Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103e.jpg" width="353">
Factory inventories continued lower during September as the stage continued to be set for a firm rebound in manufacturing activity. Of course that rebound is dependant on whether demand improves, and there are tentative indications that it is. Factory inventories fell 1.0% during September, about as they did during the prior four months. Despite the strength of these declines, the 4.6% decline during the period is a clear moderation from the 6.5% rate during the five months through April.
The moderation in inventory decumulation rates continues spotty amongst various industries. Inventories of electrical equipment &amp; appliances have fallen at a reduced 6.6% rate during the period but decumulation of machinery inventories continued firm at a 7.3% rate. Furniture inventories fell at a reduced 8.8% rate. The rate of decumulation of primary metals inventories also slowed as did cuts of motor vehicle &amp; parts inventories. Inventory reductions of computers &amp; electronic products continued firm but it may have bottomed.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103f.jpg" width="353">
Factory shipments have started to rise moderately. On a three-month basis they&#39;re up at a 3.5% rate after the 40% plus rates of decline last Winter. Shipments of primary metals have firmed to a 52.5% growth rate over the last three months and computers &amp; electronics shipments rose at a 4.7% rate. Shipments of transportation equipment rose at a 25.1% rate led by a surge in shipments of nondefense aircraft &amp; parts. Shipments of basic chemicals also turned up as did shipments from textile mills. The shipments improvement has caused unfilled orders to fall at a much-reduced 3.9% rate through September.
Overall, the reduction of inventories in the factory sector has succeeded in lowering the inventory-to-sales ratio. The decline to 1.36 was to its lowest level since October of last year and down from the recent peak of 1.46.
Finally, new orders have improved. The 0.9% increase during September raised orders at a 6.0% rate during the last three months. It reflected improvement in orders for transportation equipment, machinery, primary metals and electrical equipment.
The Manufacturers&#39; Shipments, Inventories and Orders (MSIO) data is available in Haver&#39;s USECON 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/USECON/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM" style="color:#FFFFFF">Factory Survey</a> (NAICS, %)</th>
<th scope="col">September</th>
<th scope="col">August</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">Inventories</td>
<td>-1.0</td>
<td>-0.9</td>
<td>-11.8</td>
<td>2.1</td>
<td>3.7</td>
<td>8.2&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>-0.7</td>
<td>-0.4</td>
<td>-14.1</td>
<td>-0.6</td>
<td>2.7</td>
<td>7.9</td>
</tr>
<tr class="odd">
<td class="firstcol">New Orders</td>
<td>0.9</td>
<td>-0.8</td>
<td>-17.1</td>
<td>0.1</td>
<td>1.9</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>0.8</td>
<td>0.3</td>
<td>-15.7</td>
<td>3.1</td>
<td>1.2</td>
<td>7.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>0.8</td>
<td>-0.2</td>
<td>-15.9</td>
<td>1.7</td>
<td>1.2</td>
<td>5.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>0.1</td>
<td>-0.1</td>
<td>-16.5</td>
<td>3.7</td>
<td>1.5</td>
<td>6.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Unfilled Orders</td>
<td>-0.4</td>
<td>-0.4</td>
<td>-11.5</td>
<td>3.5</td>
<td>17.1</td>
<td>15.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Transportation</td>
<td>0.5</td>
<td>-0.1</td>
<td>-14.2</td>
<td>-1.0</td>
<td>8.2</td>
<td>16.0</td>
</tr>
</tbody>
</table>
</body>
</html>

Factory inventories continued lower during September as the stage continued to be set for a firm rebound in manufacturing activity. Of course that rebound is dependant on whether demand improves, and there are tentative indications [...]

U.S. Factory Inventory Decumulation Rate Still Strong

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103d.jpg" align="left" border="0" height="265" width="353">
The auto sector is giving Europe a boost as incentive programs
are still helping to stimulate sales. Only Italy and Spain have
reported registrations for October but despite poor growth in both
regions auto sales are growing in strongly. Spain&#8217;s sales are up by
1.7% m/m in October and up at a 99% annual rate over three months even
as unemployment has hit a 10Year high there. Italy backed off in
October after a strong September.
Troubles in the financial sector have banks as less than
wiling lenders. Tough economic times have put consumers on the
sidelines. But government programs to stimulate demand with outright
subsidies linked to the scrappage of old poor-mileage vehicles has been
a way to stimulate demand and to vest theses programs with some sense
of a public purpose.
EMU Italy and Spain all saw sales crater at about the same
time. Despite different auto incentive programs in different countries
we see that Spain and Italy, two of the more challenged EMU economies,
with auto sectors that are very much in sync with the rest of Europe.
Evidence is that the recession in EMU is ending.
The EU Commission today issued a new outlook for the Zone and
confirmed that it sees recovery taking hold. It sees a contraction of
4.1% for the EU area this year followed by growth of 0.7% in 2010 and
of 1.6% in 2011 and roughly similar growth metrics for the Zone. This
outlook is a hike in its forecast from its previous stance than growth
in 2010 would contract by 0.1% in EMU.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col">E zone
Car Registrations</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo %</td>
<td colspan="2">3Mo Trend From</td>
<td colspan="2">6Mo Trend From</td>
<td colspan="2">12Mo Trend From</td>
</tr>
<tr>
<td class="firstcol">All Seas Adj</td>
<td>Oct 09</td>
<td>Sep 09</td>
<td>Aug 09</td>
<td>Oct 09</td>
<td>Sep 09</td>
<td>Oct 09</td>
<td>Sep 09</td>
<td>Oct 09</td>
<td>Sep 09</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>-1.6%</td>
<td>19.3%</td>
<td>-13.6%</td>
<td>5.8%</td>
<td>13.4%</td>
<td>16.1%</td>
<td>44.9%</td>
<td>14.5%</td>
<td>6.2%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>1.7%</td>
<td>28.8%</td>
<td>-9.3%</td>
<td>99.0%</td>
<td>158.6%</td>
<td>117.0%</td>
<td>181.5%</td>
<td>25.8%</td>
<td>17.7%</td>
</tr>
<tr>
<td class="firstcol">base Month of Calc</td>
<td>Sep-09</td>
<td>Aug-09</td>
<td>Jul-09</td>
<td>Jul-09</td>
<td>Jun-09</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>Oct-08</td>
<td>Sep-08</td>
</tr>
</tbody>
</table>
</body></html>

The auto sector is giving Europe a boost as incentive programs are still helping to stimulate sales. Only Italy and Spain have reported registrations for October but despite poor growth in both regions auto sales are growing in [...]

