Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090805g.jpg" width="353">
The outplacement firm of Challenger, Grey &amp; Christmas indicated that job cut announcements picked up last month. They rose to 97,373 versus the 74,373 jobs lost during June. Nevertheless, the figures remain well below this cycle&#39;s peak level of layoffs which occurred this past January when there were 241,749 cuts. Challenger also reported that announced hiring plans remained near the cycle low.
Announcement of job cuts in the chemical, energy, telecommunications, transportation and financial sectors remained strong. Shallower declines elsewhere were broad-based including the auto, consumer goods, computer, electronics, government, retail and services.
During the last ten years there has been a 67% (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.
The Challenger figures are available in Haver&#39;s SURVEYS database.

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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">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>97,373</td>
<td>74,373</td>
<td>-9.0%</td>
<td>1,223,993</td>
<td>768,264</td>
<td>839,822</td>
</tr>
</tbody>
</table>
</body>
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The outplacement firm of Challenger, Grey & Christmas indicated that job cut announcements picked up last month. They rose to 97,373 versus the 74,373 jobs lost during June. Nevertheless, the figures remain well below this cycle's [...]

Challenger Layoffs Pick Up Slightly Last Month But Remain Moderate

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090805e.jpg" width="353">
The recent sharp improvement in service sector activity stalled last month, but not by much. The Composite Index for the nonmanufacturing sector from the Institute for Supply Management (ISM) slipped to 46.4 from an unrevised reading of 47.0 during June. Though below the break-even level of 50, the latest figure still was near the highest level since September of last year. It fell short of Consensus expectations for a reading of 48.0. A level of the ISM index below 50 indicates declining activity. Since the series&#39; inception in 1997 there has been a 60% correlation between the level of the business activity index in the nonmanufacturing sector and the Q/Q change in real GDP for the services and the construction sectors.
ISM surveys more than 370 purchasing managers in more than 62 industries including law firms, hospitals, government and retailers. The nonmanufacturing survey dates back to July 1997.
The July decline in the overall index was broad-based amongst the component series. The employment index slipped to 41.5 but that still was near the highest level since October. Thirteen percent of firms reported higher employment levels while 26% reported lower levels. Since the series&#39; inception in 1997 there has been a 56% correlation between the level of the ISM nonmanufacturing employment index and the m/m change in payroll employment in the service-producing plus the construction industries.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090805f.jpg" width="353">
The overall business activity index for the service sector also fell to 46.1, but remained near its highest level since September. And slipping just slightly to 48.1 was the new orders series, though it remained well above last November&#39;s low of 35.6. Perhaps suggesting that the level of slack in the service sector has diminished, the supplier delivery index rose to the highest level since January.
The decline in service sector activity brought with it an easing of price pressure. The sharp 12.4 point m/m decline in the price index to 41.3 returned it to the lowest level since April. It was the sharpest one-month decline since last November. A much reduced 13% of firms reported higher prices while a significantly increased 28% reported lower prices. Since its inception ten years ago, there has been a 60% correlation between the price index and the q/q change in the GDP services chain price index.
Beginning with the January 2008 Nonmanufacturing <cite>Report On Business</cite>&reg;, the composite index is calculated as an indicator of the overall economic condition for the non-manufacturing sector. It is a composite index based on the diffusion indices of four of the indicators (business activity, new orders, employment and supplier deliveries) with equal weights. The latest report from the ISM can be found <a href="http://www.ism.ws/ISMReport/NonMfgROB.cfm">here</a>.

<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">July</th>
<th scope="col">June</th>
<th scope="col">July &#39;08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Index</td>
<td>46.4</td>
<td>47.0</td>
<td>49.6</td>
<td>47.4</td>
<td>53.5</td>
<td>55.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Business Activity</td>
<td>46.1</td>
<td>49.8</td>
<td>50.1</td>
<td>47.4</td>
<td>56.0</td>
<td>58.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Employment</td>
<td>41.5</td>
<td>43.4</td>
<td>46.8</td>
<td>43.8</td>
<td>52.0</td>
<td>53.8</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>41.3</td>
<td>53.7</td>
<td>78.8</td>
<td>66.0</td>
<td>63.8</td>
<td>65.3</td>
</tr>
</tbody>
</table>


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The recent sharp improvement in service sector activity stalled last month, but not by much. The Composite Index for the nonmanufacturing sector from the Institute for Supply Management (ISM) slipped to 46.4 from an unrevised reading [...]

U.S. ISM Nonmanufacturing Index Backpedals Slightly And Prices Fall Sharply

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090805d.jpg" align="left" border="0">
Sales fall -Retail sales fell in the Zone
in June. While the growth rat of sales is not decaying further, retail
sales volumes have been dropping at a pace of -2.5% to -2.2% over the
past twelve months. The year-over-year pace for retail sales seems to
have finally stopped falling, based on the trend in the chart above. 
 

