Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060602b.jpg" width="353">
US light vehicle sales during May fell 3.9% m/m to 16.10M units according to the Autodata Corporation. The decline exceeded Consensus expectations for sales of 16.5M units and was to the lowest level since last November.
Overall light truck sales fell 4.9% (-9.6% y/y) last month. Sales of imported light trucks gave back some of the indication of holding up perhaps apparent in April and fell 10.6% m/m (+6.1% y/y). For the fourth month this year, sales of domestic trucks fell sharply. A 3.8% (-11.9% y/y) decline dropped sales to the lowest level since a very weak November. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060602a.jpg" width="353">
Some relief from the pressure on sales of relatively fuel in-efficient trucks may have been apparent in the modest three cent decline in retail gasoline prices last week to $2.87 per gallon.
Auto sales during May slipped 2.7% (+3.9% y/y) led by a 5.4% (-2.9% y/y) fall in domestic car sales. Sales of imported autos rose 2.9% (20.1% y/y).
Imports&#39; share of the US light vehicle market surged to another record level of 24.4% versus 20.4% during all of last year.

<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">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>16.10</td>
<td>16.74</td>
<td>-3.5%</td>
<td>16.92</td>
<td>16.87</td>
<td>16.63</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>7.79</td>
<td>8.00</td>
<td>3.9%</td>
<td>7.65</td>
<td>7.49</td>
<td>7.62</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Trucks</td>
<td>8.31</td>
<td>8.74</td>
<td>-9.6%</td>
<td>9.27</td>
<td>9.37</td>
<td>9.01</td>
</tr>
</tbody>
</table>
</body>
</html>

US light vehicle sales during May fell 3.9% m/m to 16.10M units according to the Autodata Corporation. The decline exceeded Consensus expectations for sales of 16.5M units and was to the lowest level since last November. Overall light [...]

U.S. Vehicle Sales Down, Light Truck Sales Down Hard

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060602c.jpg" width="353">
Nonfarm payrolls rose a modest 75,000 during May, the weakest increase since last October. Moreover, job gains during the prior two months were revised down by a cumulative 37,000 while the May gain fell short of Consensus expectations for a 175,000 rise.
Despite the weak jobs figures from the establishment survey, the household survey indicated a drop in the unemployment rate to 4.6% which compared to Consensus expectations for m/m stability at 4.7%. Employment rose 288,000 (1.7% y/y) and the labor force rose 180,000 (1.2% y/y). 
Private sector payrolls grew 67,000 (1.6% y/y) during May while government employment rose 8,000 (0.7% y/y).
Private service-producing jobs rose 77,000 (1.6% y/y) last months after a downwardly revised 72,000 rise in April. For the twelve months ending March, these jobs were rising an average 131,000 per month. May jobs in retail trade fell 27,100 (-0.1% y/y) again reflecting broad based sector declines. Financial sector jobs rose 12,000 (2.7% y/y) and professional &amp; business services employment rose 27,000 (2.7% y/y). Temporary help services jobs fell by 2,800 (+3.7% y/y), the fourth m/m decline this year. Jobs in education &amp; health rose a firm 41,000 (2.4% y/y) but leisure &amp; hospitality jobs increased just 4,000 (1.7% y/y).
Factory sector payrolls fell 14,000 after an unrevised 19,000 April increase. Employment in the motor vehicles &amp; parts industries fell 9,700 (-1.7% y/y) and computer &amp; electronics payrolls reversed all of the prior month&#39;s gain with a 4,6000 (+0.3% y/y) worker decline.
Construction employment increased just 1,000 (3.5% y/y) following monthly gains that averaged 22,000 during the prior year. 
Growth in average hourly earnings moderated to 0.1% from an upwardly revised 0.6% rise during April. The slowdown exceeded Consensus expectations for a 0.3% increase. Private service-producing wages rose just 0.1% (4.2% y/y) following a 0.7% increase in April. Professional &amp; business services wages were unchanged (5.7% y/y) after a 1.1% April jump while finance, insurance &amp; real estate earnings fell 0.1% (4.6% y/y). Factory sector earnings were unchanged (1.6% y/y) after an upwardly revised 0.4% April gain.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB01/@EB01.HTM">Employment</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>75,000</td>
<td>126,000</td>
<td>1.4%</td>
<td>1.5%</td>
<td>1.1%</td>
<td>-0.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-14,000</td>
<td>19,000</td>
<td>-0.1%</td>
<td>-0.6%</td>
<td>-1.3%</td>
<td>-4.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.8</td>
<td>33.9</td>
<td>33.7 (May &#39;05)</td>
<td>33.8</td>
<td>33.7</td>
<td>33.7</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.1%</td>
<td>0.6%</td>
<td>3.7%</td>
<td>2.8%</td>
<td>2.1%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>4.6%</td>
<td>4.7%</td>
<td>5.1% (May &#39;05)</td>
<td>5.1%</td>
<td>5.5%</td>
<td>6.0%</td>
</tr>
</tbody>
</table>
</body>
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Nonfarm payrolls rose a modest 75,000 during May, the weakest increase since last October. Moreover, job gains during the prior two months were revised down by a cumulative 37,000 while the May gain fell short of Consensus [...]

