Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090804d.jpg" width="353">
The rebound in housing activity grew stronger last month as mortgage rates remained low. The National Association of Realtors reported that June pending sales of existing homes jumped 3.6% from May to their highest level since June of 2007. The gain easily outpaced Consensus expectations for a slight 0.6% increase in monthly sales.
Home sales rose last month in each of the country&#39;s regions, but they surged in the South and the West. In the South, sales jumped 7.1% m/m to lift them nearly nine percent from June of 2008. In the West, sales also were strong and posted a 7.1% gain. Though strong last month, sales have meandered sideways for the last year. In the Northeast, sales ticked up just 0.4% from May. That followed strong gains during three of the prior four months and left them at their highest in two years. Finally, sales in the Midwest also rose but by a slight 0.8% m/m; nevertheless, they were at their highest level since 2007.
These home sales figures are analogous to the new home sales data from the Commerce Department in that they measure existing home sales when the sales contract is signed, not at the time the sale is closed. The series dates back to 2001.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090804e.jpg" width="353">
The latest monthly gains in home sales have been accompanied by improvement in prices. The median sales price of an existing home increased 4.1% in June (-15.4% y/y) and prices have risen 7.1% since December. That latest increase reduced the affordability index of a home but it nevertheless remained up by 29.9% year-to-year and by three-quarters from the 2006 low. The median price of an existing home rose to $181,600 (-15.0% y/y) and the average mortgage rate was 5.2%, down from 6.3% one year ago.
The Realtors Association indicated in an earlier report that the number of homes on the market and available for sale slipped m/m and was down 14.9% versus one year earlier. At the current sales rate, there was a 9.4 months&#39; supply of homes on the market which was near the lowest since June 2007. However, it still was up from the 8.9 months supply during all of 2007 and 6.5 months during 2006. At the high, there was a 10.4 months supply during all of last year.
The pending home sales data are available in Haver&#39;s PREALTOR database. The number of homes on the market and prices are in the REALTOR database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Pending Home Sales (2001=100)&nbsp;</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>94.6</td>
<td>91.3</td>
<td>&nbsp;&nbsp; 6.7%</td>
<td>86.8</td>
<td>95.8</td>
<td>112.1&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>81.2</td>
<td>80.9</td>
<td>5.9</td>
<td>72.6</td>
<td>85.6</td>
<td>98.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Midwest</td>
<td>89.9</td>
<td>89.2</td>
<td>11.5</td>
<td>80.6</td>
<td>89.5</td>
<td>102.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>100.7</td>
<td>94.0</td>
<td>8.9</td>
<td>89.8</td>
<td>107.3</td>
<td>127.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; West</td>
<td>100.4</td>
<td>97.6</td>
<td>-0.2</td>
<td>99.3</td>
<td>92.1</td>
<td>109.5</td>
</tr>
</tbody>
</table>
</body>
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The rebound in housing activity grew stronger last month as mortgage rates remained low. The National Association of Realtors reported that June pending sales of existing homes jumped 3.6% from May to their highest level since June of [...]

