Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071204a.jpg" align="left" border="0">
EU unemployment was steady in October as EMU unemployment
notched down one tenth of one percentage point. The chart shows that
the long steady drop in the rate of EU unemployment has hit a slowing
phase. The current rates available for the largest EMU countries show
that the tendency of the unemployment rate to drop may be slowing.
While Germany, France and Spain all post rates at 8.1%, Spain&#8217;s rate
has barely fallen in the last 12 months. Still, each of these countries
has seen some unemployment reduction in the past several months. It is
too soon to say that the drop in unemployment in Europe has stopped.
For France the drop over the past year is significant; for Germany it
has been a rather sharp drop. Spain shows signs of stalling. 
 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col">Unemployment Rate and Changes </th>

</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Level</td>
<td colspan="3">Simple Changes</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>Oct</td>
<td>Sept</td>
<td>Aug</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
</tr>
<tr>
<td class="firstcol">&nbsp; EU</td>
<td>7.0</td>
<td>7.0</td>
<td>7.1</td>
<td>-0.1</td>
<td>-0.2</td>
<td>-0.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; EMU</td>
<td>7.2</td>
<td>7.3</td>
<td>7.4</td>
<td>-0.2</td>
<td>-0.3</td>
<td>-0.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment (000s)</td>
<td colspan="3">m/m%</td>
<td colspan="3">% changes (AR)</td>
</tr>
<tr>
<td class="firstcol">&nbsp; EU</td>
<td>-0.6%</td>
<td>-0.8%</td>
<td>-0.5%</td>
<td>-1.9%</td>
<td>-3.6%</td>
<td>-10.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; EMU</td>
<td>-0.7%</td>
<td>-0.7%</td>
<td>-0.3%</td>
<td>-1.7%</td>
<td>-2.7%</td>
<td>-8.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rates</td>
<td>Oct</td>
<td>Sept</td>
<td>Aug</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Germany</td>
<td>8.1</td>
<td>8.2</td>
<td>8.3</td>
<td>-0.3</td>
<td>-0.4</td>
<td>-1.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; France</td>
<td>8.1</td>
<td>8.2</td>
<td>8.3</td>
<td>-0.2</td>
<td>-0.4</td>
<td>-0.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Spain</td>
<td>8.1</td>
<td>8.2</td>
<td>8.2</td>
<td>-0.1</td>
<td>0</td>
<td>-0.2</td>
</tr>
</tbody>
</table>

</body></html>

EU unemployment was steady in October as EMU unemployment notched down one tenth of one percentage point. The chart shows that the long steady drop in the rate of EU unemployment has hit a slowing phase. The current rates available [...]

EU Unemployment is Stable

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071203d.jpg" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071203e.jpg" height="265" width="312">

