Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080806e.jpg" align="left" border="0" height="265" width="353">
Japan&#8217;s leading economic index fell in June after having a
small uptick in May. Over three-months the index is higher but it is
deeply weaker over 24-, 12- and 6-months. The OECD index that is not
quite as up-to-date has been pointing to strength since late 2007. 
 

The Cabinet Office reported that the trend in the composite
coincident index points to a worsening of the economic cycle,
downgrading the view a month earlier that suggested a possible change
in the business cycle. The coincident index, which measures the current
state of the economy, fell sharply to 101.7 from 103.3, in line with
expectations. The leading index signals are not so clear cut with the
OECD&#8217;s and Japan&#8217;s own indicators pointing in very different directions
&#8211; a most unusual development. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Japan's
LEI and its trends</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Levels</td>
<td colspan="4">Growth (saar)</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jun-08</td>
<td>May-08</td>
<td>Apr-08</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>24Mo</td>
</tr>
<tr>
<td class="firstcol">LEI</td>
<td>91.2</td>
<td>92.9</td>
<td>92.8</td>
<td>1.8%</td>
<td>-5.5%</td>
<td>-8.0%</td>
<td>-11.5%</td>
</tr>
<tr>
<td class="firstcol">LEI: OECD</td>
<td>#N/A</td>
<td>105.7</td>
<td>104.9</td>
<td>1.1%</td>
<td>0.9%</td>
<td>-2.4%</td>
<td>-1.1%</td>
</tr>
</tbody>
</table>
</body></html>

Japan’s leading economic index fell in June after having a small uptick in May. Over three-months the index is higher but it is deeply weaker over 24-, 12- and 6-months. The OECD index that is not quite as up-to-date has been pointing [...]

Japan LEI Falls

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<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080806d.jpg" align="left" border="0" height="265" width="353">Historically German foreign orders have been the more volatile
of the two series (foreign and domestic orders for MFG goods). The
current drop is a steep one indeed. The aggressive growth rates show
that growth fore both domestic and foreign orders is getting weaker as
the time period to calculated growth gets shorter. This is accelerating
weakness.

Quarter-to-date the growth rates are terribly weak. This
series is now complete for Q2. In Q2 total orders are falling at a
15.4% annual lead by a 21.3% drop in Foreign orders. Sales are falling
too as Consumer sales are off at an 11% pace even capital goods real
sales are off at a 5.8% annual rate in the quarter. The German
economy&#8217;s factory sector is weakening at a rapid pace. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="9" scope="col">German Orders and Sales By Sector and Origin </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Real and SA</td>
<td colspan="3">% M/M</td>
<td colspan="5">% Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jun-08</td>
<td>May-08</td>
<td>Apr-08</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
<td>QTR-2-Date</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>-2.9%</td>
<td>-1.4%</td>
<td>-1.7%</td>
<td>-21.7%</td>
<td>-11.5%</td>
<td>-8.4%</td>
<td>16.9%</td>
<td>-15.4%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>-5.1%</td>
<td>0.1%</td>
<td>-3.7%</td>
<td>-30.0%</td>
<td>-16.3%</td>
<td>-14.1%</td>
<td>23.4%</td>
<td>-21.3%</td>
</tr>
<tr>
<td class="firstcol">Domestic</td>
<td>-0.6%</td>
<td>-2.8%</td>
<td>0.3%</td>
<td>-11.9%</td>
<td>-6.1%</td>
<td>-1.7%</td>
<td>10.2%</td>
<td>-8.8%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="9">Real Sector Sales</td>
</tr>
<tr>
<td class="firstcol">MFG/Mining</td>
<td>-0.6%</td>
<td>-0.4%</td>
<td>-1.0%</td>
<td>-7.7%</td>
<td>-3.9%</td>
<td>2.1%</td>
<td>5.9%</td>
<td>-7.2%</td>
</tr>
<tr>
<td class="firstcol">Consumer&nbsp;</td>
<td>-1.6%</td>
<td>0.2%</td>
<td>-2.0%</td>
<td>-12.8%</td>
<td>-6.6%</td>
<td>-2.9%</td>
<td>2.2%</td>
<td>-11.0%</td>
</tr>
<tr>
<td class="firstcol">Consumer Durables</td>
<td>2.0%</td>
<td>-3.7%</td>
<td>1.1%</td>
<td>-2.8%</td>
<td>-1.4%</td>
<td>-1.7%</td>
<td>4.6%</td>
<td>-5.7%</td>
</tr>
<tr>
<td class="firstcol">Consumer Non-Durable</td>
<td>-2.2%</td>
<td>1.1%</td>
<td>-2.6%</td>
<td>-14.0%</td>
<td>-7.2%</td>
<td>-3.1%</td>
<td>1.7%</td>
<td>-11.8%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>0.9%</td>
<td>-2.7%</td>
<td>2.1%</td>
<td>0.9%</td>
<td>0.4%</td>
<td>4.5%</td>
<td>7.3%</td>
<td>-5.8%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>-2.0%</td>
<td>2.0%</td>
<td>-4.0%</td>
<td>-15.3%</td>
<td>-8.0%</td>
<td>1.6%</td>
<td>6.5%</td>
<td>-7.0%</td>
</tr>
<tr>
<td class="firstcol">All MFG-Sales</td>
<td>-0.7%</td>
<td>-0.5%</td>
<td>-1.0%</td>
<td>-8.4%</td>
<td>-4.3%</td>
<td>1.5%</td>
<td>5.8%</td>
<td>-7.7%</td>
</tr>
</tbody>
</table>
</body></html>

Historically German foreign orders have been the more volatile of the two series (foreign and domestic orders for MFG goods). The current drop is a steep one indeed. The aggressive growth rates show that growth fore both domestic and [...]

