - will April showers make growth
flower?
This month we look at the revised EMU and EU (in the table only; the
chart is all EMU data) reports on the services sector. We also compared
data from some different sources as we try and get a handle on the
service sector and some other trends on consumer confidence.

When we compare the NTC EMU readings to those of the EU
Commission
(EU-C) we find that the two very different gauges (one is an ISM type
diffusion measure, the other a net balance &#8216;diffusion&#8217; measure)
actually reside at similar points in their respective ranges. The NTC
report resides in the 35th percentile and the EU-C index for EMU
resides in its 29th percentile. That&#8217;s a difference but both are placed
in the roughly the same neighborhood - weak and near the bottom third
of their respective ranges constructed since mid 2000.

The German conundrum. This month we also were intrigued by the
fact
that German consumer confidence measures were rising while German MFG
and the world around Germany was having such trouble. The services
indicators explain a lot of that dilemma. Germany&#8217;s services index
stands in the 65th percentile of its range since Mid 2000 compared to
the 71st percentile for German Consumer Confidence in the same period
(EU-Commission measure).

While that is a lot of the story it is not all of it. The
services
sector is at a diffusion value of 54.9 in Germany and is clearly
showing expansion. German consumer confidence is at a net reading of
zero - at dead neutral. While Germany is coming off a period of
relatively good growth in the past two years, going back to 2000 we
capture a Germany that had been struggling. The German government is
still hoping that the consumer will show up at the shops and help to
bailout a fading economy. So while the consumer confidence range
reading is relatively high in Germany it still may be challenged in
absolute terms where the raw reading is dead flat. But this is an issue
with diffusion that we want to confront head on.

Percentile readings VS raw survey levels. I actually prefer
these
range percentile readings to the raw PMI or EU-Commission readings (or
the US ISM or the Philly Fed index-etc, etc) since we can see where the
survey value lies relative some history immediately. Also these survey
measures have components and we find that the components have very
different tendencies from one another&#8230; in term of average readings and
the range they cover and variability. Therefore an NTC reading of X for
Germany may not be easy to compare with a reading of X for Spain or
Italy. But if we express them as percentiles of their respective ranges
we have a better understanding of their relative performance and the
economic message. In truth there is more to be learned by looking at
both the percentile and the raw reading. We provide both in the table.

Look at the table below. It has seven columns and sixteen rows
of
data. While you can conclude something in comparing values across any
given row (the first six of them, anyway) you cannot compare data
vertically and make any sense of it except for the final column labeled
&#8216;percentile&#8217;. That column is the Rosetta Stone of the first column and
permits comparison among the values in the first column even though
each possesses an intrinsically different level by row, meaning that
each country (or aggregate) is distinct. The final column looks at each
with regard to own history for a fixed period of time in a way that
gives intra column comparisons (cross section comparisons in economic
parlance) meaning.

When we make these adjustments, what we see is that Germany is
setting off on its own course while the rest of EMU is largely in deep
pain. 
 

What we can say about Euro Area services and consumer
confidence. So
as we peruse the Euro Area data this month we are trying to assess
different measures of the same thing, as well as well as balancing
state by state reports Vs EMU-wide readings.

When we put these things in context it is clear that Germany
is
doing leagues better than anyone else. Germany is no bellwether for the
Euro Area. Germany&#8217;s service sector ranks rather high in its range. The
service sector in France is in rotten shape with a percentile reading
of 24% - the bottom quarter of its range - despite a raw reading that
is not that much lower than Germany&#8217;s! Italy, Spain and Ireland&#8217;s
respective percentiles are even worse and the UK standing is about the
same as for France.

These readings correlate loosely with the evaluation of
consumer
sentiment which is very high in Germany but below neutral in France,
standing in the 42nd percentile of its range (and sporting a negative
raw reading). Italy is very weak. Spain, Ireland and the UK each post
the weakest consumer sentiment readings on the EC Commission measures
that they have had since mid 2000.

What it all means for Europe&#8230; On balance these are not good
measures
for Europe. Even the aggregate service sector reading with a VERY HEAVY
GERMAN WEIGHT seems to do the region some disservice (35th percentile).
It is always hard to tell how to characterize &#8216;the whole&#8217; when its
parts are divergent. We solve that problem in the US by mostly
suppressing the regional differences, with a few exceptions.