The Good and Ugly of it all - Europe has
not suffered the same sort of spurt in the rate of unemployment that we
have in the US. But its level of unemployment remains high and it has
become even more elevated than it was. Consumer confidence has been hit
and consumers, even though better supported in Europe than in the US by
government programs, have cut back spending. Various programs in Europe
to spur auto sales have been successful as the auto registration data
show. So even as retail sales volumes shrink there is a bright spot in
the retail sector even if it is one aided by government actions. It is
always good to see that when given an incentive the consumer can and
does respond &#8211; that is not always the case. 
 

Underlying trends are improving - The PMI
index from Markit on the service sector shows some improvement in the
service sector but not much. Services has improved to a reading of
44.82 in may then they slipped to 44.65 in June and in July they have
risen to 45.69. German showed a rather sharp rise in July along with
Italy while France has back-slipped in July along with Spain. The UK,
an EU member not an EMU member, has just posted its third reading in a
row above 50 for services and is the only large EU country showing
service sector expansion. 
 

 Trends that matter are more favorable -
Since most of the jobs are in services and since jobs determine
spending we can be encouraged about prospects for retail sales progress
from these developments. Retail sales remain the back bone of GDP
growth. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="7" scope="col">Euro Area Retail Sales Volume </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">M/M</td>
<td colspan="3">Saar</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Jun-09</td>
<td>May-09</td>
<td>Apr-09</td>
<td>3-Mo</td>
<td>6-MO</td>
<td>12-Mo</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro Area Total</td>
<td>-0.2%</td>
<td>-0.2%</td>
<td>-0.2%</td>
<td>-2.2%</td>
<td>-2.5%</td>
<td>-2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food, Beverages, Tobacco</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>-0.2%</td>
<td>-1.8%</td>
<td>-2.1%</td>
<td>-2.1%</td>
</tr>
<tr class="even">
<td colspan="7">Registrations:</td>
</tr>
<tr class="odd">
<td class="firstcol">Motor Vehicle Registration</td>
<td>6.4%</td>
<td>2.3%</td>
<td>6.3%</td>
<td>79.6%</td>
<td>45.1%</td>
<td>10.6%</td>
</tr>
<tr class="even">
<td colspan="7" class="firstcol">Non-Food Country Detail:
Volume</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>-1.8%</td>
<td>-1.3%</td>
<td>1.4%</td>
<td>-6.9%</td>
<td>-5.5%</td>
<td>-1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">UK(EU)</td>
<td>1.2%</td>
<td>-1.0%</td>
<td>0.8%</td>
<td>4.0%</td>
<td>1.3%</td>
<td>2.8%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">The EA 13 countries are Austria,
Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,
the Netherlands, Portugal, Slovenia</td>
</tr>
</tbody>
</table>
</body></html>

Sales fall -Retail sales fell in the Zone in June. While the growth rat of sales is not decaying further, retail sales volumes have been dropping at a pace of -2.5% to -2.2% over the past twelve months. The year-over-year pace for [...]

EMU Retail and Auto Sales: the Good and the Ugly

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090805a.jpg" align="left" border="0">
Deterioration in the U.S. labor market continued last month,
just not at the same rate as it had. The latest report from the payroll
processor ADP, in their National Employment Report, indicated that
private nonfarm payrolls fell 371,000 during July after a revised
463,000 June decline that was slightly shallower than reported
initially. The latest reading was the eighteenth consecutive monthly
decline, but the monthly change was the smallest since October of last
year and roughly half the worst this past March. The three-month
annualized rate of decline in payrolls also eased to 4.6% from its
March peak of 7.1%.
ADP compiled the estimate from its database of individual
companies' payroll information. Macroeconomic Advisers, LLC, the St.
Louis economic consulting firm, developed the methodology for
transforming the raw data into an economic indicator.



The U.S. Bureau of Labor Statistics will report July
payroll employment this Friday. For
comparison, June's 463,000 worker decline in ADP's measure of private
nonfarm payrolls was accompanied by 415,000 job losses in the BLS
measure of private sector payrolls.
According to ADP and Macro-Advisers, the correlation between the
monthly percentage change in the ADP estimate and that in the BLS data
is 0.90.

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090805b.jpg" align="right" border="0">
ADP reported that medium-sized payrolls remained in forefront
of July job loss. They fell another 159,000 (-5.8% y/y) followed by a
138,000 (-4.4% y/y) worker decline in small-sized payrolls. Large
payrolls fell by 74,000 (-5.7% y/y). In a switch from the prior
pattern, the steady decline in service producing industry employment
outpaced that in the goods sector. The 202,000 (-3.3% y/y) drop was the
sixteenth consecutive monthly decline and in percentage terms roughly
equaled the prior three months. These recent declines are, however,
roughly half the worst from December through March. Medium-sized
service payrolls fell 86,000 (-3.7% y/y) and small-sized payrolls
dropped 80,000 (-2.9% y/y). Large service producing payrolls dropped by
36,000 (-3.5% y/y).


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090805c.jpg" align="right" border="0">
In the goods producing sector there were 169,000 fewer jobs in
July (-13.1% y/y). Here, the three-month rate of change eased to a
still hefty -13.1% from -17.1% at its worst. Details show that
medium-sized payrolls fell 73,000 (-13.7% y/y) followed by a 58,000
(-12.5% y/y) shortfall in small-sized payrolls. Large payrolls fell
38,000 (-13.1% y/y). In the manufacturing sector alone, payrolls fell
99,000 (-12.8% y/y).