German MFG Orders Have Turned Horrifically Weak

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080806b.jpg" width="353">
The total number of mortgage applications ticked up 2.8% last week, but that followed two weeks of sharp decline, according to the Mortgage Bankers Association. As a result, applications in early August were 11.1% below the July average. In July, applications fell 2.9% from June following sharper m/m declines during most of this year.
In early August, the level of all mortgage applications was down by one-third from the year-ago level.
Purchase applications fell 1.8% last week which made up just a piece of the prior three weeks&#39; sharp declines. That left applications for a mortgage to purchase a home, early this month, 8.0% below the July average.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080806a.jpg" width="353">
During the last ten years there has been a 61% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance a home mortgage rose 4.4% after two weeks of strong decline. Applications began this month 15.7% below the July average.
The effective interest rate on a conventional 15-year mortgage ticked up w/w to 6.02% after two months when they averaged 5.94%. For a thirty year mortgage, rates were little changed at 6.41%. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10-year Treasury securities. For an adjustable rate 1-Year mortgage the rate slipped to 7.17% from a 7.20% average last month.
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.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080806c.jpg" width="353">
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 covers roughly 50% of all U.S. residential mortgage applications processed each week by mortgage banks, commercial banks and thrifts. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.
The Rise and Fall of Subprime Mortgages from the Federal Reserve Bank of Dallas can be found <a href="http://dallasfed.org/research/eclett/2007/el0711.html"> 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">08/01/08</th>
<th scope="col">07/25/08</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 class="odd">
<td class="firstcol">Total Market Index</td>
<td>432.6</td>
<td>420.8</td>
<td>-34.1%</td>
<td>652.6</td>
<td>584.2</td>
<td>708.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>315.2</td>
<td>309.5</td>
<td>-29.5%</td>
<td>424.9</td>
<td>406.9</td>
<td>470.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,121.8</td>
<td>1,074.4</td>
<td>-40.4%</td>
<td>1,997.9</td>
<td>1,634.0</td>
<td>2,092.3</td>
</tr>
</tbody>
</table>
</body>
</html>

The total number of mortgage applications ticked up 2.8% last week, but that followed two weeks of sharp decline, according to the Mortgage Bankers Association. As a result, applications in early August were 11.1% below the July [...]

Mortgage Applications Down By One-third

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080806b.jpg" align="left" border="0" height="265" width="353">
The total number of mortgage applications ticked up 2.8% last
week, but that followed two weeks of sharp decline, according to the
Mortgage Bankers Association. As a result, applications in early August
were 11.1% below the July average. In July, applications fell 2.9% from
June following sharper m/m declines during most of this year.
In early August, the level of all mortgage applications was
down by one-third from the year-ago level.
Purchase applications fell 1.8% last week which made up just a
piece of the prior three weeks' sharp declines. That left applications
for a mortgage to purchase a home, early this month, 8.0% below the
July average.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080806a.jpg" align="right" border="0" height="265" width="353">
During the last ten years there has been a 61% correlation
between the y/y change in purchase applications and the change in new
plus existing single family home sales.
Applications to refinance a home mortgage rose 4.4% after two
weeks of strong decline. Applications began this month 15.7% below the
July average.
The effective interest rate on a conventional 15-year mortgage
ticked up w/w to 6.02% after two months when they averaged 5.94%. For a
thirty year mortgage, rates were little changed at 6.41%. Interest
rates on 15 and 30 year mortgages are closely correlated (&gt;90%)
with the rate on 10-year Treasury securities. For an adjustable rate
1-Year mortgage the rate slipped to 7.17% from a 7.20% average last
month.
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.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080806c.jpg" align="left" border="0" height="265" width="353">
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 covers roughly 50% of
all U.S. residential mortgage applications processed each week by
mortgage banks, commercial banks and thrifts. Visit the Mortgage
Bankers Association site <a href="http://www.mbaa.org">here</a>.
The Rise and Fall
of Subprime Mortgages from the Federal Reserve Bank of Dallas
can be found <a href="http://dallasfed.org/research/eclett/2007/el0711.html">
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">08/01/08</th>
<th scope="col">07/25/08</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 class="odd">
<td class="firstcol">Total Market Index</td>
<td>432.6</td>
<td>420.8</td>
<td>-34.1%</td>
<td>652.6</td>
<td>584.2</td>
<td>708.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>315.2</td>
<td>309.5</td>
<td>-29.5%</td>
<td>424.9</td>
<td>406.9</td>
<td>470.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,121.8</td>
<td>1,074.4</td>
<td>-40.4%</td>
<td>1,997.9</td>
<td>1,634.0</td>
<td>2,092.3</td>
</tr>
</tbody>
</table>
German MFG Orders Have
TurnedHorrifically Weak 
by <a href="/comment/Brusca.html">Robert
Brusca</a> August
6, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080806d.jpg" align="left" border="0" height="265" width="353">Historically German foreign
orders have been the more volatile
of the two series (foreign and domestic orders for MFG goods). The
current drop is a steep one indeed. The aggressive growth rates show
that growth fore both domestic and foreign orders is getting weaker as
the time period to calculated growth gets shorter. This is accelerating
weakness.

