Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080708i.jpg" align="left" border="0" height="265" width="353">
The second quarter British Chambers of Commerce (BBC)
Quarterly Economic Survey presents a grim picture. Appraisals of
domestic sales and orders and cash flow by both manufacturers and
service providers show that pessimists now outweigh optimists. As shown
in the first chart the percent balance for domestic sales by
manufacturers fell to -5% from 8% in the first quarter while that of
service providers fell, even more, to -7% from 14% in the first
quarter. These balances are still above the balances reached in the
last recession
The changes in the appraisal of cash flow in manufacturing and
the services are even more dramatic than those in sales as shown in the
second chart. Data in this series do not extend back through the
recession of the early nineties, but the current balances are the
lowest ever recorded. Fewer businessmen are planning to expand plant
and equipment and to hire additional employees. The percent balance of
confidence in profitability over the next twelve months is now close to
levels seen in the last recession as shown in the third chart.
The one bright spot in the survey is the manufacturer's
appraisal of export sales and orders. The excess of optimists over
pessimists regarding export sales increased 12 percentage points to 28%
in the second quarter from 16% in the first quarter. The excess of
optimists over pessimists regarding export orders increased 6
percentage points to 22% from 16% in the first quarter.
On balance, however, the survey results are hardly reassuring.
David Kern, Economic Adviser to the BBC commented: "The Q2 results
signal a menacing deterioration in UK prospects. We are now facing
serious risks of recession."
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080708j.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080708k.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">BRITISH
CHAMBERS OF COMMERCE ECONOMIC SURVEY &nbsp;&nbsp;</th>
<th scope="col">Q2 08</th>
<th scope="col">Q1 08&nbsp;</th>
<th scope="col">Q2 07&nbsp;</th>
<th scope="col">Q/Q CHG&nbsp;</th>
<th scope="col">Y/Y&nbsp; CHG&nbsp;</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">Domestic Sales</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Manufacturing</td>
<td>-3</td>
<td>12</td>
<td>31</td>
<td>-15</td>
<td>-34</td>
<td>32</td>
<td>19</td>
<td>12</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services</td>
<td>-2</td>
<td>17</td>
<td>36</td>
<td>-19</td>
<td>-38</td>
<td>30</td>
<td>27</td>
<td>17</td>
</tr>
<tr class="odd">
<td class="firstcol">Export Sales</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Manufacturing</td>
<td>28</td>
<td>16</td>
<td>30</td>
<td>12</td>
<td>-2</td>
<td>26</td>
<td>24</td>
<td>17</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services</td>
<td>9</td>
<td>17</td>
<td>20</td>
<td>-8</td>
<td>-11</td>
<td>21</td>
<td>26</td>
<td>10</td>
</tr>
<tr class="odd">
<td class="firstcol">Cash Flow</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Manufacturing</td>
<td>-15</td>
<td>-3</td>
<td>17</td>
<td>-18</td>
<td>-32</td>
<td>13</td>
<td>8</td>
<td>3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services</td>
<td>-10</td>
<td>5</td>
<td>15</td>
<td>-15</td>
<td>-25</td>
<td>14</td>
<td>14</td>
<td>6</td>
</tr>
<tr class="odd">
<td class="firstcol">Profitability
Confidence (Next 12 Mo.)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Manufacturing</td>
<td>5</td>
<td>27</td>
<td>37</td>
<td>-22</td>
<td>-32</td>
<td>38</td>
<td>32</td>
<td>30</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services</td>
<td>1</td>
<td>17</td>
<td>46</td>
<td>-16</td>
<td>-45</td>
<td>42</td>
<td>40</td>
<td>31</td>
</tr>
</tbody>
</table>
</body></html>

The second quarter British Chambers of Commerce (BBC) Quarterly Economic Survey presents a grim picture. Appraisals of domestic sales and orders and cash flow by both manufacturers and service providers show that pessimists now [...]

British Chambers Of Commerce Economic Survey Pointing To Recession?

