Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090204c.jpg" width="353">
Consumers&#39; aversion to purchasing autos continued last month. U.S. sales of light vehicles fell a surprising 7.1% m/m to 9.57M (SAAR) from 10.31M during December. Sales of 10.2M had been expected for January. The latest figure was the lowest since 1982 according to the Autodata Corporation and Ward&#39;s Automotive News. (Seasonal adjustment of the figures is provided by the U.S. Bureau of Economic Analysis). The decline pulled the comparison versus a year ago to -37.7% which was its worst since the data became available in the late 1960s.
Sales of domestically-made light vehicles were particularly hard hit as they posted a 12.2% decline from December to 6.75M units. The level is now 42.4% below that in January 2008. Sales of domestically made autos fell a hard 20.8% m/m, enough to pull the comparison versus a year earlier to -43.7%. Light truck sales fell 4.6% for the month (-41.4% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090204d.jpg" width="353">
Imported light vehicle sales outperformed the domestics again last month as they posted a 7.6% increase. Moreover, while sales fell 22.8% year-to-year, the decline is roughly half that for U.S. made vehicles. Sales of imported light trucks were the strongest as they increased 6.0% from January. The increase enabled sales of imported light trucks to grab 21.4% of total market share, a record and double the share of ten years earlier. Sales of imported autos also firmed and rose 8.5% (-23.0% y/y) after two months of decline.
Higher truck sales pulled import&#39;s share of the U.S. light vehicle market to a record 29.5%, up three percentage points from the 2008 average. (Imported vehicles are those produced outside the U.S. and do not include vehicles with the nameplate of a foreign manufacturer produced within the U.S.)

<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/@ED09/@ED0901/@ED0901.HTM">Light Vehicle Sales (SAAR, Mil. Units)</a></th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">Jan. / Jan.</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>9.57</td>
<td>10.31</td>
<td>-37.7%</td>
<td>13.17</td>
<td>16.16</td>
<td>16.54</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>4.60</td>
<td>5.21</td>
<td>-37.2</td>
<td>6.71</td>
<td>7.58</td>
<td>7.77</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Domestic</td>
<td>2.84</td>
<td>3.59</td>
<td>-43.7</td>
<td>4.42</td>
<td>5.07</td>
<td>5.31</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imported</td>
<td>1.76</td>
<td>1.62</td>
<td>-23.0</td>
<td>2.29</td>
<td>2.52</td>
<td>2.45</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Light Trucks</td>
<td>4.97</td>
<td>5.10</td>
<td>-38.2</td>
<td>6.47</td>
<td>8.60</td>
<td>8.78</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Domestic</td>
<td>3.91</td>
<td>4.10</td>
<td>-41.4</td>
<td>5.29</td>
<td>7.10</td>
<td>7.42</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imported</td>
<td>1.06</td>
<td>1.00</td>
<td>-22.6</td>
<td>1.18</td>
<td>1.47</td>
<td>1.37</td>
</tr>
</tbody>
</table>


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Consumers' aversion to purchasing autos continued last month. U.S. sales of light vehicles fell a surprising 7.1% m/m to 9.57M (SAAR) from 10.31M during December. Sales of 10.2M had been expected for January. The latest figure was the [...]

January U.S. Light Vehicle Sales Lowest Since 1982

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090204a.jpg" width="353">
In its latest National Employment Report, the payroll processor ADP indicated that private nonfarm payrolls fell 522,000 during January after a revised 659,000 decline during December. The decline was the thirteenth consecutive monthly decline and during the last three months, payrolls have fallen at a 5.6% annual rate.
The U.S. Bureau of Labor Statistics will report on December payroll employment this Friday. Last month, the 659,000 worker decline (-2.2% y/y) in ADP&#39;s measure of private nonfarm payrolls was accompanied by a 531,000 worker decline (-2.4% y/y) 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. 
Employment in the service producing industry again fell hard. The 279,000 (-1.7% y/y) drop was the twelfth consecutive monthly decline. Medium sized payrolls fell 135,000 (-2.1% y/y) and small sized payrolls fell 101,000 (-1.3% y/y). Large service producing payrolls dropped by 43,000 (-2.0% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090204b.jpg" width="353">
Weakness in goods producing payrolls added again to the service sector&#39;s decline with a 243,000 (-6.6% y/y) drop. Medium sized payrolls fell 120,000 (-6.8% y/y) followed by a 74,000 (-6.0% y/y) drop in small sized payrolls. Large payrolls fell 49,000 (-7.5% y/y). 
Employment in the manufacturing sector fell 160,000 (-6.3% y/y) in January. It has fallen in almost every month since 2001.
ADP compiled the estimate from its database of individual companies&#39; payroll information. Macroeconomic Advisers, LLC, the St. Louis economic consulting firm, developed the methodology for transforming the raw data into an economic indicator.
The ADP National Employment Report data is maintained in Haver&#39;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. 
The full ADP National Employment Report can be found <a href="http://www.adpemploymentreport.com/pdf/final_report_january_09.pdf" title="blocked::http://www.adpemploymentreport.com/PDF/FINAL_Report_june_09.pdf">here</a>, and the ADP methodology is explained <a href="http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf" title="blocked::http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf">here</a>. <div> </div>