The ADP National Employment Report data is maintained in
Haver's 
USECON database;
historical figures date back to December 2000. The figures in this
report cover only private sector jobs and exclude employment in the
public sector, which rose an average 11,083 during the last twelve
months.
<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/@EB/@EB25/@EB25.HTM">LAXEPA@USECON</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Nonfarm Private Payroll
Employment (m/m Chg., 000s)</td>
<td>-371</td>
<td>-463</td>
<td>-5.2%</td>
<td>-0.5%</td>
<td>1.2%</td>
<td>2.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Small
Payroll (1-49)</td>
<td>-138</td>
<td>-169</td>
<td>-4.4</td>
<td>-0.0</td>
<td>1.6</td>
<td>2.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Medium
Payroll (50-499)</td>
<td>-159</td>
<td>-203</td>
<td>-5.8</td>
<td>-0.5</td>
<td>1.2</td>
<td>1.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Large
Payroll (&gt;500)</td>
<td>-74</td>
<td>-91</td>
<td>-5.7</td>
<td>-1.6</td>
<td>-0.1</td>
<td>0.4</td>
</tr>
</tbody>
</table>
</body></html>

Deterioration in the U.S. labor market continued last month, just not at the same rate as it had. The latest report from the payroll processor ADP, in their National Employment Report, indicated that private nonfarm payrolls fell [...]

ADP Report: Rate Of Job Loss Smallest Since October

An easing rate of inventory decumulation is now playing a part in improving the level of factory sector output. During June, factory sector inventories fell 0.8%, the same as they did in May and that compares with 1.0%+ declines [...]

U.S. Factory Inventory Decumulation Eases Somewhat

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090804i.jpg" align="right" border="0" height="265" width="353">
The official policy interest rates in both Australia and New
Zealand have been unchanged since May of this year--Australia at 3% and
New Zealand at 2.5%, as can be seen in the first chart. In recent news
releases, Glenn Stevens, the Governor of the Bank of Australia, hinted
that the next move might be an increase while Alan Bollard,<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090804j.jpg" align="right" border="0" height="265" width="353">
Governor of
the Bank of New Zealand would not rule out further reductions.
Typical of the cross currents affecting these economies are
today's updates of the Haver data bases for the two countries. In
Australia, retail sales were down slightly in June, but on a quarterly
basis, the second quarter was 2% above the first quarter and almost 8%
above the second quarter of 2008. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090804k.jpg" align="right" border="0" height="265" width="353">
An index of house prices of
established homes in eight capital cities increased 4.2% in the second
quarter from the first quarter of this year and was only 1.4% below the
value of the index in the second quarter of 2008. The quarter to
quarter changes in retail sales and house prices are shown in the
second chart.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090804l.jpg" align="right" border="0" height="265" width="353">
In New Zealand wages and salaries are still rising, both for
ordinary hours and for overtime, but the rate of increase has declined
in the past few quarters, as shown in the third chart. Employment
continues to decline and was 0.75% lower in the second quarter than in
the first quarter and more than 3% lower than the second quarter of
2008. Part Time and Full Time employment trends are shown in the fourth
chart.

<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">Q2 09</th>
<th scope="col">Q1&nbsp; 09</th>
<th scope="col">Q2 08</th>
<th scope="col">Q/Q %&nbsp;</th>
<th scope="col">Y/Y %</th>
<th scope="col">2008&nbsp;</th>
<th scope="col">2007 </th>
<th scope="col"> 2006 </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="9" class="firstcol"> AUSTRALIA</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail Sales (Millions A$)</td>
<td>58,615</td>
<td>57,426</td>
<td>54,406</td>
<td>2.07</td>
<td>7.67</td>
<td>219,968</td>
<td>211,255</td>
<td>195.254</td>
</tr>
<tr class="odd">
<td class="firstcol">House Price Index
(Q2,2003-Q2,2004=100)</td>
<td>128.1</td>
<td>122.9</td>
<td>129.4</td>
<td>4.23</td>
<td>-1.39</td>
<td>128.0</td>
<td>122.7</td>
<td>110.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</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="even">
<td colspan="9" class="firstcol">NEW ZEALAND</td>
</tr>
<tr class="odd">
<td class="firstcol">Employment (000)</td>
<td>1355</td>
<td>1365</td>
<td>1400</td>
<td>-0.75</td>
<td>-3.19</td>
<td>1392</td>
<td>1370</td>
<td>1338</td>
</tr>
<tr class="odd">
<td class="firstcol">Wages Ordinary Time (Q2
2001=1000)</td>
<td>1244</td>
<td>1240</td>
<td>1209</td>
<td>0.32</td>
<td>2.89</td>
<td>1216</td>
<td>1174</td>
<td>1138</td>
</tr>
<tr class="odd">
<td class="firstcol">Wages Over Time (Q2 2001=1000)</td>
<td>1268</td>
<td>1262</td>
<td>1225</td>
<td>0.48</td>
<td>3.51</td>
<td>1233</td>
<td>1192</td>
<td>1150</td>
</tr>
</tbody>
</table>
</body></html>

The official policy interest rates in both Australia and New Zealand have been unchanged since May of this year--Australia at 3% and New Zealand at 2.5%, as can be seen in the first chart. In recent news releases, Glenn Stevens, the [...]