Selected Car Registrations In Europe

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103a.jpg" width="353">
Divergent trends within the construction sector haven&#39;t yet added up to any meaningful improvement in the total but it could be on the way. Reported yesterday, September construction spending rose 0.8% following steady monthly declines during the last two years. Consensus estimates had been for yet another decline. Nevertheless, improvement in activity in the residential sector has picked up to a degree which may foreshadow improvement elsewhere.
Residential building activity increased firmly for the second consecutive month. The 3.9% m/m rise followed a similar gain in August and lifted the level of building activity to its highest since February. Single-family construction rose 2.4% (-35.0% y/y) for the fourth consecutive strong monthly increase. Spending on improvements also firmed by 7.2% (-12.5% y/y) in September after a 5.7% August increase. Offsetting the strength here has been a steady decline in multifamily building (-41.2% y/y). <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103b.jpg" width="353">
Poor corporate profitability and reduced economic activity generally continued to negatively affect nonresidential building activity. It fell 1.8% during September following similar declines during the prior three months. Over the four months combined, nonresidential outlays overall dropped 10.2%. Spending by the food &amp; beverage industries declined 26.2% during those four months as it did in the automotive sector. Hotel &amp; motel spending fell 19.0%; commercial &amp; amusements also fell 19.3% and office building dropped 11.6%. Relatively firm was the four-month spending decline in the education sector which totaled 6.2%. Spending on health care structures was down 3.5% but building activity in the religious sector actually rose 1.3% during the four months.
Public construction overall has been firm, up 6.1% y/y. Spending recouped the August decline with a 1.3% increase. Building activity by state &amp; local governments on power facilities rose 8.6% (32.0% y/y). The transportation area increased 2.7% (23.1% y/y). Public spending on health care facilities 3.4% (4.0% y/y and spending on highways &amp; streets rose 1.0% (2.8% y/y).<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103c.jpg" width="353">
The construction put-in-place figures are available in Haver&#39;s USECON database.
Incentive Compensation, Risk Management, and Safety and Soundness is yesterday&#39;s speech by Federal Reserve Board Governor Daniel K. Tarullo an it can be found here <a href="http://www.federalreserve.gov/newsevents/speech/tarullo20091102a.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Construction (%)</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">July</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</td>
<td>0.8</td>
<td>-0.1</td>
<td>-1.2</td>
<td>-13.0</td>
<td>-6.9</td>
<td>-1.6</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>0.5</td>
<td>0.4</td>
<td>-1.8</td>
<td>-20.6</td>
<td>-11.1</td>
<td>-5.7</td>
<td>5.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>3.9</td>
<td>3.8</td>
<td>0.1</td>
<td>-27.0</td>
<td>-29.1</td>
<td>-19.7</td>
<td>1.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-1.8</td>
<td>-1.8</td>
<td>-3.0</td>
<td>-15.4</td>
<td>13.2</td>
<td>23.1</td>
<td>16.2</td>
</tr>
<tr>
<td class="firstcol">Public</td>
<td>1.3</td>
<td>-1.1</td>
<td>0.1</td>
<td>6.1</td>
<td>5.6</td>
<td>13.1</td>
<td>9.3</td>
</tr>
</tbody>
</table>
</body>
</html>

Divergent trends within the construction sector haven't yet added up to any meaningful improvement in the total but it could be on the way. Reported yesterday, September construction spending rose 0.8% following steady monthly [...]