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB25/@EB25.HTM">LAXEPA@USECON</a></th>
<th scope="col">January</th>
<th scope="col">December</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">Nonfarm Private Payroll Employment (m/m Chg.)</td>
<td>-522,000</td>
<td>-659,000</td>
<td>-2.7%</td>
<td>-0.4</td>
<td>1.2%</td>
<td>2.0%</td>
</tr>
</tbody>
</table>


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In its latest National Employment Report, the payroll processor ADP indicated that private nonfarm payrolls fell 522,000 during January after a revised 659,000 decline during December. The decline was the thirteenth consecutive [...]

ADP Report: Payroll Employment Fell Another 522,000

ADP Report: Payroll EmploymentFell Another 522,000

Robert Brusca

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090203h.jpg" width="353">
Of course the ECB sets its inflation ceiling for the HICP (consumer price index) not for the PPI. Still, the sharp drop in Europe&#146;s PPI inflation &#150; a drop that spreads pretty much across the board (see table) - is simply another manifestation of weak inflation. Today the OECD reported that inflation in the OECD area was at a 37 year low. These sorts of results can be used to warn of the heightened risk for deflation in the OECD area as well. So far Europe and the ECB have not taken the bait. The Fed has recently shifted to a more public stance of worry about deflation risk. But Europe has been slow to adopt stimulus and the ECB countries to use rhetoric that brands inflation as now under control and is publicly no more worried than that. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Ezone and UK PPI Trends
</tr>
</thead>
<tbody>
<tr class="grey7">
<td class="firstcol">&nbsp;</td>
<td colspan="2">M/M</td>
<td colspan="4">Saar</td>
</tr>
<tr class="grey6">
<td class="firstcol">Ezone-15</td>
<td>Dec-08</td>
<td>Nov-08</td>
<td>3-Mo</td>
<td>6-MO</td>
<td>Yr/Yr</td>
<td>Y/Y Yr Ago</td>
</tr>
<tr class="grey5">
<td class="firstcol">TotalxConstruct</td>
<td>-1.3%</td>
<td>-2.0%</td>
<td>-15.2%</td>
<td>-6.8%</td>
<td>1.8%</td>
<td>4.4%</td>
</tr>
<tr class="grey5">
<td class="firstcol">Excl Energy</td>
<td>-0.6%</td>
<td>-0.9%</td>
<td>-7.4%</td>
<td>-2.3%</td>
<td>1.6%</td>
<td>3.2%</td>
</tr>
<tr class="grey5">
<td class="firstcol">Capital Gds</td>
<td>0.0%</td>
<td>0.1%</td>
<td>0.7%</td>
<td>1.4%</td>
<td>2.2%</td>
<td>1.5%</td>
</tr>
<tr class="grey5">
<td class="firstcol">Consurmer Gds</td>
<td>-0.2%</td>
<td>-0.3%</td>
<td>-2.2%</td>
<td>-0.6%</td>
<td>1.5%</td>
<td>4.0%</td>
</tr>
<tr class="grey5">
<td class="firstcol">Intermediate&amp;Cap Gds</td>
<td>-0.7%</td>
<td>-1.1%</td>
<td>-9.6%</td>
<td>-3.1%</td>
<td>1.7%</td>
<td>2.7%</td>
</tr>
<tr class="grey5">
<td class="firstcol">Energy</td>
<td>-3.7%</td>
<td>-5.2%</td>
<td>-35.7%</td>
<td>-19.9%</td>
<td>2.1%</td>
<td>8.6%</td>
</tr>
<tr class="grey5">
<td class="firstcol">MFG</td>
<td>-1.6%</td>
<td>-2.1%</td>
<td>-18.9%</td>
<td>-10.8%</td>
<td>-1.2%</td>
<td>4.8%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Germany</td>
<td>-1.0%</td>
<td>-1.5%</td>
<td>-9.8%</td>
<td>-1.9%</td>
<td>4.3%</td>
<td>2.5%</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Gy ExEnergy</td>
<td>-0.6%</td>
<td>-0.8%</td>
<td>-6.4%</td>
<td>-1.4%</td>
<td>1.5%</td>
<td>2.2%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Italy</td>
<td>-1.3%</td>
<td>-1.8%</td>
<td>-17.1%</td>
<td>-8.5%</td>
<td>0.6%</td>
<td>4.7%</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; It ExEnergy</td>
<td>-0.6%</td>
<td>-1.0%</td>
<td>-8.9%</td>
<td>-3.9%</td>
<td>1.1%</td>
<td>3.1%</td>
</tr>
<tr class="grey2">
<td class="firstcol">UK</td>
<td>-1.3%</td>
<td>-2.2%</td>
<td>-18.9%</td>
<td>-15.1%</td>
<td>5.7%</td>
<td>7.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; UK ExEnergy</td>
<td>0.2%</td>
<td>-0.2%</td>
<td>-1.7%</td>
<td>0.9%</td>
<td>6.6%</td>
<td>4.1%</td>
</tr>
<tr class="grey1">
<td colspan="7">E-zone 15 Harmonized PPI excluding Construction</td>
</tr>
</tbody>
</table>
</body>
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Of course the ECB sets its inflation ceiling for the HICP (consumer price index) not for the PPI. Still, the sharp drop in Europes PPI inflation  a drop that spreads pretty much across the board (see table) - is simply another [...]