Mixed Signals From Down Under

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090804h.jpg" align="left" border="0" height="265" width="353">
EMU producer prices (x-construction) ticked up in June but are
still falling at an accelerating pace Year-over-year. Sector prices are
weak and falling across the board on all horizons but the rate of
descent is not gathering momentum overall or by sector. In the end that
is the really good news. 
 

Germany shows prices falling over three-months at about the
same pace they are falling over six months, both of which are at a
faster pace of decline than year-over-year. But core German prices,
Italian prices and UK prices, in particular, are not showing any
continuing deceleration: declines yes, but decelerations, no. In the UK
PPI prices have started to rise. In Italy the down turn has abated and
there is one month in which the PPI headline rate has risen (June).
German trends are marked by still declining headline and core rates
even monthly, but the move down is not accelerating. 
 

In short inflation appears to be contained and deflation does
not seem to be in the cards on a sampling of big picture EMU sector
news and smattering of country-level reports. Lingering economic
weakness is probably having this extended impact in depressing prices. 
 
 
 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="7" scope="col">Euro Area and UK PPI Trends </th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="2">M/M</td>
<td colspan="4">Saar</td>
</tr>
<tr class="grey3">
<td class="firstcol">Euro Area</td>
<td>Jun-09</td>
<td>May-09</td>
<td>3-Mo</td>
<td>6-MO</td>
<td>Yr/Yr</td>
<td>Y/Y Yr Ago</td>
</tr>
<tr class="grey2">
<td class="firstcol">Total excl Constructions</td>
<td>0.2%</td>
<td>-0.2%</td>
<td>-4.5%</td>
<td>-7.8%</td>
<td>-6.7%</td>
<td>7.9%</td>
</tr>
<tr class="grey1">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol">Capital Goods</td>
<td>0.0%</td>
<td>-0.3%</td>
<td>-1.2%</td>
<td>-1.2%</td>
<td>0.3%</td>
<td>2.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Consumer Goods</td>
<td>-0.1%</td>
<td>0.0%</td>
<td>-0.7%</td>
<td>-3.6%</td>
<td>-2.3%</td>
<td>4.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Intermediate &amp; Capital
Goods</td>
<td>0.0%</td>
<td>-0.4%</td>
<td>-5.2%</td>
<td>-9.4%</td>
<td>-6.4%</td>
<td>4.3%</td>
</tr>
<tr class="grey1">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol">MFG</td>
<td>0.5%</td>
<td>-0.1%</td>
<td>-0.4%</td>
<td>-5.0%</td>
<td>-7.4%</td>
<td>7.2%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Germany</td>
<td>-0.1%</td>
<td>0.0%</td>
<td>-9.4%</td>
<td>-9.8%</td>
<td>-3.3%</td>
<td>5.1%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Germany excl Energy</td>
<td>-0.1%</td>
<td>-0.2%</td>
<td>-2.3%</td>
<td>-4.1%</td>
<td>-2.8%</td>
<td>2.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Italy</td>
<td>0.2%</td>
<td>-0.2%</td>
<td>-2.9%</td>
<td>-6.6%</td>
<td>-7.2%</td>
<td>8.1%</td>
</tr>
<tr class="grey2">
<td class="firstcol">UK</td>
<td>1.1%</td>
<td>0.5%</td>
<td>1.5%</td>
<td>2.1%</td>
<td>-8.6%</td>
<td>24.1%</td>
</tr>
<tr class="grey1">
<td colspan="7" class="firstcol">E-zone Harmonized PPI ex construction</td>
</tr>
<tr class="grey3">
<td colspan="7" class="firstcol">The EA 13 countries are Austria,
Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,
the Netherlands, Portugal, Slovenia</td>
</tr>
</tbody>
</table>
</body></html>

EMU producer prices (x-construction) ticked up in June but are still falling at an accelerating pace Year-over-year. Sector prices are weak and falling across the board on all horizons but the rate of descent is not gathering momentum [...]