Quarter-to-date the growth rates are terribly weak. This
series is now complete for Q2. In Q2 total orders are falling at a
15.4% annual lead by a 21.3% drop in Foreign orders. Sales are falling
too as Consumer sales are off at an 11% pace even capital goods real
sales are off at a 5.8% annual rate in the quarter. The German
economy&#8217;s factory sector is weakening at a rapid pace. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">German
Orders and Sales By Sector and Origin </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Real and SA</td>
<td colspan="3">% M/M</td>
<td colspan="5">% Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jun-08</td>
<td>May-08</td>
<td>Apr-08</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
<td>QTR-2-Date</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>-2.9%</td>
<td>-1.4%</td>
<td>-1.7%</td>
<td>-21.7%</td>
<td>-11.5%</td>
<td>-8.4%</td>
<td>16.9%</td>
<td>-15.4%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>-5.1%</td>
<td>0.1%</td>
<td>-3.7%</td>
<td>-30.0%</td>
<td>-16.3%</td>
<td>-14.1%</td>
<td>23.4%</td>
<td>-21.3%</td>
</tr>
<tr>
<td class="firstcol">Domestic</td>
<td>-0.6%</td>
<td>-2.8%</td>
<td>0.3%</td>
<td>-11.9%</td>
<td>-6.1%</td>
<td>-1.7%</td>
<td>10.2%</td>
<td>-8.8%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="9">Real
Sector Sales</td>
</tr>
<tr>
<td class="firstcol">MFG/Mining</td>
<td>-0.6%</td>
<td>-0.4%</td>
<td>-1.0%</td>
<td>-7.7%</td>
<td>-3.9%</td>
<td>2.1%</td>
<td>5.9%</td>
<td>-7.2%</td>
</tr>
<tr>
<td class="firstcol">Consumer&nbsp;</td>
<td>-1.6%</td>
<td>0.2%</td>
<td>-2.0%</td>
<td>-12.8%</td>
<td>-6.6%</td>
<td>-2.9%</td>
<td>2.2%</td>
<td>-11.0%</td>
</tr>
<tr>
<td class="firstcol">Consumer Durables</td>
<td>2.0%</td>
<td>-3.7%</td>
<td>1.1%</td>
<td>-2.8%</td>
<td>-1.4%</td>
<td>-1.7%</td>
<td>4.6%</td>
<td>-5.7%</td>
</tr>
<tr>
<td class="firstcol">Consumer Non-Durable</td>
<td>-2.2%</td>
<td>1.1%</td>
<td>-2.6%</td>
<td>-14.0%</td>
<td>-7.2%</td>
<td>-3.1%</td>
<td>1.7%</td>
<td>-11.8%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>0.9%</td>
<td>-2.7%</td>
<td>2.1%</td>
<td>0.9%</td>
<td>0.4%</td>
<td>4.5%</td>
<td>7.3%</td>
<td>-5.8%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>-2.0%</td>
<td>2.0%</td>
<td>-4.0%</td>
<td>-15.3%</td>
<td>-8.0%</td>
<td>1.6%</td>
<td>6.5%</td>
<td>-7.0%</td>
</tr>
<tr>
<td class="firstcol">All MFG-Sales</td>
<td>-0.7%</td>
<td>-0.5%</td>
<td>-1.0%</td>
<td>-8.4%</td>
<td>-4.3%</td>
<td>1.5%</td>
<td>5.8%</td>
<td>-7.7%</td>
</tr>
</tbody>
</table>
Japan LEI Falls 
by <a href="/comment/Brusca.html">Robert
Brusca</a> August 6, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080806e.jpg" align="left" border="0" height="265" width="353">
Japan&#8217;s leading economic index fell in June after having a
small uptick in May. Over three-months the index is higher but it is
deeply weaker over 24-, 12- and 6-months. The OECD index that is not
quite as up-to-date has been pointing to strength since late 2007. 
 

The Cabinet Office reported that the trend in the composite
coincident index points to a worsening of the economic cycle,
downgrading the view a month earlier that suggested a possible change
in the business cycle. The coincident index, which measures the current
state of the economy, fell sharply to 101.7 from 103.3, in line with
expectations. The leading index signals are not so clear cut with the
OECD&#8217;s and Japan&#8217;s own indicators pointing in very different directions
&#8211; a most unusual development. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Japan's
LEI and its trends</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Levels</td>
<td colspan="4">Growth (saar)</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jun-08</td>
<td>May-08</td>
<td>Apr-08</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>24Mo</td>
</tr>
<tr>
<td class="firstcol">LEI</td>
<td>91.2</td>
<td>92.9</td>
<td>92.8</td>
<td>1.8%</td>
<td>-5.5%</td>
<td>-8.0%</td>
<td>-11.5%</td>
</tr>
<tr>
<td class="firstcol">LEI: OECD</td>
<td>#N/A</td>
<td>105.7</td>
<td>104.9</td>
<td>1.1%</td>
<td>0.9%</td>
<td>-2.4%</td>
<td>-1.1%</td>
</tr>
</tbody>
</table>
</body></html>

U.S. Mortgage Applications Down By One-third

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080805j.jpg" width="353">
As expected, the Federal Open Market Committee left the Federal funds rate unchanged today at 2.00%. The action was as widely expected.
The discount rate also was left unchanged at 2.25%.
The Fed&#39;s statement showed the distinct balance of factors which led to the decision to leave rates unchanged.1) &quot;Economic activity expanded in the second quarter, partly reflecting growth in consumer spending and exports. However, labor markets have softened further and financial markets remain under considerable stress.&quot;2) &quot;Tight credit conditions, the ongoing housing contraction, and elevated energy prices are likely to weigh on economic growth over the next few quarters. Over time, the substantial easing of monetary policy, combined with ongoing measures to foster market liquidity, should help to promote moderate economic growth.&quot;3) &quot;Inflation has been high, spurred by the earlier increases in the prices of energy and some other commodities, and some indicators of inflation expectations have been elevated. The Committee expects inflation to moderate later this year and next year, but the inflation outlook remains highly uncertain.
The decision was unanimous except that Richard W. Fisher, President of the Federal Reserve Bank of Dallas, preferred an increase in the target for the federal funds rate at this meeting.
For the complete text of the Fed&#39;s latest press release please follow this <a href="http://www.federalreserve.gov/newsevents/press/monetary/20080805a.htm"> link</a>.
Profits and Balance Sheet Developments at U.S. Commercial Banks in 2007 from the latest Federal Reserve Bulletin is available <a href="http://www.federalreserve.gov/pubs/bulletin/2008/pdf/bankprofit08.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">&nbsp;</th>
<th scope="col">Current</th>
<th scope="col">Last</th>
<th scope="col">July</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Federal Funds Rate, % (Target)</td>
<td>2.00</td>
<td>2.00</td>
<td>2.00</td>
<td>5.05</td>
<td>4.96</td>
<td>3.19</td>
</tr>
<tr>
<td class="firstcol">Discount Rate, %</td>
<td>2.25</td>
<td>2.25</td>
<td>2.25</td>
<td>5.86</td>
<td>5.96</td>
<td>4.19</td>
</tr>
</tbody>
</table>
</body>
</html>

As expected, the Federal Open Market Committee left the Federal funds rate unchanged today at 2.00%. The action was as widely expected. The discount rate also was left unchanged at 2.25%. The Fed's statement showed the distinct [...]

