Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080311h.jpg" align="left" border="0" height="265" width="353">
The RICs survey by surveyors that tells the tendency of house
prices to rise or fall is at its weakest level ever. The index is an
up/down net balance reading and the balance of house prices falling is
the largest negative excess over this rising going back to 1999.
Expectations for prices did up tick slightly in February but they too
are near historic lows. Sales expectations are in much better shape by
comparison. They turned higher after a string of negative readings and
stand at a level of +2 in the 41st percentile of their historic range.
That is below the mid-point of the range at 50 but still only a
moderately weak reading. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col">RICS: House prices and expectations for prices and sales </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>3Mo Avg</td>
<td>6Mo Avg</td>
<td>12Mo Avg</td>
<td>Range Percentile</td>
</tr>
<tr>
<td class="firstcol">Prices</td>
<td>-64</td>
<td>-55</td>
<td>-49</td>
<td>-56</td>
<td>-41</td>
<td>-13</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Price Expectations</td>
<td>-58</td>
<td>-62</td>
<td>-62</td>
<td>-61</td>
<td>-48</td>
<td>-24</td>
<td>4.0%</td>
</tr>
<tr>
<td class="firstcol">Sales expectations</td>
<td>2</td>
<td>-11</td>
<td>-19</td>
<td>-9</td>
<td>-9</td>
<td>0</td>
<td>41.2%</td>
</tr>
<tr>
<td class="firstcol">New Sales</td>
<td>-31</td>
<td>-28</td>
<td>-20</td>
<td>-26</td>
<td>-29</td>
<td>-18</td>
<td>7.3%</td>
</tr>
<tr class="grey1">
<td colspan="8" class="firstcol">Range percentile takes range back to
1999</td>
</tr>
</tbody>
</table>
</body></html>

The RICs survey by surveyors that tells the tendency of house prices to rise or fall is at its weakest level ever. The index is an up/down net balance reading and the balance of house prices falling is the largest negative excess over [...]

RICS House Prices Continue to Drop to New Lows

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080311d.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080311e.jpg" border="0" height="265" width="312">

Economy Watchers in Japan and the financial community in
Germany (as represented by participants in ZEW Survey) are still deeply
concerned about the prospect for the future of their economies. The
first and second charts show measures of the future outlook in both
countries relative to their long term averages.In Germany, the excess
of pessimists over optimist in March was 32.0
percentage points compared with a long term average of and excess of optimists
over pessimists of 30.3 percentage points. In Japan, the
diffusion index in February was 33.6 compared with a long term average
of 47.6.
The latest reports, however, suggest that they are beginning
to see some slight grounds for optimism. In Japan, the Economy
Watchers' diffusion index of current conditions in February rose 1.6
points from January and the diffusion index of future conditions rose
3.7 points. In Germany the financial community continues to downgrade
its appraisal of current conditions. The excess of pessimists over
optimists appraising the current situation increased by 1.6 percentage
points from February to March. However, the excess of pessimists
regarding the outlook six months ahead fell by 7.5 percentage points.
The third and fourth charts show the appraisals of current condition
and the outlook for Germany and Japan.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080311f.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080311g.jpg" border="0" height="265" width="312">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">GERMANY&nbsp;ZEW
INDICATORS (% BALANCE)</th>
<th scope="col">Mar 08</th>
<th scope="col">Feb 08&nbsp;</th>
<th scope="col">Mar 07&nbsp;</th>
<th scope="col">M/M Dif&nbsp;</th>
<th scope="col">Y/Y Dif&nbsp;</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Current Conditions</td>
<td>32.1</td>
<td>33.7</td>
<td>69.2</td>
<td>-1.6</td>
<td>-37.1</td>
<td>75.9</td>
<td>18.3</td>
<td>-61.8</td>
</tr>
<tr class="even">
<td class="firstcol">Expectations 6 Months
Ahead </td>
<td>-32.0</td>
<td>-39.5</td>
<td>5.8</td>
<td>7.5</td>
<td>-37.8</td>
<td>-3.0</td>
<td>22.3</td>
<td>34.8</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">JAPAN ECONOMY WATCHERS
SURVEY (DIFFUSION INDEXES)</td>
<td>Feb 08</td>
<td>Jan 08&nbsp;&nbsp;</td>
<td>Feb 07&nbsp;</td>
<td>M/M Dif&nbsp;</td>
<td>Y/Y Dif&nbsp;</td>
<td>2006</td>
<td>2005</td>
<td>2004</td>
</tr>
<tr class="even">
<td class="firstcol">Judgment of Current
Conditions</td>
<td>33.6</td>
<td>31.8</td>
<td>49.2</td>
<td>1.80</td>
<td>-15.6</td>
<td>44.9</td>
<td>51.4</td>
<td>50.3</td>
</tr>
<tr class="even">
<td class="firstcol">Judgment of Future
Conditions</td>
<td>39.5</td>
<td>35.8</td>
<td>52.1</td>
<td>3.70</td>
<td>-12.60</td>
<td>46.9</td>
<td>52.9</td>
<td>51.5</td>
</tr>
</tbody>
</table>
</body></html>

Economy Watchers in Japan and the financial community in Germany (as represented by participants in ZEW Survey) are still deeply concerned about the prospect for the future of their economies. The first and second charts show measures [...]

