Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060803a.jpg" width="353">
Initial claims for unemployment insurance increased 14,000 to 315,000 last week following a revised 4,000 drop the prior week. Consensus expectations had been for 310,000 claims and during all of July claims averaged 314,000, up a bit from 308,000 during June.
During the last ten years there has been a (negative) 78% correlation between the level of initial claims and the m/m change in nonfarm payroll employment.
The four-week moving average of initial claims rose to slightly 313,750 (-1.8% y/y).
Continuing claims for unemployment insurance rose 11,000 after a little revised 29,000 decline the prior week.
The insured rate of unemployment held steady at 1.9% where it has been since February.
Implementation of Optimal Monetary Policy from the Federal Reserve Bank of Richmond is available <a href="http://www.richmondfed.org/publications/economic_research/economic_quarterly/pdfs/spring2006/dotsey_hornstein.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">07/29/06</th>
<th scope="col">07/22/06</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">Initial Claims</td>
<td>315</td>
<td>301</td>
<td>-0.9%</td>
<td>332</td>
<td>343</td>
<td>403</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Continuing Claims</td>
<td>--</td>
<td>2,480</td>
<td>-4.5%</td>
<td>2,663</td>
<td>2,923</td>
<td>3,530</td>
</tr>
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</table>
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Initial claims for unemployment insurance increased 14,000 to 315,000 last week following a revised 4,000 drop the prior week. Consensus expectations had been for 310,000 claims and during all of July claims averaged 314,000, up a bit [...]

Initial Claims for Unemployment Insurance Rose

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060803a.jpg" width="353">
Initial claims for unemployment insurance increased 14,000 to 315,000 last week following a revised 4,000 drop the prior week. Consensus expectations had been for 310,000 claims and during all of July claims averaged 314,000, up a bit from 308,000 during June.
During the last ten years there has been a (negative) 78% correlation between the level of initial claims and the m/m change in nonfarm payroll employment.
The four-week moving average of initial claims rose to slightly 313,750 (-1.8% y/y).
Continuing claims for unemployment insurance rose 11,000 after a little revised 29,000 decline the prior week.
The insured rate of unemployment held steady at 1.9% where it has been since February.
Implementation of Optimal Monetary Policy from the Federal Reserve Bank of Richmond is available <a href="http://www.richmondfed.org/publications/economic_research/economic_quarterly/pdfs/spring2006/dotsey_hornstein.pdf"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">07/29/06</th>
<th scope="col">07/22/06</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">Initial Claims</td>
<td>315</td>
<td>301</td>
<td>-0.9%</td>
<td>332</td>
<td>343</td>
<td>403</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Continuing Claims</td>
<td>--</td>
<td>2,480</td>
<td>-4.5%</td>
<td>2,663</td>
<td>2,923</td>
<td>3,530</td>
</tr>
</tbody>
</table>
ISM Nonmanufacturing Index Off 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 3, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060803b.jpg" width="353">
The Institute for Supply Management (ISM) reported that the July Business Activity Index for the non-manufacturing sector fell for the third straight month. The 2.2 point m/m decline to 54.8 exceeded Consensus expectations for a drop to 57.0 and left the index at its lowest level since September 2005.
Since the series&#39; inception in 1997 there has been a 50% correlation between the level of the Business Activity Index and the q/q change in real GDP for services plus construction.
The new orders sub-index fell for the third consecutive month to the lowest level in three year. The employment index, however, recovered nearly half of a sharp six point decline in June. Since the series&#39; inception in 1997 there has been a 60% correlation between the level of the ISM non-manufacturing employment index and the m/m change in payroll employment in the service producing plus the construction industries.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060803c.jpg" width="353">
Pricing power also recovered a bit of its June decline and rose to 74.8, a level above the 2Q average. Since inception eight years ago, there has been a 70% correlation between the price index and the y/y change in the GDP services chain price index.
ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The non-manufacturing survey dates back to July 1997.
Business Activity Index for the non-manufacturing sector reflects a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index is a weighted average five components.
Instability in U.S. Inflation: 1967-2005 from the Federal Reserve Bank of Atlanta can be found <a href="http://www.frbatlanta.org/invoke.cfm?objectid=F6A27989-5056-9F12-12B536A6D5EE7AED&amp;method=display"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">July &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
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</thead>
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<td class="firstcol">Business Activity Index</td>
<td>54.8</td>
<td>57.0</td>
<td>60.4</td>
<td>60.1</td>
<td>62.5</td>
<td>58.3</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>74.8</td>
<td>73.9</td>
<td>69.5</td>
<td>67.9</td>
<td>68.8</td>
<td>56.6</td>
</tr>
</tbody>
</table>
U.S. Factory Inventory Accumulation Strong 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 3, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060803d.jpg" width="353">
Factory inventories rose 0.8% during June for the fifth month of firm accumulation this year. Year to date inventories have risen at a 7.8% annual rate, nearly double the rate of accumulation during all of last year.
Primary metals inventories rose 0.8% (6.2% y/y) and have been rising at a 17.2% annual rate so far this year. Inventories of computers &amp; electronic products rose 0.4% (8.4% y/y) and the year to date annual rate of accumulation has been 9.2%. Inventories of electrical equipment jumped 2.2% (9.3% y/y) but machinery inventories ticked up just 0.1% (5.7% y/y).
Total factory orders surged 1.2%. Durable goods orders jumped 2.9% that was little revised from the advance report of a 3.1% gain. Factory orders less transportation rose just 0.1% (7.8% y/y) due to a 0.7% drop in nondurables.
Factory shipments fell 0.3%. Less transportation shipments also fell 0.2% (8.0% y/y). Petroleum shipments fell 0.2% (+20.9% y/y) and factory shipments less transportation &amp; petroleum slipped 0.2% (+6.7% y/y).
Unfilled orders increased another 1.6% but less the transportation sector altogether backlogs still rose a strong 1.4% (14.2% y/y).<a href="http://research.stlouisfed.org/publications/review/05/07/Gali.pdf"> </a>