All Producer Prices in EMU Still Under Downward Pressure

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090804f.jpg" width="353">
The economy must be improving if gasoline prices are rising. Or is it seasonal strength? The pump price for regular gasoline increased last week to an average $2.56 per gallon, though that still was down a nickel from last month&#39;s high. The increase added to the nearly one dollar (59%) rise from the December low. Yesterday, however, the pricing strength was even more evident with the twenty cent jump to $2.03 per gallon in the cash market price. Gasoline prices were up off the early-July low of $1.60. The figures are reported by the U.S. Department of Energy and can be found in Haver&#39;s WEEKLY &amp; DAILY databases.
Crude oil prices also have strengthened. Light sweet crude oil prices (WTI) increased to $67.23 per barrel and they&#39;ve roughly doubled this year. Yesterday the spot market price for light sweet crude oil rose further to $71.58 per barrel. Prices had reached a daily high of $72.68 earlier in July.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090804g.jpg" width="353">
The pickup in energy prices is against the backdrop of a firming demand picture. It probably is seasonal, but during the last four weeks the demand for gasoline is up sharply. Year-to year, demand still is down by 1.8%, but that compares to a nearly 5% rate of decline last fall. Demand for distillate also is off sharply though residual fuel oil demand has moved higher. Finally, oil remains plentiful as evidenced by a 13.0% y/y rise in inventories of crude oil &amp; petroleum products. Inventories of gasoline are flat y/y but crude oil inventories less the SPR are up by 17.8%. The figures on crude oil production and inventories are available in Haver&#39;s OILWKLY database.
Natural gas prices continued their move sideways last week. At an average of $3.44 per mmbtu (-62.8% y/y), the price was down by three-quarters from the high reached in early-July of last year of $13.19/mmbtu.

<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/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">08/03/09</th>
<th scope="col">07/27/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per Gallon, Regular)</td>
<td>2.56</td>
<td>2.50</td>
<td>-34.1%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; ($ per bbl.)</td>
<td>67.23</td>
<td>64.72</td>
<td>-45.0%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
</body>
</html>

The economy must be improving if gasoline prices are rising. Or is it seasonal strength? The pump price for regular gasoline increased last week to an average $2.56 per gallon, though that still was down a nickel from last month's [...]

Gasoline Prices Move Higher As Crude Prices Rise And Demand Stabilizes

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

Previous Trump tariffs fading. A boost from new tariffs ahead?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

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Nonfarm payrolls increased 177,000 (1.2% y/y) during April after rising 185,000 in March, revised from 228,000, and 102,000 in February, revised from 117,000. Expectations had been for a 130,000 rise in the Action Economics Forecast Survey. The latest figure left the three-month average change at 155,000 in April, down from 232,000 in January.

Average hourly earnings rose 0.2% during April after unrevised increases of 0.3% in March and 0.2% in February. Earnings growth of 3.8% y/y was below the 5.9% high in March 2022.

The unemployment rate, measured in the household survey, held m/m at an expected 4.2% in April, and compared to 4.1% in February and 4.0% in January. It reached a low of 3.4% in April 2023. The unemployment rate, including employees working part-time for economic reasons plus all marginally-attached workers, eased to 7.8% in April from 7.9% in March.

In the **establishment survey**, private-sector employment rose 167,000 (1.2% y/y) after a 170,000 March increase. Factory sector jobs edged 1,000 lower (-0.7% y/y) following a 3,000 gain. Construction sector employment increased 11,000 (1.7% y/y), after rising 7,000 in March.

Private service-producing sector employment increased 156,000 (1.4% y/y) in April after improving 161,000 in March. Increases varied greatly amongst service sector categories. Private education & health sector employment rose 70,000 (3.4% y/y) last month following a 74,000 March increase. Leisure & hospitality employment rose 24,000 (1.3% y/y) after a 38,000 gain. Trade, transportation & utilities rose 32,000 (0.9% y/y) in April following a 25,000 March increase. Professional & business services employment rose 17,000 (-0.1% y/y) following a 3,000 rise while temporary help employment rose 3,600 (-3.9% y/y) following a 2,700 decline. Financial activities employment improved 14,000 (1.2% y/y) after a 6,000 gain. The number of information sector jobs held steady (-0.4% y/y) last month after falling 2,000 in March.

Government sector payrolls rose 10,000 (1.3% y/y) last month after increasing 15,000 in March. The number of local government jobs increased 13,000 (1.4% y/y) following a 17,000 gain. State government employment rose 6,000 (1.8% y/y) following a 2,000 March increase but federal government payrolls fell 9,000 (-0.3% y/y), the third consecutive monthly decline.

Private-sector average hourly earnings rose 0.2% (3.8% y/y) in April after increasing 0.3% in March. Earnings in the goods-producing sector eased 0.1% (+4.0% y/y) following a 0.6% gain. Earnings in construction rose 0.3% (3.6% y/y), after a 0.2% rise but factory sector earnings declined 0.3% (+4.3% y/y) after surging 0.8% in March. In the private services-sector, earnings rose 0.2% (3.7% y/y) in April for the third straight month. Information sector pay increased 1.0% (5.2% y/y) last month after easing 0.1%, and financial activities earnings rose 0.5% (4.3% y/y) for the second straight month. Trade, transportation & utilities sector pay increased 0.4% (3.4% y/y) after 0.6%. Professional & business sector earnings increased 0.1% (4.4% y/y) after 0.2% in March. Leisure & hospitality earnings held steady (+3.8% y/y) following a 0.6% March increase.