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080708h.jpg" width="353">
The International Council of Shopping Centers reported that chain store sales nudged up another 0.2% last week after the 0.1% uptick during the prior period. The level of sales early this month was even with the June average after sales rose 0.5% during that month.
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.
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 fell 0.4% (-2.8% y/y).
The chain store sales figures are available in Haver&#39;s SURVEYW database.
Retirement Savings and Decision Errors: Lessons from Behavioral Economics from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2008/el2008-16.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/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">07/06/08</th>
<th scope="col">06/28/08</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>491.5</td>
<td>490.7</td>
<td>2.3%</td>
<td>2.8%</td>
<td>3.3%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>


</html>

The International Council of Shopping Centers reported that chain store sales nudged up another 0.2% last week after the 0.1% uptick during the prior period. The level of sales early this month was even with the June average after [...]

U.S. Chain Store Sales Nudged Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080708f.jpg" width="353">
The National Association of Realtors reported that the level of pending sales of existing homes in May fell by 4.7% and reversed most of the 7.1% April gain. That was upwardly revised. The decline exceeded Consensus expectations for a 2.5% drop.
These figures are analogous to the new home sales data from the Commerce Department in that they measure existing home sales when the sales contract is signed, not at the time the sale is closed. The series dates back to 2001.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080708g.jpg" width="353">
The regional figures indicate that sales out West fell a modest 1.3% after the 8.3% surge during April. Elsewhere in the country, sales continued weak. Sales in the Northeast fell 2.9% after a 1.9% fall in April. Sales in the Midwest retraced about half of the April gain with a 6.0% decline. Sales in the South reversed all of their upwardly revised April rise with a 7.1% decline.
The Realtors association indicated in an earlier report that the number of homes on the market &amp; available for sale slipped a not seasonally adjusted 1.4% (+2.4% y/y) after a 10.5% jump during April.
At the current sales rate there was a 10.8 months&#39; supply of homes on the market versus an 8.9 months&#39; average during all of last year, a 6.5 months&#39; supply in 2006 and a 4.5 months&#39; supply in 2005.
The pending home sales data are available in Haver&#39;s PREALTOR database and the number of homes on the market are in the REALTOR database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Pending Home Sales (2001=100)&nbsp;</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>84.7</td>
<td>&nbsp;88.9</td>
<td>&nbsp;&nbsp; -14.0%</td>
<td>95.7</td>
<td>112.1&nbsp;</td>
<td>124.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>77.0</td>
<td>79.3</td>
<td>-16.5</td>
<td>85.6</td>
<td>98.5</td>
<td>108.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>78.6</td>
<td>83.6</td>
<td>-13.8</td>
<td>89.6</td>
<td>102.0</td>
<td>116.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>84.5</td>
<td>91.0</td>
<td>-22.1</td>
<td>107.3</td>
<td>127.3</td>
<td>134.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>97.5</td>
<td>98.8</td>
<td>2.0</td>
<td>92.1</td>
<td>109.5</td>
<td>128.6</td>
</tr>
</tbody>
</table>
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The National Association of Realtors reported that the level of pending sales of existing homes in May fell by 4.7% and reversed most of the 7.1% April gain. That was upwardly revised. The decline exceeded Consensus expectations for a [...]

U.S. Pending Home Sales Reversed Most of the April Improvement

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080708c.jpg" width="353">
The retail price for a gallon of regular gasoline ticked up one penny last week to $4.11 per gallon, according to the U.S. Department of Energy survey. For all grades of gasoline the average price also rose two cents to an average $4.17 per gallon.
Yesterday, the spot market price for a gallon of regular gasoline slipped nine cents to $3.30 per gallon, about where it has been since early June.
Weekly gasoline prices can be found in Haver&#39;s WEEKLY database, daily prices are in the DAILY database.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080708d.jpg" width="353">
According to the U.S. Department of Energy the demand for gasoline during the latest four weeks fell 2.3% from a year earlier due to the increase in gasoline prices, along with the slowdown in economic growth.
The DOE figures are available in Haver&#39;s OILWKLY database.
The price for a barrel of West Texas Intermediate crude oil surged last week to $142.46 per barrel versus an average of $137.25 during the prior. Yesterday&#39;s price fell slightly from that level to $141.38.
Price for natural gas surged again last week to $13.185 per mmbtu, double a year earlier, and near the record high reached in late-2005.
Financial Regulation and Financial Stability is this morning&#39;s speech by Federal Reserve Chairman Ben S. Bernanke and it can be found <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20080708a.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/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">07/07/08</th>
<th scope="col">06/30/08</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 Regular Gasoline ($ per Gallon)</td>
<td>4.11</td>
<td>4.10</td>
<td>38.0%</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>142.46</td>
<td>137.25</td>
<td>98.4%</td>
<td>72.25</td>
<td>66.12</td>
<td>56.60</td>
</tr>
</tbody>
</table>
</body>
</html>

The retail price for a gallon of regular gasoline ticked up one penny last week to $4.11 per gallon, according to the U.S. Department of Energy survey. For all grades of gasoline the average price also rose two cents to an average [...]