U.S. Construction Spending Increases Moderately But Residential Recovery Firms

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103a.jpg" align="left" border="0" height="265" width="353">
Divergent trends within the construction sector haven't yet
added up to any meaningful improvement in the total but it could be on
the way. Reported yesterday, September construction spending rose 0.8%
following steady monthly declines during the last two years. Consensus
estimates had been for yet another decline. Nevertheless, improvement
in activity in the residential sector has picked up to a degree which
may foreshadow improvement elsewhere.
Residential building activity increased firmly for the second
consecutive month. The 3.9% m/m rise followed a similar gain in August
and lifted the level of building activity to its highest since
February. Single-family construction rose 2.4% (-35.0% y/y) for the
fourth consecutive strong monthly increase. Spending on improvements
also firmed by 7.2% (-12.5% y/y) in September after a 5.7% August
increase. Offsetting the strength here has been a steady decline in
multifamily building (-41.2% y/y). <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103b.jpg" align="right" border="0" height="265" width="353">
Poor corporate profitability and reduced economic activity
generally continued to negatively affect nonresidential building
activity. It fell 1.8% during September following similar declines
during the prior three months. Over the four months combined,
nonresidential outlays overall dropped 10.2%. Spending by the food
&amp; beverage industries declined 26.2% during those four months
as it did in the automotive sector. Hotel &amp; motel spending fell
19.0%; commercial &amp; amusements also fell 19.3% and office
building dropped 11.6%. Relatively firm was the four-month spending
decline in the education sector which totaled 6.2%. Spending on health
care structures was down 3.5% but building activity in the religious
sector actually rose 1.3% during the four months.
Public construction overall has been firm, up 6.1% y/y.
Spending recouped the August decline with a 1.3% increase. Building
activity by state &amp; local governments on power facilities rose
8.6% (32.0% y/y). The transportation area increased 2.7% (23.1% y/y).
Public spending on health care facilities 3.4% (4.0% y/y and spending
on highways &amp; streets rose 1.0% (2.8% y/y).<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103c.jpg" align="left" border="0" height="265" width="353">
The construction put-in-place figures are available in Haver's
USECON database.
Incentive Compensation, Risk Management, and Safety
and Soundness is yesterday's speech by Federal Reserve Board
Governor Daniel K. Tarullo an it can be found here <a href="http://www.federalreserve.gov/newsevents/speech/tarullo20091102a.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Construction
(%)</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">July</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</td>
<td>0.8</td>
<td>-0.1</td>
<td>-1.2</td>
<td>-13.0</td>
<td>-6.9</td>
<td>-1.6</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>0.5</td>
<td>0.4</td>
<td>-1.8</td>
<td>-20.6</td>
<td>-11.1</td>
<td>-5.7</td>
<td>5.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>3.9</td>
<td>3.8</td>
<td>0.1</td>
<td>-27.0</td>
<td>-29.1</td>
<td>-19.7</td>
<td>1.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-1.8</td>
<td>-1.8</td>
<td>-3.0</td>
<td>-15.4</td>
<td>13.2</td>
<td>23.1</td>
<td>16.2</td>
</tr>
<tr>
<td class="firstcol">Public</td>
<td>1.3</td>
<td>-1.1</td>
<td>0.1</td>
<td>6.1</td>
<td>5.6</td>
<td>13.1</td>
<td>9.3</td>
</tr>
</tbody>
</table>
 Selected Car Registrations In
Europe 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 03, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103d.jpg" align="left" border="0" height="265" width="353">
The auto sector is giving Europe a boost as incentive programs
are still helping to stimulate sales. Only Italy and Spain have
reported registrations for October but despite poor growth in both
regions auto sales are growing in strongly. Spain&#8217;s sales are up by
1.7% m/m in October and up at a 99% annual rate over three months even
as unemployment has hit a 10Year high there. Italy backed off in
October after a strong September.
Troubles in the financial sector have banks as less than
wiling lenders. Tough economic times have put consumers on the
sidelines. But government programs to stimulate demand with outright
subsidies linked to the scrappage of old poor-mileage vehicles has been
a way to stimulate demand and to vest theses programs with some sense
of a public purpose.
EMU Italy and Spain all saw sales crater at about the same
time. Despite different auto incentive programs in different countries
we see that Spain and Italy, two of the more challenged EMU economies,
with auto sectors that are very much in sync with the rest of Europe.
Evidence is that the recession in EMU is ending.
The EU Commission today issued a new outlook for the Zone and
confirmed that it sees recovery taking hold. It sees a contraction of
4.1% for the EU area this year followed by growth of 0.7% in 2010 and
of 1.6% in 2011 and roughly similar growth metrics for the Zone. This
outlook is a hike in its forecast from its previous stance than growth
in 2010 would contract by 0.1% in EMU.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col">E zone
Car Registrations</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo %</td>
<td colspan="2">3Mo Trend From</td>
<td colspan="2">6Mo Trend From</td>
<td colspan="2">12Mo Trend From</td>
</tr>
<tr>
<td class="firstcol">All Seas Adj</td>
<td>Oct 09</td>
<td>Sep 09</td>
<td>Aug 09</td>
<td>Oct 09</td>
<td>Sep 09</td>
<td>Oct 09</td>
<td>Sep 09</td>
<td>Oct 09</td>
<td>Sep 09</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>-1.6%</td>
<td>19.3%</td>
<td>-13.6%</td>
<td>5.8%</td>
<td>13.4%</td>
<td>16.1%</td>
<td>44.9%</td>
<td>14.5%</td>
<td>6.2%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>1.7%</td>
<td>28.8%</td>
<td>-9.3%</td>
<td>99.0%</td>
<td>158.6%</td>
<td>117.0%</td>
<td>181.5%</td>
<td>25.8%</td>
<td>17.7%</td>
</tr>
<tr>
<td class="firstcol">base Month of Calc</td>
<td>Sep-09</td>
<td>Aug-09</td>
<td>Jul-09</td>
<td>Jul-09</td>
<td>Jun-09</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>Oct-08</td>
<td>Sep-08</td>
</tr>
</tbody>
</table>
 U.S. Factory Inventory
Decumulation Rate Still Strong 
by <a href="/comment/Moeller.html">Tom