Profits of all nonfinancial Japanese corporations declined
0.7%, in the third quarter, the first year to year decline since the
second quarter of 2002. Spending on plant and equipment declined 1.2%
after having declined 4.9% in the previous quarter. Current profits and
spending on plant and equipment for all corporations are shown in the
first chart.
While total profits declined, the big loss was felt among the
mid sized corporations whose profits declined by almost 17%. Large
corporations eked out a 1.3% increase and profits among small
corporations were up almost 4%. Profits by size of corporations are
shown in the second chart.
Both mid sized and small corporations have reduced spending on
plant and equipment during the last three quarters while large
corporation have continued to report increases ever since the first
quarter of 2003, as can be seen in the third chart. Plant and equipment
spending declined 13% from a year ago in the non manufacturing
industries in the second quarter and 5% in the second quarter.
Meanwhile capital spending continued to rise in the manufacturing
industry. A comparison of year to year changes in capital spending in
the manufacturing and non manufacturing industries is shown in the
fourth chart.Note: The Quarterly Report on Incorporated Enterprises
from which these data have been taken, contain additional information
from the balance sheets and income statements of non financial
corporations. The full report is shown in Haver's JAPAN
data base under Financial.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071203f.jpg" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071203g.jpg" height="265" width="312">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">JAPAN:&nbsp;
Quarterly Report on INCORPORATED ENTERPRISES 
&nbsp; Y/Y % Chg</th>
<th scope="col">Q3 07 %</th>
<th scope="col">Q2 07 %&nbsp;</th>
<th scope="col">Q1 07 %</th>
<th scope="col">Q4 06 %</th>
<th scope="col">2006 %</th>
<th scope="col">2005 %</th>
<th scope="col">2004 %</th>
<th scope="col">2003 %</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Current
Profits:&nbsp; All&nbsp;</td>
<td>-0.7</td>
<td>12.0</td>
<td>7.4</td>
<td>5.3</td>
<td>9.1</td>
<td>11.8</td>
<td>27.7</td>
<td>12.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;
Large&nbsp; (Over 1 bil Yen)</td>
<td>1.3</td>
<td>14.0</td>
<td>7.0</td>
<td>8.9</td>
<td>15.7</td>
<td>12.37</td>
<td>28.22</td>
<td>12.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;
Mid Size (100mil&nbsp; to 1 bil Yen)</td>
<td>-16.9</td>
<td>-1.2</td>
<td>14.6</td>
<td>23.9</td>
<td>15.7</td>
<td>12.9</td>
<td>20.8</td>
<td>19.0</td>
</tr>
<tr>
<td class="firstcol"> &nbsp;&nbsp;
Small Size ( 10 to 100mil Yen)</td>
<td>3.9</td>
<td>13.48</td>
<td>5.27</td>
<td>-0.0</td>
<td>-4.0</td>
<td>10.4</td>
<td>29.6</td>
<td>9.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Plant &amp;
Equipment Spending</td>
<td>-1.2</td>
<td>-4.9</td>
<td>13.6</td>
<td>16.8</td>
<td>14.7</td>
<td>8.4</td>
<td>9.6</td>
<td>2.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;
Large&nbsp; (Over 1 bil Yen)</td>
<td>6.8</td>
<td>2.5</td>
<td>8.3</td>
<td>9.2</td>
<td>10.7</td>
<td>13.0</td>
<td>6.2</td>
<td>1.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;
Mid Size (100mil&nbsp; to 1 bil Yen)</td>
<td>-13.7</td>
<td>-3.7</td>
<td>12.6</td>
<td>19.0</td>
<td>17.5</td>
<td>5.8</td>
<td>8.5</td>
<td>-1.5</td>
</tr>
<tr>
<td class="firstcol"> &nbsp;&nbsp;
Small Size ( 10 to 100mil Yen)</td>
<td>-11.7</td>
<td>-19.9</td>
<td>30.4</td>
<td>35.0</td>
<td>23.2</td>
<td>-0.4</td>
<td>18.8</td>
<td>8.0</td>
</tr>
<tr class="odd">
<td class="firstcol">
&nbsp;Manufacturing</td>
<td>6.1</td>
<td>11.7</td>
<td>12.7</td>
<td>15.4</td>
<td>13.8</td>
<td>15.1</td>
<td>15.0</td>
<td>0.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Non
Manufacturing</td>
<td>-5.12</td>
<td>-13.1</td>
<td>14.1</td>
<td>17.7</td>
<td>15.1</td>
<td>15.2</td>
<td>8.4</td>
<td>1.8</td>
</tr>
</tbody>
</table>
</body></html>

Profits of all nonfinancial Japanese corporations declined 0.7%, in the third quarter, the first year to year decline since the second quarter of 2002. Spending on plant and equipment declined 1.2% after having declined 4.9% in the [...]