U.S. Gasoline Price Reached $4.10 per Gallon

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080708a.jpg" width="353">
Small business optimism, according to the National Federation of Independent Business (NFIB), was about unchanged in June but, at 88.2, the index remained near the lowest level since January 1975, its second lowest level on record.
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.
Improvement in the percentage of respondents with one or more job openings was offset by deterioration in the percent expecting the economy to improve. Twenty-one percent had one or more job openings. During the last ten years there has been a 71% correlation between the NFIB employment percentage and the y/y change in nonfarm payrolls. The percentage planning to raise employment reversed its May deterioration but remained near the least since early-2003. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080708b.jpg" width="353">
Seven percent of firms indicated that credit was harder to get, near the highest level since 1993 and that was about double the percentage during 2004.
Four percent of respondents thought that now was a good time to expand the business, the least since 1982, but 33% of respondents expected lower earnings, a record low.
The percentage of firms actually raising prices surged to 29%, the highest level since 1981. During the last ten years there has been a 64% correlation between the y/y change in the producer price index and the level of the NFIB price index. The percentage of firms planning to raise prices also surged to 36%, also its highest since 1981.
Twenty percent of respondents indicated that inflation was the single most important problem, the highest since 1981 and four times the percentage of the prior four years.
About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.
The NFIB figures can be found in Haver&#39;s SURVEYS database.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S7/@S7.HTM">Nat&#39;l Federation of Independent Business</a></th>
<th scope="col">June</th>
<th scope="col">May</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>89.2</td>
<td>89.3</td>
<td>-7.1%</td>
<td>96.7</td>
<td>98.9</td>
<td>101.6</td>
</tr>
</tbody>
</table>
</body>
</html>

Small business optimism, according to the National Federation of Independent Business (NFIB), was about unchanged in June but, at 88.2, the index remained near the lowest level since January 1975, its second lowest level on record. [...]

U.S. Small Business Optimism Stable, Near 1975 Low

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080707d.jpg" width="353">
Data on May industrial production for Germany, the United Kingdom and Norway were released today.
Industrial production in Germany and in the UK declined more sharply in May than the consensus in each country had expected. In Germany, the decline from April to May was 2.4% compared with a consensus expectation of a 0.5% decline. The actual decline was the steepest decline since August, 1997. Part of the decline may have been due to the fact that many workers took two days off between a Wednesday holiday and the weekend. In the UK, the decline was 0.8% compared with a consensus estimated decline of 0.2%. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080707e.jpg" width="353">
In contrast to the May declines in Germany and the UK, industrial production in Norway rose 1.7%. The longer term trends in industrial production in the three countries are shown in the first chart. (The original base for Norway&#39;s index (1995=100) and the UK&#39;s, (2003=100) have been changed to (2000=100) to facilitate comparison with Germany, whose base is (2000=100).) Since 2004, the trend in industrial production in Germany has been sharply upwards while those in the U.K. and Norway have tended downward.
Manufacturing is much more important in the German economy than it is in either of the economies of the U.K. or Norway. The second chart shows the importance of manufacturing in the three countries. In Germany the ratio of manufacturing to Gross Value Added has been relatively steady over the past ten years, just below 24%. In the U.K. the share of manufacturing has declined steadily as the service sector has increased. Manufacturing is currently only about 13% of the total economy. In Norway oil and gas extraction and services dominate the economy and manufacturing plays a small roll, accounting for only about 9% of the economy. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">INDUSTRIAL PRODUCTION (2000=100)&nbsp;</th>
<th scope="col">May 08</th>
<th scope="col">Apr 08&nbsp;</th>
<th scope="col">May 07&nbsp;</th>
<th scope="col">M/M Chg&nbsp;</th>
<th scope="col">Y/Y&nbsp; Chg&nbsp;</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">Germany</td>
<td>116.5</td>
<td>119.4</td>
<td>115.6</td>
<td>-2.43</td>
<td>0.78</td>
<td>116.3</td>
<td>109.8</td>
<td>103.6</td>
</tr>
<tr>
<td class="firstcol">United Kingdom</td>
<td>94.86</td>
<td>95.63</td>
<td>96.40</td>
<td>-0.81</td>
<td>-1.6</td>
<td>65.7</td>
<td>95.4</td>
<td>95.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Norway</td>
<td>64.55</td>
<td>93.02</td>
<td>92.12</td>
<td>1.65</td>
<td>2.64</td>
<td>93.7</td>
<td>94.4</td>
<td>96.8</td>
</tr>
</tbody>
</table>
</body>
</html>