U.S. Employment & Wage Growth Slowed

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060602c.jpg" width="353">
Nonfarm payrolls rose a modest 75,000 during May, the weakest increase since last October. Moreover, job gains during the prior two months were revised down by a cumulative 37,000 while the May gain fell short of Consensus expectations for a 175,000 rise.
Despite the weak jobs figures from the establishment survey, the household survey indicated a drop in the unemployment rate to 4.6% which compared to Consensus expectations for m/m stability at 4.7%. Employment rose 288,000 (1.7% y/y) and the labor force rose 180,000 (1.2% y/y). 
Private sector payrolls grew 67,000 (1.6% y/y) during May while government employment rose 8,000 (0.7% y/y).
Private service-producing jobs rose 77,000 (1.6% y/y) last months after a downwardly revised 72,000 rise in April. For the twelve months ending March, these jobs were rising an average 131,000 per month. May jobs in retail trade fell 27,100 (-0.1% y/y) again reflecting broad based sector declines. Financial sector jobs rose 12,000 (2.7% y/y) and professional &amp; business services employment rose 27,000 (2.7% y/y). Temporary help services jobs fell by 2,800 (+3.7% y/y), the fourth m/m decline this year. Jobs in education &amp; health rose a firm 41,000 (2.4% y/y) but leisure &amp; hospitality jobs increased just 4,000 (1.7% y/y).
Factory sector payrolls fell 14,000 after an unrevised 19,000 April increase. Employment in the motor vehicles &amp; parts industries fell 9,700 (-1.7% y/y) and computer &amp; electronics payrolls reversed all of the prior month&#39;s gain with a 4,6000 (+0.3% y/y) worker decline.
Construction employment increased just 1,000 (3.5% y/y) following monthly gains that averaged 22,000 during the prior year. 
Growth in average hourly earnings moderated to 0.1% from an upwardly revised 0.6% rise during April. The slowdown exceeded Consensus expectations for a 0.3% increase. Private service-producing wages rose just 0.1% (4.2% y/y) following a 0.7% increase in April. Professional &amp; business services wages were unchanged (5.7% y/y) after a 1.1% April jump while finance, insurance &amp; real estate earnings fell 0.1% (4.6% y/y). Factory sector earnings were unchanged (1.6% y/y) after an upwardly revised 0.4% April gain.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB01/@EB01.HTM">Employment</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>75,000</td>
<td>126,000</td>
<td>1.4%</td>
<td>1.5%</td>
<td>1.1%</td>
<td>-0.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-14,000</td>
<td>19,000</td>
<td>-0.1%</td>
<td>-0.6%</td>
<td>-1.3%</td>
<td>-4.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.8</td>
<td>33.9</td>
<td>33.7 (May &#39;05)</td>
<td>33.8</td>
<td>33.7</td>
<td>33.7</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.1%</td>
<td>0.6%</td>
<td>3.7%</td>
<td>2.8%</td>
<td>2.1%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>4.6%</td>
<td>4.7%</td>
<td>5.1% (May &#39;05)</td>
<td>5.1%</td>
<td>5.5%</td>
<td>6.0%</td>
</tr>
</tbody>
</table>
U.S. Vehicle Sales Down, Light Truck Sales Down Hard 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 2, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060602b.jpg" width="353">
US light vehicle sales during May fell 3.9% m/m to 16.10M units according to the Autodata Corporation. The decline exceeded Consensus expectations for sales of 16.5M units and was to the lowest level since last November.
Overall light truck sales fell 4.9% (-9.6% y/y) last month. Sales of imported light trucks gave back some of the indication of holding up perhaps apparent in April and fell 10.6% m/m (+6.1% y/y). For the fourth month this year, sales of domestic trucks fell sharply. A 3.8% (-11.9% y/y) decline dropped sales to the lowest level since a very weak November. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060602a.jpg" width="353">
Some relief from the pressure on sales of relatively fuel in-efficient trucks may have been apparent in the modest three cent decline in retail gasoline prices last week to $2.87 per gallon.
Auto sales during May slipped 2.7% (+3.9% y/y) led by a 5.4% (-2.9% y/y) fall in domestic car sales. Sales of imported autos rose 2.9% (20.1% y/y).
Imports&#39; share of the US light vehicle market surged to another record level of 24.4% versus 20.4% during all of last year.