PPI For E-Zone Is Plunging

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090203i.jpg" width="353">
The National Association of Realtors indicated that pending sales of existing homes in December rose 6.3% The increase reversed most of the declines during the prior two months. Consensus expectations were for no change in sales m/m. For the year as a whole, sales fell 9.3% after declines of 14.6% and 9.8% during the prior two years. Despite the monthly sales increase, the December level was near the series&#39; low.
The 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.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090203j.jpg" width="353">
Lower prices continued to bolster home sales. The median sales price of an existing home in December fell for the sixth straight month and was down 15.3% year-to-year. Prices were down 23.4% from their peak during June of last year. For single-family homes only, prices fell 2.9% during December and they were off 23.8% from their peak. Lower prices combined with lower interest rates significantly raised the affordability index of a home. It reached a record high for the series which extends back to 1970.
A 13.0% December rise in the South led the latest increase in total sales but were still off 16.2% for the year. Sales in the Midwest also posted a 12.8% gain in December but that was not enough to keep full-year sales from falling 9.7%. December sales in the West fell 3.7% in December but rose 7.8% for the full year. Home sales in the Northeast ticked lower by 1.7% for the month but repeated their decline of 2007 and fell 15.2%.
Weak home sales are encouraging potential sellers to keep their homes off the market. The Realtors Association indicated in an earlier report that the number of homes on the market and available for sale fell by 11.7% last month, down 7.5% for the full year.
At the current sales rate there was a 9.3 months&#39; supply of homes on the market and there was a 10.4 months&#39; supply during all of last year, up from the 8.9 months supply during 2007 and 6.5 months during 2006. For single family homes, there was an 8.7 months&#39; supply in December versus a full-year figure of 10.0 months.
The pending home sales data are available in Haver&#39;s PREALTOR database. The number of homes on the market and prices are in the REALTOR database.
The American Recovery and Reinvestment Act of 2009 from the Congressional Budget Office can be found <a href="http://www.cbo.gov/ftpdocs/99xx/doc9977/hr1senate.pdf">here.</a>
The Term Structure of Inflation Expectations from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr362.pdf">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/WEEKLY/@W5/@W507/@W507.HTM">Pending Home Sales (2001=100)&nbsp;</a></th>
<th scope="col">December</th>
<th scope="col">November</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>87.7</td>
<td>82.5</td>
<td>&nbsp;&nbsp; 2.1%</td>
<td>86.8</td>
<td>95.7</td>
<td>112.1&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>62.1</td>
<td>63.2</td>
<td>-14.5</td>
<td>72.6</td>
<td>85.6</td>
<td>98.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>83.7</td>
<td>74.2</td>
<td>-1.2</td>
<td>80.9</td>
<td>89.6</td>
<td>102.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>96.8</td>
<td>85.7</td>
<td>1.6</td>
<td>89.8</td>
<td>107.3</td>
<td>127.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>97.5</td>
<td>101.2</td>
<td>17.5</td>
<td>99.3</td>
<td>92.1</td>
<td>109.5</td>
</tr>
</tbody>
</table>
</body>
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The National Association of Realtors indicated that pending sales of existing homes in December rose 6.3% The increase reversed most of the declines during the prior two months. Consensus expectations were for no change in sales m/m. [...]