FOMC Left Funds Rate at 2.00% - The Balance of Factors

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080805h.jpg" align="left" border="0" height="265" width="353">
The indexes of retail trade in the Euro Area and the European
Union, exclude the sales of motor vehicles and motor cycles. There are
two indexes of total retail sales: one includes repairs of personal and
household repairs and the other excludes them. The most quoted index
excludes the repairs.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080805i.jpg" align="right" border="0" height="265" width="353">
The index of value of retail trade, excluding repairs, in the
Euro Area declined by a mere 0.06% in June from May, but the volume
declined by 0.6%. Although the value of retail sales increased 1.4%
from June of 2007 to June of 2008, the volume declined by 3.1%. Over
this period, sales of food declined by 4.4% and sales of non food
items, by 2.2%.The value and volume of retail trade in the Euro Area
are shown in the first chart.
As some of the Non Euro Area countries in the European Union,
particularly those in eastern Europe, chalked up substantial year over
year increases in the volume of retail trade, the decline in the volume
of sales over the last year was less than that for the European Union--
-1.1% vs.-3.1%. Among these, Romania showed a whopping 23.3% increase
in the volume of retail sales, while Slovenia, Poland and the Czech
Republic showed more moderate increases of 5.7%, 5.2% and 5.1%,
respectively. The value of retail trade in the entire European Union
was unchanged from May to June while the volume was down 1.1%. The
value and volume of retail trade in the European Union are shown in the
second chart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">EURO
AREA (15) EU (27)&nbsp;&nbsp;(2000=100)</th>
<th scope="col">Jun 08</th>
<th scope="col">May 08&nbsp;</th>
<th scope="col">Jun 07&nbsp;</th>
<th scope="col">M/M 
% chg&nbsp;</th>
<th scope="col">Y/Y 
% 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">EURO AREA</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="grey2">
<td class="firstcol">Volume of
Retail Sales ex Repairs (NSA)</td>
<td>104.9</td>
<td>106.7</td>
<td>108.24</td>
<td>--</td>
<td>-3.1</td>
<td>109.5</td>
<td>108.5</td>
<td>106.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Volume of
Retail Sales ex Repairs (SA)</td>
<td>107.8</td>
<td>108.4</td>
<td>109.9</td>
<td>-0.6</td>
<td>--</td>
<td>109.5</td>
<td>108.5</td>
<td>106.8</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Value of
Retail Sales ex Repairs (NSA)</td>
<td>120.7</td>
<td>121.9</td>
<td>119.1</td>
<td>--</td>
<td>1.4</td>
<td>120.4</td>
<td>117.5</td>
<td>114.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Value of
Retail Sales ex Repairs (NSA)</td>
<td>122.8</td>
<td>122.9</td>
<td>120.3</td>
<td>-0.06</td>
<td>--</td>
<td>120.4</td>
<td>117.5</td>
<td>114.2</td>
</tr>
<tr class="grey2">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">EUROPEAN
UNION&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Volume of
Retail Sales ex Repairs (NSA)</td>
<td>115.1</td>
<td>116.9</td>
<td>116.3</td>
<td>--</td>
<td>-1.1</td>
<td>117.9</td>
<td>115.2</td>
<td>112.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Volume of
Retail Sales ex Repairs (SA)</td>
<td>117.8</td>
<td>119.1</td>
<td>118.6</td>
<td>-1.0</td>
<td>--</td>
<td>117.9</td>
<td>115.2</td>
<td>112.2</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Value of
Retail Sales ex Repairs (NSA)</td>
<td>129.4</td>
<td>130.4</td>
<td>126.3</td>
<td>--</td>
<td>-0.74</td>
<td>127.8</td>
<td>122.4</td>
<td>118.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Value of
Retail Sales ex Repairs (NSA)</td>
<td>131.6</td>
<td>131.6</td>
<td>127.6</td>
<td>0.0</td>
<td>--</td>
<td>127.8</td>
<td>122.4</td>
<td>118.0</td>
</tr>
</tbody>
</table>
</body></html>

The indexes of retail trade in the Euro Area and the European Union, exclude the sales of motor vehicles and motor cycles. There are two indexes of total retail sales: one includes repairs of personal and household repairs and the [...]