<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">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>16.10</td>
<td>16.74</td>
<td>-3.5%</td>
<td>16.92</td>
<td>16.87</td>
<td>16.63</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>7.79</td>
<td>8.00</td>
<td>3.9%</td>
<td>7.65</td>
<td>7.49</td>
<td>7.62</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Trucks</td>
<td>8.31</td>
<td>8.74</td>
<td>-9.6%</td>
<td>9.27</td>
<td>9.37</td>
<td>9.01</td>
</tr>
</tbody>
</table>
U.S. Factory Inventory Accumulation Regained Momentum 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 2, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060602g.jpg" width="353">
Factory inventories rose 0.7% during April after an upwardly revised 0.9% gain during March. The back to back two-month gains were the strongest since early last year. Historical figures in this MSIO report were very much revised.
Machinery inventories rose 0.6% (4.9% y/y) while inventories of computers &amp; electronic products rose 1.2% (6.3% y/y) after a 2.9% March rise. Inventories of electrical equipment rose 0.6% (6.5% y/y) though inventories of furniture &amp; related products fell 0.2% (5.0% y/y) after the 2.1% jump during March. Primary metals inventories rose 1.2% (1.5% y/y).
Total factory orders gave back half of the prior month&#39;s jump with a 1.8% decline. Durable goods orders fell 4.4% and that was little revised from the advance report of a 4.8% slide. Factory orders less transportation rose 0.2% (7.9% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060602h.jpg" width="353">
Factory shipments were unchanged following the 1.0% spike in March. Less transportation shipments added 0.6% (6.9% y/y) to the 0.9% March increase. Petroleum shipments rose 3.5% (20.5% y/y). Factory shipments less transportation &amp; petroleum rose 0.3% (5.4% y/y).
Unfilled orders increased another 1.5% due to a 3.7% (74.1% y/y) jump in civilian aircraft. Less the transportation sector altogether backlogs still rose a strong 1.1% (13.7% y/y).<a href="http://research.stlouisfed.org/publications/review/05/07/Gali.pdf"> </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/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory Survey</a> (NAICS)</th>
<th scope="col">April</th>
<th scope="col">Mar</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>0.7%</td>
<td>0.9%</td>
<td>3.4%</td>
<td>4.0%</td>
<td>6.9%</td>
<td>-7.4%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>-1.8%</td>
<td>4.0%</td>
<td>8.7%</td>
<td>8.5%</td>
<td>7.5%</td>
<td>0.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>0.0%</td>
<td>1.0%</td>
<td>6.0%</td>
<td>7.1%</td>
<td>6.8%</td>
<td>0.2%</td>
</tr>
<tr>
<td class="firstcol">Unfilled Orders</td>
<td>1.5%</td>
<td>3.0%</td>
<td>22.8%</td>
<td>16.3%</td>
<td>4.5%</td>
<td>-1.0%</td>
</tr>
</tbody>
</table>
EMPL Database Facilitates Labor Force Analysis; Example: Elderly Workers on the Rise 
by <a href="/comment/Stone.html">Carol Stone</a> June 2, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060602d.jpg" width="353">
For the last several months, we have been working to expand and reorganize Haver&#39;s EMPL database, which consists of the BLS&#39;s massive collection of details on the Household Employment Survey. We&#39;ve recoded the entire database, hopefully making the codes simpler, more intuitive and less like serial numbers. We&#39;ve added about 1,700 new series, including more detail on employment of various resident Hispanic groups, such as Puerto Ricans. There is also greater detail now on educational status, a topic that receives much attention among the BLS data offerings. The database&#39;s menus in DLXVG3 are being restructured so they follow more closely the logic of the tables in Employment and Earnings. This &quot;maintenance&quot; has achieved much in facilitating the use of this enormous database -- now running toward 12,000 series -- and the work continues. Obviously, if you have suggestions, please offer them at <a href="mailto:data@haver.com">data@haver.com</a>.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060602e.jpg" width="353">
Meantime, we can address numerous questions and topics in the relationships of people to the labor market. We picked something at random to illustrate: labor force participation by age and race, with a highlight on older workers. The first graph shows that in recent years, total labor force participation has decreased somewhat: from 67% of the civilian noninstitutional population in the late 1990s to 66% in 2004 and 2005; it stood at 66.1% in
May, according to the latest data, reported this morning.This modest decline masks widely varying trends among age groups. Teen-agers (16-19 years old) participation has plunged, from 52% at the turn of the decade to just 43.5% last month. This rate has stabilized, however, creeping up from a low of 42.8% in March 2004. So a larger proportion of kids is once again starting to want to work. Other parts of EMPL will tell you how many of kids aged 16-24 are in school, whether they&#39;ve graduated high school or are perhaps enrolled in college part-time. If they&#39;re unemployed, the data will tell you if how many are looking for full- or part-time work.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060602f.jpg" width="353">
The opposite trend is seen in older workers. For people over age 65, labor force participation is rising; from an average of 12.2% of the population in 1995, the rate reached 15.5% in May. This is also seen in an almost parallel move among white workers in that age group. Other racial and ethnic groups have experienced even larger proportional increases. For blacks and Hispanics, this reflected lower participation in the mid-1990s, just around 10.5%. By now, that for Hispanics is as high as for whites, and blacks are not much below. Since 2000, the BLS has reported separate data for Asian workers. Their participation rates, at 13.7% for the 65 years &amp; older age category, were above the rate for the total labor force in 2000, and while those rates are still relatively high, they also have been more erratic, so it is hard to draw strong conclusions about their labor force status. Nonetheless, an uptrend is clearly identifiable.