With such a weak services sector, such low confidence, a
lagging MFG
sector to boot, and a currency that is at ALL TIME HIGHS in
trade-weighted-inflation-adjusted terms, it is hard to get on the ECB&#8217;s
inflation fighting bandwagon. It&#8217;s not that inflation is in great shape
but that we know that inflation has stemmed from surging energy and
food prices and now we can see the gathering storm clouds of economic
weakness that should cap fears of second round effects and of price
pass-throughs and of surging of wage deals. Already workers are showing
some job insecurity.

The Euro-worm is turning. We can begin to see it in the value
of the
euro itself, since its climb has become somewhat less relentless
recently. Still, oil prices carry the trappings of strength on episodic
supply disruptions and maverick forecasts of still higher prices to
come. With such weakness in the western developed economies and with
the developing world depending on economies that are export oriented
and deficient in domestic demand, it is hard to swallow the argument
that these developing nations will be unaffected or little-affected.
The developing world has always grown faster than its developed
counterpart. This is nothing new. What is new is that it that developed
economies as a group sport GDP that is LARGER relative to the developed
world than in the past. While that may give it some resilience, it will
leave these nations with no niche markets to nurture when developing
nation demand falters. We think a global slowdown is in train and is
already farther advanced in Europe than most admit.

Arguably, you can find the data that proves just about any
forecast
given the wide-ranging nature of Euro-data. We have tried to find the
path that gives some of the main reports their objective due. I don&#8217;t
set one indicator above another. But, when we see them all in equal
light the picture is darker than an aging Rembrandt and considerably
less pleasing. Moreover, we see the ECB with its finger in the wrong
dike.


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">NTC
Services Indices for EU/EMU </th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td>Apr-08</td>
<td>Mar-08</td>
<td>Feb-08</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>Percentile</td>
</tr>
<tr class="grey3">
<td class="firstcol">Euro-13</td>
<td>51.98</td>
<td>51.61</td>
<td>52.29</td>
<td>51.96</td>
<td>52.29</td>
<td>54.64</td>
<td>35.7%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Germany</td>
<td>54.92</td>
<td>51.83</td>
<td>52.17</td>
<td>52.97</td>
<td>52.07</td>
<td>54.60</td>
<td>65.7%</td>
</tr>
<tr class="grey3">
<td class="firstcol">France</td>
<td>52.82</td>
<td>57.25</td>
<td>58.15</td>
<td>56.07</td>
<td>57.14</td>
<td>57.70</td>
<td>24.4%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Italy</td>
<td>49.81</td>
<td>48.76</td>
<td>47.15</td>
<td>48.57</td>
<td>49.01</td>
<td>52.69</td>
<td>16.9%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Spain</td>
<td>42.50</td>
<td>40.89</td>
<td>46.13</td>
<td>43.17</td>
<td>45.91</td>
<td>50.13</td>
<td>8.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Ireland</td>
<td>45.19</td>
<td>48.13</td>
<td>48.27</td>
<td>47.20</td>
<td>49.97</td>
<td>53.00</td>
<td>1.6%</td>
</tr>
<tr class="grey4">
<td class="firstcol" colspan="8">EU
only</td>
</tr>
<tr class="grey3">
<td class="firstcol">UK (CIPs)</td>
<td>50.35</td>
<td>52.11</td>
<td>54.05</td>
<td>52.17</td>
<td>52.21</td>
<td>54.38</td>
<td>28.5%</td>
</tr>
<tr class="grey2">
<td colspan="8" class="firstcol">EU
Commission Indices for
EU and EMU</td>
</tr>
<tr class="grey4">
<td class="firstcol">EU Index</td>
<td>Apr-08</td>
<td>Mar-08</td>
<td>Feb-08</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>Percentile</td>
</tr>
<tr class="grey3">
<td class="firstcol">EU Services</td>
<td>6</td>
<td>11</td>
<td>6</td>
<td>-12.00</td>
<td>-10.83</td>
<td>-7.25</td>
<td>39.1%</td>
</tr>
<tr class="grey4">
<td class="firstcol">EMU</td>
<td>Apr-08</td>
<td>Mar-08</td>
<td>Feb-08</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>Percentile</td>
</tr>
<tr class="grey3">
<td class="firstcol">Services</td>
<td>7</td>
<td>9</td>
<td>10</td>
<td>8.67</td>
<td>11.00</td>
<td>15.67</td>
<td>29.7%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Cons Confidence</td>
<td>-12</td>
<td>-12</td>
<td>-12</td>
<td>-12.00</td>
<td>-10.83</td>
<td>8.03</td>
<td>39.1%</td>
</tr>
<tr class="grey1">
<td colspan="8" class="firstcol">Consumer
confidence by
country</td>
</tr>
<tr class="grey3">
<td class="firstcol">Germany</td>
<td>0</td>
<td>-2</td>
<td>-3</td>
<td>-1.67</td>
<td>-0.17</td>
<td>3.86</td>
<td>71.9%</td>
</tr>
<tr class="grey3">
<td class="firstcol">France</td>
<td>-15</td>
<td>-15</td>
<td>-14</td>
<td>-14.67</td>
<td>-13.33</td>
<td>-3.97</td>
<td>42.4%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Ital</td>
<td>-23</td>
<td>-25</td>
<td>-23</td>
<td>-23.67</td>
<td>-22.83</td>
<td>-8.58</td>
<td>7.4%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Spain</td>
<td>-25</td>
<td>-19</td>
<td>-21</td>
<td>-21.67</td>
<td>-20.17</td>
<td>-15.19</td>
<td>0.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Ireland</td>
<td>-24</td>
<td>-20</td>
<td>-22</td>
<td>-22.00</td>
<td>-21.50</td>
<td>-17.61</td>
<td>0.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">UK</td>
<td>-13</td>
<td>-10</td>
<td>-9</td>
<td>-10.67</td>
<td>-8.00</td>
<td>-12.36</td>
<td>0.0%</td>
</tr>
<tr class="grey3">
<td colspan="8" class="firstcol">percentile
is over range since May
2000</td>
</tr>
</tbody>
</table>
</body></html>