Moeller</a> November 03, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103e.jpg" align="left" border="0" height="265" width="353">
Factory inventories continued lower during September as the
stage continued to be set for a firm rebound in manufacturing activity.
Of course that rebound is dependant on whether demand improves, and
there are tentative indications that it is. Factory inventories fell
1.0% during September, about as they did during the prior four months.
Despite the strength of these declines, the 4.6% decline during the
period is a clear moderation from the 6.5% rate during the five months
through April.
The moderation in inventory decumulation rates continues
spotty amongst various industries. Inventories of electrical equipment
&amp; appliances have fallen at a reduced 6.6% rate during the
period but decumulation of machinery inventories continued firm at a
7.3% rate. Furniture inventories fell at a reduced 8.8% rate. The rate
of decumulation of primary metals inventories also slowed as did cuts
of motor vehicle &amp; parts inventories. Inventory reductions of
computers &amp; electronic products continued firm but it may have
bottomed.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103f.jpg" align="right" border="0" height="265" width="353">
Factory shipments have started to rise moderately. On a
three-month basis they're up at a 3.5% rate after the 40% plus rates of
decline last Winter. Shipments of primary metals have firmed to a 52.5%
growth rate over the last three months and computers &amp;
electronics shipments rose at a 4.7% rate. Shipments of transportation
equipment rose at a 25.1% rate led by a surge in shipments of
nondefense aircraft &amp; parts. Shipments of basic chemicals also
turned up as did shipments from textile mills. The shipments
improvement has caused unfilled orders to fall at a much-reduced 3.9%
rate through September.
Overall, the reduction of inventories in the factory sector
has succeeded in lowering the inventory-to-sales ratio. The decline to
1.36 was to its lowest level since October of last year and down from
the recent peak of 1.46.
Finally, new orders have improved. The 0.9% increase during
September raised orders at a 6.0% rate during the last three months. It
reflected improvement in orders for transportation equipment,
machinery, primary metals and electrical equipment.
The Manufacturers' Shipments, Inventories and Orders (MSIO)
data is available in Haver's USECON 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/USECON/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM" style="color: rgb(255, 255, 255);">Factory Survey</a>
(NAICS, %)</th>
<th scope="col">September</th>
<th scope="col">August</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">Inventories</td>
<td>-1.0</td>
<td>-0.9</td>
<td>-11.8</td>
<td>2.1</td>
<td>3.7</td>
<td>8.2&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding
Transportation</td>
<td>-0.7</td>
<td>-0.4</td>
<td>-14.1</td>
<td>-0.6</td>
<td>2.7</td>
<td>7.9</td>
</tr>
<tr class="odd">
<td class="firstcol">New Orders</td>
<td>0.9</td>
<td>-0.8</td>
<td>-17.1</td>
<td>0.1</td>
<td>1.9</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding
Transportation</td>
<td>0.8</td>
<td>0.3</td>
<td>-15.7</td>
<td>3.1</td>
<td>1.2</td>
<td>7.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>0.8</td>
<td>-0.2</td>
<td>-15.9</td>
<td>1.7</td>
<td>1.2</td>
<td>5.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding
Transportation</td>
<td>0.1</td>
<td>-0.1</td>
<td>-16.5</td>
<td>3.7</td>
<td>1.5</td>
<td>6.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Unfilled Orders</td>
<td>-0.4</td>
<td>-0.4</td>
<td>-11.5</td>
<td>3.5</td>
<td>17.1</td>
<td>15.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding
Transportation</td>
<td>0.5</td>
<td>-0.1</td>
<td>-14.2</td>
<td>-1.0</td>
<td>8.2</td>
<td>16.0</td>
</tr>
</tbody>
</table>
 Brazil's Industrial Production
Points To Good Third Quarter Growth In GDP 
by <a href="/comment/Curley.html">Louise
Curley</a> November 3, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103g.jpg" align="left" border="0" height="265" width="353">
Brazilian industrial production increased 0.75% to 119.2
(2002=100) in September from 118.3 in August, a little short of
expectations, but still on the upward trend that began in January. The
three major marketing groups--capital goods, intermediate goods and
consumer goods--have all recovered from their falls in December as can
be seen in the first chart. The decline in capital goods was especially
severe and the recovery equally sharp.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103h.jpg" align="right" border="0" height="265" width="353">
Industrial production is a good proxy for Brazilian GDP.
Brazil reports real GDP on an index basis with 1995=100. We rebased the
Industrial production index to 1995=100 and aggregated the monthly
figures to quarterly. The second chart compares this index with the
index of real GDP. The correlation between the two series is strong at
.97. In the third quarter, industrial production increased 4.1%. A 3.9%
increase in industrial production was associated with a 1.9% increase
in real GDP. If the relationship between industrial production and real
GDP holds, Brazil's real GDP should show another roughly 2% rise in GDP
in the third quarter.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">BRAZIL</th>
<th scope="col">Sep 09</th>
<th scope="col">Aug&nbsp;09</th>
<th scope="col">Sep 08</th>
<th scope="col">M/M %&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="odd">
<td class="firstcol">Industrial Production&nbsp;
(2002=100) as reported</td>
<td>109.2</td>
<td>118.3</td>
<td>129.7</td>
<td>0.75</td>
<td>-8.1</td>
<td>125.3</td>
<td>121.8</td>
<td>115.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Industrial Production (1995=100)</td>
<td>136.2</td>
<td>135.2</td>
<td>148.3</td>
<td>0.75</td>
<td>-8.1</td>
<td>143.2</td>
<td>139.2</td>
<td>131.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Q3 09</td>
<td>Q2 09</td>
<td>Q1 09</td>
<td>Q4 08</td>
<td>Q3 08</td>
<td>Q2 08</td>
<td>Q1 08</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Real GDP (1995=100)</td>
<td>&nbsp;</td>
<td>145.3</td>
<td>142.7</td>
<td>146.0</td>
<td>149.0</td>
<td>147.1</td>
<td>144.9</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Industrial Production (1995=100)</td>
<td>135.1</td>
<td>129.8</td>
<td>124.9</td>
<td>133.8</td>
<td>148.2</td>
<td>146.3</td>
<td>144.7</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body></html>