Older workers are thus increasingly &quot;economically active&quot;, to apply the phrase used in several European countries. This could be simply because they are healthier than before. It could also be that basic living costs necessitate the earning of wage income. But there is one other policy factor that may be important. In April 2000, Congress and the President enacted a law repealing the earnings ceiling on social security benefits. Previously, a recipient&#39;s benefits were reduced $1 for every $3 they had in earnings above this ceiling, a clear disincentive to work in more than casual employment. Since then, however, there has been no such rule, and upturns in labor force participation can be marked to roughly the time of the law change. The increased participation even included the months of recession in 2001, a time when people usually pull back from job-hunting. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">% of Noninstitutional Population</th>
<th scope="col">May 2006</th>
<th scope="col">Apr 2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2000</th>
<th scope="col">1995</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total*</td>
<td>66.1</td>
<td>66.1</td>
<td>66.0</td>
<td>66.0</td>
<td>66.2</td>
<td>67.1</td>
<td>66.6</td>
</tr>
<tr>
<td class="firstcol">Age 16-19*</td>
<td>43.5</td>
<td>43.4</td>
<td>43.7</td>
<td>43.8</td>
<td>44.5</td>
<td>52.0</td>
<td>53.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Age 25-54*</td>
<td>82.8</td>
<td>82.8</td>
<td>82.8</td>
<td>82.8</td>
<td>83.0</td>
<td>84.0</td>
<td>83.5</td>
</tr>
<tr>
<td class="firstcol">Age 65 &amp; Over</td>
<td>15.5</td>
<td>15.4</td>
<td>15.0</td>
<td>14.4</td>
<td>14.0</td>
<td>12.9</td>
<td>12.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; White</td>
<td>15.6</td>
<td>15.5</td>
<td>15.1</td>
<td>14.6</td>
<td>14.1</td>
<td>13.0</td>
<td>12.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Black</td>
<td>14.8</td>
<td>13.1</td>
<td>13.6</td>
<td>13.1</td>
<td>12.9</td>
<td>11.6</td>
<td>10.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Asian</td>
<td>16.3</td>
<td>20.4</td>
<td>15.5</td>
<td>13.1</td>
<td>13.7</td>
<td>13.7</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Hispanic</td>
<td>15.5</td>
<td>15.8</td>
<td>13.9</td>
<td>14.5</td>
<td>12.8</td>
<td>12.2</td>
<td>10.5</td>
</tr>
</tbody>
</table>
</body>
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Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060601f.jpg" width="353">
The PMI is a simple survey, asking procurement officers of companies how major measures of their business have behaved in the latest month. Did production go up or down? Did orders go up or down? Did they add employees or reduce their number? and so on. The results are stated as the number of firms reporting an increase plus half the number reporting no change; anything above 50% indicates an economic expansion. These surveys, coordinated mainly by NTC Economics in London, are becoming available in more and more countries; the table below includes a cross-section from several regions of the world.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060601g.jpg" width="353">
May&#39;s results for manufacturers, reported on June 1 for nearly all participating countries, generally show a moderately widespread expansion. The margin narrowed in the US, as Tom Moeller highlights here in a separate article, but the indexes were steady or higher in the Euro-Zone, China and South Africa. Among the countries we perused, only Australia showed any notable weakness, falling to 48.93 from 50.27 in April, but this is less severe than it was last autumn. Japan looks to be moving through a slower growth period after peaking in January, but so far the moderation is less than 2 index points.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060601h.jpg" width="353">
The European performance is striking. The overall index and the output component both reached their highest levels since August 2000. New orders were off slightly in May, but are hovering in a high range. Even employment has been ratcheting upward since the spring of 2003; this last is a relative movement. Only since December has the employment index been at or above 50%, so until that time &quot;improvement&quot; meant that progressively fewer companies were reporting contractions in the number of workers. Even so, we&#39;ve so often thought of Europe in the doldrums and these data suggest that&#39;s not the case.
In fact, we&#39;re fairly impressed with these manufacturing industry performances. Unfortunately, the data for the non-US countries don&#39;t have much history, so we can&#39;t see how they relate to entire business cycles. However, the Euro-Zone combined index, which began in June 1997, has a remarkable 88% correlation with the year-to-year growth in manufacturing production in the Euro-Zone, with a lead of two months. This suggests more strength to come in Euro-Zone production data. In the face of rising prices of energy, commodities and other inputs, this suggests perhaps more resilience than we&#39;d have envisioned for the European producers.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">PMI Diffusion Indexes</th>
<th scope="col">May 2006</th>
<th scope="col">April 2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Euro-Zone</td>
<td>57.02</td>
<td>56.73</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Germany</td>
<td>58.53</td>
<td>58.11</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; France</td>
<td>56.14</td>
<td>55.31</td>
</tr>
<tr>
<td class="firstcol">Japan</td>
<td>55.31</td>
<td>55.52</td>
</tr>
<tr class="odd">
<td class="firstcol">China</td>
<td>52.83</td>
<td>52.72</td>
</tr>
<tr>
<td class="firstcol">Australia</td>
<td>48.93</td>
<td>50.27</td>
</tr>
<tr class="odd">
<td class="firstcol">South Africa</td>
<td>57.6</td>
<td>54.3</td>
</tr>
<tr>
<td class="firstcol">Memo: US</td>
<td>54.4</td>
<td>57.3</td>
</tr>
</tbody>
</table>
</body>
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The PMI is a simple survey, asking procurement officers of companies how major measures of their business have behaved in the latest month. Did production go up or down? Did orders go up or down? Did they add employees or reduce their [...]