Retail Trade in the Euro Area and the European Union

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080805f.jpg" align="left" border="0" height="265" width="353">
Central banks are not having good luck with inflation. Of
course, critics will say that inflation fighting has little to do with
luck and that is true enough. The PPI is not a targeted rate by the ECB
so in some sense it can be anything and it doesn&#8217;t matter. But we know
it matters and that PPI prices feed into sectors and become costs for
consumer prices so a surging PPI is not good news at all. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col">Euro Area
and UK PPI Trends </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="2">M/M</td>
<td colspan="4">Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro Area -13</td>
<td>Jun-08</td>
<td>May-08</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>Yr/Yr</td>
<td>Y/Y Yr Ago</td>
</tr>
<tr>
<td class="firstcol">Total excl Constructions</td>
<td>0.9%</td>
<td>1.2%</td>
<td>12.8%</td>
<td>11.1%</td>
<td>8.0%</td>
<td>2.3%</td>
</tr>
<tr>
<td class="firstcol">Excl Energy</td>
<td>0.4%</td>
<td>0.3%</td>
<td>4.4%</td>
<td>5.5%</td>
<td>4.0%</td>
<td>3.1%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.5%</td>
<td>3.0%</td>
<td>2.0%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods</td>
<td>0.2%</td>
<td>0.1%</td>
<td>2.1%</td>
<td>3.6%</td>
<td>4.5%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">Intermediate &amp; Capital
Goods</td>
<td>0.4%</td>
<td>0.4%</td>
<td>5.6%</td>
<td>6.5%</td>
<td>3.8%</td>
<td>3.9%</td>
</tr>
<tr>
<td class="firstcol">Energy</td>
<td>2.7%</td>
<td>4.1%</td>
<td>41.9%</td>
<td>29.9%</td>
<td>21.4%</td>
<td>-0.5%</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>0.7%</td>
<td>1.3%</td>
<td>11.0%</td>
<td>9.5%</td>
<td>6.9%</td>
<td>2.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Germany</td>
<td>0.9%</td>
<td>1.0%</td>
<td>12.5%</td>
<td>10.9%</td>
<td>6.7%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">Excl Energy</td>
<td>0.3%</td>
<td>0.4%</td>
<td>3.9%</td>
<td>4.5%</td>
<td>3.0%</td>
<td>2.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">France</td>
<td>0.7%</td>
<td>1.3%</td>
<td>11.7%</td>
<td>9.2%</td>
<td>7.3%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">Excl Energy</td>
<td>0.4%</td>
<td>0.3%</td>
<td>3.9%</td>
<td>4.7%</td>
<td>3.8%</td>
<td>2.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Italy</td>
<td>0.8%</td>
<td>1.5%</td>
<td>11.1%</td>
<td>10.8%</td>
<td>8.2%</td>
<td>2.7%</td>
</tr>
<tr>
<td class="firstcol">Excl Energy</td>
<td>0.5%</td>
<td>0.2%</td>
<td>5.1%</td>
<td>6.4%</td>
<td>4.2%</td>
<td>3.2%</td>
</tr>
<tr class="grey2">
<td class="firstcol">UK</td>
<td>2.0%</td>
<td>2.6%</td>
<td>32.2%</td>
<td>22.0%</td>
<td>19.5%</td>
<td>1.2%</td>
</tr>
<tr>
<td class="firstcol">Excl Energy</td>
<td>0.8%</td>
<td>1.4%</td>
<td>12.9%</td>
<td>11.3%</td>
<td>7.2%</td>
<td>2.9%</td>
</tr>
<tr class="grey1">
<td colspan="4">Euro Area 13 Harmonized PPI
excluding Construction</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey1">
<td colspan="7" class="firstcol">The EA 13
countries are Austria,
Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,
the Netherlands, Portugal, Slovenia</td>
</tr>
</tbody>
</table>
</body></html>

Central banks are not having good luck with inflation. Of course, critics will say that inflation fighting has little to do with luck and that is true enough. The PPI is not a targeted rate by the ECB so in some sense it can be [...]

EMU PPI Surges Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080805e.jpg" width="353">
Chain store sales, according to the International Council of Shopping Centers, held onto the strong gain during the prior week. The unchanged level of sales in early-August followed a 1.2% w/w jump at the end of July. It left the level of sales at its record high which was up 1.0% from the July average. That followed July&#39;s 0.4% rise.
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.
The leading indicator of chain store sales from ICSC-UBS continued to weaken and fell 1.5% (-5.3% y/y) after a 0.9% decline during the week prior.
The chain store sales figures are available in Haver&#39;s SURVEYW database.
Can Young Americans Compete in a Global Economy? from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2008/el2008-22.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">08/08/08</th>
<th scope="col">07/26/08</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>499.2</td>
<td>499.2</td>
<td>2.9%</td>
<td>2.8%</td>
<td>3.3%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>


</html>

Chain store sales, according to the International Council of Shopping Centers, held onto the strong gain during the prior week. The unchanged level of sales in early-August followed a 1.2% w/w jump at the end of July. It left the [...]

U.S. Chain Store Sales Held the High Ground

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

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

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Total factory orders declined 4.8% (+5.6% y/y) in June after surging 8.3% in May, revised from 8.2%, as reported by the U.S. Census Bureau. A 4.9% decline had been expected in the Action Economics Forecast Survey. A halving in orders for nondefense aircraft accounted for much of the June decline. Factory orders excluding transportation altogether rose 0.4% after increasing 0.3% in May, revised from 0.2%.

Durable goods orders fell 9.4% (+10.9% y/y) in June after 16.5% rise in May. The advance report indicated a 9.3% decline. Transportation orders fell 22.4% (+30.5% y/y). Automobile orders declined 3.1% (-2.7% y/y). Computer & electronic product orders increased 0.6% (5.2% y/y) while electrical equipment, appliances & components rose 0.1% (4.5% y/y). Machinery orders improved 0.3% (3.0% y/y). Furniture & related products increased 0.1% (1.1% y/y). Primary metals orders increased 0.6% (-0.5% y/y) while fabricated metals orders edged 0.1% (3.1% y/y) higher.

Nondurable goods orders, which equal nondurable goods shipments, rose 0.5% (0.6% y/y) in June after edging 0.1% higher in May. Shipments of petroleum & coal products rose 1.4% (-4.5% y/y) and beverage & tobacco products rose 1.5% (4.2% y/y). Food product shipments improved 0.4% (0.9% y/y) and textile product shipments rose a minimal 0.1% (1.9% y/y). To the downside, apparel shipments declined 0.9% (-4.7% y/y) and chemical product shipments eased 0.1% (+3.6% y/y). Paper products declined 0.3% (+0.7% y/y).

Total shipments increased 0.5% (1.8% y/y) in June following a 0.2% May increase. Excluding transportation, shipments rose 0.4% (1.3% y/y) in June after a 0.1% uptick in May. Shipments of durable goods industries rose 0.5% (3.0% y/y) in April, the seventh consecutive m/m rise.  Transportation equipment shipments rose 0.8% (4.3% y/y) as nondefense aircraft shipments fell 6.2% (+13.8% y/y). Machinery shipments rose 1.0% (1.5% y/y), and electrical equipment, appliances & components shipments increased 0.6 (4.6% y/y). Primary metals shipments rose 0.6% (2.4% y/y), fabricated metals shipment rose 0.2% (1.9% y/y), but furniture & related products eased 0.2% (+1.4% y/y).