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The length of the average workweek held steady at 34.3 hours in April. The workweek in the goods-producing sector eased to 39.8 hours from 40.0 hours. The construction sector average workweek eased to 39.0 hours from 39.3 hours while the factory sector workweek moved lower to 40.0 hours from 40.2. The average workweek in the private service sector held at 33.2 hours. Professional & business service hours fell to 36.3 hours from 36.4 while trade, transportation & utilities hours improved to 34.3 from 34.0 hours. Private education hours rose slightly to 32.8, but leisure & hospitality held steady at 25.5 hours.

In the **household survey**, the unemployment rate held at 4.2% in April as employment rose 436,000 and the size of the labor force increased 518,000. The labor force participation rate edged up to 62.6% last month from 62.5% in March. It remained below the high of 63.3% early in 2020. The rate for teenagers declined to 36.9%. For workers aged 20-24, the rate held steady at 72.1%, up from 71.8% six months earlier. For workers aged 25-54 the rate rose to 83.6%, a five-month high. For individuals 55 and over, the rate improved to 38.4% in April.

The employment/population ratio for all workers in April rose to 60.0%. It remained below the peak reading of 61.1% in February, 2020 just prior to the pandemic.

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's **USECON** database. Detailed figures are in the **EMPL** and **LABOR** databases. The expectations figures are in the **AS1REPNA** database.

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- Job growth spreads across most sectors.
- Earnings growth trend decelerates.
- Jobless rate holds steady.

U.S. Job Growth Is Firm in April but March Gain Is Lessened

Winnie Tapasanun

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Total factory orders rose a slightly less-than-expected 4.3% m/m in March after rises of 0.5% in February and 1.8% in January, data from the U.S. Census Bureau showed. A 4.5% m/m March increase had been expected in the Action Economics Forecast Survey. The March reading was the third successive monthly rise and the largest since July 2024. The year-on-year rate accelerated to 6.0% in March, the highest since November 2022, from 2.3% in February. Notably, orders for nondefense aircraft & parts soared 139.0% in March following a 7.4% drop in February and a 92.9% surge in January. Factory orders excluding defense rose 4.8% (5.9% y/y), the largest of three straight m/m/ rises, after a 0.4% February increase. Factory orders excluding the transportation sector fell 0.2% (+1.1% y/y), the first m/m fall since August, after rising 0.3% in February, January and December.

Durable goods orders jumped 9.2% (11.9% y/y) in March, the third consecutive m/m gain and the biggest since July 2024, on top of a 0.8% increase in February (matching +9.2% m/m in the advance report on April 24). The March jump reflected m/m orders increases of 27.1% (the largest m/m surge since July 2024; 31.2% y/y) in transportation equipment, 1.1% (4.9% y/y) in primary metals, 0.5% (-0.4% y/y) in furniture & related products, 0.1% (2.5% y/y) in fabricated metal products, and 0.1% (0.9% y/y) in machinery. To the downside, durable goods orders for computers & electronic products (-1.3%; +2.7% y/y) and electrical equipment, appliances & components (-1.0%; +4.2% y/y) declined m/m in March.

Nondurable goods orders, which equal nondurable goods shipments, fell 0.3% (+0.4% y/y) in March, the first m/m fall since September, after a 0.1% uptick in February. The March fall reflected m/m drops of 2.4% (-9.3% y/y) in petroleum & coal products and 0.9% (-1.2% y/y) in apparel. To the upside, the following nondurable goods shipments rose m/m in March: leather & allied products (1.5%; 8.6% y/y), beverage & tobacco products (0.7%; 5.8% y/y), paper products (0.6%; 2.3% y/y), printing (0.3%; 3.8% y/y), textile mills (0.3%; 0.8% y/y), chemical products (0.2%; 5.4% y/y), plastics & rubber products (0.2%; 0.4% y/y), food products (0.1%; 1.8% y/y), and textile products (0.1%; 2.1% y/y).

Total shipments slipped 0.1% (+2.0% y/y) in March, the first m/m easing since October, after a 0.7% increase in February. Excluding transportation, shipments were virtually unchanged m/m (+1.1% y/y) in March following six straight m/m gains. Shipments of durable goods industries inched up 0.1% (3.8% y/y) in March, the smallest of four consecutive m/m increases, after a 1.3% advance in February. This reflected m/m durable goods shipments rises of 1.2% (5.6% y/y) in primary metals, 0.9% (0.1% y/y) in furniture & related products, 0.8% (-0.2% y/y) in nonmetallic mineral products, 0.4% (0.0% y/y) in machinery, 0.3% (1.8% y/y) in fabricated metal products, 0.2% (4.5% y/y) in computers & electronic products, 0.2% (-2.1% y/y) in wood products, and 0.1% (3.0% y/y) in electrical equipment, appliances & components. In contrast, durable goods shipments for transportation equipment (-0.5%; +7.3% y/y) and miscellaneous durable goods (-0.1%; +2.9% y/y) fell m/m in March following three successive m/m increases.

Unfilled orders rose 2.0% (2.3% y/y) in March, up for the eighth month in nine, after a 0.1% uptick in February. Excluding transportation, unfilled orders dipped 0.1% (+0.7% y/y) in March, the first m/m easing since May 2024, after holding steady in February. Backlogs of durable goods rose 2.0% (2.3% y/y) in March, reflecting m/m rises of 3.1% (3.1% y/y) in transportation equipment and 0.2% (2.4% y/y) in electrical equipment, appliances & components.