PMI Surveys Show Good Manufacturing Growth in Many Countries

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060601m.jpg" width="353">
The Challenger, Grey &amp; Christmas survey indicated that announced job cuts fell another 10.0% last month and have now fallen in each month of 2006. The decline was to the lowest level since late 2000.
During the last ten years there has been an 83% (inverse) correlation between the three month moving average level of announced job cuts and the three month change payroll employment.
Layoffs fell in transportation (-58.3% y/y) and energy (-97.0% y/y) as did job cuts in electronics (-89.0 y/y), industrial goods (-13.4% y/y), insurance (-61.2% y/y), media (+15.9% y/y) and real estate (-75.0% y/y).
Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.
Challenger also reported a sharp m/m drop in announced hiring plans (-34.1% y/y).

<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/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>53,716</td>
<td>59,688</td>
<td>-34.7%</td>
<td>1,072,054</td>
<td>1,039,935</td>
<td>1,236,426</td>
</tr>
</tbody>
</table>
</body>
</html>

The Challenger, Grey & Christmas survey indicated that announced job cuts fell another 10.0% last month and have now fallen in each month of 2006. The decline was to the lowest level since late 2000. During the last ten years there [...]

Challenger Layoffs Fell Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060601k.jpg" width="353">
Home prices as measured by the Office of Federal Housing Enterprise Oversight (OFHEO) rose another 2.0% last quarter. The increase was the slowest after rising between 2.5% and 4.5% each quarter for two years.
The OFHEO house price index is a geometric weighted average based on more than 26.5 million repeat transactions (purchase or refinance) over 29 years and 12,000 transactions annually.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060601i.jpg" width="353">
Year to year, the 12.5% gain in prices nationwide was the slowest since late 2004.
The purchase only home price index rose 1.8% (10.1% y/y), also its slowest gain in nearly three years after quarterly gains which ranged between 2.1% and 2.9%.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060601j.jpg" width="353">
Slower growth in home prices ranged across the country but was pronounced in Massachusetts where prices rose just 0.5% (6.5% y/y). That y/y gain is down from a peak of 14.4% in 2000 and 10.1% last year. Prices also inched up just 0.2% (2.9% y/y) in Michigan, the slowest y/y gain since 1993. In South Dakota, home prices fell 0.1% (+6.1% y/y).
In New York, house prices rose 1.9% (12.4% y/y) and in California prices rose 2.5% (19.2% y/y), a slowdown from the 28.0% y/y gain in late 2004.
House price appreciation continued strong in Florida as evidenced by a 4.3% (26.6% y/y) gain. Last year prices in Florida rose 25.9% and in 2004 were up 17.0%.
View the latest OFHEO release <a href="http://www.ofheo.gov/media/pdf/1q06hpi.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E911/@E91101/@E91101.HTM">OFHEO</a></th>
<th scope="col">1Q06</th>
<th scope="col">4Q05</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">House Price Index</td>
<td>2.0%</td>
<td>3.1%</td>
<td>12.5%</td>
<td>13.3%</td>
<td>10.8%</td>
<td>6.9%</td>
</tr>
</tbody>
</table>
</body>
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Home prices as measured by the Office of Federal Housing Enterprise Oversight (OFHEO) rose another 2.0% last quarter. The increase was the slowest after rising between 2.5% and 4.5% each quarter for two years. The OFHEO house price [...]

Home Prices Rose More Slowly

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060601e.jpg" width="353">
The value of construction put in place slipped 0.1% in April after a downwardly revised 0.9% March increase. Consensus expectations had been for no change.
Residential building reversed all of a downwardly revised 1.0% March gain. New single family building slumped 1.6% (11.5% y/y), the first monthly decline in over a year, and the value of spending on improvements fell 0.5% (-6.9% y/y).
Nonresidential building improved 2.5% following an upwardly revised 0.6% March increase as office construction surged 3.0% (13.8% y/y) and commercial building rose 1.8% (6.5% y/y). Multi-retail building jumped 2.0% (33.2% y/y) led by a 6.0% (52.7% y/y) ramp-up in the value of building shopping malls.
Public construction spending slipped 0.2% though construction activity on highways &amp; streets, nearly one third of the value of public construction spending, rose 0.4% (10.7% y/y).
These more detailed categories represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for Automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.

<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/@E9/@E907/@E90701/@E90701.HTM">Construction Put-in-place</a></th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-0.1%</td>
<td>0.9%</td>
<td>8.5%</td>
<td>9.2%</td>
<td>10.9%</td>
<td>5.4%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>-0.1%</td>
<td>0.9%</td>
<td>8.6%</td>
<td>9.7%</td>
<td>13.6%</td>
<td>6.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>-1.1%</td>
<td>1.0%</td>
<td>7.1%</td>
<td>11.5%</td>
<td>18.2%</td>
<td>12.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>2.5%</td>
<td>0.6%</td>
<td>12.2%</td>
<td>5.4%</td>
<td>3.9%</td>
<td>-5.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>-0.2%</td>
<td>0.8%</td>
<td>8.2%</td>
<td>7.6%</td>
<td>2.5%</td>
<td>2.7%</td>
</tr>
</tbody>
</table>
</body>
</html>

The value of construction put in place slipped 0.1% in April after a downwardly revised 0.9% March increase. Consensus expectations had been for no change. Residential building reversed all of a downwardly revised 1.0% March gain. New [...]