The Financial Community in Germany and Economy Watchers in Japan Are a Bit less Pessimistic about Their Economies

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080311a.jpg" width="353">
During January the U.S. foreign trade deficit widened to $58.2B from a revised $57.9B in December, which was shallower than initially reported. Consensus expectations had been for a deficit of $59.6B.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080311b.jpg" width="353">
Lifted by the weaker dollar, U.S. exports during January again were strong. They posted a 1.6% jump following the unrevised 1.5% December gain. Exports of goods rose 1.3% (15.2% y/y) as exports of foods, feeds &amp; beverages surged. A 7.6% m/m jump in food exports lifted the y/y rise to 42.0%. Exports of industrial supplies &amp; materials also were quite strong and jumped 2.8% (25.1% y/y). Exports of capital goods have wobbled during the last several months and fell 1.3% (+7.6% y/y) during January. Weaker exports of civilian aircraft accounted for most of that wobble, declining 12.6% (+10.8% y/y). Exports of computers rose 5.2% (6.3% y/y) while exports of nonauto consumer goods were again strong and rose 3.8% (12.9 y/y).
U.S. exports of services in January jumped 1.8% (18.2% y/y). Travel exports rose 26.0% y/y and passenger fares were up 27.6%.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080311c.jpg" width="353">
Overall imports fully reversed the December decline and rose 1.3%. Higher oil prices raised nominal petroleum imports by 10.6%. Petroleum imports in constant dollars, however, rose a lesser 8.8% m/m and in fact fell 1.6% during the last twelve months. In constant dollars, imports of nonauto consumer goods reflected the weaker U.S. economy and fell 4.6% (-0.8% y/y) while real capital goods imports fell 0.4% (+2.4% y/y).
The U.S. trade deficit in goods with China deepened m/m to $20.3B but that remained well below last year&#39;s monthly record of $25.9B. Growth in imports from China has slowed to 2.1% during the last twelve months after growth between 10% and 30% during the last several years. Exports to China for January showed a 15.1% decline but that followed huge gains during the past several years, also between 10% and 30%.
G-10 central banks announced measures and will consult regularly on liquidity pressures in funding markets. The statement by the Federal Reserve can be found <a href="http://www.federalreserve.gov/newsevents/press/monetary/20080311a.htm"> here</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EE/@EE01/@EE01.HTM">Foreign Trade&nbsp;</a></th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">U.S. Trade Deficit</td>
<td>$58.2B</td>
<td>$57.9B</td>
<td>$57.4B (1/07)</td>
<td>$708.5</td>
<td>$758.5</td>
<td>$714.4B</td>
</tr>
<tr>
<td class="firstcol">Exports - Goods &amp; Services</td>
<td>1.6%</td>
<td>1.5%</td>
<td>16.6%</td>
<td>12.6%</td>
<td>12.7%</td>
<td>10.9%</td>
</tr>
<tr>
<td class="firstcol">Imports - Goods &amp; Services</td>
<td>1.3%</td>
<td>-1.2%</td>
<td>11.9%</td>
<td>6.0%</td>
<td>10.4%</td>
<td>12.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>10.6%</td>
<td>3.6%</td>
<td>59.0%</td>
<td>9.5%</td>
<td>20.1%</td>
<td>39.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonpetroleum Goods</td>
<td>-1.1%</td>
<td>-2.9%</td>
<td>2.5%</td>
<td>4.6%</td>
<td>9.1%</td>
<td>10.3%</td>
</tr>
</tbody>
</table>
</body>
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During January the U.S. foreign trade deficit widened to $58.2B from a revised $57.9B in December, which was shallower than initially reported. Consensus expectations had been for a deficit of $59.6B. Lifted by the weaker dollar, U.S. [...]

U.S. Trade Deficit Widened

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080311a.jpg" align="left" border="0" height="265" width="353">
During January the U.S. foreign trade deficit widened to
$58.2B from a revised $57.9B in December, which was shallower than
initially reported. Consensus expectations had been for a deficit of
$59.6B.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080311b.jpg" align="right" border="0" height="265" width="353">
Lifted by the weaker dollar, U.S. exports during January again
were strong. They posted a 1.6% jump following the unrevised 1.5%
December gain. Exports of goods rose 1.3% (15.2% y/y) as exports of
foods, feeds &amp; beverages surged. A 7.6% m/m jump in food
exports lifted the y/y rise to 42.0%. Exports of industrial supplies
&amp; materials also were quite strong and jumped 2.8% (25.1% y/y).
Exports of capital goods have wobbled during the last several months
and fell 1.3% (+7.6% y/y) during January. Weaker exports of civilian
aircraft accounted for most of that wobble, declining 12.6% (+10.8%
y/y). Exports of computers rose 5.2% (6.3% y/y) while exports of
nonauto consumer goods were again strong and rose 3.8% (12.9 y/y).
U.S. exports of services in January jumped 1.8% (18.2% y/y).
Travel exports rose 26.0% y/y and passenger fares were up 27.6%.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080311c.jpg" align="left" border="0" height="265" width="353">
Overall imports fully reversed the December decline and rose
1.3%. Higher oil prices raised nominal petroleum imports by 10.6%.
Petroleum imports in constant dollars, however, rose a lesser 8.8% m/m
and in fact fell 1.6% during the last twelve months. In constant
dollars, imports of nonauto consumer goods reflected the weaker U.S.
economy and fell 4.6% (-0.8% y/y) while real capital goods imports fell
0.4% (+2.4% y/y).
The U.S. trade deficit in goods with China deepened m/m to
$20.3B but that remained well below last year's monthly record of
$25.9B. Growth in imports from China has slowed to 2.1% during the last
twelve months after growth between 10% and 30% during the last several
years. Exports to China for January showed a 15.1% decline but that
followed huge gains during the past several years, also between 10% and
30%.
G-10 central banks announced measures and will consult
regularly on liquidity pressures in funding markets.
The statement by the Federal Reserve can be found <a href="http://www.federalreserve.gov/newsevents/press/monetary/20080311a.htm">
here</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EE/@EE01/@EE01.HTM">Foreign
Trade&nbsp;</a></th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">U.S. Trade Deficit</td>
<td>$58.2B</td>
<td>$57.9B</td>
<td>$57.4B 
(1/07)</td>
<td>$708.5</td>
<td>$758.5</td>
<td>$714.4B</td>
</tr>
<tr>
<td class="firstcol">Exports - Goods &amp;
Services</td>
<td>1.6%</td>
<td>1.5%</td>
<td>16.6%</td>
<td>12.6%</td>
<td>12.7%</td>
<td>10.9%</td>
</tr>
<tr>
<td class="firstcol">Imports - Goods &amp;
Services</td>
<td>1.3%</td>
<td>-1.2%</td>
<td>11.9%</td>
<td>6.0%</td>
<td>10.4%</td>
<td>12.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>10.6%</td>
<td>3.6%</td>
<td>59.0%</td>
<td>9.5%</td>
<td>20.1%</td>
<td>39.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonpetroleum Goods</td>
<td>-1.1%</td>
<td>-2.9%</td>
<td>2.5%</td>
<td>4.6%</td>
<td>9.1%</td>
<td>10.3%</td>
</tr>
</tbody>
</table>
U.S. Chain Store Sales Weak As
Gasoline Price Surged 
by <a href="/comment/Moeller.html">Tom
Moeller</a> March 11, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080311k.jpg" align="left" border="0" height="265" width="353">
The International Council of Shopping Centers ICSC-UBS Chain
Store survey indicated that chain store sales, last week, recovered
just 0.3% of the prior period's 0.6% decline. The latest level of sales
was about equal to the February average.