U.S. Pending Home Sales Up in December But Down For 2008. Affordability At New High With Lower Rates & Prices

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090203g.jpg" align="left" border="0" height="265" width="353">
German nominal and real ex-auto retail sales are off for the
third month in a row. In the fourth quarter nominal retail sales are
off at a 4% pace; ex-auto real retail sales are dropping at a 2.1%
pace. The sequential growth rates show an accelerating pattern of
losses from 12-months to 6-months to 3-months, across the main
categories in the table. 
 

The downturn has spreading across other measures as well, as
manufacturing has been notoriously weak. German consumers have not been
much of a prop to this economy for a long time. In the quarter ended
Sept 2008 they did rise by 1.9% Q/Q (saar), but that was after falling
by 3.2% (saar) in the previous quarter. Yr/Yr quarterly average real
(ex auto) retail sales have been negative in German since the quarter
ended December 2006. Ironically the 2008-Q4 retail sales figures on
this same basis are up by 0.1%, the first quarterly increase since
Q4-2008 and it comes as sales have turned tail to move sharply lower in
the quarter. 
 

The German retailing association HDE is looking for retail
sales to decline in real terms in 2009. Manufacturing is coming apart
at the seams. Construction is weak, The German economy, Europe&#8217;s
largest, is under fire. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col"> German Real and Nominal Retail Sales</th>
<th scope="col">QTR</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp; Nominal</td>
<td>Dec-08</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>3-MO</td>
<td>6-MO</td>
<td>12-MO</td>
<td>YrAgo</td>
<td>Saar</td>
</tr>
<tr>
<td class="firstcol">Retaill Ex auto</td>
<td> -0.6%</td>
<td> -0.8%</td>
<td> -0.9%</td>
<td> -8.7%</td>
<td> -0.4%</td>
<td>1.2%</td>
<td> -4.6%</td>
<td> -4.0%</td>
</tr>
<tr>
<td class="firstcol">Food Bev &amp; Tobacco</td>
<td> -1.5%</td>
<td> -1.6%</td>
<td>0.0%</td>
<td> -11.6%</td>
<td> -1.1%</td>
<td>1.2%</td>
<td> -3.2%</td>
<td> -2.6%</td>
</tr>
<tr>
<td class="firstcol">Clothing footwear</td>
<td> -0.9%</td>
<td>1.1%</td>
<td> -4.4%</td>
<td> -15.9%</td>
<td>4.3%</td>
<td>1.1%</td>
<td> -2.7%</td>
<td> -5.</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="9">&nbsp; Real</td>
</tr>
<tr>
<td class="firstcol">Retail Ex auto</td>
<td> -0.2%</td>
<td> -0.1%</td>
<td> -0.9%</td>
<td> -4.6%</td>
<td>0.6%</td>
<td>0.2%</td>
<td> -6.5%</td>
<td> -2.1%</td>
</tr>
</tbody>
</table>
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German nominal and real ex-auto retail sales are off for the third month in a row. In the fourth quarter nominal retail sales are off at a 4% pace; ex-auto real retail sales are dropping at a 2.1% pace. The sequential growth rates [...]

German Retail Sales Head South For The Winter

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090203f.jpg" width="353">
With a 1.6% increase last week chain store sales recovered nearly all of the prior week&#39;s decline, according to the International Council of Shopping Centers-Goldman Sachs Index. Nevertheless, the year-to year change of -2.5% continued as the weakest in the series&#39; history which extends back to 1990. For January as a whole, sales ticked up 0.1% from December after that month&#39;s 0.3% gain.
During the last ten years there has been a 64% correlation between the year-to-year growth in chain store sales and the growth in general merchandise sales.
The ICSC-Goldman Sachs retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
The outlook for sales weakened further as the weekly leading indicator of chain store sales from ICSC-Goldman Sachs fell 0.7% and it was the third straight week of decline. The average level in January was up 0.6% from December, which rose 2.1% versus November. Since the lows of one month ago the index has recovered 3.0%.
The chain store sales figures are available in Haver&#39;s SURVEYW database.
The January 2009 Senior Loan Officer Opinion Survey on Bank Lending Practices from the Federal Reserve Board can be found <a href="http://www.federalreserve.gov/boarddocs/SnLoanSurvey/200902/fullreport.pdf">here.</a>

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">01/30/09</th>
<th scope="col">01/23/09</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">Total Weekly Chain Store Sales</td>
<td>478.5</td>
<td>471.0</td>
<td>-2.5%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>3.3%</td>
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</tbody>
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With a 1.6% increase last week chain store sales recovered nearly all of the prior week's decline, according to the International Council of Shopping Centers-Goldman Sachs Index. Nevertheless, the year-to year change of -2.5% [...]