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<colgroup><col><col><col><col><col><col></colgroup>
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<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">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
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<td class="firstcol">Inventories</td>
<td>0.8%</td>
<td>0.7%</td>
<td>5.5%</td>
<td>4.0%</td>
<td>6.9%</td>
<td>-7.4%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>1.2%</td>
<td>1.0%</td>
<td>6.0%</td>
<td>8.5%</td>
<td>7.5%</td>
<td>0.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>-0.3%</td>
<td>2.5%</td>
<td>7.5%</td>
<td>7.1%</td>
<td>6.8%</td>
<td>0.2%</td>
</tr>
<tr>
<td class="firstcol">Unfilled Orders</td>
<td>1.6%</td>
<td>0.7%</td>
<td>19.3%</td>
<td>16.3%</td>
<td>4.5%</td>
<td>-1.0%</td>
</tr>
</tbody>
</table>
CPI Inflation in Turkey & Macedonia: Up, but Not High 
by <a href="/comment/Stone.html">Carol Stone</a> August 3, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060803e.jpg" width="353">
Inflation in Turkey has picked up a bit in recent months, but remains quite modest compared with Turkey&#39;s historical experience. The CPI in July was up 1.7% from June, seasonally adjusted (by Haver Analytics), and 11.7% from a year ago. June and May were both up about 10% from year-earlier levels. Our standard table shows only the last three years of data and for this period, these recent numbers would look a bit discouraging. Nonetheless, these are low. As recently as 2002, inflation ran just under 30% and from early 1994 to late 1998, the lowest 12-month reading was 75.7%, with numerous months above 100%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060803f.jpg" width="353">
Since 2003, the Turkish Statistical Institute has published some detail data. As seen in the graph, food prices are one of the sources of the recent rise in inflation. Actually so are clothing prices, but at a much lower level: year-on-year changes were in fact negative in the first few months of 2006, but that index has stabilized and even risen slightly in May, June and July. Otherwise, we see that various measures of &quot;core&quot; inflation are not much affected by the exclusion of food, energy and administered prices.
Note that Turkey data offerings are contained in Haver&#39;s EMERGEMA database, which includes Middle Eastern and African countries.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060803g.jpg" width="353">
Haver is also accumulating a growing amount of data on other emerging markets. Late yesterday, the Statistical Office of Macedonia reported its consumer prices for June. These data are included in EMERGECW, along with other Central, Southern and Eastern European countries. Macedonia&#39;s total CPI began in 2000, with a standard breakdown starting in 2004. Over the time span available, inflation in that small nation (about the size of Vermont, according to the CIA&#39;s &quot;World Factbook&quot;) has been quite modest. In June, the total index was 3.1% above June 2005, also a pickup the couple of years. In 2005 overall, the index rose just 1.3% and it fell in 2004 by 2.1%. Among components, food, energy and home furnishings all saw price weakness through part or all of 2005, but they have since firmed. However, their rates generally remain lower than elsewhere, with housing and utilities costs rising 1.3% in June and transportation 10.0%. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">CPI% Changes</th>
<th scope="col">July 2006</th>
<th scope="col">June 2006</th>
<th scope="col">May 2006</th>
December/December
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2005</td>
<td>2004</td>
<td>2003</td>
</tr>
<tr>
<td class="firstcol">Turkey: SA, Mo/Mo</td>
<td>1.7</td>
<td>1.2</td>
<td>2.1</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">NSA, Yr/Yr</td>
<td>11.7</td>
<td>10.1</td>
<td>9.9</td>
<td>7.7</td>
<td>9.4</td>
<td>12.7</td>
</tr>
<tr>
<td class="firstcol">Ex Energy</td>
<td>11.2</td>
<td>9.6</td>
<td>9.9</td>
<td>7.8</td>
<td>8.7</td>
<td>12.2*</td>
</tr>
<tr class="odd">
<td class="firstcol">Ex Energy, Others**</td>
<td>10.5</td>
<td>9.0</td>
<td>8.7</td>
<td>6.6</td>
<td>9.9</td>
<td>11.5*</td>
</tr>
<tr>
<td class="firstcol">&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">Macedonia</td>
<td>--</td>
<td>3.1</td>
<td>4.0</td>
<td>1.3</td>
<td>-2.1</td>
<td>2.5</td>
</tr>
</tbody>
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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/060802e.jpg" width="353">
As the first potential hurricane of 2006, Chris, forms near the Dominican Republic and Cuba, we are reminded, of course, of the drastic impact of last year&#39;s Katrina. This morning, the BLS released the household survey data for June for metropolitan areas, and we can get an assessment of economic conditions now in some of the affected cities. These data are carried in Haver&#39;s EMPLR database. Series for labor force, employment, unemployment and the unemployment rate are included for hundreds of metro areas, micro areas, and the other standard combinations of urban communities in all 50 States, the District of Columbia and Puerto Rico.
In New Orleans, the center of Katrina&#39;s damage, the number of people employed is up about 25,000 from its October low, but is clearly still well off the pre-storm numbers. Unemployment, while not at the extreme of October, remains higher than 2003 and 2004, suggesting that even with a reduced labor force, job opportunities are not relatively as plentiful.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060802f.jpg" width="353">
Gulfport-Biloxi is also continuing to face strained economic conditions. Unemployment remains far higher than before and also higher than in New Orleans, even though the unemployment rates in the two areas were about the same in the 2003-04 period.
Other cities in the region are doing better. Baton Rouge, the State Capital, saw its unemployment rate shoot up immediately after Katrina, as workers from New Orleans poured into the area. As seen in the table, the rate rose even as the number of employed persons expanded by slightly more than 10,000. Since then, however, employment has fallen back to its pre-storm level and so has unemployment, as the transient workers apparently returned home or moved on.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060802g.jpg" width="353">
Cities in Texas also received people from the storm-damaged region. Beaumont-Port Arthur, very near the Louisiana state line, experienced a spike in its labor force and its unemployment rate, but this dissipated. Presently, employment is running about the same as in 2004 and 2005, and the unemployment rate is actually somewhat lower than previously.
Finally, in Houston, the labor force expanded by 25,400 in September and for the most part, these people stayed. Employment rose even more and unemployment fell. Only in June did some of this labor market vigor fade a bit, with a somewhat larger-than-normal June rise in the unemployment rate. So Houston generally was able to absorb its new workers and find jobs for them, and the labor force in Houston is nearly 2.5% larger than a year ago, compared with 1.5% in the nation as a whole.