During the last ten years there has been a 45% correlation
between the y/y change in chain store sales and the change in nonauto
retail sales less gasoline.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080311l.jpg" align="right" border="0" height="265" width="353">

The ICSC-UBS 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.


During the latest week the leading indicator of chain store
sales from ICSC-UBS recovered 1.0% after sharp declines during the
prior two months.The index has trended steadily lower since
early January.
Retail gasoline prices last week jumped
seven cents to a new high of $3.23 per gallon, according to the U.S.
Department of Energy survey.The gain was pushed by the increase in the
wholesale price of gasoline which was up another ten cents yesterday
from last week's average.
Strength in crude oil prices has driven gasoline prices.
Yesterday's price of $107.90was well up from last week's average
$103.43 which had risen nearly three dollars from early this month.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS
(SA, 1977=100)</a></th>
<th scope="col">03/07/08</th>
<th scope="col">02/29/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain
Store Sales</td>
<td>488.3</td>
<td>487.0</td>
<td>1.6%</td>
<td>2.8%</td>
<td>3.3%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly
Prices</a></th>
<th scope="col">03/10/08</th>
<th scope="col">03/03/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Gasoline ($ per Gallon)</td>
<td>3.23</td>
<td>3.16</td>
<td>26.0%</td>
<td>2.80</td>
<td>2.57</td>
<td>2.27</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil,
WTI&nbsp; ($ per bbl.)</td>
<td>103.43</td>
<td>100.88</td>
<td>70.0%</td>
<td>94.00</td>
<td>61.11</td>
<td>58.16</td>
</tr>
</tbody>
</table>
Small Business Optimism Ticked Up 
by <a href="/comment/Moeller.html">Tom
Moeller</a> March 11, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080311i.jpg" align="left" border="0" height="265" width="353">
According to the National Federation of Independent Business
(NFIB), small business optimism recovered a modest 1.2% during February
after the prior month's 3.0% decline. Optimism remained near the lowest
level since during the recession of 1990.
During the last ten years there has been a 70% correlation
between the level of the NFIB index and the two quarter change in real
GDP.
Nine percent fewer respondents expected the economy to improve
following sharp declines during the prior four months. None of the
respondents expected higher real sales in six months. In addition, none
of the respondents indicated that now was a good time to expand the
business.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080311j.jpg" align="right" border="0" height="265" width="353">
The percent planning to increase employment ticked up slightly
from the lowest level since early 2006 and the percentage with one or
more job openings reversed all of the prior month's improvement. During
the last ten years there has been a 72% correlation between the NFIB
percentage and the y/y change in nonfarm payrolls.
The percentage of firms planning to increase capital
expenditures rose m/m to 26% but that remained below the average of 29%
last year, 30% in 2006 and 32% in 2005.
The percentage of firms actually raising
prices rose m/m but, at 13%, remained below last year's average of 15%.
During the last ten years there has been a 60% correlation between the
change in the producer price index and the level of the NFIB price
index. The percentage of firms planning to raise
prices also fell to 22% versus last year's average 23% and 27% in 2006.
About 24 million businesses exist in the United States. Small
business creates 80% of all new jobs in America.

<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/SURVEYS/@S7/@S7.HTM">Nat'l
Federation of Independent Business</a></th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Small Business Optimism Index
(1986=100)</td>
<td>92.9</td>
<td>91.8</td>
<td>-5.4%</td>
<td>96.7</td>
<td>98.9</td>
<td>101.6</td>
</tr>
</tbody>
</table>
The Financial Community in Germany
and Economy Watchers in Japan Are a Bit less Pessimistic about Their
Economies 
by <a href="/comment/Curley.html">Louise
Curley</a> March 11, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080311d.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080311e.jpg" border="0" height="265" width="312">