The Euro Area is an unwieldy beast…but it’s getting weaker. The Euro Area is a complex beast to follow because it has some many moving parts to follow. Its data are a mish-mash of new indicators constructed to help us better [...]

EMU Service Sector Makes Erratic Recovery in April

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

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.

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Service Sectors Prop-up Global Economy

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Total factory orders declined 4.8% (+5.6% y/y) in June after surging 8.3% in May, revised from 8.2%, as reported by the U.S. Census Bureau. A 4.9% decline had been expected in the Action Economics Forecast Survey. A halving in orders for nondefense aircraft accounted for much of the June decline. Factory orders excluding transportation altogether rose 0.4% after increasing 0.3% in May, revised from 0.2%.

Durable goods orders fell 9.4% (+10.9% y/y) in June after 16.5% rise in May. The advance report indicated a 9.3% decline. Transportation orders fell 22.4% (+30.5% y/y). Automobile orders declined 3.1% (-2.7% y/y). Computer & electronic product orders increased 0.6% (5.2% y/y) while electrical equipment, appliances & components rose 0.1% (4.5% y/y). Machinery orders improved 0.3% (3.0% y/y). Furniture & related products increased 0.1% (1.1% y/y). Primary metals orders increased 0.6% (-0.5% y/y) while fabricated metals orders edged 0.1% (3.1% y/y) higher.

Nondurable goods orders, which equal nondurable goods shipments, rose 0.5% (0.6% y/y) in June after edging 0.1% higher in May. Shipments of petroleum & coal products rose 1.4% (-4.5% y/y) and beverage & tobacco products rose 1.5% (4.2% y/y). Food product shipments improved 0.4% (0.9% y/y) and textile product shipments rose a minimal 0.1% (1.9% y/y). To the downside, apparel shipments declined 0.9% (-4.7% y/y) and chemical product shipments eased 0.1% (+3.6% y/y). Paper products declined 0.3% (+0.7% y/y).