U.S. Pending Home Sales Rise To The Highest Level In Two Years

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090804a.jpg" width="353">
As &quot;automatic stabilizers&quot; vanished, June personal income reversed all of the prior month&#39;s jump with a 1.3% decline. Government payments to individuals dropped 6.0% as &quot;other&quot; stimulus payments reversed the May gain with a 16.5% decline (-7.3% y/y). As might be expected, wages &amp; salaries, remained under pressure with the weak job market. The 0.4% decline from May was the ninth decline in the last ten months (-4.7% y/y). In the goods producing industries, wages have been particularly hard hit and are down 11.4% y/y. In addition, the decline in interest rates has taken its toll on interest income which in June was off 3.7% y/y while fewer dividends were paid by the corporate sector (-24.4% y/y). These latest figures reflect benchmark revisions which generally lowered income and the June decline roughly matched Consensus expectations for a 1.0% drop.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090804b.jpg" width="353">
With lower income came lower taxes. Tax payments fell 1.5% last month and they were down by nearly one-quarter since December. Nevertheless, disposable personal income fell 1.3% last month. So far this year disposable income has risen at a 1.7% annual rate which very much reflects sharp downward revisions to earlier figures. Adjusted for inflation, real disposable income also reversed the May gain and fell 1.8%. Revisions dropped growth in real take-home pay to a negative 0.4% since December whereas earlier figures showed firm growth.
Whatever it takes, consumers have attempted to rebuild their balance sheets. Though the personal savings rate backpedaled last month with the income drop, the 4.6% figure was near the highest since 1998 despite the downward income revisions.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090804c.jpg" width="353">
Restraint on spending has driven the rise in savings. June personal consumption expenditures about matched expectations and rose just 0.4%. They are up 2.5% at a annual rate so far this year. However, that growth largely reflects the rise in gasoline prices. Adjusted for inflation, June spending slipped 0.1% and so far this year it is up at just a 0.4% annual rate. (The details behind this restraint will be available later this week.)
Pricing power continues to held back by sluggish spending. The PCE chain price index rose 0.5% last month, largely due to the rise in energy prices. Less food and energy prices rose just 0.2%. Combined with weakness during prior months, the y/y gain in core prices dropped to 1.5% which was its lowest since 2003. The latest increase in prices matched Consensus expectations.
The personal income &amp; consumption figures are available in Haver&#39;s USECON and USNA databases.
Bank Supervision is today&#39;s Senate testimony by Fed Governor Daniel K. Tarullo and it can be found <a href="http://www.federalreserve.gov/newsevents/testimony/tarullo20090804a.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a> (%)&nbsp;</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>-1.3</td>
<td>1.3</td>
<td>-3.4</td>
<td>2.9</td>
<td>5.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Disposable Personal Income</td>
<td>-1.3</td>
<td>1.6</td>
<td>-1.3</td>
<td>3.9</td>
<td>4.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption Expenditures</td>
<td>0.4</td>
<td>0.1</td>
<td>-2.2</td>
<td>3.1</td>
<td>5.4</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>4.6</td>
<td>6.2</td>
<td>3.5 (June &#39;08)</td>
<td>2.6</td>
<td>1.7</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>0.5</td>
<td>0.1</td>
<td>-0.4</td>
<td>3.3</td>
<td>2.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.2</td>
<td>0.1</td>
<td>1.5</td>
<td>2.4</td>
<td>2.4</td>
</tr>
</tbody>
</table>
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As "automatic stabilizers" vanished, June personal income reversed all of the prior month's jump with a 1.3% decline. Government payments to individuals dropped 6.0% as "other" stimulus payments reversed the May gain with a 16.5% [...]

U.S. Personal Income Reverses Large May Gain While Savings Rate Tumbles

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090803h.jpg" align="right" border="0" height="265" width="353">
The U.S. government's "Cash for Clunkers" program was given
credit for supporting sales of light vehicles last month. The program
gives car buyers up to $4,500 for trading in older, gas-guzzling
vehicles if they're buying more fuel efficient cars. The Treasury Dept.
was authorized to spend $1 billion and an additional $2 billion
currently is under consideration by the Senate. The House passed its
approval of the plan on Friday. One estimate is that, just last week,
the program helped spike vehicle sales to a 15-to-16 million annual
rate. Regardless of the program's impact, U.S. light vehicle
sales last month jumped 15.8% <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090803i.jpg" align="right" border="0" height="265" width="353">
from June to 11.24 million
units (AR) which was the highest sales rate since last September. It
followed a 1.6% decline during June. While sales were firm last month,
they remained down by nearly one-third, year-to-date, from the first
seven months of 2008. (Benchmark revisions altered sales levels
slightly back to 2002.)
Unit sales of U.S. made light vehicles
jumped 15.8% m/m to 8.17M units during July which was their highest
since last September, according to the Autodata Corporation. (Seasonal
adjustment of the figures is provided by the U.S. Bureau of Economic
Analysis). Sales of domestically made cars jumped 25.4% m/m to 4.11M
units while light truck sales rose 7.4% m/m to 4.06M units. YTD, sales
of domestic vehicles overall are down 33.6% following last year's 35.8%
drop from December-to-December.
In similar fashion, sales of imported light vehicles<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090803j.jpg" align="right" border="0" height="265" width="353">
were strong and rose 16.0% m/m during July from June. Sales of imported
autos rose 18.3% from June and were at their highest level since last
August. Sales of imported light trucks were nearly as strong m/m, up
11.3% from June, but they've really been strong all year rising to
their highest just since March. Sales of imported vehicles YTD have
increased 12.5%.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090803k.jpg" align="right" border="0" height="265" width="353">
Overall, import's share of the U.S. light
vehicle market held steady at 27.3% last month after reaching 26.5%
during all of last year. (Imported vehicles are those produced outside
the United States.) Imports' share of the U.S. car market totaled 33.7%
while the share of the light truck market was 19.5%, up slightly from
last year.
The U.S. vehicle sales figures can be found in Haver's
USECON database.