Japanese Corporations Report Lower Profits and Capital Spending

Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071203a.jpg" align="left" border="0">
For November, the Institute of Supply Management (ISM)
reported that its Composite Index of Manufacturing Sector Activity was
about unchanged from the October level. The figure of 50.8 essentially
met Consensus expectations for a reading of 50.7. Data points above 50
indicates growth in factory sector activity.
Last month's PMI figure remained the lowest since January when
industrial production in the factory sector fell 0.6% and the three
month % change in factory sector output fell to 0.4%.
During the last twenty years there has been a 64% correlation
between the level of the Composite Index and the three month growth in
factory sector industrial production.
It is appropriate to correlate the ISM index level
with factory sector growth because the ISM index
is a diffusion index. It measures growth by being constructed using all
of the absolute positive changes in activity added to one half of the
no change in activity measures.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071203b.jpg" align="right" border="0">
New orders, vendor deliveries &amp; inventories, three of
the index's five components, remained near the October level. The
employment index, however, fell sharply in November to its lowest since
2003. During the last twenty years there has been a 67% correlation
between the level of the ISM employment Index and the three month
growth in factory sector employment.
Some of that decline in employment was offset by a rise in
production.
The index of new export orders rose sharply m/m to 58.5, its
highest level since this past May. The import index conversely remained
at the October level (47.5), the lowest level since 2001. That suggests
imports declined last month.
The Unsustainable US Current Account Position
Revisited* is a 2005 National Bureau of Economic Research
working paper by Maurice Obtsfeld &amp; Kenneth Rogoff and the
abstract from it can be found <a href="http://elsa.berkeley.edu/%7Eobstfeld/NBER_final.pdf">
here</a>.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071203c.jpg" align="left" border="0">
The prices paid index again moved much higher, reflecting the
near $11 m/m surge in Brent crude oil costs, to the highest level since
July. During the last twenty years there has been a 77% correlation
between the price index and the three month change in the PPI for
intermediate goods.
Asian nations driving world oil prices
from the Federal Reserve Bank of St. Louis is available <a href="http://stlouisfed.org/publications/re/2007/b/pages/oil_prices.html">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th></th>
<th scope="col"> November</th>
<th scope="col">October</th>
<th scope="col">October'06</th>
<th scope="col"> 2006</th>
<th scope="col"> 2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td>Composite Index</td>
<td>50.8</td>
<td>50.9</td>
<td>49.9</td>
<td>53.9</td>
<td>55.5</td>
<td>60.5</td>
</tr>
<tr>
<td>&nbsp; New Orders Index</td>
<td>52.6</td>
<td>52.5</td>
<td>49.7</td>
<td>55.4</td>
<td>57.4</td>
<td>63.5</td>
</tr>
<tr class="odd">
<td>Prices Paid Index (NSA)</td>
<td>67.5</td>
<td>63.0</td>
<td>53.5</td>
<td>65.0</td>
<td>66.4</td>
<td>79.8</td>
</tr>
</tbody>
</table>
</body></html>

For November, the Institute of Supply Management (ISM) reported that its Composite Index of Manufacturing Sector Activity was about unchanged from the October level. The figure of 50.8 essentially met Consensus expectations for a [...]

ISM Index Still Low at an Expected 50.8

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071203a.jpg" align="left" border="0">
For November, the Institute of Supply Management (ISM)
reported that its Composite Index of Manufacturing Sector Activity was
about unchanged from the October level. The figure of 50.8 essentially
met Consensus expectations for a reading of 50.7. Data points above 50
indicates growth in factory sector activity.
Last month's PMI figure remained the lowest since January when
industrial production in the factory sector fell 0.6% and the three
month % change in factory sector output fell to 0.4%.
During the last twenty years there has been a 64% correlation
between the level of the Composite Index and the three month growth in
factory sector industrial production.
It is appropriate to correlate the ISM index level
with factory sector growth because the ISM index
is a diffusion index. It measures growth by being constructed using all
of the absolute positive changes in activity added to one half of the
no change in activity measures.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071203b.jpg" align="right" border="0">
New orders, vendor deliveries &amp; inventories, three of
the index's five components, remained near the October level. The
employment index, however, fell sharply in November to its lowest since
2003. During the last twenty years there has been a 67% correlation
between the level of the ISM employment Index and the three month
growth in factory sector employment.
Some of that decline in employment was offset by a rise in
production.
The index of new export orders rose sharply m/m to 58.5, its
highest level since this past May. The import index conversely remained
at the October level (47.5), the lowest level since 2001. That suggests
imports declined last month.
The Unsustainable US Current Account Position
Revisited* is a 2005 National Bureau of Economic Research
working paper by Maurice Obtsfeld &amp; Kenneth Rogoff and the
abstract from it can be found <a href="http://elsa.berkeley.edu/%7Eobstfeld/NBER_final.pdf">
here</a>.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071203c.jpg" align="left" border="0">
The prices paid index again moved much higher, reflecting the
near $11 m/m surge in Brent crude oil costs, to the highest level since
July. During the last twenty years there has been a 77% correlation
between the price index and the three month change in the PPI for
intermediate goods.
Asian nations driving world oil prices
from the Federal Reserve Bank of St. Louis is available <a href="http://stlouisfed.org/publications/re/2007/b/pages/oil_prices.html">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th></th>
<th scope="col"> November</th>
<th scope="col">October</th>
<th scope="col">October'06</th>
<th scope="col"> 2006</th>
<th scope="col"> 2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td>Composite Index</td>
<td>50.8</td>
<td>50.9</td>
<td>49.9</td>
<td>53.9</td>
<td>55.5</td>
<td>60.5</td>
</tr>
<tr>
<td>&nbsp; New Orders Index</td>
<td>52.6</td>
<td>52.5</td>
<td>49.7</td>
<td>55.4</td>
<td>57.4</td>
<td>63.5</td>
</tr>
<tr class="odd">
<td>Prices Paid Index (NSA)</td>
<td>67.5</td>
<td>63.0</td>
<td>53.5</td>
<td>65.0</td>
<td>66.4</td>
<td>79.8</td>
</tr>
</tbody>
</table>
&nbsp;Japanese Corporations
Report Lower Profits and Capital Spending&nbsp; 
by <a href="/comment/Curley.html">Louise
Curley</a> December 3, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071203d.jpg" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071203e.jpg" height="265" width="312">