U.S. Construction Spending Slipped

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060601d.jpg" width="353">
The Institute of Supply Management (ISM) reported that the May Composite Index of factory sector activity reversed more than all of the prior month&#39;s gain and fell to 54.4. Consensus expectations had been for a more moderate decline to 56.0.
During the last twenty years there has been a 68% correlation between the level of the Composite Index and the three month growth in factory sector industrial production.
New orders fell for the fourth month of 2006 to the lowest level (53.7) in a year. New export orders, however, recovered about half of an April decline and rose to 55.7. During the last nineteen years there has been a 68% correlation between the level of the ISM export index and the y/y change in real exports of goods.
A 3.2 point decline in the production index to 57.2 also reversed all of the prior month&#39;s sharp gain while employment (52.9) fell for the third month this year. During the last twenty years there has been a 67% correlation between the level of the ISM employment Index and the three month growth in factory sector employment.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060601c.jpg" width="353">
The inventory index fell as well to 48.0 and the supplier deliveries index eased to 57.6 from 57.7.
The price index rose 5.5 points to the highest level since October. During the last twenty years there has been a 91% correlation between the price index and the three month change in the PPI for intermediate goods less food &amp; energy.
Are We Engineering Ourselves Out of Manufacturing Jobs? from the Federal Reserve Bank of Cleveland can be found <a href="http://www.clevelandfed.org/Research/Com2006/0101.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF02/@EF02.HTM">ISM Manufacturing Survey</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">May &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Index</td>
<td>54.4</td>
<td>57.3</td>
<td>51.8</td>
<td>55.5</td>
<td>60.5</td>
<td>53.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>53.7</td>
<td>57.6</td>
<td>51.9</td>
<td>57.4</td>
<td>63.5</td>
<td>57.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>77.0</td>
<td>71.5</td>
<td>58.0</td>
<td>66.4</td>
<td>79.8</td>
<td>59.6</td>
</tr>
</tbody>
</table>
</body>
</html>

The Institute of Supply Management (ISM) reported that the May Composite Index of factory sector activity reversed more than all of the prior month's gain and fell to 54.4. Consensus expectations had been for a more moderate decline [...]

ISM Index Decline Reflected Broad Component Weakness

Reaccelerating goods price inflation along with sticky services inflation clouds the outlook

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

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Winnie Tapasanun

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The advance estimate of the U.S. international trade deficit in goods widened to a larger-than-expected $103.57 billion in July after narrowing to $84.85 billion in June, data from the U.S. Census Bureau showed. The July reading, the second widening in the goods trade deficit in three months, was slightly smaller than a $103.92 billion shortfall in July 2024. A deficit of $90.2 billion for July had been expected by the Action Economics Forecast Survey. The deficit reached a record $161.95 billion in March. In Q2'25, the goods trade deficit narrowed to $266.96 billion, the smallest since Q4'23, after ballooning to a record $465.035 billion in Q1'25; the monthly deficit averaged $88.99 billion in Q2'25, down from a record $155.01 billion in Q1'25.

Total goods exports dipped 0.1% m/m (+3.0% y/y), the third consecutive monthly decline, to $177.97 billion in July, the lowest level since January, after a 0.7% decrease to $178.08 billion in June. April registered a record high of $190.08 billion. Exports were up 9.6% from a June 2023 low but down 2.1% from a July 2022 high. The m/m decline in exports in July reflected exports m/m drops of 2.4% (+16.3% y/y) in other goods, 0.9% (+5.1% y/y) in nonfood consumer goods excluding autos, and 0.8% (-1.2% y/y) in industrial supplies & materials. To the upside, exports for the following end-use categories rose m/m in July: automotive vehicles & parts (2.2%; -4.0% y/y), capital goods excluding autos (0.7%; 7.0% y/y), and foods, feeds & beverages (0.5%; 1.4% y/y).

Total goods imports rebounded 7.1% m/m (1.7% y/y), the first monthly increase since March, to a four-month-high $281.54 billion in July following a 4.6% drop to $262.94 billion in June. March registered a record high of $344.59 billion. Imports were up 11.9% from a June 2023 low but down 2.6% from a March 2022 high. The m/m rebound in imports in July reflected m/m rises in most imports end-use categories. These included a 25.4% surge (the first m/m increase and the largest since January; 4.9% y/y) in industrial supplies & materials as well as rises of 11.5% (23.5% y/y) in other goods, 4.8% (14.7% y/y) in capital goods excluding autos, 2.4% (4.9% y/y) in foods, feeds & beverages, and 2.1% (-12.2% y/y) in nonfood consumer goods excluding autos. In contrast, imports of automotive vehicles & parts, the only end-use category with a monthly decline in July, fell 3.2% (-14.1% y/y), the third m/m fall in four months, on top of a 3.6% June decrease.

The advance international trade data can be found in Haver's **USECON** database. The expectation figure is from the Action Economics Forecast Survey, which is in **AS1REPNA**.

- Deficit: $103.57 bil. in July, jumping 22.1% from June’s $84.85 bil.
- Exports -0.1%, down for the third straight month, led by a 2.4% decline in exports of other goods.
- Imports +7.1%, up for the first time since March, led by a 25.4% surge in imports of industrial supplies & materials.

U.S. Goods Trade Deficit Balloons in July; Largest Since March’s Record High

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Real GDP grew 3.3% (SAAR) during the second quarter of 2025, revised from a 3.0% gain reported initially. The increase followed an unrevised 0.5% decline in Q1. A 3.1% rise had been expected in the Action Economics Forecast Survey. Growth during the last four quarters of 2.1% compared to 2.0% y/y in Q1, and remained below its most recent high of 3.2% in Q4 2023.

After-tax corporate profits without IVA & CCA adjustment increased 1.4% (7.0% y/y) last quarter after easing 0.8% in Q1. Before-tax earnings with IVA & CCA rose 1.7% (4.3% y/y) after falling 2.3% in Q1. Financial sector earnings rose 1.4% (15.3% y/y) after rising 2.3% in Q1. Nonfinancial corporate profits rose 2.2% (2.5% y/y) after falling 2.5% in Q1. Earnings from abroad eased 0.7% (-0.4% y/y) following a 7.3% Q1 decline.