U.S. Chain Store Sales Recovered Last Week

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Despite the U.S. recession and reduced demand, regular gasoline prices again moved higher last week to an average $1.89 per gallon prices. That was up from 10 cents from the January average and up 28 cents from the December low, according to the U.S. Department of Energy survey. Yesterday, the spot market price for regular gasoline fell sharply backward from Friday&#39;s level to $1.17 per gallon (where it began the month of January). Spot prices still were up, however, by 32 cents from their December low.
Weekly gasoline prices can be found in Haver&#39;s WEEKLY database. Daily prices are in the DAILY database.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090203e.jpg" width="353">
Demand continued quite weak for gasoline in reaction to the economy&#39;s weakness. The U.S. Department of Energy reported that the demand for gasoline fell by 3.5% during the latest four weeks. While the rate of decline remained nearly the fastest since late-1995 (the latest four weeks versus the same four weeks in 2008) it has been stable since November. The demand for all petroleum products also is down a sharp 4.0% y/y. These numbers are available in Haver&#39;s OILWKLY database.
The source for that reduced demand for gasoline is the cutback in vehicle miles driven which have fallen 5.3% year-to-year during the twelve months ended November. The rate of decline has been accelerating since late 2007 and it is nearly unprecedented. These Department of Transportation figures are available in Haver&#39;s OGJ database.
The price for a barrel of West Texas Intermediate crude moved slightly higher last week to $42.52 per barrel and it was up 10 dollars from the low reached late in December. Prices reached a high of $145.66 last July. In futures trading yesterday, the one-month price for crude oil fell versus last week to $40.08 per barrel, down sharply from one week ago.
The price of natural gas fell again, last week to $4.75 per mmbtu (-40.9% y/y). The latest average price was down roughly two-thirds from the high reached in early-July of $13.19/mmbtu.
Labor Supply Responses to Changes in Wealth and Credit from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2009/el2009-05.pdf">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/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">02/02/09</th>
<th scope="col">01/25/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
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<tr>
<td class="firstcol">Retail Regular Gasoline ($ per Gallon)</td>
<td>1.89</td>
<td>1.84</td>
<td>-36.5%</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>42.52</td>
<td>42.18</td>
<td>-53.3%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
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Despite the U.S. recession and reduced demand, regular gasoline prices again moved higher last week to an average $1.89 per gallon prices. That was up from 10 cents from the January average and up 28 cents from the December low, [...]

U.S. Gasoline Prices Up Again

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

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

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

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Andrew Cates

**The US housing market**
This first chart below highlights the growing downside risks to the US economic outlook stemming from the housing market. The S&P Case-Shiller home price index has slowed sharply from the pandemic-era surge, while the NAHB (National Association of Homebuilders) housing market index has weakened to levels historically associated with falling home prices. Housing matters because it is not just a cyclical sector but also a key transmission channel for the broader economy: consumer confidence, household balance sheets and credit conditions are all heavily influenced by shifts in the housing market.

250821Z1.jpg

**China’s economy**
The latest run of data from China has also reinforced downside risks for the broader world economy. As the Citigroup Economic Surprise Indices show below, China-specific data have more consistently undershot expectations in recent days. China’s July releases in particular disappointed: retail sales growth slowed to just 3.7% y/y, with weakness in autos and furniture hinting that earlier policy-driven boosts are fading. Industrial output and fixed-asset investment also came in below consensus, while property prices continued to fall and retail sector investment contracted by double digits. Even the labour market showed strain, with unemployment edging higher. The worry is not just China’s slowdown in isolation, but the spillovers. Softer Chinese demand feeds directly into global supply chains, commodity markets, and regional trade partners. Combined with tariff and non-tariff headwinds from the US, the risk is that China’s structural challenges spill into weaker global growth momentum.

250821Z2.jpg

**UK inflation** 
Persistently high services inflation remains one of the biggest headaches for UK monetary policy - and the UK is far from unique in that regard. Services are wage- and demand-sensitive, and their stickiness complicates the calibration of monetary policy even as broader disinflation takes hold. This week’s July upside surprise to UK services inflation was driven in no small part by airfares, which spiked 30% month-on-month – the largest July rise on record. While such volatility may prove temporary, it nonetheless lifted year-on-year services inflation to 5.0%, well above comfort levels. Still, the offsets are important: stripping out airfares and other volatile components, underlying services momentum appears to have eased, while broader data on wages, employment, and activity point to cooling demand. Nevertheless, this tension – headline stickiness versus softer underlying trends – underscores why the Bank of England is treading carefully.