Economy Watchers in Japan and the financial community in
Germany (as represented by participants in ZEW Survey) are still deeply
concerned about the prospect for the future of their economies. The
first and second charts show measures of the future outlook in both
countries relative to their long term averages.In Germany, the excess
of pessimists over optimist in March was 32.0
percentage points compared with a long term average of and excess of optimists
over pessimists of 30.3 percentage points. In Japan, the
diffusion index in February was 33.6 compared with a long term average
of 47.6.
The latest reports, however, suggest that they are beginning
to see some slight grounds for optimism. In Japan, the Economy
Watchers' diffusion index of current conditions in February rose 1.6
points from January and the diffusion index of future conditions rose
3.7 points. In Germany the financial community continues to downgrade
its appraisal of current conditions. The excess of pessimists over
optimists appraising the current situation increased by 1.6 percentage
points from February to March. However, the excess of pessimists
regarding the outlook six months ahead fell by 7.5 percentage points.
The third and fourth charts show the appraisals of current condition
and the outlook for Germany and Japan.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080311f.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080311g.jpg" border="0" height="265" width="312">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">GERMANY&nbsp;ZEW
INDICATORS (% BALANCE)</th>
<th scope="col">Mar 08</th>
<th scope="col">Feb 08&nbsp;</th>
<th scope="col">Mar 07&nbsp;</th>
<th scope="col">M/M Dif&nbsp;</th>
<th scope="col">Y/Y Dif&nbsp;</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Current Conditions</td>
<td>32.1</td>
<td>33.7</td>
<td>69.2</td>
<td>-1.6</td>
<td>-37.1</td>
<td>75.9</td>
<td>18.3</td>
<td>-61.8</td>
</tr>
<tr class="even">
<td class="firstcol">Expectations 6 Months
Ahead </td>
<td>-32.0</td>
<td>-39.5</td>
<td>5.8</td>
<td>7.5</td>
<td>-37.8</td>
<td>-3.0</td>
<td>22.3</td>
<td>34.8</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">JAPAN ECONOMY WATCHERS
SURVEY (DIFFUSION INDEXES)</td>
<td>Feb 08</td>
<td>Jan 08&nbsp;&nbsp;</td>
<td>Feb 07&nbsp;</td>
<td>M/M Dif&nbsp;</td>
<td>Y/Y Dif&nbsp;</td>
<td>2006</td>
<td>2005</td>
<td>2004</td>
</tr>
<tr class="even">
<td class="firstcol">Judgment of Current
Conditions</td>
<td>33.6</td>
<td>31.8</td>
<td>49.2</td>
<td>1.80</td>
<td>-15.6</td>
<td>44.9</td>
<td>51.4</td>
<td>50.3</td>
</tr>
<tr class="even">
<td class="firstcol">Judgment of Future
Conditions</td>
<td>39.5</td>
<td>35.8</td>
<td>52.1</td>
<td>3.70</td>
<td>-12.60</td>
<td>46.9</td>
<td>52.9</td>
<td>51.5</td>
</tr>
</tbody>
</table>
RICS House Prices Continue to Drop
to New Lows 
by <a href="/comment/Brusca.html">Robert
Brusca</a> March 11, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080311h.jpg" align="left" border="0" height="265" width="353">
The RICs survey by surveyors that tells the tendency of house
prices to rise or fall is at its weakest level ever. The index is an
up/down net balance reading and the balance of house prices falling is
the largest negative excess over this rising going back to 1999.
Expectations for prices did up tick slightly in February but they too
are near historic lows. Sales expectations are in much better shape by
comparison. They turned higher after a string of negative readings and
stand at a level of +2 in the 41st percentile of their historic range.
That is below the mid-point of the range at 50 but still only a
moderately weak reading. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">RICS:
House prices and expectations for prices and sales </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>3Mo Avg</td>
<td>6Mo Avg</td>
<td>12Mo Avg</td>
<td>Range Percentile</td>
</tr>
<tr>
<td class="firstcol">Prices</td>
<td>-64</td>
<td>-55</td>
<td>-49</td>
<td>-56</td>
<td>-41</td>
<td>-13</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Price Expectations</td>
<td>-58</td>
<td>-62</td>
<td>-62</td>
<td>-61</td>
<td>-48</td>
<td>-24</td>
<td>4.0%</td>
</tr>
<tr>
<td class="firstcol">Sales expectations</td>
<td>2</td>
<td>-11</td>
<td>-19</td>
<td>-9</td>
<td>-9</td>
<td>0</td>
<td>41.2%</td>
</tr>
<tr>
<td class="firstcol">New Sales</td>
<td>-31</td>
<td>-28</td>
<td>-20</td>
<td>-26</td>
<td>-29</td>
<td>-18</td>
<td>7.3%</td>
</tr>
<tr class="grey1">
<td colspan="8" class="firstcol">Range
percentile takes range back to
1999</td>
</tr>
</tbody>
</table>
</body></html>

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<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080310j.jpg" align="left" border="0" height="265" width="353">
The ZEW index continues to show erosion in the current
conditions index but the forward-looking expectations portion of the
survey is up for two months running. A year ago current conditions
stood at 69.2 compared to 32.1 in March 2008. Expectations were +5.8 a
year ago and are now at -32. The current conditions reading in March
stands at the 70th percentile in range.
Expectations stand in the 20th percentile of its
range. The turn in
expectations is a hopeful sign since the expectations index is not all
that erratic. Changes in direction tend to be lasting.
So the upturn is an encouraging one at a time that the
German economy is still in a period of turbulence and being battered by
a still-rising euro rate. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> ZEW
Economic Index For Germany</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="4">Level of Zew Index</td>
<td colspan="3">Averages</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;</td>
<td>Mar-08</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>Yr Ago</td>
<td>3-Mo</td>
<td>6-MO</td>
<td>12-MO</td>
</tr>
<tr>
<td class="firstcol">Current</td>
<td>32.1</td>
<td>33.7</td>
<td>56.6</td>
<td>69.2</td>
<td>40.8</td>
<td>54.4</td>
<td>68.5</td>
</tr>
<tr>
<td class="firstcol">Expectations</td>
<td>-32</td>
<td>-39.5</td>
<td>-41.6</td>
<td>5.8</td>
<td>-37.7</td>
<td>-33.5</td>
<td>-12.9</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Percentiles</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Current</td>
<td>69.8</td>
<td>70.6</td>
<td>82.9</td>
<td>89.6</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Expectations</td>
<td>19.9</td>
<td>15.0</td>
<td>13.6</td>
<td>44.8</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="grey1">
<td colspan="8" class="firstcol">Percentiles
are readings in this
period as percentile of the full range of values back to 1/92</td>
</tr>
</tbody>
</table>
</body></html>

The ZEW index continues to show erosion in the current conditions index but the forward-looking expectations portion of the survey is up for two months running. A year ago current conditions stood at 69.2 compared to 32.1 in March [...]