Profits of all nonfinancial Japanese corporations declined
0.7%, in the third quarter, the first year to year decline since the
second quarter of 2002. Spending on plant and equipment declined 1.2%
after having declined 4.9% in the previous quarter. Current profits and
spending on plant and equipment for all corporations are shown in the
first chart.
While total profits declined, the big loss was felt among the
mid sized corporations whose profits declined by almost 17%. Large
corporations eked out a 1.3% increase and profits among small
corporations were up almost 4%. Profits by size of corporations are
shown in the second chart.
Both mid sized and small corporations have reduced spending on
plant and equipment during the last three quarters while large
corporation have continued to report increases ever since the first
quarter of 2003, as can be seen in the third chart. Plant and equipment
spending declined 13% from a year ago in the non manufacturing
industries in the second quarter and 5% in the second quarter.
Meanwhile capital spending continued to rise in the manufacturing
industry. A comparison of year to year changes in capital spending in
the manufacturing and non manufacturing industries is shown in the
fourth chart.Note: The Quarterly Report on Incorporated Enterprises
from which these data have been taken, contain additional information
from the balance sheets and income statements of non financial
corporations. The full report is shown in Haver's JAPAN
data base under Financial.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071203f.jpg" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071203g.jpg" height="265" width="312">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">JAPAN:&nbsp;
Quarterly Report on INCORPORATED ENTERPRISES 
&nbsp; Y/Y % Chg</th>
<th scope="col">Q3 07 %</th>
<th scope="col">Q2 07 %&nbsp;</th>
<th scope="col">Q1 07 %</th>
<th scope="col">Q4 06 %</th>
<th scope="col">2006 %</th>
<th scope="col">2005 %</th>
<th scope="col">2004 %</th>
<th scope="col">2003 %</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Current
Profits:&nbsp; All&nbsp;</td>
<td>-0.7</td>
<td>12.0</td>
<td>7.4</td>
<td>5.3</td>
<td>9.1</td>
<td>11.8</td>
<td>27.7</td>
<td>12.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;
Large&nbsp; (Over 1 bil Yen)</td>
<td>1.3</td>
<td>14.0</td>
<td>7.0</td>
<td>8.9</td>
<td>15.7</td>
<td>12.37</td>
<td>28.22</td>
<td>12.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;
Mid Size (100mil&nbsp; to 1 bil Yen)</td>
<td>-16.9</td>
<td>-1.2</td>
<td>14.6</td>
<td>23.9</td>
<td>15.7</td>
<td>12.9</td>
<td>20.8</td>
<td>19.0</td>
</tr>
<tr>
<td class="firstcol"> &nbsp;&nbsp;
Small Size ( 10 to 100mil Yen)</td>
<td>3.9</td>
<td>13.48</td>
<td>5.27</td>
<td>-0.0</td>
<td>-4.0</td>
<td>10.4</td>
<td>29.6</td>
<td>9.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Plant &amp;
Equipment Spending</td>
<td>-1.2</td>
<td>-4.9</td>
<td>13.6</td>
<td>16.8</td>
<td>14.7</td>
<td>8.4</td>
<td>9.6</td>
<td>2.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;
Large&nbsp; (Over 1 bil Yen)</td>
<td>6.8</td>
<td>2.5</td>
<td>8.3</td>
<td>9.2</td>
<td>10.7</td>
<td>13.0</td>
<td>6.2</td>
<td>1.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;
Mid Size (100mil&nbsp; to 1 bil Yen)</td>
<td>-13.7</td>
<td>-3.7</td>
<td>12.6</td>
<td>19.0</td>
<td>17.5</td>
<td>5.8</td>
<td>8.5</td>
<td>-1.5</td>
</tr>
<tr>
<td class="firstcol"> &nbsp;&nbsp;
Small Size ( 10 to 100mil Yen)</td>
<td>-11.7</td>
<td>-19.9</td>
<td>30.4</td>
<td>35.0</td>
<td>23.2</td>
<td>-0.4</td>
<td>18.8</td>
<td>8.0</td>
</tr>
<tr class="odd">
<td class="firstcol">
&nbsp;Manufacturing</td>
<td>6.1</td>
<td>11.7</td>
<td>12.7</td>
<td>15.4</td>
<td>13.8</td>
<td>15.1</td>
<td>15.0</td>
<td>0.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Non
Manufacturing</td>
<td>-5.12</td>
<td>-13.1</td>
<td>14.1</td>
<td>17.7</td>
<td>15.1</td>
<td>15.2</td>
<td>8.4</td>
<td>1.8</td>
</tr>
</tbody>
</table>
</body></html>