<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/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">May</th>
<th scope="col">July Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>11.24</td>
<td>9.70</td>
<td>9.86</td>
<td>-11.4%</td>
<td>13.17</td>
<td>16.16</td>
<td>16.54</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>6.20</td>
<td>5.04</td>
<td>4.89</td>
<td>-10.7</td>
<td>6.71</td>
<td>7.58</td>
<td>7.77</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Domestic</td>
<td>4.11</td>
<td>3.28</td>
<td>3.19</td>
<td>-7.0</td>
<td>4.42</td>
<td>5.07</td>
<td>5.31</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Imported</td>
<td>2.09</td>
<td>1.76</td>
<td>1.71</td>
<td>-17.3</td>
<td>2.29</td>
<td>2.52</td>
<td>2.45</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Light Trucks</td>
<td>5.04</td>
<td>4.66</td>
<td>4.37</td>
<td>-12.2</td>
<td>6.47</td>
<td>8.60</td>
<td>8.78</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Domestic</td>
<td>4.06</td>
<td>3.78</td>
<td>4.05</td>
<td>-12.6</td>
<td>5.29</td>
<td>7.10</td>
<td>7.42</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Imported</td>
<td>0.98</td>
<td>0.88</td>
<td>0.92</td>
<td>-10.4</td>
<td>1.18</td>
<td>1.47</td>
<td>1.37</td>
</tr>
</tbody>
</table>
</body></html>

The U.S. government's "Cash for Clunkers" program was given credit for supporting sales of light vehicles last month. The program gives car buyers up to $4,500 for trading in older, gas-guzzling vehicles if they're buying more fuel [...]