Unfilled orders rose 1.0% (7.1% y/y) in June after a 3.4% jump in May. Excluding transportation, unfilled orders held steady (+0.8 y/y) after a 0.1% rise in May. Backlogs of durable goods increased 1.0% (7.1% y/y), reflecting a 2.1% rise (14.7% y/y) in nondefense aircraft and a 0.1% decline (-1.8% y/y) in machinery. Electrical equipment, appliances & components backlogs also rose 0.1% (1.0% y/y) while computer & electronic equipment backlogs eased 0.1% both m/m and y/y.
 
Inventories increased 0.2% (1.1% y/y) in June after edging 0.1% higher in May. Excluding transportation, inventories rose 0.2% (1.0% y/y) in June after a 0.1% uptick in May. Durable goods inventories rose 0.2% (1.5% y/y) in June, the same as in May, and rose 0.1% in both of the prior two months. Nondurable goods inventories increased 0.2% 0.5% y/y) after declines in both of the prior two months.

The factory sector data are available in Haver’s **USECON** database. The Action Economics Forecast Survey is in the **AS1REPNA** database.

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- Total orders less transportation rise moderately.
- Shipments pick up.  
- Unfilled orders surge as inventories rise modestly.

U.S. Factory Orders Retreat in June, Largely Centered in Aircraft

Tian Yong Woon

This week, we examine the latest wave of trade developments across Asia as the US unveiled a full list of its modified reciprocal tariff rates, set to take effect on August 7. As anticipated, many of the updated rates are now lower than the original tariffs, with Cambodia and Vietnam seeing the sharpest reductions (chart 1). However, from peak tariff levels, China stands out—continuing to benefit from a 10% pause rate, down from triple-digit highs.

South Korea secured a deal just before the deadline, lowering its tariff from 25% to 15%. The new rate also applies to auto exports, offering relief to Korean automakers (chart 2). Thailand and Cambodia followed with US trade agreements after agreeing to an unconditional ceasefire following earlier military clashes. Their US-imposed tariffs dropped from 36% to 19%, highlighting how US trade policy can intersect with geopolitical interests and, in this case, may help reduce trade uncertainty (chart 3).

Malaysia, a key mediator in the ceasefire, also finalized a trade deal, reducing its tariff rate to 19% and gaining exemptions on key exports such as semiconductors (chart 4). Turning to Japan, while its US trade deal helped avert immediate tensions, the vague terms and a headline $550 billion investment—mostly in the form of loans—leave room for future friction (chart 5). China, however, remains a wildcard. Talks to extend its tariff pause are ongoing, but failure could see a return to extreme tariff levels (chart 6). Meanwhile, tech tensions linger, despite eased restrictions on Nvidia AI chip exports.

**Latest US tariff developments**
We gained further clarity on the new reciprocal tariff rates announced by the US administration last week, as the White House released a full list of the modified rates on Thursday. It also announced that the new rates will take effect on August 7, giving partner countries a bit more time to negotiate new terms. Overall, as earlier indications suggested, Trump’s post-pause tariff rates—regardless of whether trade deals were secured—have often ended up lower than the original rates, as shown in chart 1. The largest reductions from original tariff levels have so far come from Cambodia and Vietnam. However, when looking at the steepest reductions from peak tariff rates, China stands out. It continues to benefit from a 10% tariff pause—down sharply from the triple-digit rates imposed at the height of US-China trade tensions earlier this year. On the flipside, a handful of economies—including New Zealand, the Philippines, and Brunei—are now facing modified tariff rates that are actually higher than their original Liberation Day levels. Notably, the Philippines ended up in this group despite having secured a trade deal with the US.

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**South Korea**
As for South Korea, the US reduced its tariff rate to 15% just ahead of the August 1 deadline, a significant drop from the original Liberation Day rate of 25%. In return, South Korea committed to, among other terms, $350 billion in investments into the US. Of that total, $150 billion will go specifically toward shipbuilding cooperation—supporting the entry of Korean firms into the US shipbuilding industry—while the remaining $200 billion will be directed toward semiconductors and other sectors. Similar to Japan’s arrangement, the new 15% tariff rate will also apply to South Korean auto exports, likely providing relief to the country’s automakers. As shown in chart 2, South Korea’s vehicle exports—and, by extension, its export-driven growth—have come under pressure, with more recent headwinds stemming from the broad 25% auto tariffs imposed by the US. Notably, South Korea’s dealmaking pace with the US has been considered exceptionally swift, especially given that the country had only recently undergone an administrative transition following its presidential elections, leaving limited time to initiate formal trade negotiations.

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**Thailand and Cambodia**
Moving to other parts of Asia, one of the more notable developments last week was the signing of two additional US trade deals—specifically with Thailand and Cambodia. The two countries had recently been engaged in escalating border clashes but agreed to an unconditional ceasefire after mediation by Malaysia and the US. In reality, tensions between Thailand and Cambodia had been simmering for some time, likely driving in part the heightened uncertainty shown in chart 3, though other factors may have played a role. Notably, US President Trump stated that he had made it clear to both governments that no trade deal would be considered while they remained in conflict—an ultimatum that may have incentivized both sides to pursue de-escalation. Ultimately, US trade deals with both countries were announced, reducing their tariff rates from the original Liberation Day level of 36% to 19%. This illustrates how the US approach to dealmaking goes beyond trade, sometimes factoring in broader geopolitical considerations as well.

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**Malaysia**
Touching further on Malaysia, which played a key role in mediating the Thailand-Cambodia conflict mentioned earlier, a last-minute US-Malaysia trade deal also materialized shortly after the agreements with Thailand and Cambodia were hinted at. Under the new terms, Malaysia’s tariff rate was reduced to 19%, down from the original 24%. Malaysian Trade Minister Zafrul described the deal as a “win-win,” noting that Malaysia has either reduced or eliminated tariffs on nearly all American products. Notably—and perhaps offering some interim relief—Malaysia also secured tariff exemptions for its exports of semiconductors and pharmaceuticals. This is especially significant, as semiconductor exports account for a substantial share of Malaysia’s shipments to the US, as shown in chart 4.