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<colgroup><col><col><col><col><col><col><col></colgroup>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/EMPLR/@H01/@H0102/@H0102.HTM">Employment, NSA, Thous</a></th>
<th scope="col">June 2006</th>
<th scope="col">May 2006</th>
<th scope="col">Oct 2005</th>
<th scope="col">June 2005</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">New Orleans, LA*</td>
<td>412.0</td>
<td>404.5</td>
<td>388.5</td>
<td>610.9</td>
<td>n.m.</td>
<td>587.6</td>
<td>578.7</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>7.2</td>
<td>6.4</td>
<td>17.1</td>
<td>6.1</td>
<td>n.m.</td>
<td>5.1</td>
<td>5.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Gulfport-Biloxi, MS</td>
<td>95.4</td>
<td>94.1</td>
<td>97.9</td>
<td>118.4</td>
<td>n.m.</td>
<td>115.5</td>
<td>114.1</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>12.5</td>
<td>12.9</td>
<td>21.2</td>
<td>6.9</td>
<td>n.m.</td>
<td>5.2</td>
<td>5.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Baton Rouge, LA</td>
<td>341.0</td>
<td>339.3</td>
<td>348.3</td>
<td>338.2</td>
<td>n.m.</td>
<td>329.7</td>
<td>319.9</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>5.3</td>
<td>4.4</td>
<td>9.7</td>
<td>6.7</td>
<td>n.m.</td>
<td>5.9</td>
<td>6.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Beaumont-Port Arthur, TX</td>
<td>164.0</td>
<td>164.1</td>
<td>163.2</td>
<td>166.4</td>
<td>164.9</td>
<td>163.6</td>
<td>165.0</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>7.1</td>
<td>6.3</td>
<td>11.2</td>
<td>7.6</td>
<td>7.7</td>
<td>8.3</td>
<td>8.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Houston, TX*</td>
<td>2544.0</td>
<td>2532.2</td>
<td>2521.0</td>
<td>2480.3</td>
<td>2484.4</td>
<td>2419.1</td>
<td>2379.2</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>5.6</td>
<td>5.0</td>
<td>5.4</td>
<td>5.7</td>
<td>5.5</td>
<td>6.2</td>
<td>6.8</td>
</tr>
</tbody>
</table>
</body>
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As the first potential hurricane of 2006, Chris, forms near the Dominican Republic and Cuba, we are reminded, of course, of the drastic impact of last year's Katrina. This morning, the BLS released the household survey data for June [...]

Local Employment Data Show Gulf Port Cities Still Struggle 9 Months After Katrina, But Houston Gains

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060802d.jpg" width="353">
A 1.2% decline last week in the total number of mortgage applications extended the recent decline to three consecutive weeks. Applications for all of July fell 1.9% from June when applications fell 1.5% from May.
Lower purchase applications led last week&#39;s decline with 3.3% drop which pulled the July average 2.1% below June, the third consecutive down month.
During the last ten years there has been a 58% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance added 2.3% to the prior week&#39;s 0.6% recovery to limit the decline during all of July to 1.8% versus June. Refis fell 3.1% during June from the May average.
The effective interest rate on a conventional 30-year mortgage fell nine basis points w/w to 6.82%. The peak for 30 year financing was 7.08% late in June. The rate on 15-year financing also fell to 6.53% and the peak rate was 6.75%. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage.
In July, 35.4% of all loan applications were to refinance, down from 44.2% last July.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">07/28/06</th>
<th scope="col">07/21/06</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 Market Index</td>
<td>527.6</td>
<td>533.8</td>
<td>-29.8%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>376.2</td>
<td>389.0</td>
<td>-23.9%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,417.2</td>
<td>1,385.2</td>
<td>-37.0%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
</body>
</html>

A 1.2% decline last week in the total number of mortgage applications extended the recent decline to three consecutive weeks. Applications for all of July fell 1.9% from June when applications fell 1.5% from May. Lower purchase [...]