U.S. Light Vehicle Sales Benefit From "Cash For Clunkers" Program

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090803g.jpg" align="left" border="0" height="265" width="353">
Cash earnings, including bonuses, for Japanese workers in all
establishments of 5 or more persons were 430,620 Yen (approximately
$4,500) in June, 8% below a year ago. The sharp decline was due to
lower bonuses and less overtime pay. The average bonus in June of this
year was 167,044 yen compared with 197,226 yen last June, a decline of
more than 15%. Overtime pay was 15,725 yen compared with 19,275 yen a
year ago, a decline of 18.42% and, although the decline was small, even
base pay declined 1.4% to 247,851 yen from 251,437 yen a year ago.
Cash earnings in the manufacturing industry in establishments
of 5 or more persons were down over 13% in June. Again, bonuses were
the major cause of the decline. Bonuses in Manufacturing were 155,298
yen in June 2009, compared with 209,309 yen in June 2008, a drop of
almost 40%. In contrast to industry as a whole, manufacturing saw an
increase in base pay of 1.5% and an increase of 5.7% in overtime from
May to June.
Total cash wages for all surveyed industries and for
manufacturing are shown in the attached 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">Japan
Wages (Average monthly data in yen)</th>
<th scope="col">Jun 09</th>
<th scope="col">May&nbsp; 09</th>
<th scope="col">Jun 08</th>
<th scope="col">M/M %&nbsp;</th>
<th scope="col">Y/Y %</th>
<th scope="col">2008&nbsp;</th>
<th scope="col">2007 </th>
<th scope="col"> 2006 </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol" colspan="9">All
Industries</td>
</tr>
<tr class="odd">
<td class="firstcol">Schedule wages</td>
<td>247851</td>
<td>242451</td>
<td>251437</td>
<td>1.39</td>
<td>-1.43</td>
<td>251069</td>
<td>249749</td>
<td>252809</td>
</tr>
<tr class="odd">
<td class="firstcol">Overtime</td>
<td>15725</td>
<td>15940</td>
<td>19275</td>
<td>-1.35</td>
<td>-18.42</td>
<td>19147</td>
<td>19753</td>
<td>19805</td>
</tr>
<tr class="odd">
<td class="firstcol">Total=Contractual
Wages&nbsp;</td>
<td>263576</td>
<td>260391</td>
<td>270712</td>
<td>1.22</td>
<td>-2.64</td>
<td>270515</td>
<td>2695B02</td>
<td>272614</td>
</tr>
<tr class="odd">
<td class="firstcol">Bonuses</td>
<td>167044</td>
<td>7928</td>
<td>197226</td>
<td>n.m.</td>
<td>-15.30</td>
<td>60538</td>
<td>60396</td>
<td>62844</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Cash Wages</td>
<td>430620</td>
<td>268319</td>
<td>467938</td>
<td>n.m</td>
<td>-7.97</td>
<td>331053</td>
<td>329898</td>
<td>335438</td>
</tr>
<tr class="even">
<td class="firstcol" colspan="9">Manufacturing</td>
</tr>
<tr class="odd">
<td class="firstcol">Schedule wages</td>
<td>267443</td>
<td>263356</td>
<td>269229</td>
<td>1.55</td>
<td>-0.66</td>
<td>267625</td>
<td>265482</td>
<td>271803</td>
</tr>
<tr class="odd">
<td class="firstcol">Overtime</td>
<td>19424</td>
<td>18351</td>
<td>31988</td>
<td>5.69</td>
<td>-39.28</td>
<td>30963</td>
<td>33025</td>
<td>34168</td>
</tr>
<tr class="odd">
<td class="firstcol">Total=Contractual
Wages&nbsp;</td>
<td>286867</td>
<td>281737</td>
<td>301217</td>
<td>1.82</td>
<td>-4.76</td>
<td>298588</td>
<td>298507</td>
<td>305972</td>
</tr>
<tr class="odd">
<td class="firstcol">Bonuses</td>
<td>155298</td>
<td>5836</td>
<td>209309</td>
<td>n.m.</td>
<td>-25.80</td>
<td>75644</td>
<td>75664</td>
<td>59515</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Cash Wages</td>
<td>442165</td>
<td>287573</td>
<td>510526</td>
<td>n.m.</td>
<td>-13.39</td>
<td>374231</td>
<td>374171</td>
<td>385487</td>
</tr>
<tr>
<td colspan="9" class="firstcol">N.M.
presented in the table
is&nbsp; because of the distortions in the monthly data due to the
distribution of Bonuses in mid and end years, the month to month data
for bonuses and total cash wages are not meaningful</td>
</tr>
</tbody>
</table>
</body></html>

Cash earnings, including bonuses, for Japanese workers in all establishments of 5 or more persons were 430,620 Yen (approximately $4,500) in June, 8% below a year ago. The sharp decline was due to lower bonuses and less overtime pay. [...]

Japanese Wages Continue To Decline In June

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090803d.jpg" align="left" border="0" height="265" width="353">
The FACT: German ex-auto retail sales fell
sharply in June, the second sharp drop in a row after posting a strong
gain in April. 
 

THE REVERSAL: After a terrible January
German non-auto retail sales have been on a nice strong recovery path
as sales cut their decline of over 1% (m/m) in January to drop of -0.2%
in February then rose in March and rose strongly in April by 1.8%. That
was before this new episode in which they have posted back to back
large drops in May and in June. 
 

THE IMPACT: Despite the disappointing
numbers in the last two months, earlier increases will hold retail
sales ex-autos flat in real terms; the nominal numbers will rise by
1.7% at an annual rate in Q2. 
 

THE PARADOX: The retail sales report was a
bitter one for June and it comes in a day that Europe-wide and German
MFG PMI results we better-than-expected. The EMU report registered its
second highest month-to-month gain in its relatively modest history-
still an impressive jump. The German MFG reading rose to 45.7 on its
largest point gain ever, reaching a ten-month high, although still
indicating a declining state. All of that is impressive. 
 

THE UPSHOT: So the day&#8217;s reports are mixed.
In Europe and in Germany manufacturing is making a strong step toward
recovery. Still, the level of the reading tells us that the strong
month-to-month improvement leaves industry output contracting. The
retailing sector that had begun to look like it was in a state of
repair is now looking much worse. While the quarter will not end too
badly for German retail sales that is because of past strength. The
recent collapse in retail sales should be a warning to policymakers
about complacency &#8211; even in the face of a manufacturing turnaround that
is in progress. 
 