Data on May industrial production for Germany, the United Kingdom and Norway were released today. Industrial production in Germany and in the UK declined more sharply in May than the consensus in each country had expected. In Germany, [...]

Industrial Production Declines More Than Expected in Germany And U.K.: Increases in Norway

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080707c.jpg" align="left" border="0" height="265" width="353">
UK IP is now lower in two of the past three months. The
three-month moving average has turned negative. Weakness in the
industrial economy is now spreading and deepening. The consumer sector
is leading the weakness. Consumer durable goods output is down in seven
of the last eight months on a Yr/Yr basis. Consumer nondurables are
down yr/yr in six of the last eight months but also in eight of the
last 10 months (Yr/Yr basis as well). Intermediate goods output is off
in two of the past three-months Yr/Yr. While capital goods output has
fallen in May on a Yr/Yr basis for the first time since December 2005.

The declines in output the current quarter (2008-Q2) are
severe. For MFG the drop is -1.8% at an annual rate. Consumer durable
goods output is off at a 9.4% pace in the quarter. Nondurables output
is off at a 2.9% pace. Intermediate goods output is falling at a 3.3%
pace. Capital goods output is rising at a 2.0% pace.

The UK is showing both inflation pressures and economic
weakness. The weakness in the UK is more severe than what Europe has
showed, at least as a whole. Still, the UK like Europe continues to
show capital goods as the strongest sector. In this month&#8217;s report that
strength is clearly on the decline.



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="11" scope="col"> UK IP and MFG</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Saar except m/m</td>
<td colspan="3">Mo/Mo</td>
<td>May 08</td>
<td>Apr 08</td>
<td>May 08</td>
<td>Apr 08</td>
<td>May 08</td>
<td>Apr 08</td>
<td>&nbsp;</td>
</tr>
<tr class="even">
<td class="firstcol">UK MFG</td>
<td>May 08</td>
<td>Apr 08</td>
<td>Mar 08</td>
<td>3Mo</td>
<td>3Mo</td>
<td>6mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Q1 Date</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG</td>
<td>-0.6%</td>
<td>0.1%</td>
<td>-0.5%</td>
<td>-3.8%</td>
<td>0.0%</td>
<td>-0.8%</td>
<td>0.2%</td>
<td>-0.8%</td>
<td>0.0%</td>
<td>-1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Durables</td>
<td>-0.1%</td>
<td>-0.6%</td>
<td>-2.9%</td>
<td>-13.5%</td>
<td>-7.4%</td>
<td>1.6%</td>
<td>-1.2%</td>
<td>-1.2%</td>
<td>-3.5%</td>
<td>-9.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer-Nondurables</td>
<td>-0.8%</td>
<td>-0.1%</td>
<td>-0.4%</td>
<td>-5.1%</td>
<td>0.0%</td>
<td>-2.0%</td>
<td>0.2%</td>
<td>-1.7%</td>
<td>-0.4%</td>
<td>-2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate</td>
<td>-1.0%</td>
<td>0.1%</td>
<td>-0.5%</td>
<td>-5.4%</td>
<td>-1.3%</td>
<td>-3.8%</td>
<td>-2.7%</td>
<td>-2.3%</td>
<td>0.3%</td>
<td>-3.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital</td>
<td>-0.7%</td>
<td>0.7%</td>
<td>0.0%</td>
<td>0.0%</td>
<td>3.7%</td>
<td>1.1%</td>
<td>0.7%</td>
<td>-0.1%</td>
<td>0.8%</td>
<td>2.0%</td>
</tr>
<tr>
<td class="firstcol">Memo: Detail</td>
<td>1Mo%</td>
<td>1Mo%</td>
<td>1Mo%</td>
<td>3Mo</td>
<td>3Mo</td>
<td>6mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Q4 Date</td>
</tr>
<tr class="odd">
<td class="firstcol">Food Drink &amp; tobacco</td>
<td>-0.3%</td>
<td>-0.4%</td>
<td>-0.4%</td>
<td>-4.3%</td>
<td>-0.4%</td>
<td>-1.0%</td>
<td>0.4%</td>
<td>-1.4%</td>
<td>-1.7%</td>
<td>-2.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Textile &amp; Leather</td>
<td>-0.3%</td>
<td>0.1%</td>
<td>0.3%</td>
<td>0.5%</td>
<td>6.5%</td>
<td>4.4%</td>
<td>1.8%</td>
<td>0.6%</td>
<td>3.6%</td>
<td>2.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Motor Vehicles &amp; trailer</td>
<td>-3.7%</td>
<td>1.9%</td>
<td>-1.0%</td>
<td>-11.0%</td>
<td>11.4%</td>
<td>2.9%</td>
<td>5.1%</td>
<td>5.1%</td>
<td>9.4%</td>
<td>-0.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Mining and Quarry</td>
<td>0.7%</td>
<td>-0.1%</td>
<td>0.3%</td>
<td>3.4%</td>
<td>-3.3%</td>
<td>-5.8%</td>
<td>-12.2%</td>
<td>-7.0%</td>
<td>-5.7%</td>
<td>0.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Electricity, Gas &amp; Water</td>
<td>-5.2%</td>
<td>1.3%</td>
<td>-1.0%</td>
<td>-18.2%</td>
<td>3.7%</td>
<td>-10.3%</td>
<td>-1.2%</td>
<td>-3.7%</td>
<td>7.3%</td>
<td>-8.2%</td>
</tr>
</tbody>
</table>
</body></html>