Mortgage Applications Down Further

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060802b.jpg" width="353">
US light vehicle sales in July rose 5.8% m/m to 17.24M units, according to the Autodata Corporation. July sales were the highest since this past January and the figure beat Consensus expectations for sales of 16.6M units.
Despite the latest increase, sales fell 16.8% from July 2005 when the successful &quot;employee pricing&quot; plan was instituted for most car buyers.
Overall light truck sales rose 4.7% last month but a steep 28.7% decline versus July 2005 reflects both the success of last year&#39;s sales&#39; incentives and higher gasoline prices.
Domestic truck sales rose 4.3% but fell 32.8% y/y. During the first seven month of this year sales were down 12.2% from the first seven months of 2005. Sales of the relatively fuel efficient imported light trucks rose 7.1% m/m (6.8% y/y). Year to date sales of imported light trucks rose 9.0% from the first seven months of 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060802c.jpg" width="353">
Auto sales rose 7.0% (1.9% y/y) in July. Domestic car sales turned in a 5.1% gain but still fell 5.6% from last year. Year to date sales were up 0.3% versus last year. Sales of imported autos, in contrast, surged 10.7% (20.0% y/y). Year to date imported car sales rose 9.9% from last year.
Imports garnered a 24.6% share of the US light vehicle market during July, a monthly record, versus 20.4% during all of last year.
Deficits, Debt and Trust Funds from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/net/20060801/cover.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/@ED/@ED09/@ED0901/@ED0901.HTM">Light Vehicle Sales (SAAR, Mil. Units)</a></th>
<th scope="col">July</th>
<th scope="col">June</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>17.24</td>
<td>16.30</td>
<td>-16.8%</td>
<td>16.92</td>
<td>16.87</td>
<td>16.63</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>8.23</td>
<td>7.69</td>
<td>1.9%</td>
<td>7.65</td>
<td>7.49</td>
<td>7.62</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Trucks</td>
<td>9.01</td>
<td>8.61</td>
<td>-28.7%</td>
<td>9.27</td>
<td>9.37</td>
<td>9.01</td>
</tr>
</tbody>
</table>
</body>
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US light vehicle sales in July rose 5.8% m/m to 17.24M units, according to the Autodata Corporation. July sales were the highest since this past January and the figure beat Consensus expectations for sales of 16.6M units. Despite the [...]

U.S. Vehicle Sales Up, But Struggle Against Incentives Last Year

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060802a.jpg" width="353">
The Nat&#39;l Employment Report, published by the payroll processor ADP, indicated that private nonfarm payrolls in July rose just 99,000.
For June the increase in ADP&#39;s measure of private nonfarm payrolls of 368,000 was accompanied by a 90,000 rise in private nonfarm payrolls as published by the Bureau of Labor Statistics. The July figure from BLS will be published this Friday.
ADP has compiled the estimate from its database of individual companies&#39; payroll information. Macroeconomic Advisers, LLC, the St. Louis economic consulting firm, developed the methodology for transforming the raw data into an economic indicator.
According to ADP and Macro Advisers, the correlation between the monthly percentage change in the ADP estimate and that in the BLS data is 0.90.
The ADP National Employment Report data is maintained in Haver&#39;s USECON database; historical data go back to December 2000. The figures in this report cover only private sector jobs and exclude employment in the public sector, which grew an average of 11,333 per month over the last year.
The full ADP National Employment Report can be found <a href="http://www.adpemploymentreport.com/PDF/FINAL_July_NER_Report.pdf">here</a>, and the ADP methodology is explained <a href="http://www.adpemploymentreport.com/PDF/ADPNERMethodology.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/@EB/@EB25/@EB25.HTM">LAXEPA@USECON</a></th>
<th scope="col">July</th>
<th scope="col">June</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">Nonfarm Private Payroll Employment (Chg.)</td>
<td>99,000</td>
<td>368,000</td>
<td>2.0%</td>
<td>1.7%</td>
<td>1.3%</td>
<td>-0.4%</td>
</tr>
</tbody>
</table>
</body>
</html>

The Nat'l Employment Report, published by the payroll processor ADP, indicated that private nonfarm payrolls in July rose just 99,000. For June the increase in ADP's measure of private nonfarm payrolls of 368,000 was accompanied by a [...]