THE FUTURE: The new bout of retail weakness
puts retail sales in a deep hole from which to start off in 2009-Q3.
For example if German retail sales do not rise in July they will carry
a growth rate off the previous quarter of -6.4% at annual rate in Q3
over Q2. This is a big inherited weakness that is unlikely to spur any
increase in the output of consumer goods in Germany &#8211; setting aside the
auto sector where special incentives are having a positive impact. The
optimistic spin here is that all of consumer attention is going into
the auto incentives and that is leaving other retail behind. Things may
not be as weak as they seem by looking at non-auto retail sales alone.
That may be true, but that is only a matter of solace if attention and
spending in the non-auto sector turns up, because it is starting off Q3
in a really deep hole. The auto sales revival in Q2 will only make it
that much more difficult to get Q3 sales higher. In other words if the
auto incentives don&#8217;t stay in place and do not continue to have a
strong positive impact, German overall retail sales will become a heavy
negative weight on German GDP in Q3. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> German
Real and Nominal Retail
Sales
</th>
<th scope="col">QTR</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp; Nominal</td>
<td>Jun-09</td>
<td>May-09</td>
<td>Apr-09</td>
<td>3-MO</td>
<td>6-MO</td>
<td>12-MO</td>
<td>Year Ago</td>
<td>Saar</td>
</tr>
<tr>
<td class="firstcol">Retail Ex auto</td>
<td>-1.6%</td>
<td>-1.4%</td>
<td>1.8%</td>
<td>-4.7%</td>
<td>-3.9%</td>
<td>-2.2%</td>
<td>1.6%</td>
<td>1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="9">&nbsp;
Real</td>
</tr>
<tr>
<td class="firstcol">Retail Ex auto</td>
<td>-1.8%</td>
<td>-1.3%</td>
<td>1.4%</td>
<td>-6.9%</td>
<td>-5.5%</td>
<td>-1.9%</td>
<td>-1.7%</td>
<td>0.0%</td>
</tr>
</tbody>
</table>
</body></html>

The FACT: German ex-auto retail sales fell sharply in June, the second sharp drop in a row after posting a strong gain in April. THE REVERSAL: After a terrible January German non-auto retail sales have been on a nice strong recovery [...]

German Retail Sales Take A Dive - Without The Swan

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090803e.jpg" width="353">
It&#39;s been a long time coming, but a bottoming of the two-year decline in construction outlays arrived in 2008. During June, the value of overall construction put-in-place ticked up 0.3% after a little-revised 0.8% May slip, and the latest beat expectations for a 0.5% decline. More to the point, however, was that outlays through June versus January fell just 2.1% (AR) versus the 9.9% three-month rate of decline through January.
Private nonresidential building outlays continued to support overall construction activity. Though the monthly increases so far this year have been small, the gains versus January lead to an 8.6% annual rate of growth and that reverses the decline through the beginning of this year.Spending in virtually all sectors has turned positive, notably in the education, health care and transportation areas. The rate of decline in office construction also has moderated but still is quite negative.
The best that can be pointed out about residential building activity is that there was a 0.5% uptick in June, but that only lessened the negative growth rate this year to -25.9%, half that at its worst. Single-family home construction is down by nearly half from its January level while multi-family construction fell the same 7% it did did in May (-33.1% y/y).Spending on improvements reversed all of a 1.2% May decline and have risen at a 12.3% annual rate since January.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090803f.jpg" width="353">
Public construction activity was firm again during June and the 1.0% gain lifted spending since January at quite-strong 17.9% rate since January. The increase has been led by strong gains in the heath care (24.0% y/y), educational (4.6% y/y) and transportation (+1.0% y/y) areas.
The construction put-in-place figures are available in Haver&#39;s USECON database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Construction (%)</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.3</td>
<td>-0.8</td>
<td>-10.2</td>
<td>-6.9</td>
<td>-1.6</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>-0.1</td>
<td>-1.4</td>
<td>-16.3</td>
<td>-11.1</td>
<td>-5.7</td>
<td>5.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>0.5</td>
<td>-3.1</td>
<td>-30.0</td>
<td>-29.1</td>
<td>-19.7</td>
<td>1.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-0.5</td>
<td>-0.4</td>
<td>-4.8</td>
<td>13.2</td>
<td>23.1</td>
<td>16.2</td>
</tr>
<tr>
<td class="firstcol">Public</td>
<td>1.0</td>
<td>0.4</td>
<td>5.1</td>
<td>5.6</td>
<td>13.1</td>
<td>9.3</td>
</tr>
</tbody>
</table>
</body>
</html>

It's been a long time coming, but a bottoming of the two-year decline in construction outlays arrived in 2008. During June, the value of overall construction put-in-place ticked up 0.3% after a little-revised 0.8% May slip, and the [...]