UK IP is now lower in two of the past three months. The three-month moving average has turned negative. Weakness in the industrial economy is now spreading and deepening. The consumer sector is leading the weakness. Consumer durable [...]

UK IP Trends Turn Lower

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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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.

250807Z1.jpg

**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.

250807Z2.jpg

**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.

250807Z3.jpg

**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.

250807Z4.jpg

**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.

250807Z5.jpg

**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.

250807Z6.jpg

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).

Charts of the Week: Downside Risks

250806A1.jpg

250806B1.jpg

Mortgage applications increased 3.1% (17.8% y/y) in the week ending August 1, after declining 3.8% in the prior week, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications for loan refinancing jumped 5.2% (17.5% y/y) last week, following three straight weeks of decline. Applications for loans to purchase a home rose 1.5% (18.0% y/y) last week, following a 5.8% decline in the week of July 25.

The effective interest rate on a 30-year fixed-rate loan slipped to 6.94% in the week ending August 1, from 7.00% in the prior week. It was the lowest rate since the first week of April. The rate on 15-year fixed-rate mortgages declined to 6.19% in the latest week from 6.28% in the week of July 25. The rate on 30-year Jumbo loans dropped to 6.82% last week from 6.89% one week earlier. The rate on a 5-year ARM dropped to 6.25% in the week of August 1 after rising to 6.40% in the prior week. It was above a low of 5.84% in the week of September 13, 2024.

The share of applications for refinancing an existing loan rose to 41.5% of total applications in the week ending August 1, from 40.7% in the prior week. The adjustable-rate mortgage (ARM) share of activity rose to 8.50% in the latest week from 8.30% in the week of July 25.

The average size of a mortgage loan rose 1.9% (0.6% y/y) to $381,400 in the week of August 1, following a 0.7% rise in the prior week. The average size of a purchase loan rose 0.7% (1.3% y/y) to $432,300 in the latest week after gaining 0.6% in the week ending July 27. The average size of a loan to refinance a mortgage rose 5.2% (-0.8% y/y) to $309,800 last week, after rising 2.3% in the prior week.

The Mortgage Bankers Association Survey covers 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver’s **SURVEYS** database.

- Loan refinancing jumps as purchase applications edge higher.
- Effective fixed-interest rate eases on 30-year loans. 
- Average loan size increases again.