250821Z3.jpg

**Inflation expectations and energy**
US medium-term inflation expectations have been unusually decoupling from oil prices in recent weeks. Normally, falling oil prices would help anchor breakevens, yet the 5-year forward inflation rate has edged higher of late even as WTI has slipped. This probably reflects US tariff policies that are shifting inflation dynamics away from energy and toward trade-related costs. At the same time, a weaker dollar has lifted imported prices, and the upward creep in expectations suggests markets may be more actively questioning whether the Fed’s “higher for longer” stance is sufficient to contain medium-term inflation risks.

250821Z4.jpg

**Clean energy**
Pivoting to more structural issues, the stark divergence between the global clean energy equity market index and the broader S&P 500 underlines the mounting challenges facing the renewables sector at present. While US equities have pushed to record highs, clean energy stocks have languished, weighed down by policy uncertainty, higher financing costs, and a more sceptical public mood. In the US, shifting political winds and uneven implementation of green subsidies have clouded the outlook for investment, while globally, resistance to renewables has grown as consumers and businesses grapple with high energy bills. Rising interest rates have further undermined the economics of capital-intensive clean energy projects, eroding returns and delaying investment pipelines. At the same time, bottlenecks in transmission infrastructure, permitting delays, and questions over the pace of the net-zero transition have all dented confidence. The result is a sector underperforming dramatically even as the urgency of the climate challenge grows.

250821Z5.jpg

**Renewables versus non-renewables**
Global energy consumption data show how limited—and in some respects, stalled—the transition away from fossil fuels has become. Oil, gas, and coal still dominate the energy mix, with shares that have proven remarkably resilient over the past several years. In fact, coal use has ticked higher of late as countries turned back to cheaper, more secure supplies amid energy price spikes and supply disruptions. While renewables have grown rapidly in percentage terms, their absolute contribution remains small compared with the scale of fossil fuel demand. Nuclear and hydro have also struggled to gain ground, leaving the overall mix looking more like a story of continuity than transformation. The result is a global transition that has not just slowed but, in key areas, has partially reversed—highlighting the gulf between climate ambitions and energy realities.

250821Z6.jpg

Recent financial market gains have been underpinned by resilient global data, AI-fuelled optimism, and hopes that most central banks will continue to loosen monetary policy. Yet beneath the surface, a more complicated picture may be emerging. In the US, housing indicators are flashing warnings about household balance sheets and credit channels (chart 1), while China’s latest data—covering retail sales, industrial output, and property—underscore persistent weakness (chart 2). In the UK, this week’s data showing sticky services inflation is complicating the Bank of England’s easing path (chat 3), while back in the US, medium-term inflation expectations have been rising despite softer oil prices (chart 4), hinting at a more disruptive role for trade policy. Against this cyclical backdrop sit deeper structural challenges: global energy consumption remains overwhelmingly dependent on fossil fuels, the clean energy sector has lost momentum amid high costs and policy uncertainty, and equity markets have punished renewables even as climate imperatives intensify (charts 5 and 6). Together, these dynamics suggest that while markets continue to trade on optimism, the mix of weak housing signals, patchy Chinese demand, sticky inflation, and an uneven energy transition potentially leaves the global outlook more fragile than headline performance implies.

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/1GqSlFq3gfZuMYDWhif8Ht?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: Cracks Beneath The Shine

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Mortgage applications fell 1.4% (+22.7% y/y) in the week ending August 15 after rising 10.9% in the prior week, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications for purchase loans edged 0.1% higher (22.7% y/y) last week, following a 1.4% gain in the prior week. Applications to refinance a home loan fell 3.1% (+22.8% y/y) last week, following a 23.0% rise in the week of August 8.

The effective interest rate on a 30-year fixed-rate loan held steady at 6.86% in the week ending August 15 after falling from 6.94% in the first week of August. It was the lowest rate since the first week of March, down from a high of 7.28% in the second week of January. The rate on 15-year fixed-rate mortgages rose to 6.13% in the latest week from 6.09% in the week of August 8. Conversely, the rate on 30-year Jumbo loans decreased to 6.82% last week from 6.86% one week earlier. The rate on a 5-year ARM rose to 6.24% in the week of August 15 and reversed the prior week’s decline to 6.05%.

The share of applications for refinancing an existing loan eased to 46.1% of total applications in the week ending August 15 after rising to 46.5% in the prior week. The share hit a low of 34.6% in the fourth week of May. The adjustable-rate mortgage (ARM) share of activity declined to 8.60% in the latest week after rising to 9.60% in the week of August 8.

The average size of a mortgage loan fell 2.7% (+4.1% y/y) to $387,800 in the week of August 15, following a 4.5% rise in the prior week. The average size of a purchase loan edged 0.5% higher (0.6% y/y) to $429,000 in the latest week after falling 1.2% in the week ending August 8. The average size of a loan to refinance a mortgage fell 7.3% (+9.5% y/y) to $339,800 last week, after rising 18.3% to $366,400 in the prior week. It was increased from $277,900 in the last week of May.