ZEW Expectations Rise Again as Current Conditions Erode

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080310i.jpg" align="left" border="0" height="265" width="353">
Japan orders are showing signs of erratic rebound. Orders hit
their cycle low early in 2007. Since then they have been rebounding
irregularly. Foreign demand is showing the sharpest increase but the
domestic/foreign order breakdowns are for total orders not core orders
explaining why the two series are so volatile.
The table below shows that the core orders with the lesser
volatility are now in a clear trend and are recovering strongly over
the recent 3 months. The progression from two years ago forward shows
steady improvement in order growth rates.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">Japan
Machinery Orders </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">m/m %</td>
<td colspan="4">Saar %</td>
</tr>
<tr class="odd">
<td class="firstcol">SA</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>3-Mos</td>
<td>6-Mos</td>
<td>12-Mos</td>
<td>12-Mo Ago</td>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>26.5%</td>
<td>-6.8%</td>
<td>-5.9%</td>
<td>51.3%</td>
<td>45.1%</td>
<td>18.9%</td>
<td>11.4%</td>
</tr>
<tr>
<td class="firstcol">Core Orders*</td>
<td>19.6%</td>
<td>-3.2%</td>
<td>-2.8%</td>
<td>60.1%</td>
<td>17.0%</td>
<td>11.4%</td>
<td>2.6%</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="8">Total
Orders</td>
</tr>
<tr>
<td class="firstcol">Foreign Demand</td>
<td>43.1%</td>
<td>-4.9%</td>
<td>-18.4%</td>
<td>51.8%</td>
<td>113.2%</td>
<td>41.1%</td>
<td>19.5%</td>
</tr>
<tr>
<td class="firstcol">Domestic demand</td>
<td>15.5%</td>
<td>-8.3%</td>
<td>3.5%</td>
<td>44.6%</td>
<td>13.3%</td>
<td>5.0%</td>
<td>8.0%</td>
</tr>
<tr class="grey1">
<td colspan="5" class="firstcol">* Excl ships
and electric power</td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>
</body></html>

Japan orders are showing signs of erratic rebound. Orders hit their cycle low early in 2007. Since then they have been rebounding irregularly. Foreign demand is showing the sharpest increase but the domestic/foreign order breakdowns [...]

Japan Machinery Orders Show Strength

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080310h.jpg" align="left" border="0" height="265" width="353">
Japan&#8217;s economy watcher&#8217;s index made a long awaited bounce in
February. The future conditions index rebounded most sharply. The current conditions and current
employment indices each made soft rebounds as well. The future index is
now &#8216;only in the bottom 17th percentile of its
five year range instead of at the bottom. The overall economy watchers
index is only up to the bottom 7.1% of its range from the bottom.
Typically when the future index has been weak and makes a significant
rebound that rebound is meaningful. The rise in the various economy
watcher indices this month is encouraging. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">Japan
Economy Watchers Surveys </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="4">Raw readings of each survey</td>
<td colspan="3">Percent of 5Yr range*</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>Dec-07</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan="8">Diffusion</td>
</tr>
<tr>
<td class="firstcol">Economy Watchers</td>
<td>33.6</td>
<td>31.8</td>
<td>36.6</td>
<td>38.8</td>
<td>7.1%</td>
<td>0.0%</td>
<td>5.0%</td>
</tr>
<tr>
<td class="firstcol">Employment</td>
<td>35.0</td>
<td>34.1</td>
<td>37.5</td>
<td>41.9</td>
<td>2.8%</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Future</td>
<td>39.5</td>
<td>35.8</td>
<td>37.0</td>
<td>38.8</td>
<td>17.8%</td>
<td>0.0%</td>
<td>1.5%</td>
</tr>
</tbody>
</table>
</body></html>

Japan’s economy watcher’s index made a long awaited bounce in February. The future conditions index rebounded most sharply. The current conditions and current employment indices each made soft rebounds as well. The future index is now [...]