U.S. Construction SpendingIncreases Moderately But Residential Recovery Firms

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091102k.jpg" align="right" border="0" height="265" width="353">Japanese
household consumption expenditures in the third quarter will not be
known until the "First Preliminary Release" of GDP for the third
quarter due November 16 is released.&nbsp; Some indication of what
the consumers is doing can be gleaned from recent monthly data from the
Family Income and Expenditure Survey and the data on wages and
employment.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091102l.jpg" align="right" border="0" height="265" width="353">Results of
Japan's Family Income and Expenditure Survey
for September were released over the week end.&nbsp; In nominal
terms, the index of living expenditures declined in July to 95.0 (2005
= 100) from 97.0 in June, but rose in August and September to 96.9 and
97.3, respectively.&nbsp; Nevertheless, for the quarter, living
expenditures in nominal terms were 2.4% below the year ago
figure.&nbsp; As a result of continued deflation in the Japanese
economy, real living expenditures increased in August and September and
for the quarter were up 0.4% from the third quarter of 2008 as can be
seen in the first chart.
On the whole, the Family Income and
Expenditure Surveys for the last three months suggest that real
consumer spending may show a small increase in the third quarter.The
outlook for consumer incomes and hence their ability to spend is
mixed.&nbsp; Seasonally unadjusted wages in nominal terms have
continued to decline on a year to year basis--5.6% in July, 2.7% in
August and 1.59% in September.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091102m.jpg" align="right" border="0" height="265" width="353">
But again adjusted for
deflation, real wages were up 0.9% in September over September, 2008
one of the few year over year increases in real wages that has occurred
over the past three years as can be seem in the second Chart.&nbsp;
Employment&nbsp; increased&nbsp; and unemployment decreased
marginally&nbsp; in August and September&nbsp; as can be seen
in the third chart.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Sep 09</th>
<th scope="col">Aug&nbsp; 09</th>
<th scope="col">Jul 09</th>
<th scope="col">Jun 09</th>
<th scope="col">May 09</th>
<th scope="col">Apr 08&nbsp;</th>
<th scope="col">Mar 09</th>
<th scope="col">Feb 09</th>
<th scope="col">Jan 09</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Real Living Expenditures (Y/Y %
Chg)</td>
<td>1.25</td>
<td>1.68</td>
<td>-1.75</td>
<td>0.84</td>
<td>-0.82</td>
<td>-1.16</td>
<td>-0.93</td>
<td>-18.4</td>
<td>-5.54</td>
</tr>
<tr>
<td class="firstcol">Nominal Living Expenditures
(Y/Y % Chg)</td>
<td>-1.22</td>
<td>-1.22</td>
<td>-4.62</td>
<td>-1.02</td>
<td>-1.81</td>
<td>-1.94</td>
<td>-0.92</td>
<td>-1.82</td>
<td>-5.76</td>
</tr>
<tr class="odd">
<td class="firstcol">Real Wages (Y/Y % Chg)&nbsp;</td>
<td>0.88</td>
<td>-0.12</td>
<td>-3.02</td>
<td>-5.2</td>
<td>-1.35</td>
<td>-2.64</td>
<td>-3.66</td>
<td>-2.44</td>
<td>-2.63</td>
</tr>
<tr>
<td class="firstcol">Nominal Wages (Y/Y % Chg)</td>
<td>-1.59</td>
<td>-2.71</td>
<td>-5.60</td>
<td>-7.01</td>
<td>-2.53</td>
<td>-2.73</td>
<td>-3.85</td>
<td>-2.43</td>
<td>-2.72</td>
</tr>
<tr class="odd">
<td class="firstcol">Employment&nbsp; (10,000
Persons)</td>
<td>6264</td>
<td>6260</td>
<td>6231</td>
<td>6233</td>
<td>6201</td>
<td>6305</td>
<td>6311</td>
<td>6373</td>
<td>6395</td>
</tr>
<tr>
<td class="firstcol">Unemployment&nbsp;</td>
<td>352</td>
<td>362</td>
<td>376</td>
<td>336</td>
<td>343</td>
<td>334</td>
<td>320</td>
<td>295</td>
<td>276</td>
</tr>
</tbody>
</table>

</body></html>

Japanese household consumption expenditures in the third quarter will not be known until the "First Preliminary Release" of GDP for the third quarter due November 16 is released. Some indication of what the consumers is doing can be [...]

Japanese Consumers: Recent Trends In Spending And Income

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091102j.jpg" align="right" border="0" height="265" width="353">
Without question, the sales price of most homes is under
pressure. Demand is down and supply is up. Nevertheless, home prices
recently have turned around after a decline that began early in 2006.
On a month-to-month basis home prices have risen for the last five
months, as measured by First American CoreLogic. Moreover, the y/y
decline is half that logged early this year. Nevertheless, prices still
are down 10.1% from August of 2008 and they have fallen 28.1% from the
peak during the spring of 2006. 
Until 2006, measuring the degree to which prices were affected
by distressed sales hadn't been much of an issue. Recently, however, it
has become relevant in providing perspective on home price performance.
When distressed sales are stripped out prices also are down y/y, but
the depth of the decline is less dramatic than the total. These prices
have risen for just the last four months, but the y/y change of -6.3%
is notably moderate. Since the peak these prices have fallen 20.8%. 
The Loan
Performance House Price Index (HPI) is a repeat-sales index that tracks
increases and decreases in sales prices for
the same homes over time. This approach provides a more accurate
"constant-quality"
view of pricing trends than basing analysis on all home sales. The data
are
developed by First American CoreLogic and are available from Haver's USECON
database.
Seasonal adjustment of the data is done by Haver Analytics.&nbsp;
Residential
and commercial real estate is the title of this morning's
testimony by Jon
D. Greenlee, Associate Director, Division of Banking Supervision and
Regulation
and it can be found here <a href="http://www.federalreserve.gov/newsevents/testimony/greenlee20091102a.htm">here</a>. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S2/@S201/@S201.HTM">House
Price</a> (SA) </th>
<th scope="col">August</th>
<th scope="col">July</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 (year-to-year)</td>
<td>-10.1</td>
<td>-11.7</td>
<td>-14.6</td>
<td>-4.4</td>
<td>-7.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;
month-to-month</td>
<td>0.7</td>
<td>1.5</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Distress Sales Excluded (y/y)</td>
<td>-6.3</td>
<td>-6.9</td>
<td>-10.9</td>
<td>-3.0</td>
<td>-6.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;
month-to-month</td>
<td>0.1</td>
<td>0.7</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>


</body></html>

Without question, the sales price of most homes is under pressure. Demand is down and supply is up. Nevertheless, home prices recently have turned around after a decline that began early in 2006. On a month-to-month basis home prices [...]

U.S. Home Prices On The Rise; Distressed Sales Matter

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091102g.jpg" align="right" border="0" height="265" width="353">
Housing
demand is increasing faster than generally expected. The National
Association of Realtors (NAR) reported that September pending home
sales increased 6.1%. The gain was similar to the August increase and
continued stronger than June's 3.6% and July's 3.2% gains. Consensus
expectations had been for a slight m/m sales decline. The index level
of 110.1 was at its highest since December 2006 and up 26.9% from the
January low. The base for the index is 2001=100.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091102h.jpg" align="right" border="0" height="265" width="353">
September sales likely were boosted by the pending expiration of an
$8,000 first-time home buyers tax credit; due to expire later this
month. Congress currently is considering extending the credit through
April of next year. In this report only the Northeast region of the
country failed to participate in the September sales gain. Sales in the
West jumped 10.2% after a 16.0% rise during August. The sales index
here was at its all-time high. Elsewhere, sales in the Midwest gained
8.1% on top of a 3.1% rise in August. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091102i.jpg" align="right" border="0" height="265" width="353">
They were up more than one-third
from the January low. Sales in the South were the laggards with just a
4.9% gain but they also were up one-third from the January trough.
Sales in the Northeast slipped 2.0% during September, down for the
second month in the last three but still 44.6% higher than the January
low. These home sales 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. The series dates back to 2001.The pending home sales
data are available in Haver's PREALTOR database.
The number of homes on the market and prices are in the REALTOR
database.&nbsp;&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><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">September</th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>110.1</td>
<td>103.8</td>
<td>97.6</td>
<td>&nbsp;&nbsp; 21.1%</td>
<td>86.8</td>
<td>95.8</td>
<td>112.1&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>83.6</td>
<td>85.3</td>
<td>78.8</td>
<td>16.9</td>
<td>73.1</td>
<td>85.9</td>
<td>98.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Midwest</td>
<td>98.2</td>
<td>90.8</td>
<td>88.1</td>
<td>17.7</td>
<td>80.6</td>
<td>89.5</td>
<td>101.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>109.7</td>
<td>104.6</td>
<td>103.8</td>
<td>22.8</td>
<td>89.6</td>
<td>107.3</td>
<td>127.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; West</td>
<td>143.8</td>
<td>130.5</td>
<td>112.5</td>
<td>23.6</td>
<td>99.5</td>
<td>92.3</td>
<td>109.6</td>
</tr>
</tbody>
</table>
</body></html>