ADP Nat'l Employment Report: Slower Job Growth in July

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060802a.jpg" width="353">
The Nat&#39;l Employment Report, published by the payroll processor ADP, indicated that private nonfarm payrolls in July rose just 99,000.
For June the increase in ADP&#39;s measure of private nonfarm payrolls of 368,000 was accompanied by a 90,000 rise in private nonfarm payrolls as published by the Bureau of Labor Statistics. The July figure from BLS will be published this Friday.
ADP has compiled the estimate from its database of individual companies&#39; payroll information. Macroeconomic Advisers, LLC, the St. Louis economic consulting firm, developed the methodology for transforming the raw data into an economic indicator.
According to ADP and Macro Advisers, the correlation between the monthly percentage change in the ADP estimate and that in the BLS data is 0.90.
The ADP National Employment Report data is maintained in Haver&#39;s USECON database; historical data go back to December 2000. The figures in this report cover only private sector jobs and exclude employment in the public sector, which grew an average of 11,333 per month over the last year.
The full ADP National Employment Report can be found <a href="http://www.adpemploymentreport.com/PDF/FINAL_July_NER_Report.pdf">here</a>, and the ADP methodology is explained <a href="http://www.adpemploymentreport.com/PDF/ADPNERMethodology.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/@EB/@EB25/@EB25.HTM">LAXEPA@USECON</a></th>
<th scope="col">July</th>
<th scope="col">June</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">Nonfarm Private Payroll Employment (Chg.)</td>
<td>99,000</td>
<td>368,000</td>
<td>2.0%</td>
<td>1.7%</td>
<td>1.3%</td>
<td>-0.4%</td>
</tr>
</tbody>
</table>
U.S. Vehicle Sales Up, But Struggle Against Incentives Last Year 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 2, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060802b.jpg" width="353">
US light vehicle sales in July rose 5.8% m/m to 17.24M units, according to the Autodata Corporation. July sales were the highest since this past January and the figure beat Consensus expectations for sales of 16.6M units.
Despite the latest increase, sales fell 16.8% from July 2005 when the successful &quot;employee pricing&quot; plan was instituted for most car buyers.
Overall light truck sales rose 4.7% last month but a steep 28.7% decline versus July 2005 reflects both the success of last year&#39;s sales&#39; incentives and higher gasoline prices.
Domestic truck sales rose 4.3% but fell 32.8% y/y. During the first seven month of this year sales were down 12.2% from the first seven months of 2005. Sales of the relatively fuel efficient imported light trucks rose 7.1% m/m (6.8% y/y). Year to date sales of imported light trucks rose 9.0% from the first seven months of 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060802c.jpg" width="353">
Auto sales rose 7.0% (1.9% y/y) in July. Domestic car sales turned in a 5.1% gain but still fell 5.6% from last year. Year to date sales were up 0.3% versus last year. Sales of imported autos, in contrast, surged 10.7% (20.0% y/y). Year to date imported car sales rose 9.9% from last year.
Imports garnered a 24.6% share of the US light vehicle market during July, a monthly record, versus 20.4% during all of last year.
Deficits, Debt and Trust Funds from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/net/20060801/cover.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/@ED/@ED09/@ED0901/@ED0901.HTM">Light Vehicle Sales (SAAR, Mil. Units)</a></th>
<th scope="col">July</th>
<th scope="col">June</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>17.24</td>
<td>16.30</td>
<td>-16.8%</td>
<td>16.92</td>
<td>16.87</td>
<td>16.63</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>8.23</td>
<td>7.69</td>
<td>1.9%</td>
<td>7.65</td>
<td>7.49</td>
<td>7.62</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Trucks</td>
<td>9.01</td>
<td>8.61</td>
<td>-28.7%</td>
<td>9.27</td>
<td>9.37</td>
<td>9.01</td>
</tr>
</tbody>
</table>
Mortgage Applications Down Further 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 2, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060802d.jpg" width="353">
A 1.2% decline last week in the total number of mortgage applications extended the recent decline to three consecutive weeks. Applications for all of July fell 1.9% from June when applications fell 1.5% from May.
Lower purchase applications led last week&#39;s decline with 3.3% drop which pulled the July average 2.1% below June, the third consecutive down month.
During the last ten years there has been a 58% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance added 2.3% to the prior week&#39;s 0.6% recovery to limit the decline during all of July to 1.8% versus June. Refis fell 3.1% during June from the May average.
The effective interest rate on a conventional 30-year mortgage fell nine basis points w/w to 6.82%. The peak for 30 year financing was 7.08% late in June. The rate on 15-year financing also fell to 6.53% and the peak rate was 6.75%. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage.
In July, 35.4% of all loan applications were to refinance, down from 44.2% last July.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">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/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">07/28/06</th>
<th scope="col">07/21/06</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 Market Index</td>
<td>527.6</td>
<td>533.8</td>
<td>-29.8%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>376.2</td>
<td>389.0</td>
<td>-23.9%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,417.2</td>
<td>1,385.2</td>
<td>-37.0%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
Local Employment Data Show Gulf Port Cities Still Struggle 9 Months After Katrina, But Houston Gains 
by <a href="/comment/Stone.html">Carol Stone</a> August 2, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060802e.jpg" width="353">
As the first potential hurricane of 2006, Chris, forms near the Dominican Republic and Cuba, we are reminded, of course, of the drastic impact of last year&#39;s Katrina. This morning, the BLS released the household survey data for June for metropolitan areas, and we can get an assessment of economic conditions now in some of the affected cities. These data are carried in Haver&#39;s EMPLR database. Series for labor force, employment, unemployment and the unemployment rate are included for hundreds of metro areas, micro areas, and the other standard combinations of urban communities in all 50 States, the District of Columbia and Puerto Rico.
In New Orleans, the center of Katrina&#39;s damage, the number of people employed is up about 25,000 from its October low, but is clearly still well off the pre-storm numbers. Unemployment, while not at the extreme of October, remains higher than 2003 and 2004, suggesting that even with a reduced labor force, job opportunities are not relatively as plentiful.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060802f.jpg" width="353">
Gulfport-Biloxi is also continuing to face strained economic conditions. Unemployment remains far higher than before and also higher than in New Orleans, even though the unemployment rates in the two areas were about the same in the 2003-04 period.
Other cities in the region are doing better. Baton Rouge, the State Capital, saw its unemployment rate shoot up immediately after Katrina, as workers from New Orleans poured into the area. As seen in the table, the rate rose even as the number of employed persons expanded by slightly more than 10,000. Since then, however, employment has fallen back to its pre-storm level and so has unemployment, as the transient workers apparently returned home or moved on.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060802g.jpg" width="353">
Cities in Texas also received people from the storm-damaged region. Beaumont-Port Arthur, very near the Louisiana state line, experienced a spike in its labor force and its unemployment rate, but this dissipated. Presently, employment is running about the same as in 2004 and 2005, and the unemployment rate is actually somewhat lower than previously.
Finally, in Houston, the labor force expanded by 25,400 in September and for the most part, these people stayed. Employment rose even more and unemployment fell. Only in June did some of this labor market vigor fade a bit, with a somewhat larger-than-normal June rise in the unemployment rate. So Houston generally was able to absorb its new workers and find jobs for them, and the labor force in Houston is nearly 2.5% larger than a year ago, compared with 1.5% in the nation as a whole.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/EMPLR/@H01/@H0102/@H0102.HTM">Employment, NSA, Thous</a></th>
<th scope="col">June 2006</th>
<th scope="col">May 2006</th>
<th scope="col">Oct 2005</th>
<th scope="col">June 2005</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">New Orleans, LA*</td>
<td>412.0</td>
<td>404.5</td>
<td>388.5</td>
<td>610.9</td>
<td>n.m.</td>
<td>587.6</td>
<td>578.7</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>7.2</td>
<td>6.4</td>
<td>17.1</td>
<td>6.1</td>
<td>n.m.</td>
<td>5.1</td>
<td>5.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Gulfport-Biloxi, MS</td>
<td>95.4</td>
<td>94.1</td>
<td>97.9</td>
<td>118.4</td>
<td>n.m.</td>
<td>115.5</td>
<td>114.1</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>12.5</td>
<td>12.9</td>
<td>21.2</td>
<td>6.9</td>
<td>n.m.</td>
<td>5.2</td>
<td>5.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Baton Rouge, LA</td>
<td>341.0</td>
<td>339.3</td>
<td>348.3</td>
<td>338.2</td>
<td>n.m.</td>
<td>329.7</td>
<td>319.9</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>5.3</td>
<td>4.4</td>
<td>9.7</td>
<td>6.7</td>
<td>n.m.</td>
<td>5.9</td>
<td>6.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Beaumont-Port Arthur, TX</td>
<td>164.0</td>
<td>164.1</td>
<td>163.2</td>
<td>166.4</td>
<td>164.9</td>
<td>163.6</td>
<td>165.0</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>7.1</td>
<td>6.3</td>
<td>11.2</td>
<td>7.6</td>
<td>7.7</td>
<td>8.3</td>
<td>8.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Houston, TX*</td>
<td>2544.0</td>
<td>2532.2</td>
<td>2521.0</td>
<td>2480.3</td>
<td>2484.4</td>
<td>2419.1</td>
<td>2379.2</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>5.6</td>
<td>5.0</td>
<td>5.4</td>
<td>5.7</td>
<td>5.5</td>
<td>6.2</td>
<td>6.8</td>
</tr>
</tbody>
</table>
</body>
</html>