U.S. Mortgage Applications Rise Last Week as Interest Rates Slip

250806E.jpg

German orders expressed in real terms fell by 1% in June after falling by 0.8% in May. Foreign orders fell by 3% month-to-month after rising 3.8% in May. Domestic orders came back to life rising by 2.2% in June but only after a sharp 7.5% drop in May; that drop had been preceded by a 2.8% increase in April. The gyration and trend performance of orders is still choppy and, for the most part, weak.

**Order trends**
Sequential growth rates show that overall orders for Germany (still expressed in real terms) rose by 0.6% over 12 months; however, they fall at 4.7% annual rate over six months and fall at a 0.5% annual rate over three months. Foreign orders rise by 7.4% over 12 months; over six months the gain is at a 13.7% annual rate, and over three months that pace is reduced to a 7.3% annual rate. German domestic orders fall by 8.6% over 12 months, then decline at an extremely rapid 26.1% annual rate over six months, and continue to decline at 11.1% annual rate over three months. For the time being, orders have been propped up by strength in the international market while domestic orders continue to languish and to contract.

**Real sales**
Sector sales, expressed in real terms, rose by 1% and those across all the components after seeing widespread contractions in May that had followed an uneven performance in April. Real sales for manufacturing fall by 1.5% over 12 months, fall at a 1.9% annual rate over six months, and fall at an annual rate of 9.2% over three months. Real sales trends are not reassuring.

**European Surveys on Industry**
Survey results for the largest economies in the European Monetary Union show slippages in June compared to May as three of the four large economies weaken (with Italy being the exception). Over three months France logged a weaker reading compared to six-months, Germany improved, Italy's performance is unchanged; Spain reports a result that's better by a single tick on the survey index comparing 3-months to 6-months. Comparing the 12-month to averages to 3-month averages for the four large European economies, shows deterioration that's across the board with the slight exception of Italy.

**Quarter-to-date (completed Q2)**
The quarter-to-date (QTD) performance in Germany for orders are strong, rising at a 13.1% annual rate. Sector sales show deteriorated real sector sales across most sectors on QTD basis; manufacturing sales fall at a 2.9% annual rate.

**Longer term evaluations** 
The two right hand columns evaluate the growth and level performance of these various metrics on real sector sales and on a level basis and well as on annual growth rates. Total orders and foreign orders ranked on levels are well above their 50% mark, which puts them above their median on data back to 1994. Domestic sales levels have only a 21.8 percentile standing, extremely weak. Rankings on growth rates show total orders at a 45.9 percentile ranking, below the median growth rate (which occurs at a ranking of 50%). However, foreign orders’ growth ranks in the 70th percentile, quite firm, while the domestic growth rate queue ranking resides in the lower 10.7 percentile of its range. Growth rates for real sector sales are mostly below their 50-percentile mark except for consumer nondurables and consumer goods sales overall (which, of course, are boosted by the sales of consumer nondurables). The industrial confidence indicators for European economies that are from diffusion surveys are evaluated relative to historic levels only. All of them score weak results. The best queue standing is Spain with a 37.5 percentile standing, followed by Italy at a 24.8 percentile standing. France has a 14.6 percentile standing, while Germany has a 7.4 percentile standing. These range from weak, and below median, to very weak.

250806.jpg

**Summing up**
On balance, German performance in June is poor. The trends are poor, and far from reassuring. Sector sales performance is poor. Performance across Europe continues to be poor as captured by survey results- that performance continues, for the most part, to deteriorate. However, German quarter-to-date growth rates for orders are strong in Q2 compared to Q1, but that is only on the back of strength in foreign orders. German domestic orders are still behaving badly. All-in-all, it's a disappointing report on the manufacturing sector for Germany and for what we survey of Europe.

Germany

German Orders Fall Again, Unexpectedly

250806N4.jpg

250806O4.jpg

The U.S. ISM Services PMI declined to 50.1 during July, after rising to 50.8 in June from 49.9 in May, according to the Institute for Supply Management. The index hit a recent high of 55.8 in October of last year, and remains below the all-time high of 67.5 in November 2021. The Action Economics Forecast Survey expected a reading of 51.5 for July.

The composite index combines the services index and the manufacturing index released last Friday. This index fell to 49.8 in July from 50.6 in June. The latest figure is the lowest since June 2024, down from the November 2024 high of 54.7.