ISM Index Still Low at an Expected50.8

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<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071130i.jpg" align="left" border="0" height="265" width="353">
The IFO released its survey detail for its sector results
previously announced for November. The IFO headlines are dropping
steadily and consistently. Manufacturing,
while showing some bounce in other recent surveys, is giving off
strings of negative readings that reflect diminished growth from one
year ago and fading prospects. In fact the IFO activity response is
weaker Y/Yr for three months running. Demand is off for at least five
months running. &#8216;Foreign orders on hand&#8217; has been the slowest series to
react but it is now down Yr/Yr for two months in a row.
The current situation is evaluated as steady for the last two
months running. It remains in nearly the top 5% of the range for
current situation historically. But business expectations continue to
erode. They are still in the top one third of their range, but barely.
In the outlook for the next three months conditions are
slipping. Retail orders expectations are erratically moving lower
although this month interrupted a two month period of severe Yr/Yr
drops. Wholesaling is however weakening rapidly and severely compared
to its year ago levels. Export business expectations are consistently
weaker than they were a year ago. Employment expectations continue to
improve. Surely if the other trends are valid, that one can&#8217;t last. 

<table border="0" cellspacing="0" width="100%">
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">IFO
Survey: Germany </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="5">Percent: Yr/Yr</td>
<td colspan="3">INDEX NUMBERS</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Nov-07</td>
<td>Oct-07</td>
<td>Sep-07</td>
<td>Aug-07</td>
<td>Jul-07</td>
<td>Current</td>
<td>Average</td>
<td>%tile</td>
</tr>
<tr>
<td class="firstcol">Biz Climate</td>
<td style="color: red;">-2.5%</td>
<td style="color: red;">-1.5%</td>
<td style="color: red;">-0.9%</td>
<td>0.7%</td>
<td>0.8%</td>
<td>104.2</td>
<td>95.8</td>
<td>81.0%</td>
</tr>
<tr>
<td class="firstcol">Current Situation</td>
<td style="color: red;">-3.1%</td>
<td style="color: red;">-2.1%</td>
<td style="color: red;">-1.3%</td>
<td>2.5%</td>
<td>2.4%</td>
<td>110.4</td>
<td>94.9</td>
<td>84.8%</td>
</tr>
<tr>
<td class="firstcol">Biz Expectations: Next 6-Mos</td>
<td style="color: red;">-2.0%</td>
<td style="color: red;">-0.7%</td>
<td style="color: red;">-0.4%</td>
<td style="color: red;">-1.1%</td>
<td style="color: red;">-0.9%</td>
<td>98.3</td>
<td>96.7</td>
<td>67.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Manufacturing:</td>
<td>Nov-07</td>
<td>Oct-07</td>
<td>Sep-07</td>
<td>Aug-07</td>
<td>Jul-07</td>
<td>Current</td>
<td>Average</td>
<td>%tile</td>
</tr>
<tr>
<td class="firstcol">Current Situation</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.8%</td>
<td>4.4%</td>
<td>4.4%</td>
<td>111.1</td>
<td>92.5</td>
<td>94.8%</td>
</tr>
<tr>
<td class="firstcol">Biz Expectations: Next
6-Mos</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td style="color: red;">-2.9%</td>
<td style="color: red;">-2.4%</td>
<td style="color: red;">-1.5%</td>
<td style="color: red;">-1.9%</td>
<td style="color: red;">-0.5%</td>
<td>97.3</td>
<td>96.5</td>
<td>67.1%</td>
</tr>
<tr>
<td class="firstcol">Activity (m/m)</td>
<td style="color: red;"></td>
<td style="color: red;"></td>
<td style="color: red;"></td>