Bottoming Of U.S. Construction Spending Evident For A Fifth Month

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<body>
 




<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090803a.jpg" align="right" border="0" height="265" width="353">Though
overall activity declined again last month, the recession in the
factory sector continued to moderate, according to The National
Association of Purchasing Management. Its July composite index rose to
48.9 from an unrevised June reading of 44.8 and reached it's highest
level since August of last year. The August figure was up from the low
of 32.9 hit last December. (Any reading below the break-even point of
50 suggests declining activity.) The July figure about matched
Consensus expectations. The ISM data is available in Haver's USECON
database. Improvement in the components of the overall
June ISM index again was broad-based. The production component surged
to 57.9, up from the low of 26.3 in December, and was at its highest
since June of 2007. During the last ten years there has been an 84%
correlation between the level of the production component of the
composite index and the three-month growth in factory sector industrial
production. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090803b.jpg" align="right" border="0" height="265" width="353">
It is appropriate to correlate the ISM index level
with factory sector output growth because the ISM
index is a diffusion index. It measures growth by using all of the
positive changes in activity added to one half of the zero change in
activity measures.· The new orders figure also jumped sharply
to the highest level in nearly two years. At 55.3 it was up from the
December low of 23.1. Suggesting some stabilization in the recessions
abroad was a modest rise in the export order index to 50.5 versus the
December low of 35.5. During the last ten years there has been a 53%
correlation between the index and the q/q change in real exports of
goods in the GDP accounts. Factory sector improvement also was
indicated by a rise in the employment index. The jump to 45.6 was to
its highest level since last August and that was up from the February
low of 26.1. During the last ten years there has been a 90% correlation
between the index level and the three-month change in manufacturing
payrolls.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090803c.jpg" align="right" border="0" height="265" width="353">
The rate of inventory destocking picked finally may have
stabilized as indicated by a modest rise in the inventory index to
33.5. It still was near the lowest level since 1982. That improvement
brought with it another decline in the speed of supplier deliveries. At
52.0, the vendor performance index rose for the fourth consecutive
month to its highest level in one year. The separate index of prices
paid again rose with improved factory sector activity levels. At 55.0,
the reading above the break-even level of 50 was its highest since last
August and it's up from the December low of 18.0. During the last
twenty years there has been a 79% correlation between the price index
and the three-month change in the PPI for intermediate goods. 
Below The Line: Estimates of Negative Equity Among Nonprime Mortgage
Borrowers from the Federal Reserve Bank of New York can be
found <a href="http://www.newyorkfed.org/research/epr/09v15n1/0907haug.pdf">
here</a>.&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S2/@S201/@S201.HTM">ISM
Mfg</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">June '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Index</td>
<td>48.9</td>
<td>44.8</td>
<td>49.5</td>
<td>45.5</td>
<td>51.1</td>
<td>53.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>55.3</td>
<td>49.2</td>
<td>44.9</td>
<td>42.1</td>
<td>54.3</td>
<td>55.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Employment Index</td>
<td>45.6</td>
<td>40.7</td>
<td>51.0</td>
<td>43.2</td>
<td>50.5</td>
<td>51.7</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>55.0</td>
<td>50.0</td>
<td>88.5</td>
<td>66.5</td>
<td>64.6</td>
<td>65.0</td>
</tr>
</tbody>
</table>
</body></html>

Though overall activity declined again last month, the recession in the factory sector continued to moderate, according to The National Association of Purchasing Management. Its July composite index rose to 48.9 from an unrevised June [...]

ISM Factory Sector Index Reaches Its Highest Level In Nearly One Year

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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250506M8.jpg

- 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

250506C2.jpg

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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

250506E.jpg

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 2009

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