Amongst the services component series, the business activity index fell to 52.6 last month from 54.2 in June. Twenty-four percent (NSA) of respondents reported improved activity while 14.4% reported a decline. The new orders index fell to 50.3 in July from 51.3 in June. Twenty percent (NSA) of respondents reported improved orders while a higher 18.7% reported a decline. The employment series weakened to 46.4, its lowest level in four months, from 47.2 in June. An increased 12.3% (NSA) of respondents reported increased employment while a higher 18.1% reported a decline. Working higher, the supplier delivery series edged up to 51.0 in July after falling to 50.3 in June, but remained below a high of 56.4 in October of last year. A reduced 4.3% of respondents (NSA) reported faster delivery speeds while a higher 6.3% reported a slowing.

On the inflation front, the prices index surged to 69.9 in July after easing to 67.5 in June. It was the highest level since October 2022. An increased 42.1% (NSA) of respondents reported higher prices while an increased 4.0% reported lower prices. The index was increased from its March 2024 low 53.5 and stood at its highest level since October 2022.

Additionally, the new export orders index fell sharply to 47.9 (NSA) in October following a rise to 51.1 in June. Just 10.4% of survey respondents reported higher exports while an increased 14.7% reported a decline. The imports index fell sharply to 45.9 last month from 51.7 in June. A greatly lessened 4.1% of respondents reported higher imports while a higher 12.4% reported a decline. The inventory change index weakened to 51.8. The order backlog index rose to 44.3 in July after falling to 42.4 in June. A higher 8.3% of respondents reported higher backlogs while a fewer 19.7% reported a decline. These series are not seasonally adjusted and not included in the ISM Services PMI total.

The ISM Services PMI is a composite index consisting of four equally weighted diffusion indexes: Business Activity, New Orders, Employment, and Supplier Deliveries. A reading above 50 indicates expansion in the services sector, while below 50 suggests contraction. Supplier Deliveries is the only ISM index that is inversed; a reading above 50 indicates slower deliveries.

The ISM figures are available in Haver's **USECON** database, with additional detail in the **SURVEYS** database. The expectations figure from Action Economics is in the **AS1REPNA** database.

250806P4.jpg

250806Q4.jpg

- Total index trending lower for nine months.
- Business activity, new orders & employment weaken.
- Prices Index strengthens to highest level since 2022.

U.S. ISM Services PMI Declines in July; Price Index Increases

Winnie Tapasanun

250805J23.jpg

250805K23.jpg

The U.S. trade deficit in goods and services (BOP basis) narrowed to $60.18 billion in June after widening to $71.66 billion in May ($71.52 billion originally), according to the U.S. Census Bureau. This was the second month in three in which the deficit had narrowed. The June deficit was the smallest since September 2023 and much smaller than the $73.89 billion in June 2024. A deficit of $61.6 billion had been expected in the Action Economics Forecast Survey. Exports declined 0.5% m/m (+3.3% y/y) in June following a 4.1% drop in May (-4.0% previously) and four successive m/m increases. Imports fell 3.7% (-1.4% y/y) after an unrevised 0.1% downtick in May, registering the third consecutive m/m fall and the fourth in five months.

The real (inflation-adjusted) goods trade deficit (customs value; chained 2017 dollars) narrowed to $84.61 billion in June after widening to $93.32 billion in May; it was smaller than the $92.82 billion in June 2024. The $87.43 billion average monthly real trade deficit in Q2'25 was the smallest since Q4'23 and significantly smaller than the record $143.28 billion in Q1'25. A trade balance (net exports) added 4.99%-points to Q2'25 real GDP growth after subtracting 4.61%-points in Q1'25.

The deficit in goods trade (BOP basis) narrowed to $85.88 billion in June, the smallest since September 2023, after widening to $97.30 billion in May; it was much smaller than the $99.56 billion in June 2024. Goods exports fell 0.7% (+3.3% y/y) in June following a 5.9% drop in May and four straight m/m rises. Imports of goods decreased 4.5% (-2.9% y/y), down for the fourth month in five, after a 0.1% May easing.