Housing demand is increasing faster than generally expected. The National Association of Realtors (NAR) reported that September pending home sales increased 6.1%. The gain was similar to the August increase and continued stronger than [...]

U.S. Pending Home Sales Rise To Highest Since 2006

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091102f.jpg" align="left" border="0" height="265" width="353">
Europe&#8217;s MFG sector is up over the neutral reading of 50 for
the first time in 17 months. The Markit/NTC gauges of the EMU economy
and for individual nations is a stronger reading than in the EU
Commission framework.
Five of the nine economies with individual readings in the
table are above the breakeven value of &#8216;50&#8217; in October. Among these
nine nations only Greece saw its reading slip in October.
The rebound now looks like that much talked above Vee-shape.
Despite rampant pessimism Europe is putting on a good recovery in
Manufacturing. The EMU countries as well as the UK are looking quite
strong.
The EMU percentile standings for these gauges are in the low
6oth percentile up to the 69th percentile for France and Austria; the
65th for Germany. This is evidence of a true recovery and is one of the
more optimistic reports out of Europe for some time.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th scope="col" colspan="8">NTC/Markit
MFG Indices</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Oct-09</td>
<td>Sep-09</td>
<td>Aug-09</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>Percentile</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro-13</td>
<td>50.73</td>
<td>49.29</td>
<td>48.24</td>
<td>49.42</td>
<td>46.30</td>
<td>40.50</td>
<td>63.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>51.04</td>
<td>49.65</td>
<td>49.17</td>
<td>49.95</td>
<td>45.99</td>
<td>39.68</td>
<td>65.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>55.61</td>
<td>52.99</td>
<td>50.78</td>
<td>53.13</td>
<td>49.45</td>
<td>43.18</td>
<td>69.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>49.24</td>
<td>47.58</td>
<td>44.25</td>
<td>47.02</td>
<td>45.04</td>
<td>40.30</td>
<td>57.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>46.30</td>
<td>45.82</td>
<td>47.20</td>
<td>46.44</td>
<td>44.87</td>
<td>38.17</td>
<td>61.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Austria</td>
<td>51.05</td>
<td>50.31</td>
<td>49.95</td>
<td>50.44</td>
<td>46.51</td>
<td>41.06</td>
<td>69.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Greece</td>
<td>47.97</td>
<td>48.46</td>
<td>51.13</td>
<td>49.19</td>
<td>48.36</td>
<td>44.27</td>
<td>46.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Ireland</td>
<td>48.01</td>
<td>46.57</td>
<td>44.01</td>
<td>46.20</td>
<td>44.01</td>
<td>40.20</td>
<td>63.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Netherlands</td>
<td>50.52</td>
<td>50.02</td>
<td>50.51</td>
<td>50.35</td>
<td>47.22</td>
<td>42.24</td>
<td>61.7%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">EU</td>
</tr>
<tr class="odd">
<td class="firstcol">UK</td>
<td>53.68</td>
<td>49.85</td>
<td>50.47</td>
<td>51.33</td>
<td>49.57</td>
<td>43.58</td>
<td>87.8%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">percentile is over range since March
2000</td>
</tr>
</tbody>
</table>
</body></html>

Europe’s MFG sector is up over the neutral reading of 50 for the first time in 17 months. The Markit/NTC gauges of the EMU economy and for individual nations is a stronger reading than in the EU Commission framework. Five of the nine [...]

Europe's MFG PMIs Continue To Rise. EMU PMI Rises Over 50 For First Time In 18 Months To Vee Or Not To Vee…Is That [...]

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

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

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Andrew Cates

**The global business cycle** 
The recent sharp decline in the Future Output Balance in the global composite PMI survey reflects a sudden deterioration in global business expectations. The sweeping tariffs, introduced in April 2025, have generated heightened uncertainty around trade policy and sparked fears of retaliatory actions from key trading partners. As a result, businesses worldwide are scaling back their expectations for future output, wary of rising costs, disrupted demand flows, and a broader shift toward protectionism that could undermine global economic momentum.

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Note: The extreme declines in the Future Output Balance that were recorded in the early months of 2020 (at the height of the COVID pandemic) have been removed from this chart.

**Global supply chain pressures**
Still, despite the marked deterioration in global business expectations, this second chart below provides a reassuring counterpoint: as of now, there is little evidence that global supply chain pressures have materially intensified. Both the New York Fed’s Global Supply Chain Pressure Index and the Baltic Exchange Dry Index remain relatively subdued, especially compared to the pandemic-era spikes of 2020–2022. While there has been heightened concern following the April 2025 US tariff announcements, these trade policy shifts have yet to translate into measurable physical disruption in logistics or freight rates. The stability of these indices suggests that although sentiment has taken a hit, global shipping networks and supply flows are, for now, absorbing the shock. However, this calm may prove fragile if the policy environment hardens further or retaliatory trade actions begin to compound the strain.