<td style="color: red;"></td>
<td style="color: red;"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td style="color: red;">-3.2%</td>
<td style="color: red;">-5.3%</td>
<td style="color: red;">-4.5%</td>
<td style="color: red;">1.0%</td>
<td style="color: red;">-1.8%</td>
<td>101.7</td>
<td>97.0</td>
<td>72.8%</td>
</tr>
<tr>
<td class="firstcol">Demand M/M</td>
<td style="color: red;"></td>
<td style="color: red;"></td>
<td style="color: red;"></td>
<td style="color: red;"></td>
<td style="color: red;"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td style="color: red;">-5.6%</td>
<td style="color: red;">-8.4%</td>
<td style="color: red;">-6.4%</td>
<td style="color: red;">-2.8%</td>
<td style="color: red;">-3.3%</td>
<td>99.2</td>
<td>97.1</td>
<td>61.9%</td>
</tr>
<tr>
<td class="firstcol">Orders on hand</td>
<td style="color: red;"></td>
<td style="color: red;"></td>
<td style="color: red;"></td>
<td style="color: red;"></td>
<td style="color: red;"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td style="color: red;">-4.7%</td>
<td style="color: red;">-7.9%</td>
<td style="color: red;">-4.6%</td>
<td style="color: red;">-2.4%</td>
<td style="color: red;">-2.7%</td>
<td>101.1</td>
<td>96.5</td>
<td>68.9%</td>
</tr>
<tr>
<td class="firstcol" colspan="9">Foreign
orders on hand</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td style="color: red;">-1.9%</td>
<td style="color: red;">-0.4%</td>
<td>0.5%</td>
<td>2.5%</td>
<td>2.0%</td>
<td>109.7</td>
<td>94.7</td>
<td>91.7%</td>
</tr>
<tr>
<td colspan="9" class="firstcol">Yr/Yr
percentage changes in
underlying Indices</td>
</tr>
<tr class="even">
<td colspan="9" class="firstcol">IFO
outlook for 3-Months
ahead</td>
</tr>
<tr class="even">
<td class="firstcol">3-Mos ahead</td>
<td colspan="5">Percent: Yr/Yr</td>
<td colspan="3">INDEX NUMBERS</td>
</tr>
<tr>
<td class="firstcol">Expected Activity</td>
<td>Nov-07</td>
<td>Oct-07</td>
<td>Sep-07</td>
<td>Aug-07</td>
<td>Jul-07</td>
<td>Current</td>
<td>Average</td>
<td>%tile</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td style="color: red;">-2.3%</td>
<td style="color: red;">-1.9%</td>
<td style="color: red;">-1.0%</td>
<td>2.4%</td>
<td>1.0%</td>
<td>101.3</td>
<td>96.8</td>
<td>85.6%</td>
</tr>
<tr>
<td class="firstcol">Orders expectations</td>
<td colspan="5">Changes over
12-months</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Retail Orders</td>
<td>4.0%</td>
<td style="color: red;">-12.0%</td>
<td style="color: red;">-8.0%</td>
<td>3.0%</td>
<td>4.0%</td>
<td style="color: red;">-8.8</td>
<td style="color: red;">-17.7</td>
<td>76.8%</td>
</tr>
<tr>
<td class="firstcol">Wholesale</td>
<td style="color: red;">-10.0%</td>
<td style="color: red;">-12.0%</td>
<td style="color: red;">-13.0%</td>
<td style="color: red;">-5.0%</td>
<td style="color: red;">-5.0%</td>
<td>5.5</td>
<td style="color: red;">-13.8</td>
<td>80.2%</td>
</tr>
<tr>
<td class="firstcol" colspan="9">EXPORT
Biz Expectations</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td style="color: red;">-3.3%</td>
<td style="color: red;">-3.8%</td>
<td style="color: red;">-2.4%</td>
<td style="color: red;">-0.1%</td>
<td style="color: red;">-0.9%</td>
<td>103.1</td>
<td>98.5</td>
<td>87.7%</td>
</tr>
<tr>
<td class="firstcol" colspan="9">Employment
Expectations</td>
</tr>
<tr>
<td class="firstcol">MFG (Since June 1997)</td>
<td>1.6%</td>
<td>1.6%</td>
<td>3.1%</td>
<td>3.1%</td>
<td>6.2%</td>
<td>105.5</td>
<td>96.1</td>
<td>97.7%</td>
</tr>
</tbody>
</table>
</body></html>