Inventories edged up 0.1% (0.9% y/y) in March, the fifth straight m/m increase, after rising at the same pace in the prior two months. Excluding transportation, inventories were up 0.1% (0.5% y/y) in March, the fifth consecutive m/m rise. Durable goods inventories ticked up 0.1% (1.0% y/y) in March after holding steady in February and January; nondurable goods inventories edged up 0.1% (0.8% y/y), the fifth successive m/m increase.

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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- March manufacturers’ new orders +4.3% m/m; +6.0% y/y, highest since Nov. ’22.
- Durable goods orders (+9.2%) jump m/m, while nondurable goods orders (-0.3%) and shipments (-0.1%) decline m/m.
- Transportation equipt. orders +27.1% m/m, w/ a 139.0% m/m surge in nondefense aircraft & parts orders.
- Unfilled orders +2.0%, the eighth m/m rise in nine months.
- Inventories +0.1%, the fifth consecutive m/m increase.

U.S. Factory Orders Increase for the Third Straight Month in March

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The global manufacturing data showed broad weakening in April as conditions weakened across more than half of the contributing early reporters in the S&P survey of manufacturing. Of the 18 early reporting countries, more than half of them showed deceleration over six months and 12 months. Over three months, only 8 of 18 showed deterioration and that's about as good as it got in this report. In the current month, month-to-month changes showed more than half of the survey contributors showing weaker results than the month before. In the S&P framework, manufacturing improved month-to-month for the U.S.; however, looking at sequential averages for the U.S., U.K., European monetary union, Canada, and Japan, we see a steady weakening and results over 12 months, over six months versus 12 months, and for three months versus 6 months. The highly developed countries are not doing particularly well.

Asian economies are also showing slight deterioration but doing a little better than the developed countries in general.

Only five of the 18 reporting countries have queue percentile standings in their data back to January 2021 that are above their medians. Readings at or above the 50% mark are at or above the median standing. Canada is showing the weakest manufacturing result on record over this span, in terms of its queue percentile standing which is at 0 in the current month.

I showed the graphic for the Baltic dry goods index in this report rather than statistics on the manufacturing PMI data because the Baltic data, which reflect shipping volume for dry goods - that is excluding things like oil - is weak but it's only in the neighborhood where it's been for some time. There has been a great deal of talk about how tariffs may have impacted trade flows, expected trade flows, shipping, shipping rates, and the like. However, according to the Baltic dry goods index, there isn't much evidence that this is occurring right now and affecting the current data. That may still lie ahead but for now it's not baked in the cake.

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Globally Manufacturing Weakens

Andrew Cates

**China-US shipping activity** 
The economic fallout from escalating US-China trade tensions is becoming increasingly visible in the data. A clear example is the chart below, which highlights a sharp drop in vessel arrivals at the ports of Los Angeles and Long Beach, along with a notable decline in ships waiting offshore. These trends point to a tangible weakening in bilateral trade flows, as the effects of tit-for-tat tariffs imposed by both countries begin to bite. Given the outsized role the US and China play in global commerce, this slowdown is likely to reverberate through global supply chains, weighing on trade volumes, dampening demand, and curbing economic growth worldwide.

250501Z1.jpg

**GDP growth in Q1**
Data this week showed that the US economy contracted, albeit modestly, in Q1 even as the euro area recorded a modest expansion—an unusual divergence. The contraction in US GDP can be largely attributed to a sharp increase in imports, as firms rushed to front-load purchases ahead of anticipated tariff hikes. In addition, domestic demand was subdued, with weaker contributions from both consumer spending and government consumption. This decoupling between the US and euro area economies is particularly striking given the current global focus on the US dollar. While the euro area has shown unexpected signs of resilience, the US downturn raises important questions about its underlying momentum, especially as trade dynamics and policy uncertainty continue to cloud the outlook.

250501Z2.jpg

**The US dollar versus yield differentials**
Chart 3 below illustrates a sharp breakdown in the correlation between the US-Germany 10-year yield differential and the EUR/USD exchange rate. Historically, the dollar has moved closely with interest rate spreads, as yield-seeking capital flowed into US assets. But since early 2025—and more acutely following the April tariff actions—the dollar has weakened markedly even as the yield spread has narrowed only modestly. This decoupling underscores a critical shift: capital markets are reacting not just to monetary policy, but to rising trade and geopolitical uncertainty. In other words, the exchange rate is now being driven as much by risk sentiment as by interest rate arbitrage.

250501Z3.jpg

**The US economy’s structural outperformance and the dollar**
A second dynamic, captured in the next chart, reveals a tight correlation between the US real effective exchange rate and the potential GDP growth differential between the US and euro area over the past 50-60 years. This raises the question: has dollar strength (until recently) merely been a reflection of US growth leadership—or are capital inflows themselves helping to sustain this growth outperformance? In effect, the tail may be wagging the dog. Global investors have long allocated capital to the US, attracted by its macroeconomic resilience, technological leadership, and deep, liquid financial markets. The danger now is that the US trade war may disrupt this equilibrium. A sharp or sustained reduction in capital inflows could undermine growth, weaken the dollar, and trigger broader financial instability. Moreover, reversing this dynamic is not straightforward—barring a credible structural resurgence in European (or Asian) growth, the global investment landscape remains tilted toward the US.