Total shipments increased 0.5% (1.8% y/y) in June following a 0.2% May increase. Excluding transportation, shipments rose 0.4% (1.3% y/y) in June after a 0.1% uptick in May. Shipments of durable goods industries rose 0.5% (3.0% y/y) in April, the seventh consecutive m/m rise.  Transportation equipment shipments rose 0.8% (4.3% y/y) as nondefense aircraft shipments fell 6.2% (+13.8% y/y). Machinery shipments rose 1.0% (1.5% y/y), and electrical equipment, appliances & components shipments increased 0.6 (4.6% y/y). Primary metals shipments rose 0.6% (2.4% y/y), fabricated metals shipment rose 0.2% (1.9% y/y), but furniture & related products eased 0.2% (+1.4% y/y).

Unfilled orders rose 1.0% (7.1% y/y) in June after a 3.4% jump in May. Excluding transportation, unfilled orders held steady (+0.8 y/y) after a 0.1% rise in May. Backlogs of durable goods increased 1.0% (7.1% y/y), reflecting a 2.1% rise (14.7% y/y) in nondefense aircraft and a 0.1% decline (-1.8% y/y) in machinery. Electrical equipment, appliances & components backlogs also rose 0.1% (1.0% y/y) while computer & electronic equipment backlogs eased 0.1% both m/m and y/y.
 
Inventories increased 0.2% (1.1% y/y) in June after edging 0.1% higher in May. Excluding transportation, inventories rose 0.2% (1.0% y/y) in June after a 0.1% uptick in May. Durable goods inventories rose 0.2% (1.5% y/y) in June, the same as in May, and rose 0.1% in both of the prior two months. Nondurable goods inventories increased 0.2% 0.5% y/y) after declines in both of the prior two months.

The factory sector data are available in Haver’s **USECON** database. The Action Economics Forecast Survey is in the **AS1REPNA** database.

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- Total orders less transportation rise moderately.
- Shipments pick up.  
- Unfilled orders surge as inventories rise modestly.

U.S. Factory Orders Retreat in June, Largely Centered in Aircraft

Tian Yong Woon

This week, we examine the latest wave of trade developments across Asia as the US unveiled a full list of its modified reciprocal tariff rates, set to take effect on August 7. As anticipated, many of the updated rates are now lower than the original tariffs, with Cambodia and Vietnam seeing the sharpest reductions (chart 1). However, from peak tariff levels, China stands out—continuing to benefit from a 10% pause rate, down from triple-digit highs.

South Korea secured a deal just before the deadline, lowering its tariff from 25% to 15%. The new rate also applies to auto exports, offering relief to Korean automakers (chart 2). Thailand and Cambodia followed with US trade agreements after agreeing to an unconditional ceasefire following earlier military clashes. Their US-imposed tariffs dropped from 36% to 19%, highlighting how US trade policy can intersect with geopolitical interests and, in this case, may help reduce trade uncertainty (chart 3).

Malaysia, a key mediator in the ceasefire, also finalized a trade deal, reducing its tariff rate to 19% and gaining exemptions on key exports such as semiconductors (chart 4). Turning to Japan, while its US trade deal helped avert immediate tensions, the vague terms and a headline $550 billion investment—mostly in the form of loans—leave room for future friction (chart 5). China, however, remains a wildcard. Talks to extend its tariff pause are ongoing, but failure could see a return to extreme tariff levels (chart 6). Meanwhile, tech tensions linger, despite eased restrictions on Nvidia AI chip exports.

**Latest US tariff developments**
We gained further clarity on the new reciprocal tariff rates announced by the US administration last week, as the White House released a full list of the modified rates on Thursday. It also announced that the new rates will take effect on August 7, giving partner countries a bit more time to negotiate new terms. Overall, as earlier indications suggested, Trump’s post-pause tariff rates—regardless of whether trade deals were secured—have often ended up lower than the original rates, as shown in chart 1. The largest reductions from original tariff levels have so far come from Cambodia and Vietnam. However, when looking at the steepest reductions from peak tariff rates, China stands out. It continues to benefit from a 10% tariff pause—down sharply from the triple-digit rates imposed at the height of US-China trade tensions earlier this year. On the flipside, a handful of economies—including New Zealand, the Philippines, and Brunei—are now facing modified tariff rates that are actually higher than their original Liberation Day levels. Notably, the Philippines ended up in this group despite having secured a trade deal with the US.