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060801i.jpg" width="353">
Incoming data on economic conditions in the Euro Zone suggests that the second quarter growth is likely to exceed the 2.53% annual rate of GDP growth in the first quarter. If so, it will be the first time since 2001 when the annual rate of growth in the Euro Zone exceeded that of the United States. The seasonally adjusted annual rates of GDP growth for the Euro Zone and the U. S are shown in the first chart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060801j.jpg" width="353">
The unemployment rate for the Euro Zone fell to 7.8% in June, the lowest value since August, 2001. The average for the second quarter was 7.9% compared with 8.1 % in the first quarter. Most of the other current economic indicators, such as production, new orders, shipments and sales, have been positive, but are available only through May. However, the Center for Economic Policy Research (CEPR) based in London produces an indicator, EuroCOINTM, of the monthly growth in real GDP that is used in their analysis of the business cycle. This indicator tracks the quarterly changes in real GDP reasonably well as can be seen in the second chart.According to CEPR, if the value of the indicator is above the long term average of the monthly growth rate--0.59% (the monthly average growth of the sample period, 1988-2003)--this suggests that the economy is growing at a rate faster than the long term norm. In June, the indicator was .633 and for the second quarter it averaged .620 suggesting that second quarter growth is above average. 

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/EUROSTAT/@U2/@U219/@U219.HTM">Euro Zone</a></th>
<th scope="col">Jun&nbsp; 06</th>
<th scope="col">May 06</th>
<th scope="col">Jun 05</th>
<th scope="col">M/M</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
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<td class="firstcol">Unemployment Rate %&nbsp;</td>
<td>7.8</td>
<td>7.9</td>
<td>8.6</td>
<td>-0.1</td>
<td>-0.8</td>
<td>8.6</td>
<td>8.9</td>
<td>8.7</td>
</tr>
<tr>
<td class="firstcol">EuroCOIN&nbsp;</td>
<td>.633</td>
<td>.617</td>
<td>.365</td>
<td>.016</td>
<td>.268</td>
<td>.442</td>
<td>.497</td>
<td>.527</td>
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Incoming data on economic conditions in the Euro Zone suggests that the second quarter growth is likely to exceed the 2.53% annual rate of GDP growth in the first quarter. If so, it will be the first time since 2001 when the annual [...]

Euro Zone 2nd Quarter GDP Annual Rate of Growth May Exceed the 2.46% of the U. S.

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

Previous Trump tariffs fading. A boost from new tariffs ahead?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

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

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

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

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

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

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

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

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

U.S. Trade Deficit Deepens to Record in March

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Retail gasoline prices for all grades improved to an average $3.27 per gallon (-13.1% y/y) in the week ended May 5 and reversed the prior week’s easing to $3.26. Prices were $3.37 per gallon to begin the month but remained above their low of $3.13 in the week of December 9. An earlier high was $3.79 in the week ending April 22, 2024. The all-time high of $5.11 occurred in the week ending June 13, 2022. The retail price for on-highway diesel fuel eaed to $3.50 per gallon (-10.2% y/y) in the week of May 5 from $3.51 in the prior week. The latest diesel price stood well below a high of $4.63 in the week ending September 18, 2023 and a peak of $5.81 in the week ending June 20, 2022.

The price of West Texas Intermediate crude oil declined to $59.64 per barrel (-26.4% y/y) in the week ended May 2, after rising to $63.09 per barrel in the prior week. Prices remained below a high of $91.45 in the week of September 29, 2023. The cost of crude oil peaked at $120.46 in the week of June 10, 2022. Yesterday, the price was $57.13 per barrel. The price of European Brent crude oil declined to $63.50 per barrel (-25.9% y/y) in the week of May 2 from $67.92 in the previous week. Prices remained well below a recent high of $95.61 in the week of September 29, 2023 and compared to a peak of $127.40 in the week of June 10, 2022.

Natural gas prices improved to an average $3.09 per mmbtu (+88.4% y/y) in the week ended May 2, after falling to $3.00/mmbtu in the prior week. Prices remained well above a low of $1.40/mmbtu in the week of March 15, 2024 but below their peak of $9.56 in the week of August 26, 2022. Yesterday’s price was $3.26/mmbtu.