The customs value goods trade deficit fell to $84.85 billion in June, the smallest since September 2023, after widening to $96.21 billion in May; it was much smaller than the $98.81 billion in June 2024. The latest figure was slightly smaller than an $85.99 billion deficit in the advance report released on July 29. Custom value exports fell 0.7% (+3.5% y/y) in June following a 5.6% drop in May and four consecutive m/m gains. This reflected m/m falls of 7.4% (+0.7% y/y) in industrial supplies & materials and 2.6% (+22.8% y/y) in other goods. To the upside, exports for the following end-use categories rose m/m in June: nonfood consumer goods excluding autos (4.6%; 4.3% y/y), foods, feeds & beverages (4.4%; 1.2% y/y), capital goods excluding autos (3.4%; 9.7% y/y), and automotive vehicles, parts & engines (1.6%; -15.8% y/y).

Customs value imports slid 4.6% (-2.9% y/y) in June, the third straight m/m slide and the fourth in five months, after a 0.1% downtick in May. This reflected m/m drops of 12.7% (-13.3% y/y) in nonfood consumer goods excluding autos, 5.2% (-12.4% y/y) in industrial supplies & materials, 4.9% (+7.8% y/y) in other goods, 3.6% (-12.2% y/y) in automotive vehicles, parts & engines, and 1.5% (+3.8% y/y) in foods, feeds & beverages. In contrast, imports of capital goods excluding autos, the only end-use category with a monthly increase in June, rose 0.7% (14.0% y/y), the seventh m/m rise in eight months, on top of a 0.3% May rebound. Meanwhile, petroleum imports fell 3.8% (-24.7% y/y) in June, the fourth m/m fall in five months, reversing a 1.5% rise in May. Nonpetroleum imports slid 4.6% (-1.1% y/y), the third straight m/m slide, after a 0.2% May decline.

The services trade surplus rose to $25.70 billion in June after narrowing to $25.64 billion in May; it was in line with $25.67 billion in June 2024. Services exports fell 0.2% (+3.3% y/y) in June, the fifth m/m fall in six months, on top of a 0.6% decline in May. This reflected m/m drops of 4.8% (-11.3% y/y) in government goods & services, 2.1% (+30.8% y/y) in maintenance & repair services, and 1.1% (-0.02% y/y) in travel services, while exports for construction services (0.9%; -5.7% y/y), insurance services (0.7%; 18.9% y/y) and charges for the use of intellectual property (0.5%; 7.0% y/y) increased m/m in June. Services imports fell 0.3% (+4.5% y/y) after a 0.3% May fall and two successive m/m increases. This reflected m/m drops of 1.9% (+48.0% y/y) in maintenance & repair services, 1.5% (+2.9% y/y) in travel services, and 1.3% (-1.3% y/y) in transport services, while imports for construction services (2.0%; 82.3% y/y), charges for the use of intellectual property (0.8%; 1.3% y/y) and financial services (0.5%; 4.9% y/y) rose m/m in June.

The U.S. goods trade deficit with China narrowed to a seasonally adjusted $9.38 billion in June, the smallest on record, after falling to $13.97 billion in May. Exports surged 45.4% (-16.6% y/y) following a 19.9% May slump, while imports fell 6.9% (-45.6% y/y) on top of a 26.3% May plunge. The goods trade deficit with the European Union narrowed markedly to $9.52 billion in June, the smallest since June 2013, after widening to $22.54 billion in May, with exports up 6.8% (16.6% y/y) and imports down 19.2% (-8.2% y/y). The trade shortfall with Japan narrowed marginally to $5.72 billion in June, the smallest since February, from $5.77 billion in the previous month, reflecting declines of 3.4% (-7.5% y/y) in exports and 2.3% (-0.4% y/y) in imports.

The international trade data, including relevant data on oil prices, can be found in Haver’s **USECON** database. Detailed figures on international trade are available in the **USINT** and **USTRADE** databases. The expectations figures are from the Action Economics Forecast Survey in **AS1REPNA**.

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- $60.2 bil. trade deficit, reflecting $85.9 bil. goods deficit & $25.7 bil. services surplus.
- Exports -0.5% m/m, down for the second consecutive month.
- Imports -3.7% m/m, down for the third straight month.
- Real goods trade deficit narrows to $84.6 bil. after May’s widening.
- Goods trade deficits w/ China at a record low, w/ EU at a June ’13 low, and w/ Japan at a 4-month low.

Economy in Brief: July 2008

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British Chambers Of Commerce Economic Survey Pointing To Recession?

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U.S. Gasoline Price Reached $4.10 per Gallon

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U.S. Small Business Optimism Stable, Near 1975 Low

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