Economy Watchers Index Rebounds

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080310d.jpg" align="left" border="0" height="265" width="353">
China's balance on trade in goods declined substantially in
February to $8.6 billion from $19.5 billion in January. Both exports
and imports declined; the former by 20% and the latter by 13%. The
unadjusted figures are shown in the first chart. Part of the declines
in exports and imports may have resulted from the extreme weather
conditions which disrupted transportation. In addition, the variable
occurrence of the Chinese New Year always introduces anomalies in
Chinese statistics at the beginning of the year.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080310e.jpg" align="right" border="0" height="265" width="353">
Haver Analytics adjusts the data for seasonal factors and the
occurrence of the Chinese New Year. These adjusted data are shown in
the second chart. Even with seasonal adjustment, the decline in the
balance of trade remains significant. The seasonally adjusted exports
show a decline, the seasonally adjusted imports show a substantial rise.
While the total trade balance shows a decline of over 50% for
both the seasonally adjusted and the non adjusted data for February,
the balance of trade with the U. S. showed a smaller decline of about
20% for the seasonally adjusted and unadjusted. On a seasonally
adjusted basis Chinese exports to the U.S. were still positive. The
third chart compares the Chinese balance of trade with the U.S. on a
seasonally adjusted and an unadjusted basis. Finally the fourth chart
compares the total Chinese surplus on trade with the surplus on trade
with the U. S.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080310f.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080310g.jpg" border="0" height="265" width="312">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">CHINA
TRADE DATA (Mil. US%)&nbsp;</th>
<th scope="col">Feb 08</th>
<th scope="col">Jan 08&nbsp;</th>
<th scope="col">Feb 07&nbsp;</th>
<th scope="col">M/M %Chg&nbsp;</th>
<th scope="col">Y/Y %Chg&nbsp;</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Total Exports (NSA)</td>
<td>87368</td>
<td>109655</td>
<td>82020</td>
<td>-20.32</td>
<td>6.52</td>
<td>1218020</td>
<td>968935</td>
<td>461953</td>
</tr>
<tr class="even">
<td class="firstcol">Imports
(NSA)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>78813</td>
<td>90174</td>
<td>58336</td>
<td>-12.60</td>
<td>35.02</td>
<td>955821</td>
<td>791461</td>
<td>659953</td>
</tr>
<tr class="odd">
<td class="firstcol">Balance (NSA)</td>
<td>8555</td>
<td>19480</td>
<td>23694</td>
<td>-56.07</td>
<td>63.89</td>
<td>262200</td>
<td>177474</td>
<td>102000</td>
</tr>
<tr class="even">
<td class="firstcol">Exports&nbsp;(SA)&nbsp;</td>
<td>113616</td>
<td>116995</td>
<td>101012</td>
<td>-289</td>
<td>12.48</td>
<td>1218020</td>
<td>968935</td>
<td>461953</td>
</tr>
<tr class="even">
<td class="firstcol">Imports&nbsp;(SA)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>101525</td>
<td>92259</td>
<td>73790</td>
<td>10.05</td>
<td>37.59</td>
<td>955821</td>
<td>791461</td>
<td>659953</td>
</tr>
<tr class="odd">
<td class="firstcol">Balance (SA)</td>
<td>12091</td>
<td>24741</td>
<td>27222</td>
<td>-51.03</td>
<td>-55.58</td>
<td>262200</td>
<td>177474</td>
<td>102000</td>
</tr>
<tr class="even">
<td class="firstcol">Exports to
US&nbsp;Domestic
(NSA)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>15478</td>
<td>19162</td>
<td>16336</td>
<td>-19.22</td>
<td>-5.25</td>
<td>232761</td>
<td>203512</td>
<td>162937</td>
</tr>
<tr class="even">
<td class="firstcol">Imports from US (NSA)</td>
<td>6053</td>
<td>7068</td>
<td>4095</td>
<td>-14.36</td>
<td>47.81</td>
<td>69861</td>
<td>59223</td>
<td>48735</td>
</tr>
<tr>
<td class="firstcol"> Balance
(NSA)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>9425</td>
<td>12094</td>
<td>12241</td>
<td>-22.07</td>
<td>-23.06</td>
<td>162900</td>
<td>144289</td>
<td>114202</td>
</tr>
<tr class="even">
<td class="firstcol">Exports to
US&nbsp;Domestic
(SA)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>20599</td>
<td>19780</td>
<td>19888</td>
<td>4.14</td>
<td>3.58</td>
<td>232761</td>
<td>203512</td>
<td>162937</td>
</tr>
<tr class="even">
<td class="firstcol">Imports from US
(SA)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>8185</td>
<td>7085</td>
<td>5113</td>
<td>15.55</td>
<td>60.09</td>
<td>69861</td>
<td>59223</td>
<td>48735</td>
</tr>
<tr>
<td class="firstcol"> Balance (SA)&nbsp;</td>
<td>12414</td>
<td>15695</td>
<td>14776</td>
<td>-20.90</td>
<td>-15.99</td>
<td>162900</td>
<td>144289</td>
<td>114202</td>
</tr>
</tbody>
</table>
</body></html>

China's balance on trade in goods declined substantially in February to $8.6 billion from $19.5 billion in January. Both exports and imports declined; the former by 20% and the latter by 13%. The unadjusted figures are shown in the [...]

China's Surplus on Total Trade in Goods Down Sharply in February But Less So With the U.S.

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

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

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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Consumer credit outstanding increased $7.4 billion (2.1% y/y) during June after rising an unrevised $5.1 billion in May, and strengthening $16.4 billion in April, revised from $16.9 billion. A $9.0 billion June rise had been expected in the Action Economics Forecast Survey. As a percentage of disposable personal income, consumer credit of 22.4% in June compared to 22.5% in May and 22.9% one year earlier. It reached a high of 26.4% during all of 2017. The figures are reported by the Federal Reserve Board.

Nonrevolving credit outstanding rose $8.4 billion (1.9% y/y) during June after rising $8.9 billion in May, revised from $8.6 billion and an unrevised $9.4 billion in April. Nonrevolving credit held by depository institutions declined 6.8% y/y in June after falling 7.2% y/y in May. Finance company debt holdings eased 0.4% y/y after slipping 0.2% y/y in May, while credit union holdings rose 11.2% y/y in June after a 10.8% y/y May strengthening. Nonrevolving debt of the federal government rose 4.1% y/y in June following a 4.0% y/y rise in May.

In June, revolving credit outstanding, which includes credit cards, fell $1.0 billion (+2.5% y/y) after declining $3.8 billion in May, revised from -$3.5 billion and rising 7.0 billion in April, revised from $7.5 billion. Revolving credit outstanding held by depository institutions fell a steady 2.9% y/y. Revolving credit held by finance companies fell 15.0% y/y after a 14.3% y/y drop in May, while credit union debt rose a fairly steady 4.1% y/y in June.

In Q2’25, student loans rose $8.2 billion (4.2% y/y) while motor loans increased $5.1 billion (0.3% 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.

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- Moderate increases in last two months follow strong April gain.
- Nonrevolving credit usage strengthens as revolving credit eases.

U.S. Consumer Credit Picks Up in June

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Japan's economy watchers index is showing some rebound after a period of weakness. The economy is not breaking out into sharply improved readings; however, the monthly readings have now increased and improved for three months in a row for both the current and the future indexes. The increase for the current index over three months is 2.6 diffusion points; for the future index it's 4.6 diffusion points. Over 12 months, both readings are still lower on balance.

**Percentile standings-rankings**
Both headline readings are still below their historic medians, but the current index has a 34.8 percentile standing and the future index has a 39.5 percentile standing. The headline queue standings in both cases are below 50%- a reading below 50% indicates a reading below its historic median.

**Diffusion readings**
Current index components all have diffusion readings below their respective 50 marks, which tells us that they're all showing contraction. The surveys show a headline reading of 45.2 for the current index in July, compared to 47.3 for the future index in July. For the current index, all of the component rankings are below 50 for July, June and May. For the future index, there are three readings above 50 in July and none for June or May.