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.

**Tracking Labor Market Stress** from the Federal Reserve Bank of San Francisco is available [here](https://www.frbsf.org/research-and-insights/publications/economic-letter/2025/08/tracking-labor-market-stress/).

- Purchase applications edge higher while loan refinancing declines.
- Effective fixed-interest rate on 30-year loans remains at four-month low.
- Average loan size declines.

U.S. Mortgage Applications Decline Last Week as Interest Rates Steady

250819F1.jpg

250819G1.jpg

Total housing starts increased 5.2% (12.9% y/y) in July to 1.428 million (SAAR) after rising 5.9% in June to 1.358 million, revised from 1.321 million, and falling 8.3% to 1.282 in May, revised from 1.263 million, according to the U.S. Census Bureau. Total starts in July remained 22.5% below their peak of 1.820 million units reached in April 2022. The Action Economics Forecast Survey expected 1.30 million starts in July.

Single-family starts in July rose 2.8% (7.8% y/y) to 939,000 after falling 3.8% in June to 913,000, revised from 883,000, and edging 0.1% higher in May to 949,000, revised from 926,000. Multi-family starts surged 9.9% (24.1% y/y) in July to 489,000 after strengthening 33.6% in June to 445,000, revised from 438,000, and declining 26.0% to a little-revised 333,000 units in May.

Housing starts in the Midwest surged 33.3% (40.8% y/y) in July to 252,000 after rising 3.3% in June. Adding to this increase, starts in the South rose 19.2% (29.5% y/y) to 833,000 after holding steady in June. Offsetting these gains, starts in the West declined 27.5% (-14.4% y/y) to 232,000 after rising 8.1% in June. Housing starts in the Northeast declined 26.0% (-35.5% y/y) to 111,000 after increasing 44.2% in June.

Building permits declined 2.8% (-5.7% y/y) last month to 1.354 million after easing slightly in June. It was the fourth consecutive monthly decline. Single-family permits rose 0.5% (-7.9% y/y) in July to 870,000 after weakening for four straight months. Multi-family permits fell 8.2% (-1.4% y/y) to 484,000 after rising 6.5% in June. Building permits in the Northeast rose 25.2% (-7.9% y/y), and they edged up 0.5% (12.9% y/y) in the Midwest. In the South, building permits declined 4.6% (-6.1% y/y) while in the West, building permits weakened 10.1% (-15.2% y/y).

The housing starts and building permits figures can be found in Haver’s **USECON** database. The expectations figure is contained in the **AS1REPNA** database.

250819H1.jpg

250819I1.jpg

- Increase brings starts to five-month high.
- Multi-family starts surge while single-family starts rise moderately.
- Building permits decline is led by multi-family.

U.S. Housing Starts Strengthen Unexpectedly in July

Winnie Tapasanun

250819A35.jpg

250819B35.jpg

Online retail sales, formally known as retail e-commerce sales, rose a seasonally adjusted 1.4% q/q in Q2'25 to $304.2 billion following a 0.1% downtick in Q1’25 (0.0% initially) and a 1.7% increase in Q4’24 (unrevised), according to the U.S. Census Bureau. The Q2’25 reading was the 14th q/q gain in 15 quarters. The year-on-year rate of increase decelerated to 5.3% in Q2'25, the lowest since Q2'22, from 6.0% Q1’25. The latest y/y number was lower than 7.1% in Q2'24; thus, having remained significantly below a high of 45.3% in Q1'21 and a peak of 53.5% in Q2’20.

The Q2'25 rise in retail e-commerce sales compared to a 0.4% q/q gain (3.9% y/y) to $1,865.4 billion in total retail sales during the same period. This overall measure of retail sales excludes food services and restaurant sales. Retail e-commerce sales accounted for 16.3% of total retail sales in Q2'25 following 16.1% in Q1'25, registering the highest rate since Q2'20; the percentage was 16.1% in 2024, 15.3% in 2023, and 7.1% in 2015.

Details of the retail e-commerce sales data by sector are not seasonally adjusted. Sales of nonstore retailers, which accounted for 58.5% of total e-commerce sales, rose 5.3% (1.8% y/y) in Q2'25, the fourth q/q rise in five quarters, following a 20.7% decrease in Q1'25. Building materials & garden equipment sales recovered 34.7% (9.9% y/y), the largest q/q gain since Q2'20, reversing a 16.2% drop. Health & personal care sales rebounded 12.8% (1.7% y/y), the second q/q increase in three quarters, after having plummeted 40.9%.