250507Z2.jpg

**Expectations for central banks’ policy rates** 
Adding to the picture of mounting economic caution, the latest Blue Chip Financial Forecasts survey reveals that expectations for policy easing over the next 12 months have become even more pronounced than in previous months. While earlier surveys had already pointed to a further extension of the global rate-cutting cycle, the latest results suggest forecasters now anticipate a deeper and more aggressive round of monetary easing—most notably from the US Federal Reserve, which is now expected to deliver nearly a full percentage point in rate cuts over the next 12 months. The sharp deterioration in business sentiment is reshaping the macro narrative: central banks are no longer simply guiding inflation lower, but are instead preparing to confront the risk of a deeper, demand-driven slowdown.

250507Z3.jpg

**Energy prices and inflation** 
Adding further context to the growing expectations for policy easing, oil prices have dropped sharply in recent weeks—driven by mounting concerns over global growth, as reflected in weakening business sentiment and softer demand indicators. The chart below provides a longer-run perspective on why this matters: energy prices have historically played a central role in shaping the global inflation trajectory. The strong positive correlation (r = 0.83) between median world energy price inflation and median core consumer price inflation underscores the powerful pass-through effects energy costs can have on broader price dynamics. While core inflation tends to be stickier, this historical relationship makes clear that sustained declines in energy prices often foreshadow broader disinflationary trends.

250507Z4.jpg

**Intangibles versus tangibles** 
Shifting focus from short-term cyclical risks to longer-term structural dynamics, the next chart below underscores a fundamental transformation in the composition of US investment: the economy has increasingly been built on intangibles. Over the past several decades, investment in intangible assets—such as software, intellectual property, R&D, and brand equity—has steadily climbed and, since the mid-2010s, has overtaken investment in both structures and equipment as a share of GDP. This shift reflects the rise of a knowledge-based, innovation-driven economy, but it also introduces new forms of vulnerability. Unlike physical capital, intangible assets rely heavily on trust, reputation, legal protections, and global openness. In this context, escalating trade frictions and a more confrontational US economic stance—as signalled by the recent tariff wave—risk eroding the goodwill and institutional credibility that underpin much of the value created by intangibles. If geopolitical uncertainty undermines the perceived reliability of US intellectual property protections or weakens global collaboration, it could pose a deeper structural challenge to future growth than any immediate cyclical downturn.

250507Z5.jpg

**Investment in Artificial Intelligence**
The centrality of intangibles to the US growth model is nowhere more evident than in the explosion of private investment in artificial intelligence. As this chart illustrates, global AI investment has surged over the past decade—reaching new highs in 2024—and the United States has consistently accounted for the lion’s share of that spending. This reflects not only America’s previous leadership in frontier technologies but also its dependence on intangible capital, from algorithms and data infrastructure to human expertise and institutional trust. However, this dominance also underscores the strategic stakes of current policy choices. In an environment of rising trade tensions and potential fragmentation, the foundations of US leadership in AI—cross-border collaboration, data openness, and global market access—could be at risk.

250507Z6.jpg

Financial market sentiment has rebounded in recent weeks, buoyed by signs of de-escalation in the US-led trade war and growing confidence that central banks—particularly the Federal Reserve—will step in with more rate cuts to cushion any fallout. Yet beneath the surface, a more sobering picture of the global economy persists. For example, latest PMI surveys reveal that global business expectations have slumped to their lowest levels since the pandemic, reflecting widespread unease about the growth outlook (chart 1). While supply chain pressures have so far remained contained, suggesting no repeat of the logistical chaos seen during the pandemic (chart 2), the latest Blue Chip Financial Forecasts survey reveals that forecasters are now pencilling in deeper and more widespread monetary easing than previously anticipated—an acknowledgment that demand is faltering (chart 3). Falling oil prices further reinforce this view: they are both a symptom of weakening global demand and a potential source of disinflation, reducing the urgency for central banks to maintain tight policy (chart 4). At the structural level, the US economy's increasing reliance on intangible assets—ranging from intellectual property to reputation—has made it more vulnerable to geopolitical frictions and the erosion of global trust (chart 5). This risk is compounded by America's dominant role in AI investment, a sector symbolic of both its economic strengths and its exposure to international perceptions (chart 6). The longer-term challenge, then, is not just navigating the current downturn, but ensuring that the institutional goodwill and cross-border openness that support the modern US economy are not sacrificed in a more fragmented and uncertain global order.

Charts of the Week: Relief Rally Meets Recession Risk

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At today’s meeting of the Federal Open Market Committee, the target range for the Fed funds rate was left unchanged at 4.25% to 4.50%. This followed reductions at three consecutive meetings in the fall of 2024. Rates remain below the high of 5.25% to 5.50% in place in mid-September. Today’s target range matched expectations in the Action Economics Forecast Survey.

The statement following the meeting indicated that, “The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook has increased further. The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen.”

“The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.”

The Fed continued, “The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage backed securities.”

250507L1.jpg

250507M1.jpg

- FOMC holds funds rate target at late-December level.
- Risk assessments include higher unemployment & inflation.

FOMC Targeted Funds Rate Range Is Unchanged; Increased Risks Acknowledged

Kathleen Stephansen, CBE

250507F4.jpg

250507G4.jpg

Consumer credit outstanding rose $10.2 billion (1.9% y/y) during March after declining by $0.6 billion (+1.7% y/y) during February, revised from a decline of $0.8 billion (+1.7% y/y. A $10.0 billion rise had been expected in the Action Economics Forecast Survey. As a percentage of disposable personal income, consumer credit was 22.4% in March, compared to 22.9% one year earlier.

Nonrevolving credit outstanding rose $8.3 billion (1.5% y/y) in March after easing $0.3 billion (1.3% y/y) in February. Nonrevolving credit held by depository institutions declined 7.8% y/y in March after declining 9.0% y/y in February. Finance company debt holdings rose 0.8% y/y, while credit union holdings eased 1.9% y/y in March. Nonrevolving debt held by the federal government rose 3.4% y/y.