**July’s Future Index improvement**
The improvement in July for the future index is concentrated in eating and drinking places, services, and employment – all are households or individual-linked readings. That may reflect some sense of relief that Japan’s tariff negotiations with the United States were progressing and finally a deal was struck. The future index, in addition to having several diffusion readings above 50 in July, shows three readings that have queue standings, above the 50th percentile, putting them above their historic medians. Those are readings for eating and drinking places, services, and for housing. The reading for housing takes on a 59.3 percentile queue standing even though its diffusion index remains below 50 at 47. In July it moved up to 47, making a relatively sharp gain from a reading of 42.7 in June.

There is, therefore, relatively more evidence of improvement going on in the future index compared to the current index where monthly gains were generally smaller.

**The breadth of improvement**
Month-to-month the current index improved in 60% of the categories in July compared to 70% in May and June. The future index components improved across the board in July, 80% of them improved in June, and gains were across the board again in May. Looking at the changes over three months, six months, and 12 months according to average data, over three months 60% of the current categories improved compared to none over six months and 80% over 12 months. For average future data, 100% improve over three months, none improve over six months and 60% improve over 12 months.

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**Summing up**
The improvement in the most recent months is clear cut, whether it can be sustained is another matter. It likely reflects some release of anxiety over the tension created by the tariff negotiations with the United States; however, the Bank of Japan is still trying to corral inflation, and on the political side the LDP lost its upper house election and Japanese politics is being reorganized. As far as consumer confidence and expectations are concerned, we can expect that a lot is still in flux in Japan.

Japan

Japan’s Economy Watchers Index Rebounds

Andrew Cates

**Capacity pressures in the US and Europe**
Output gaps in advanced economies (the US and euro area) are estimated to have narrowed sharply in recent months and could be on the verge of turning negative. This reflects a prior period of weaker growth and a growing degree of slack in the economy—conditions that typically translate into softer inflation and heightened pressure on central banks to ease policy. Labour markets are certainly showing greater signs of weakness in the US. A big caveat to this is that estimating output gaps is inherently difficult, especially after recent supply shocks and structural shifts in labour markets. Still, most real-time indicators now suggest aggregate demand is slipping below potential. And that, alongside weakening job data, is strengthening the case for further policy easing and hints at continued disinflation in the months ahead.

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**The US housing market**
US housing has long been a bellwether for broader economic conditions, largely because of its deep ties to credit creation, household balance sheets, and interest rates. That’s why the latest data showing a renewed slump in builder sentiment and a more sustained drop in house price momentum has been of note. With mortgage rates still elevated and lending standards – as we discuss below – still tight, the housing sector looks increasingly fragile—raising fresh concerns about the durability of US growth.

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**US bank lending standards**
This week’s latest Fed Senior Loan Officer Survey confirms that US credit conditions remain restrictive. Banks are still tightening lending standards for companies and consumers while loan demand continues to weaken—a pattern historically associated with periods of economic downturn. Although the net percentage of banks tightening standards has eased somewhat from 2023 peaks (see chart below), it remains elevated, and credit demand is now falling across most categories, from small business to commercial real estate. This tightening in credit supply and fall in demand suggests that monetary policy is still transmitting forcefully through the banking sector.

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**Global growth momentum** 
Until recently, global economic surprises and sentiment surveys were broadly supportive, suggesting the global cycle still had momentum. But this week’s Sentix survey revealed a renewed drop in expectations for August. That decline, coupled with a fading Citi Economic Surprise Index, hints that global momentum may be weakening again. As forward-looking indicators start to roll over, investors and policymakers alike should be alert to a potential shift toward a more pronounced downturn.

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**Global shipping costs and supply chain pressures** 
One additional area of heightened investor concern of late has been the potential inflationary fallout from recent US tariff measures. But so far, there is little evidence – at the global level - to suggest that global supply chains or freight costs have been meaningfully disrupted. The Baltic Exchange Dry Index and the NY Fed’s Global Supply Chain Pressure Index both remain relatively subdued, indicating that logistics bottlenecks have not re-emerged.

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**China’s excess capacity**
China’s economic influence remains pivotal in shaping global goods inflation. The latest data show that producer prices in China continue to contract, extending a prolonged period of deflation that reflects both domestic weakness and excess industrial capacity. This ongoing slack not only suppresses China’s export prices but also exerts downward pressure on global manufacturing input costs. At a time when central banks (most notably in the US) are weighing the risk of reacceleration in inflation, China’s persistent deflation in upstream prices acts as a powerful counterforce—reinforcing the view that goods inflation risks could remain subdued for now.

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Last week’s weaker-than-expected US labour market report—marked by sluggish payroll growth, rising unemployment, and downward revisions to prior months—sparked a notable shift in financial markets. Bond yields fell sharply as investors repriced the outlook for Fed easing, with rate cut expectations brought forward. This recalibration arguably reflects growing awareness of mounting downside risks across the US and broader global economy. Several indicators reinforce this view. Output gaps in many major economies are narrowing or turning negative, signalling that demand is falling short of potential (chart 1). The US housing market looks fragile, amidst weak builder sentiment and falling prices (chart 2). US bank lending standards are still restrictive, with implications for credit availability, household and business investment, and overall economic momentum (chart 3). Some (though not all) global sentiment surveys have softened, and positive growth surprises are now fading. Meanwhile, and despite earlier fears, US tariffs have not triggered renewed supply chain stress or inflationary pressures (chart 5). Add to that the ongoing deflation in China’s producer prices, and the macro narrative could be tilting more decisively toward slower growth and diminishing inflation risks—leaving policymakers with more space to continue easing monetary policy (chart 6).