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**Japan**
Turning to Japan, the recent US-Japan trade deal appears to have averted the worst for now. However, many key details remain unclear, particularly regarding Japan’s reported $550 billion investment into the US. While the headline figure is striking, Japan’s chief trade negotiator, Akazawa, later clarified that only 1–2% of the amount would constitute actual investment, with the remainder largely consisting of loans. More critically, the deal—like several other recent US-Asia trade agreements—was not accompanied by formal documentation, leaving its terms vague and, perhaps more concerning, open to future revision. These loose ends present ongoing risks to US-Japan economic relations and could potentially unwind recent market gains driven by trade optimism, as uncertainty remains and may yet resurface (see chart 5). This lingering uncertainty likely contributed to the Bank of Japan’s decision to hold its policy rate steady last week. The central bank adopted a wait-and-see approach before considering further rate hikes, while notably revising its inflation forecasts upward and presenting a slightly improved growth outlook for the fiscal year.

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**China**
Amid the recent flurry of US trade deals, one critical issue that may have slipped from the spotlight—but remains central to the global outlook —is China. Ongoing discussions between the two countries aim to extend China’s current tariff pause. If talks break down, US Treasury Secretary Scott Bessent has warned that the existing 10% tariff on Chinese exports could “boomerang” back to its previously exorbitant levels. This could potentially drive the US effective import tariff rate on China well above its already-elevated levels, as shown in chart 6. Meanwhile, the recent reversal of export restrictions by the US on Nvidia’s H20 AI chips may have brought temporary relief to China’s AI sector. However, Chinese authorities have raised national security concerns over the chips’ built-in tracking features and potential remote shutdown capabilities—adding yet another layer of complexity to the already tense US-China trade relationship and broader economic rivalry.

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Asia

Economic Letter from Asia: New Duty Roster

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Nonfarm payrolls increased 73,000 during July after rising 14,000 in June, revised from 147,000, and 19,000 in May, revised from 144,000. Expectations had been for a 102,000 rise in the Action Economics Forecast Survey. The three-month average change in payrolls of 35,000 compared to 64,000 in June. The Bureau of Labor Statistics indicates that monthly revisions result from additional reports received from businesses and government agencies since the last published estimates.

Average hourly earnings rose an expected 0.3% during July after unrevised gains of 0.2% and 0.4% in June & May. Earnings growth of 3.9% y/y is little changed over twelve months, but has been trending lower from its 5.9% high in March 2022.

The unemployment rate, measured in the household survey, edged up m/m to an expected 4.2% from 4.1% and compared to 4.2% in the previous three months. It reached a low of 3.4% in April 2023. The unemployment rate, including employees working part-time for economic reasons plus all marginally-attached workers, rose to 7.9% last month from 7.7% In June. It was 6.6% in April 2023.

In the **establishment survey**, private-sector employment in July rose 83,000, factory sector jobs declined 11,000, off for the third straight month. Construction sector employment increased 2,000, after rising 3,000 in June. The number of mining & logging industry jobs declined 4,000 after falling in both of the prior two months. 

Private service sector employment increased 96,000 July after improving 16,000 in June. Increases varied greatly amongst service sector categories. Private education & health sector employment rose 79,000 last month, following a 52,000 increase in June. The number of trade, transportation & utilities jobs gained 11,000, following a 22,000 decline and financial activities employment improved 15,000 after a 2,000 drop, while leisure & hospitality employment rose just 5,000 after a 4,000 gain. The number of professional & business services jobs fell 14,000, down for the third straight month.  Information sector employment fell 2,000, after holding steady in June.

Government sector payrolls declined 10,000 last month and revered June’s 11,000 rise. Federal government employment weakened 12,000 and has fallen for six straight months. Local government employment eased 3,000 after rising 10,000 in June while state government payrolls rose 5,000 after increasing 10,000.

Private-sector average hourly earnings rose 0.3% (3.9% y/y) in July. Earnings in the goods-producing sector edged up 0.1% (3.6% y/y). In construction, earnings rose 0.2% (3.7% y/y) following a 0.4% rise, but factory sector earnings eased 0.1% (+3.6% y/y). In the service sector, earnings rose 0.4% (4.0% y/y) in July after increasing 0.2% in June.

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The length of the average workweek rose to 34.3 hours in July from 34.2 hours in June. The workweek in the goods-producing sector lengthened to 39.9 hours from 39.7 hours. The construction sector average workweek rose to 39.1 hours from 38.9 while the factory sector workweek held steady at 40.1 hours. The average workweek in the private service sector edged up to 33.2 hours from 33.1 hours.

In the **household survey**, the unemployment rate increased to 4.2% in July after falling to 4.1% as employment fell 260,000 after rising 93,000 in June and the size of the labor force declined 38,000, off for the third straight month. The labor force participation rate eased to 62.2% last month from 62.3% and remained below the high of 63.3% early in 2020. The rate for teenagers declined to 35.0%, after plunging to 35.1%. For workers aged 20-24, the rate declined to 70.9%. For workers aged 25-54, the participation rate eased to 83.4%. For individuals 55 and over, the rate improved slightly to 38.1% but remained near a 20-year low of 38.0% in June.

The employment/population ratio for all workers slipped to 59.6% last month. It remained below the peak reading of 61.1% in February, 2020 just prior to the pandemic. For men, the rate fell to 64.7% in July from 64.9% and for women, the rate eased to 54.7% from 54.8% in June.

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's **USECON** database. Detailed figures are in the **EMPL** and **LABOR** databases. The expectations figures are in the **AS1REPNA** database.

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- Recent job growth reduced by fewer factory & government jobs.
- Earnings gain remains steady y/y.
- Jobless rate reverses June decline.