Gasoline demand rose 3.2% y/y in the four weeks ending April 25 following a 0.4% y/y decline in the prior four weeks. Demand for all petroleum products improved 0.3% y/y in the four weeks ending April 25 after a 0.4% y/y rise in the previous four-week period. Crude oil input to refineries eased 0.1% y/y in the four weeks ending April 25 after a 1.3% y/y decline in the prior four weeks.

Gasoline inventories slipped 0.7% y/y in the week ending April 25 after a 1.2% y/y rise in the week ending April 18. Residual fuel oil inventories fell 18.7% y/y in the week of April 25, after a 19.0% y/y fall in the prior week. Crude oil inventories rose 1.4% y/y in the week of April 25 after a 2.6% y/y rise in the previous week.

Measured in days’ supply, gasoline inventories fell w/w to 25.5 days in the week of April 25 from 26.4 days in the prior. The recent low was 22.9 days in the week of November 8. The supply of crude oil eased w/w to 27.9 days in the week of April 25 after three weeks at 28.3 days, and remained below a high of 31.9 days in the week of March 3, 2023.

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

- Gasoline prices edge higher.
- Crude oil prices decline.
- Natural gas costs rise.

U.S. Energy Prices Remain Mixed in Latest Week

Robert Brusca

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Not many respondents are showing absolute slowing. Only five this month. Only six over the last three months on average. The median total PMI score fell to 49.7 showing contraction in April from 51.1 in March. The average fared slightly better. The 12-months to 6-months to 3-months show a moderate but consistent slowing. The breadth of slowing is wide with 60.9% of survey respondents slowing over three months compared to six months.

The percentile standings show the most strength for the BRIC group with reading above 50% (that marks the median). All other groupings have standings below the 50% mark indicating that they are below their respective medians of the last four-plus years.

Over every horizon from 12-months to 6-months to 3-months, more than 50% of the respondents show a weakening (slowing) in their PMI responses.

Among the largest economies, only Italy has a composite PMI standing above its median (above 50%).

Only 9 of 24 respondents have PMI ranked percentile standings above the 50% mark. That underlines the weakness in composite conditions and the breadth of the weakness.
 
Services sectors no longer are providing the lift to offset ongoing weakness in manufacturing. The differences among countries are narrowing.

Economic conditions across countries may be narrowing for several reasons, one being that the COVID period and then the shock reaction to Russia's invasion from Ukraine put all countries on the same timeline as central banks have been leaning against the shockwaves from those 2 events. As a result of those events, inflation flared but has more recently been falling. Still, inflation continues to be over the top of targets with the European Monetary Union right now making the most progress and Japan facing more late cycle weakness with excessive inflation than other countries in the mix. More recently aggressive tariff policy the United States has put all countries on their back foot and puts everyone on notice that the future has become a lot more uncertain. Central banks that were progressing toward rate cuts now are worried about the possibility of more inflation from tariffs or from the possibility of recession from tariffs - tariffs up the ante on uncertainty as well as on risk. What we see in this month's PMI statistics is a gradual continued erosion as the perceived risk here is that things get steadily but slowly worse as firms, investors, and consumers began to pull in their horns and prepare for something bad to happen not knowing what that might be.

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Global Composite PMIs Erode

Tian Yong Woon

This week, we focus on trade developments between the US and major Asian economies. Early indications coming out of US-India trade talks seem encouraging, with terms such as “forward most-favoured-nation” for the US and “zero-for-zero” tariffs appearing in news reports — terms which, if enacted, would represent a significant win for the US. India stands to benefit greatly as well if key exports to the US, such as pharmaceuticals (chart 1), receive substantial tariff relief. The benefits could be strongly mutual if a deal also grants the US greater access to India’s large auto consumer market, particularly for major US electric vehicle (EV) producers, given that EV adoption in India remains at a very early stage (chart 2).

Turning to South Korea, discussions also appear to be progressing at a healthy pace, although details remain limited and ongoing domestic political challenges continue to hinder substantive breakthroughs. Nonetheless, the South Korean won has shown signs of stabilisation, while local equity markets have remained buoyant (chart 3). Recent trade data for April has also provided some investor relief, as weak exports to the US were more than offset by a strong performance in semiconductor shipments (chart 4).

In Japan, the race to secure a trade deal with the US is well underway, with automotive exports expected to be a key focal point given their significance to Japan’s economy and the US being a major export destination (chart 5). China, however, remains a notable outlier, with formal trade talks with the US not yet underway. Still, the US-China trade relationship continues to be the most closely watched, given its scale and potential impact on global growth and trade dynamics. While markets await China’s official April trade data, early indicators such as port activity already suggest a decline in bilateral trade flows (chart 6).

**US-India trade talks**
US-India trade discussions have reportedly been progressing rapidly, with both sides having already finalized in April the terms of reference for talks, setting the stage for formal negotiations. One early sign of favourable momentum is India’s possible offering of a “forward most-favoured-nation” clause to the US. This would ensure the US always receives the most favourable tariff terms, ahead of any other trade partner. If enacted, this would be a significant win for the US and a major leap forward in the US-India trade relationship. Another reported breakthrough involves India’s reported proposal of “zero-for-zero” tariffs on steel, auto components, and pharmaceuticals—offered on a reciprocal basis up to a certain quantity. If agreed, this would be mutually beneficial, especially as pharmaceuticals remain one of the US economy’s key imports from India, as shown in chart 1. On a separate note, and more recently, India’s phone exports to the US have reportedly gained prominence. With steep US tariffs on China, firms like Apple are increasingly incentivised to accelerate production shifts to India.