250501Z4.jpg

**US competitiveness versus Europe, China and Japan** 
The next chart below examines relative unit labour costs across major economies since 2011. The US and China have seen a broadly similar trajectory, with steady increases in relative cost structures, while the euro area has remained flat and Japan has seen dramatic improvement. This suggests that, from a cost competitiveness standpoint, the US is not uniquely disadvantaged vis-à-vis China. However, as we discuss further below, this parallel erosion of cost competitiveness is occurring at much higher nominal wage levels in the US, which blunts its ability to regain export share through tariff-related shifts alone. The trade war strategy—absent a corresponding improvement in productivity or structural reforms—risks imposing costs without delivering material competitiveness gains.

250501Z5.jpg

**Average wages in selected developed and developing economies**
This point is reinforced by the final chart, which shows estimates for average monthly wages across countries in 2024. US labour remains much more expensive than in peer or emerging economies. So even if China’s costs rise in tandem with the US, the global supply chain has ample alternatives. 'China plus one' strategies are accelerating, and the US remains structurally misaligned with low-cost production hubs. Tariffs aimed at reshoring supply chains are unlikely to deliver sustained gains unless accompanied by deep supply-side reforms, and risk further disincentivizing foreign direct investment if global firms perceive US trade policy as erratic or punitive.

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Financial markets found a measure of calm this week, buoyed by some subtle shifts in tone from US policymakers. A softening in the administration’s rhetoric around trade tariffs coupled with a less confrontational stance toward Federal Reserve Chair Jerome Powell, helped ease tensions that had roiled markets earlier in the month. Equities rebounded modestly, and volatility indicators edged lower, reflecting cautious optimism that the worst of the policy shocks may be behind us. But beneath the surface, significant downside risks persist. New shipping data point to a pronounced slowdown in US-China trade flows (chart 1), suggesting the damage from recent tariff escalations is already rippling through global supply chains. Meanwhile, incoming data for the US revealed an unexpected contraction in the economy in Q1 and further signs of weakness in the labour market (chart 2). The US dollar, in the meantime, while long supported by superior growth and yield differentials, has begun to decouple from traditional drivers (charts 3 and 4) suggesting growing pressure on capital flows. At the same time, structural imbalances are drawing renewed scrutiny: unit labour cost comparisons show the US steadily losing competitiveness (chart 5), while nominal wage disparities remain stark versus China and other Asian economies, further complicating any effort to restore trade balance without broader reforms (chart 6). In short, while markets may be drawing temporary comfort from a pause in tariff brinkmanship, the deeper economic and financial vulnerabilities exposed this month remain unresolved—and increasingly central to the global macro narrative.

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Charts of the Week: Tariff Truce, Tenuous Trust

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U.S. light vehicle sales dropped 2.9% (+6.5% y/y) to 17.31 million units (SAAR) in April after surging 10.8% to 17.82 million units in March. The retreat in April vehicle sales accompanied a 1.7% y/y rise in real disposable income through March, which compared to 2.0% growth last year.

Sales declines were broad-based last month. Light truck sales fell 1.3% (+9.9% y/y) during April to 14.34 million units (SAAR), after rising 12.4% in March. Purchases of domestically-made light trucks declined 1.2% (+11.9% y/y) to 11.02 million units, after jumping 12.5% in March. Sales of imported light trucks fell 1.8% (+4.4% y/y) to 3.32 million units, following an 11.6% March surge.

Trucks’ record 82.8% share of the light vehicle market last month compared to 81.5% in March and 80.3% in April of last year. The share averaged 80.3% during all of 2024 versus 53.3% ten years earlier.

Auto sales also declined last month, down 9.5% (-7.5%) to 2.97 million units (SAAR) following a 3.5% March rise. The decline reversed all of the increase over the prior two months. Purchases of domestically-produced cars fell 9.8% (-4.3% y/y) last month to 2.22 million units, after rising 3.8% in March. Sales of imported autos declined 9.6% (-15.7% y/y) to 0.75 million units, following a 2.5% March increase.

Imports' 23.5% share of the U.S. light vehicle market was little changed from 23.6% in March and compared to a May 2023 low of 22.9% and a high of 26.3% in November of 2023. Imports' share of the passenger car market held steady at 25.3% last month and compared to 27.7% in April of last year. It reached a high of 38.7% in September 2021. Imports' share of the light truck market eased to 23.2% last month after falling to 23.3% in March.

U.S. vehicle sales figures can be found in Haver's **USECON** database. Additional detail by manufacturer is in the I**NDUSTRY** database.

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- Light truck sales pull back, while auto sales tumble.
- Both domestic and imported sales decline.
- Imports' market share slips further.

Economy in Brief: August 2009

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