U.S. Employment Report Shows Weakness in July, While Revisions Reduce Earlier Gains; Jobless Rate Picks Up

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U.S. light vehicle sales increased 7.6% (6.0% y/y) to 16.87 million units (SAAR) in July after falling 0.3% to 15.68 million units in June. The gain followed three straight months of decline. The improvement in July vehicle sales accompanied a 1.7% y/y rise in real disposable income through June, which compared to 2.1% growth last year.

Increases in sales were broad-based last month. Light truck sales rose 7.7% (10.0% y/y) in July to 14.02 million units, after easing 0.2% to 13.02 million in June and weakening 8.7% in May to 13.04 million. Purchases of domestically-made light trucks improved 7.1% (12.0% y/y) to 10.79 million units, after falling 1.0% in June to 10.07 million. Sales of imported light trucks rose 9.8% (3.8% y/y) to 3.24 million units, following a 3.9% rise in June.

Trucks’ record 83.1% share of the light vehicle market last month compared to 83.0% in June and 80.1% in July of last year. The share averaged 80.3% during all of 2024 versus 53.3% ten years earlier.

Auto sales rose 6.4% last month, down 9.8% y/y, to 2.84 million units (SAAR) following a 0.4% June decline. Purchases of domestically-produced cars rebounded 10.1% (-6.4% y/y) last month to 2.18 million units, after declining 2.5% in June. Sales of imported autos fell 2.9% (-20.5% y/y) to 0.66 million units, after a 4.6% June gain.

Imports' 23.1% share of the U.S. light vehicle market edged down from 23.2% in June. These compare to a May 2023 low of 22.9% and a high of 26.3% in November of 2023. Imports' share of the passenger car market fell to 23.2% last month and compared to 26.4% in July of last year. It reached a high of 38.7% in September 2021. Imports' share of the light truck market rose to 23.1% last month after rising to 22.7% in June.

U.S. vehicle sales figures can be found in Haver's **USECON** database. Additional detail by manufacturer is in the **INDUSTRY** database.

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- Both light truck and auto sales recover.
- Domestic and imports each increase.
- Imports' market share steadies.

U.S. Light Vehicle Sales Rebound in July

Winnie Tapasanun

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The ISM U.S. manufacturing PMI fell to 48.0 in July from 49.0 in June and 48.5 in May, according to the Institute for Supply Management. The July manufacturing PMI, below the 50 expansion-contraction dividing line, indicated that the U.S. manufacturing sector contracted for the fifth consecutive month and to the lowest level since October 2024. The July reading, while slightly higher than a low of 46.9 in October and 47.0 in July of last year, was below its recent high of 50.9 in January and a peak of 63.8 in March 2021. A reading of 49.5 for July had been expected in the Action Economics Forecast Survey.

The production index rose to 51.4 in July after rising to 50.3 in June, suggesting production expanded for the second successive month and to the highest level since January; it was up from its most recent low of 44.0 in April but slightly below a high of 53.7 in March 2024. Twenty percent (NSA) of respondents reported higher production in July while 19.2% reported lower.

The new orders index increased to 47.1 in July after falling to 46.4 in June, indicating new orders contracted for the sixth straight month but at a slightly less severe pace. The Index, while below its recent high of 55.1 in January, was up from a low of 42.7 in January 2023. Nearly nineteen percent (NSA) of respondents reported higher new orders in July while 25.9% reported declines. The inventories index, however, fell to 48.9 in July after rising to 49.2 in June, showing inventories contracted for the third consecutive month. The index was down from its recent high of 53.4 in March and a high of 56.5 in July 2022. Meanwhile, the supplier deliveries index fell to 49.3 in July from 54.2 in June, indicating faster delivery performance following seven straight months in slower territory. An 8.7% (NSA) of respondents reported slower delivery speeds in July while an increased 10.2% reported faster speeds.

On the labor front, the employment index fell to 43.4 in July after falling to 45.0 in June, indicating employment contracted for the sixth straight month and to the lowest level since June 2020. The index was down from its recent high of 50.3 in January and a high of 56.5 in March 2022. A 12.6% (NSA) of respondents reported higher employment in July while an increased 25.0% reported less hiring.

On the pricing front, the prices paid index declined to 64.8 (NSA) in July after rising to 69.7 in June, indicating raw materials prices rose for the 10th straight month but at the slowest rising rate since February. The July index remained well above a low of 39.4 in December 2022 but meaningfully below a high of 87.1 in March 2022 and a peak of 92.1 in June 2021. A decreased 35.4% (NSA) of respondents reported higher prices in July while 5.8% reported price declines.

In other ISM series not included in the composite index, the new export orders index slipped to 46.1 in July after increasing to 46.3 in June, indicating new export orders contracted for the fifth straight month. It was down from its recent high of 52.4 in January and a high of 57.1 in February 2022. The imports index edged up to 47.6 in July after rising to 47.4 in June, remaining at a contraction level for the fourth consecutive month; it was down from its recent high of 52.6 in February and a high of 55.4 in February 2022. The order backlog index increased to 46.8 (NSA) in July after declining to 44.3 in June, indicating falling backlog levels since October 2022. It was up from a low of 37.5 in May 2023 but down from a peak of 70.6 in May 2021.

The ISM figures are based on responses from over 400 purchasing and supply executives from 18 industries, which are weighted according to each industry’s contribution to GDP. These data are diffusion indexes where a reading above 50 indicates expansion; below 50 indicates contraction. The ISM Manufacturing PMI is a composite index based on the diffusion indexes of five of the indexes (seasonally adjusted) with equal weights: New Orders, Production, Employment, Supplier Deliveries, and Inventories. The figures from the Institute for Supply Management can be found in Haver’s **USECON** database; further detail is found in the **SURVEYS** database. The expectations number is available in Haver’s **AS1REPNA** database.

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- 48.0 in July vs. 49.0 in June; the fifth consecutive month of contraction.
- Production (51.4) expands to a six-month high.
- New orders (47.1) contract for the sixth successive month.
- Employment (43.4) contracts to the lowest level since June ’20.
- Prices Index (64.8) indicates prices rise for the 10th straight month; exports & imports contracting.

Economy in Brief: August 2008

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