Foreign trade balance improvement added 4.95 percentage points to growth last quarter after subtracting 4.61 percentage points in Q1. Imports fell 29.8% (+1.3% y/y) after surging 38.0% in Q1. Exports declined 1.3% (+2.0% y/y) after improving 0.4% in Q1. Inventories subtracted 3.29 percentage points from growth after adding 2.59 percentage point to Q1 growth.

Real final sales to domestic purchasers grew 1.6% (2.4% y/y), revised from 1.1%, in Q2 after rising 1.5% in Q1. Personal consumption expenditures rose 1.6% (2.4% y/y), revised from 1.4%, following a 0.5% gain. Durable goods spending rose 2.6% (4.6% y/y) after falling 3.7% in Q1. Motor vehicle purchases strengthened 11.7% (6.7% y/y) after declining 11.2% in Q1. Spending on home furnishings & appliances weakened 2.1% (+3.5% y/y) following a 1.5% rise. Recreational goods & vehicle outlays fell 3.5% (+4.3% y/y) last quarter after a 0.4% Q1 gain.

Nondurable goods outlays in constant dollars rose 2.3% (3.0% y/y) following 2.1% growth in Q1. Apparel spending increased 5.4% (4.8% y/y) following a 7.0% rise. Food & beverage buying gained 0.3% (1.5% y/y) after a 1.0% increase. Gasoline & fuel oil purchases weakened 1.4% (+0.9% y/y) after gaining 3.6% in Q1.

Real spending on services increased 1.2% (1.9% y/y) after a 0.6% gain. Outlays on housing & utilities eased 0.4% (+1.1% y/y) after rising 2.9% in Q1. Health care expenditures rose 4.2% (4.8% y/y) after a 3.1% increase. Transportation outlays declined 2.9% (-0.6% y/y) after a 1.4% rise, while recreation spending rose 3.6% (0.7% y/y) following a 5.1% decline. Restaurant & hotel expenditures increased 5.1% (1.9% y/y) after falling 1.8%. Financial services expenditures rose 1.9% (2.3% y/y) following a 0.1% Q1 increase.

Business fixed investment in constant dollars increased 5.7% last quarter (4.2% y/y), revised from 1.9%, following a 10.3% surge in Q1. Expenditures on structures declined 8.9% (-3.4% y/y), after falling 2.4% in Q1. Expenditures on producers’ durable equipment increased 7.4% (7.7% y/y), revised from 4.8%, after surging 23.7% in Q1. Outlays on information processing equipment rose 10.1% (20.1% y/y), revised from 5.5%, after soaring 72.8% during Q1. Industrial equipment investment rose 6.7% (4.0% y/y) after a 4.7% rise. Transportation equipment investment surged 20.4% (6.8% y/y) after a 6.9% gain. Intellectual property product spending rose 12.8% last quarter (5.2% y/y) following a 6.0% rise.

Residential structures investment in real terms declined a little-revised 4.7% (-1.3% y/y), the fourth decline in the last five quarters.

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Government spending eased 0.2%, revised from up 0.5% in Q2 (+1.8% y/y) after a 0.6% decline. Federal government expenditures declined 4.7% (+0.7% y/y) after falling 4.6% in Q1. National defense expenditures increased 1.4% (3.0% y/y) after declining 7.1% in Q1. State & local government spending rose 2.6% (2.5% y/y) following a 2.0% rise.

The GDP chain price index rose an unrevised and expected 2.0% last quarter (2.5% y/y) after increasing 3.8% in Q1. The PCE chain price index increased 2.0% (2.4% y/y) following a 3.7% rise. The PCE price index excluding food and energy rose 2.5% (2.7% y/y) after increasing 3.5% in Q1. The business fixed investment price index edged 0.5% lower (+1.1% y/y) after a 0.4% rise. The residential price index rose 1.1% (2.6% y/y) after a 4.1% rise while the government price index increased 3.3% (3.1% y/y) following a 4.6% rise.

The GDP data can be found in Haver’s **USECON** and **USNA** databases. **USNA** contains virtually all of the Bureau of Economic Analysis detail in the national accounts. The Action Economics consensus estimates can be found in **AS1REPNA**.

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- Business investment strengthens & consumer spending firms.
- U.S. business earnings reverse Q1 decline.
- Increase in price index is unrevised, remaining roughly half of Q1’s gain.

U.S. GDP Q2’25 Growth Revised Up; Profits Improve

Sandy Batten

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The Kansas City Fed manufacturing composite index was unchanged at 1 in August from July. This was the second consecutive month that the index has been positive, indicating the manufacturing in the KC Fed district continue to inch up in August. Prior to the positive reading in July, the index had been negative for 22 consecutive months. The index’s most recent high was 31 reached in both April 2021 and October 2021. The durable manufacturing sector was mostly flat in August, while nondurable manufacturing activity declined slightly driven by printing activities and paper and chemical manufacturing. 

The August survey was open for a six-day period from August 20-25, 2025 and included 103 responses from plants in Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico, and western Missouri.

The ISM-adjusted index calculated by Haver Analytics rose to 51.1 (NSA) in August from 50.2 in July. This was the fifth reading above the critical 50 level that separates expansion from contraction in the past six months, a further indication of expanding manufacturing activity.