Clothing accessory store sales rose 9.2% (-1.3% y/y) in Q2'25 after a 38.3% plunge in Q1'25. General merchandise store sales increased 8.4% (17.2% y/y) following a 20.9% drop. Sales of furniture & home furnishings rose 5.1% (4.4% y/y) after a 15.6% fall. Sporting goods, hobby, musical instrument & book sales grew 4.3% (6.7% y/y) following a 31.3% slump. These series registered the fourth q/q gain in five quarters.

Sales of motor vehicles & parts advanced 8.3% (15.9% y/y) in Q2'25, the largest of six straight q/q increases, on top of a 1.0% rise in Q1'25. Miscellaneous sales including gasoline stations recovered 2.6% (2.3% y/y), up for the second quarter in three, following a 2.3% decline. Food & beverage sales excluding food services rose 0.8% (15.5% y/y), the third q/q rise in four quarters, after a 0.1% easing.

E-commerce sales are goods and services ordered over an internet, mobile device (M-commerce), extranet, Electronic Data Interchange (EDI) network, electronic mail, or other comparable online system. Payment may or may not be made online and sometimes sale & price are negotiated. Total sales estimates are adjusted for seasonal variation, but not for price changes. They are also adjusted for trading-day differences and moving holidays.

Retail e-commerce sales data can be found in Haver's **USECON** database.

- Sales +1.4%, the 14th q/q rise in 15 qtrs.; +5.3% y/y, the lowest since Q2'22.
- Online share of total retail sales up to 16.3%, the highest since Q2'20.
- Nonstore sales rebound, up for the fourth quarter in five.
- Widespread gain in online sales led by bldg. materials & garden equipt. (+34.7% q/q).

U.S. Retail E-Commerce Sales Rise in Q2'25

250819C20.jpg

250819D20.jpg

Retail gasoline prices for all grades, on average, inched up to $3.25 per gallon (-7.1% y/y) last week after falling to $3.24 one week earlier. Prices remained above their low of $3.13 in the week of December 9. The recent high was $3.79 in the week ending April 22, 2024. Their all-time high of $5.11 occurred in the week ending June 13, 2022. The retail price for on-highway diesel fuel fell to $3.71 per gallon (+0.7% y/y) in the week of August 18 after easing to $3.75 in the prior week. The latest diesel price stood well below a high of $4.63 in the week ending September 18, 2023 and a peak of $5.81 in the week ending June 20, 2022.

The price of West Texas Intermediate crude oil declined to $63.31 per barrel (-19.7% y/y) in the week ended August 15 from $64.71 in the prior week. The drop left prices at the lowest level since the first week of June. Prices remained above a $59.04 low in the second week of May. The cost of crude oil peaked at $120.46 in the week of June 10, 2022. Yesterday, the price was $63.96 per barrel. The price of European Brent crude fell to $67.17 per barrel (-18.6% y/y) in the week of August 15, after falling to $68.17 in the prior week. Prices remained below a recent high of $95.61 in the week of September 29, 2023 and below a peak of $127.40 in June 2022. The price was $68.18 per gallon yesterday.

Natural gas prices slipped to an average $2.94/mmbtu (+38.0% y/y) in the week ended August 15, after falling to an average $2.99/mmbtu in the prior week. Prices remained well above a low of $1.40/mmbtu in the week of March 15, 2024 but below their peak of $9.56 in the week of August 26, 2022. Yesterday, the price was $2.96 per mmbtu.

Gasoline demand declined 1.5% y/y in the four weeks ending August 8, following a 2.2% y/y decline in the prior four weeks. Demand for all petroleum products rose 2.9% y/y in the four weeks ending August 8, after a 1.6% y/y increase in the previous four-week period. Crude oil input to refineries rose 4.2% y/y in the four weeks ending August 8, after a 2.9% y/y gain in the prior four weeks.

Gasoline inventories rose 1.8% y/y in the week ending August 8 after a 0.9% y/y in the prior week. Residual fuel oil inventories fell 25.7% y/y in the week of August 8, after a 25.8% y/y fall in the prior week. Crude oil inventories rose 2.8% y/y in the week of August 8 after a 2.7% y/y rise in the previous week.

Measured in days’ supply, gasoline inventories stood at 25.0 days in the week of August 8, unchnged from the prior week. The recent low was 22.9 days in the week of November 8, 2024. The supply of crude oil held at 25.0 days in the week of August 8, and remained below a high of 31.9 days in the week of March 3, 2023.

These data are reported by the Energy Information Administration of the U.S. Department of Energy. The price and supply/demand data can be found in Haver’s **WEEKLY** & **USENERGY** database.

Economy in Brief: February 2009

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