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**South Korea**
As for South Korea, the US reduced its tariff rate to 15% just ahead of the August 1 deadline, a significant drop from the original Liberation Day rate of 25%. In return, South Korea committed to, among other terms, $350 billion in investments into the US. Of that total, $150 billion will go specifically toward shipbuilding cooperation—supporting the entry of Korean firms into the US shipbuilding industry—while the remaining $200 billion will be directed toward semiconductors and other sectors. Similar to Japan’s arrangement, the new 15% tariff rate will also apply to South Korean auto exports, likely providing relief to the country’s automakers. As shown in chart 2, South Korea’s vehicle exports—and, by extension, its export-driven growth—have come under pressure, with more recent headwinds stemming from the broad 25% auto tariffs imposed by the US. Notably, South Korea’s dealmaking pace with the US has been considered exceptionally swift, especially given that the country had only recently undergone an administrative transition following its presidential elections, leaving limited time to initiate formal trade negotiations.

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**Thailand and Cambodia**
Moving to other parts of Asia, one of the more notable developments last week was the signing of two additional US trade deals—specifically with Thailand and Cambodia. The two countries had recently been engaged in escalating border clashes but agreed to an unconditional ceasefire after mediation by Malaysia and the US. In reality, tensions between Thailand and Cambodia had been simmering for some time, likely driving in part the heightened uncertainty shown in chart 3, though other factors may have played a role. Notably, US President Trump stated that he had made it clear to both governments that no trade deal would be considered while they remained in conflict—an ultimatum that may have incentivized both sides to pursue de-escalation. Ultimately, US trade deals with both countries were announced, reducing their tariff rates from the original Liberation Day level of 36% to 19%. This illustrates how the US approach to dealmaking goes beyond trade, sometimes factoring in broader geopolitical considerations as well.

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**Malaysia**
Touching further on Malaysia, which played a key role in mediating the Thailand-Cambodia conflict mentioned earlier, a last-minute US-Malaysia trade deal also materialized shortly after the agreements with Thailand and Cambodia were hinted at. Under the new terms, Malaysia’s tariff rate was reduced to 19%, down from the original 24%. Malaysian Trade Minister Zafrul described the deal as a “win-win,” noting that Malaysia has either reduced or eliminated tariffs on nearly all American products. Notably—and perhaps offering some interim relief—Malaysia also secured tariff exemptions for its exports of semiconductors and pharmaceuticals. This is especially significant, as semiconductor exports account for a substantial share of Malaysia’s shipments to the US, as shown in chart 4.

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**Japan**
Turning to Japan, the recent US-Japan trade deal appears to have averted the worst for now. However, many key details remain unclear, particularly regarding Japan’s reported $550 billion investment into the US. While the headline figure is striking, Japan’s chief trade negotiator, Akazawa, later clarified that only 1–2% of the amount would constitute actual investment, with the remainder largely consisting of loans. More critically, the deal—like several other recent US-Asia trade agreements—was not accompanied by formal documentation, leaving its terms vague and, perhaps more concerning, open to future revision. These loose ends present ongoing risks to US-Japan economic relations and could potentially unwind recent market gains driven by trade optimism, as uncertainty remains and may yet resurface (see chart 5). This lingering uncertainty likely contributed to the Bank of Japan’s decision to hold its policy rate steady last week. The central bank adopted a wait-and-see approach before considering further rate hikes, while notably revising its inflation forecasts upward and presenting a slightly improved growth outlook for the fiscal year.

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**China**
Amid the recent flurry of US trade deals, one critical issue that may have slipped from the spotlight—but remains central to the global outlook —is China. Ongoing discussions between the two countries aim to extend China’s current tariff pause. If talks break down, US Treasury Secretary Scott Bessent has warned that the existing 10% tariff on Chinese exports could “boomerang” back to its previously exorbitant levels. This could potentially drive the US effective import tariff rate on China well above its already-elevated levels, as shown in chart 6. Meanwhile, the recent reversal of export restrictions by the US on Nvidia’s H20 AI chips may have brought temporary relief to China’s AI sector. However, Chinese authorities have raised national security concerns over the chips’ built-in tracking features and potential remote shutdown capabilities—adding yet another layer of complexity to the already tense US-China trade relationship and broader economic rivalry.

Economy in Brief: May 2008

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