For the major component indexes, the production index was 0 in August, but this was up from -3 in July. The new orders index rose to 5 in August, its highest reading since May 2022, from 2 in July. The shipments index increased to 6 in August from 3 in July. The employment index was 0 in August, but this was up from -11 in July. Also, the average workweek index rebounded to 3 in August after having been in negative territory for the previous four months. Supplier delivery times were unchanged at 7 in August. The elevation of this index since April may indicate some incipient supply-chain disruptions from higher tariffs. In contrast, raw materials inventories fell to -7 in August from 8 in July.

On the inflation front, the prices paid for raw materials index remained elevated but fell to 43 in August from 47 in July and a local high of 51 in June. Forty-four percent of respondents reported an increase in raw materials prices in August, down from 48% in July and 53% in June, while only 4% reported a decrease, down from 5% in July and 6% in June. The prices received for finished products index increased to 21 in August from 18 in July. This index has fluctuated in a range between 17 and 21 for the past four months.

Expectations for future activity remained positive, with the composite index rising to 11 from 8, as firms anticipate an improvement in production and new orders. While expectations have been trending up over the past several months, they remain depressed relative to the recent high reading of 17 last December. Capital expenditures expectations remained in negative territory in August for the second consecutive month but edged up to -3 from -4 in July.

The series dates back to July 2001. The diffusion indexes are calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Data for the Kansas City Fed Survey can be found in Haver’s **SURVEYS** database.

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- Index remained (though barely) in positive territory for the second consecutive month, indicating that manufacturing activity was inching up.
- Prior to last month, the index had been negative for 22 consecutive months.
- Positive readings across most key components.

FRB Kansas City Manufacturing Index Unchanged in August

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The Pending Home Sales Index weakened 0.4% in July (+0.7% y/y) to 71.7 after falling an unrevised 0.8% in June and rising an unrevised 1.8% in May, according to the National Association of Realtors (NAR). The Index remained 42.7% below its most recent peak of 125.1 in October 2021. The index is a forward-looking measure of home sales based on contract signings.

The fall in pending home sales occurred as the average rate on a 30-year mortgage rose to 6.72% in July after holding steady m/m at 6.82% in June. These rates remained well above a low of 5.22% in August 2022 and more than double a record-low 2.68% in December 2020.

Pending home sales were mixed last month in the four major regions of the country. Sales in the Midwest declined 4.0% (+1.3% y/y) in July after easing 0.8% in June. Sales in the Northeast fell 0.6% both m/m and y/y, after holding steady in June. In the South, sales eased 0.1% (+1.8% y/y) following a 0.6% June decline, but sales in the West increased 3.7% (-1.9% y/y), reversing a 3.9% June drop.

The pending home sales index measures sales at the time the contract for the purchase of an existing home is signed, similar to the Census Bureau's new home sales data. In contrast, the National Association of Realtors' existing home sales data are recorded when the sale is closed, which is usually a couple of months after the sales contract has been signed. In developing the pending home sales index, the NAR found that the level of monthly sales contract activity leads the level of closed existing home sales by about two months.

The series dates back to 2001 and are available in Haver's **PREALTOR** database. Weekly mortgage interest rates from the Mortgage Bankers Association can be found in the **WEEKLY** database.

- Decline adds to June weakness.
- Regional changes are mixed.


U.S. Pending Home Sales Decline in July

Kathleen Stephansen, CBE

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Initial claims for unemployment insurance declined to 229,000 during the week of August 23, after rising to 234,000 in the week of August 16, revised from 235,000. The Action Economics Forecast Survey expected 230,000 initial claims for last week. The four-week moving average of initial claims increased to 228,500 from 226,000, revised from 226,250. It was the highest level since the second week of July.

In the week ended August 16, the total number of unemployment insurance beneficiaries – also known as “continuing claims” – decreased by 7,000 to 1.954 million from 1.961 million in the prior week, revised down by 11,000 from 1.972 million. The four-week moving average rose to 1.956 million in the week ending August 16, the highest level in six weeks, and up from 1.952 million in the prior week, revised from 1.955 million.

In the week ending August 16, the insured rate of unemployment (the number of beneficiaries as a percent of covered employment) was 1.3% for the twelfth consecutive week.

The insured unemployment rate varied greatly across individual states and territories. In the week ended August 9, the highest unemployment rates were in New Jersey (2.75%), Rhode Island (2.58%), Massachusetts (2.18%), Minnesota (2.17%), California (2.11%), Washington (2.08%), District of Columbia (2.04%), and Puerto Rico (2.02%). The lowest were in South Dakota (0.28%), Florida (0.42%), and Alabama and North Carolina (both 0.47%). Rates in other notable states include Pennsylvania (1.92%), New York (1.73%), Illinois (1.72%), and Texas (1.24%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986. The expectations figure is from the Action Economics Forecast Survey in the **AS1REPNA** database.

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- Initial claims declined in latest week after a surge in the prior week.
- Continuing claims declined.
- Insured unemployment rate holds steady.

Economy in Brief: June 2006

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U.S. Vehicle Sales Down, Light Truck Sales Down Hard

U.S. Employment & Wage Growth Slowed

U.S. Employment & Wage Growth Slowed

PMI Surveys Show Good Manufacturing Growth in Many Countries

Challenger Layoffs Fell Again

Home Prices Rose More Slowly

U.S. Construction Spending Slipped

ISM Index Decline Reflected Broad Component Weakness