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Additionally, India’s proposed “zero-for-zero” tariff plan for auto parts may galvanise US access to India’s large domestic auto market, which has remained comparatively insulated due to high import tariffs. Another area to watch in the trade talks is electric vehicle (EV) imports, especially given US EV giant Tesla’s continued interest in expanding into the Indian market. That said, EV adoption in India remains in its early stages by many measures. While India has an immense middle class with future sales potential, EVs accounted for only about 2% of new cars sold in 2023, as shown in chart 2. This is well below levels seen in other Asian economies like China, or leaders in this space like Norway, where nearly all new cars sold are EVs. Challenges remain in unlocking the domestic Indian market—particularly around affordability and the underdeveloped state of EV infrastructure.

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**US-South Korea trade talks**
Discussions on the US-South Korea trade front also appear to be progressing at a steady pace, with technical talks reportedly having concluded in Washington last week. However, details remain limited, and full-scale negotiations have not yet begun. Complicating matters is South Korea’s domestic political landscape. With the country heading into a snap presidential election on June 3, Vice Industry Minister Park has said there is no chance of a comprehensive deal being reached before then. Still, both sides have committed to working toward an agreement before the expiration of Trump’s 90-day reciprocal tariff pause on July 8. In financial markets, the won continues to swing but remains above its year-to-date lows (chart 3). Meanwhile, South Korean equities have been lifted by a softening in trade rhetoric from both the US and China, as well as optimism around the US-South Korea talks.

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Turning to the hard trade data, South Korea’s more complete April numbers offered some initial relief to investors. The economy still managed to post moderate export growth, surprising many, despite a nearly 7% y/y decline in exports to the US, as shown in chart 4. One of the key drivers was semiconductors, which recorded double-digit y/y growth for the second consecutive month. However, these figures likely do not yet reflect the full initial impact of the steep mutual tariffs between the US and China. Firmer indications may emerge in the coming months. By then, though, attention will likely have shifted toward the outcome of US trade talks with key partners, as the end of its 90-day reciprocal tariff pause draws near.

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**US-Japan trade talks**
Turning to Japan, there is a sense of cautious optimism, with Japan’s chief trade negotiator Akazawa expressing hope for a US-Japan trade deal by June, following the second and most recent round of talks held in Washington last week. A key point of interest is whether Japan can negotiate an exemption from the current 25% automotive tariffs imposed by the US. This is especially significant given the importance of the US as a destination for Japanese auto exports, as shown in chart 5, and the central role the sector plays in Japan’s broader manufacturing economy. Also worth noting is a recent clarification by Japan’s Finance Minister Kato, who walked back earlier remarks and stated that Japan will not use the sale of US Treasuries as a bargaining tool. The clarification may help defuse a potential point of friction between the two sides as trade discussions continue.

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**US-China trade developments**
Turning to US-China trade developments — while progress here has lagged, this relationship remains the most closely watched, given its potentially large impact if meaningful movement occurs. Recent messaging from both sides has softened, stepping back from the fiery exchanges and tariff escalations seen earlier in April, offering some interim relief for investors. China has reportedly exempted certain US imports from tariffs, including specific pharmaceutical and industrial chemical products. However, on US-China trade talks, they remain at a very early stage, with China merely “evaluating” the prospect of negotiations with the US. This suggests we are still far from anything resembling a formal deal. Investors are now closely watching for first-round effects of US tariffs, which are expected to appear in China’s April trade numbers due later this week. Early signs point to a slowdown. For example, vessel traffic at the Los Angeles–Long Beach port remains at range lows, hinting at reduced shipments from China.

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Asia

Economic Letter from Asia: Art of the Deal

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The U.S. ISM Services PMI rose to 51.6 during April, after falling sharply to 50.8 in March from 53.5 in February, according to today’s report by the Institute for Supply Management. The reading indicated service sector expansion for the tenth consecutive month, although the rate of expansion has slowed significantly. 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 50.2 for April.

Haver Analytics constructs a composite index combining the services index and the manufacturing index released on Thursday. This index rose to 51.2 in Apri from 50.6 in March. The latest figure remains above its June low of 49.1.

Amongst the services component series, the employment index led last month’s improvement in the overall index. It rose to 49.0 after falling sharply to 46.2 in March. Higher employment was reported by a slightly improved 14.6% (NSA) of respondents while a lessened 16.4% reported a decline. The new orders index rose to 52.3 after falling to 50.4 in March. A higher 22.4% (NSA) of respondents reported a rise in orders while a lessened 15.3% reported a decline. Reporting slower delivery speeds, the supplier delivery series edged up to 51.3 in April after falling to 50.6 in March. Working lower, the business activity series declined to 53.7 after rising to 55.9 in March. A higher 26.2% (NSA) of respondents reported improved activity while a lessened 14.0% reported deterioration.

On the inflation front, the prices index surged to 68.9 in April after easing to 62.8 in March. A greatly increased 39.6% (NSA) of respondents reported higher prices while a lessened 1.9% reported lower prices. The index was increased from its December 2022 low 53.1 and stood at its highest level since October 2022.

Additionally, the new export orders index increased to 48.6 (NSA) in April following a decline to 45.8 in March from 52.1 in February. Just 14.8% of survey respondents reported higher exports while an increased 17.7% reported a decline. The imports index plummeted to 44.3 last month from 52.6 in March. A greatly lessened 4.7% of respondents reported higher imports while a doubled 16.2% reported a decline. The inventory change index jumped to 53.4, a six-month high. The order backlog index edged up to 48.0 in April after falling sharply to 47.4 in March. A lessened 12.2% of respondents reported higher backlogs while a fewer 16.2% 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.

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- Total index remains near nine-month low.
- Employment, new orders & supplier deliveries edge up. Business activity weakens. 
- Prices Index strengthens to roughly two-year high.

Economy in Brief: August 2006

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Euro Zone 2nd Quarter GDP Annual Rate of Growth May Exceed the 2.46% of the U. S.