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/7i7Y1SpHPmWN4WbPNCd9Tg?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: Downside Risks

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Wholesale inventories increased 0.1% (1.3% y/y) during June after falling an unrevised 0.3% decline in May. The rise was revised from a 0.3% increase in the advance release issued last week and matched expectations in the Informa Global Markets survey. Durable goods inventories rose 0.1% during June (0.2% y/y) after falling 0.7% in May. Furniture & home furnishings inventories eased slightly (+4.9% y/y) after weakening 2.1% in May. Professional & business equipment inventories were off 0.5% (+6.4% y/y) after falling 2.1% in May. Motor vehicle & parts inventories were off 1.2% (-4.7% y/y) for the second consecutive month. Machinery inventories also slipped m/m (-2.4% y/y), after falling 0.8%. Electrical equipment inventories jumped 2.6% (0.7% y/y) after increasing 0.6% in May. Hardware & plumbing equipment inventories rose 0.3% (8.4% y/y) following a 1.2% increase.

Inventories of nondurable goods also edged 0.1% higher during June (3.3% y/y) after rising 0.4% in May. Drug inventories increased 0.6% (5.8% y/y) after a 1.9% gain but apparel inventories declined 2.6% (-3.9% y/y) following a 0.4% fall. Grocery inventories increased 0.7% (10.4% y/y) after no change in May. Paper inventories were off 0.7% (+5.0% y/y) following a 0.2% rise while chemical inventories rose 1.9% (-1.0% y/y), the third straight month of sharp decline. Petroleum & petroleum product inventories rose 6.0% (-3.2% y/y) following a 2.9% increase.

Wholesale sales increased 0.3% (5.5% y/y) in June after falling 0.4% in May. A 0.2% increase had been expected in the Action Economics Forecast Survey. Sales of durable goods rose 0.5% (7.6% y/y) in June after rising 0.2% in May. Auto sales fell 0.7% (+4.3% y/y) after a 3.5% rise. Sales of electrical equipment improved 0.2% (15.3% y/y) following a 1.1% rise. Metals & minerals sales gained 0.6% (4.3% y/y) following a 1.2% gain. Furniture sales declined 2.2% (-3.0% y/y) after falling 2.3%. Professional equipment sales improved 0.3% (7.6% y/y) following a 0.3% decline. Machinery sales rose 0.8% (6.5% y/y) after declining 0.9% in May.

Sales of nondurable goods edged 0.1% higher (3.5% y/y) during June after falling 1.0% in May. Paper sales slumped 1.4% (+0.3% y/y) after falling 1.0% in May. Drug sales rose 0.8% (11.2% y/y) after falling 0.3% in May. Petroleum sales increased 0.9% (-7.4% y/y) after declining 3.0%. Sales of apparel rose 0.9% (9.3% y/y) after rising 1.9%. Grocery store sales decreased 	0.7% (+5.1% y/y) after rising 0.7% in May.

The June inventory-to-sales ratio in the wholesale sector stood at 1.3 for the fifth straight month. The durable goods I/S ratio eased to 1.66, down from the 1.81 high in March of last year. The ratio ranged from 2.84 for machinery to 0.98 for electrical equipment. The nondurable goods I/S ratio held at 0.95. The I/S ratio for apparel was 2.03 in June while for petroleum it was 0.35.

The wholesale trade figures are available in Haver's **USECON** database. The expectations figure for inventories is contained in the **MMSAMER** database. Expectations for sales are from the **AS1REPNA** database.

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- Slight inventory gain masks divergent industry patterns.
- Sales increase is first since March.
- I/S ratio steadies at three-year low.

U.S. Wholesale Inventories Edge Higher in June

Sandy Batten

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Nonfarm business labor productivity (output per hour) rebounded in Q2, increasing 2.4% q/q (SAAR) after having fallen 1.8% in Q1 (revised down from -1.5%). A 2.0% quarterly increase in Q2 was expected by the Action Economics Forecast Survey. Compared to a year ago, productivity growth edged up to 1.3% in Q2 from 1.2% in Q1.

Real value added (output) advanced 3.7% q/q in Q2 after declining 0.6% in Q1. Hours worked increased 1.3% q/q, up only marginally from a 1.2% gain in Q1. Compensation growth slowed to 4.0% q/q in Q2 from 5.0% in Q1 and 5.5% in last year’s Q4. As a result, unit labor costs advanced only 1.6% q/q in Q2, down markedly from a 6.9% quarterly gain in Q1. However, on a y/y basis, unit labor costs increased 2.6% y/y in Q2 versus 2.0% in Q1. Annual unit labor costs have been on an uptrend since the middle of last year.

Factory sector productivity slowed to 2.1% q/q (SAAR) in Q2 from a downwardly revised 3.3% in Q1 (previously 4.4%). Compared with a year ago, manufacturing productivity increased 1.5% in Q2, its fastest annual advance since Q2 2021. Manufacturing compensation growth slowed to 3.8% q/q in Q2 from 6.3% in Q1. Accordingly, unit labor cost growth slowed to 1.7% q/q in Q1, its slowest pace in four quarters, from 2.9% in Q1.

The productivity and labor cost data are available in Haver’s **USECON** database. The Action Economics expectations figures are in the **AS1REPNA** database.

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- Nonfarm business productivity increased 2.4% q/q annualized in Q2, more than reversing the 1.8% quarterly decline in Q1.
- Compensation growth slowed to 4.0% from 5.0% in Q1.
- Consequently, unit labor cost growth slowed markedly to 1.6% from 6.9% in Q1.

Economy in Brief: March 2008

Jump to:

RICS House Prices Continue to Drop to New Lows

The Financial Community in Germany and Economy Watchers in Japan Are a Bit less Pessimistic about Their Economies

U.S. Trade Deficit Widened

U.S. Trade Deficit Widened

ZEW Expectations Rise Again as Current Conditions Erode

Japan Machinery Orders Show Strength

Economy Watchers Index Rebounds

China's Surplus on Total Trade in Goods Down Sharply in February But Less So With the U.S.