In March, revolving credit outstanding, which includes credit cards, rose $1.9 billion (2.9% y/y) following a decline of $0.3 billion (2.9% y/y) in February. Revolving credit outstanding held by depository institutions fell 1.5% y/y. Revolving credit held by finance companies dropped 12.2% y/y, while that held by credit unions rose 3.7% y/y.

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

250507H4.jpg

250507I4.jpg

- Consumer credit rises close to expectations.
- Nonrevolving and revolving credit rise.


U.S. Consumer Credit Rebounded in March

250507A20.jpg

250507B20.jpg

Mortgage applications increased 11.0% (26.0% y/y) in the week ended May 2, after declining 4.2% in the week ended April 25, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications to purchase a home rose 11.1% (12.9% y/y) in the week ended May 2 after declining 4.4% in the previous week. Loan applications to refinance a home loan also increased 11.1% (51.0% y/y) in the latest week after falling 3.7% in the prior week.

The effective interest rate on a 30-year fixed rate loan of 7.03% in the week ended May 2 compared to 7.08% in the prior week. The effective rate on a 15-year fixed rate loan of 6.34% in the week ended May 2 followed 6.36% in the prior week. The rate on a 30-year jumbo loan declined to 6.99% in the latest week from 7.06% in the prior week, while the rate on a 5-year ARM eased	to 6.08% in the week ended May 2 from 6.12% in the prior week.

The share of applications to refinance an existing mortgage slipped to 37.1% in the week ended May 2 from 37.3% in the prior week. The share of loans with an adjustable rate rose to 8.3% in the latest week from 7.4% one week earlier.

The average size of a mortgage loan rose 4.2% (3.8% y/y) to $400,200 in the week ended May 2, after slipping 0.7% to $384,100 in the prior week. The average size of a loan to purchase a home increased 1.0% (0.2% y/y) to $444,300 in the latest week from $440,100 in the week prior. The average size of a loan to refinance an outstanding mortgage increased 12.3% (27.6% y/y) last week to $325,400 from $289,800 one week earlier.

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.

- Purchase & refinancing loan applications jump.
- Effective interest rates remain range-bound.
- Average loan size increases.

Mortgage Applications Surge as Interest Rates Ease Last Week

250506J8.jpg

250506K8.jpg

The U.S. trade deficit in goods and services (BOP basis) in March grew to $140.5 billion after narrowing slightly to $123.2 billion in February, revised from $122.7 billion, after widening to $130.7 billion in January according to the U.S. Census Bureau. A $136.7 billion deficit was expected by the Action Economics Forecast Survey. Exports rose 0.2% (6.7% y/y) in March after increasing 2.8% in February. This was accompanied by a 4.4% rise (27.1% y/y) rise in imports which came after m/m stability in February. In Q1’25, the deficit grew to an average $131.4 billion, after rising to an average $83.3 billion in Q4’24.

The trade deficit in goods (BOP basis) widened to a record $163.2 billion in March from $147.9	 billion in February, revised from $147.0 billion. Goods exports (customs value) rose 1.4% (7.0% y/y) in March, after increasing 3.6% in February. The latest increase reflected an 8.2% (8.4% y/y) surge in auto exports which came after a 12.7% strengthening. A 3.5% (4.0% y/y) gain occurred in industrial supplies & materials exports which followed a 5.1% rise. Foods, feeds & beverage exports rose 6.6% (1.4% y/y) after declining in four of the prior five month. Working lower, capital goods exports fell 2.5% (+13.9% y/y) in March after a 4.	8% increase and nonauto consumer goods exports were off 1.1% (+3.4% y/y) in March after a 2.4% gain.

Imports of goods increased 5.5% (31.4% y/y) in March after a 0.2% February easing. Imports of nonauto consumer goods imports surged 27.9% (56.0% y/y) following a 3.1% February gain. Auto imports rose 6.6% (8.7% y/y) after a 1.2% rise. Capital goods imports rose 4.2% (22.5% y/y) following a 1.1% rise. Foods, feeds & beverage imports eased 0.4% (+11.1% y/y) following a 2.0% weakening. Industrial supplies & materials imports declined 12.4% (+39.5% y/y) after weakening 4.6% in February. Petroleum imports by end-use fell 4.1% (-10.2% y/y) after a 2.9% decline. Nonpetroleum imports increased 6.0% (34.8% y/y) after holding steady in February.

The inflation-adjusted goods trade deficit (customs value) deepened to $150.9 billion in March from $136.9 billion in February. Real exports rose 1.6% (5.3% y/y) after a 3.0% February increase, while real imports rose 5.8% (29.8% y/y) in March following a 0.5% February slip.

The services trade surplus narrowed to $23.0 billion in March after decreasing to $23.8 billion in February. It reached a peak of $25.7 billion in November of last year. Service exports fell 0.9% (+5.7% y/y) after a 0.8% decline in February. Construction services exports rose 1.0% (37.7% y/y) after increasing 2.6% in February. Travel services exports fell 7.1% (-3.7% y/y) and financial exports increased 0.9% (7.3% y/y). Transport exports rose 3.1% (2.4% y/y). Service imports eased 0.1% (+10.8% y/y) in March following a 0.8% gain. Maintenance & repair services declined 1.5% (+32.1% y/y) while imported transport services increased 1.2% (1.7% y/y). Imported travel services fell 2.2% (5.3% y/y) while charges for use of intellectual property rose 1.0% (13.6 y/y).

The U.S. goods trade deficit with China narrowed to a seasonally adjusted $24.8 billion in March from $26.6 billion in February. Exports to China declined 8.2% (-10.5% y/y) while imports weakened 7.2% (-2.7% y/y). The deficit with the European Union deepened to a record $48.3 billion in March from $30.9 billion in February. Exports rose 10.9% (14.5% y/y) while imports soared 34.0% (65.4% y/y). The deficit with Japan deepened to $5.8 billion from $5.2 billion in February. Exports rose 1.8% (8.8% y/y) and imports rose 6.4% (9.9% y/y).

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**.

250506L8.jpg

250506M8.jpg

- Goods deficit grows as imports surge ahead of tariff imposition.
- Exports edge higher, led by autos.
- Petroleum product imports fall as crude oil prices decline.

Economy in Brief: November 2009

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