The IFO released its survey detail for its sector results previously announced for November. The IFO headlines are dropping steadily and consistently. Manufacturing, while showing some bounce in other recent surveys, is giving off [...]

IFO Index Continues to Slip; Components Show Weakness

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071130h.jpg" align="left" border="0" height="265" width="353">
The monthly HICP has finally done it. It has moved up 3% and
the ECB is stuck on the horns of a real dilemma. Prices are zooming up
across the Euro area and most of it is oil. But 3% is a long way from
2%, the ECB&#8217;s oft stated limit for inflation. And the inflation rate
shows a steady acceleration in recent months: a 5.8% rate over three
months, 3.6% over 6 months 3% over 12 months&#8230; A year ago inflation was
at 1.9% Yr/Yr. Now it is at 3% and pressing higher. Germany and Italy
also with topical inflation reports available (Nov) show the same
pattern and same ugly development.
If the ECB makes any more excuses it will look like that old
three-stooges skit where the boys dare a muscle-bound bully to cross
this line in the sand then keep redrawing it as he steps over it before
they turn and run away. Nice image, eh?
Not only is inflation flaring on the headline but the core has
been less than well behaved and money and credit growth have been
excessive for so long that even the three stooges skit seems an
inappropriate analogy by comparison.
The ECB has its back against a very uncomfortable wall and its
bare feet on very hot tin roof. It is worried about second round
inflation taking hold as first round inflation is stubbornly &#8211; and now
chronically - well past its barrier. And Europe has the excessive
liquidity to make that fear of second round effects real&#8230; but it also
has the euro so strong that economic growth already is being undercut.
Welcome, Mr. Euro, to the realm of the reserve currency unit.
This is exactly the sort of dilemma we have warned that Europe is not
ready to face. And now it is front and center. The problem with being a
reserve currency is that those hot little capital flows don&#8217;t always
come when you want them. Those economic hot flashes can create trouble.
Now Europe is on the brink of hiking rates and creating another episode
of euro strength at a time it isn&#8217;t really needed or desired. The
envelope please, Mr Trichet&#8230; 

<table border="0" cellspacing="0" width="100%">
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Trends
in HICP</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% mo/mo</td>
<td colspan="4">% saar</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td>Nov-07</td>
<td>Oct-07</td>
<td>Sep-07</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
</tr>
<tr class="grey3">
<td class="firstcol">EU-13*</td>
<td>0.6%</td>
<td>0.4%</td>
<td>0.4%</td>
<td>5.8%</td>
<td>3.6%</td>
<td>3.0%</td>
<td>1.9%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Core</td>
<td>#N/A</td>
<td>0.3%</td>
<td>0.2%</td>
<td>3.0%</td>
<td>2.2%</td>
<td>2.1%</td>
<td>1.6%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Goods</td>
<td>#N/A</td>
<td>0.8%</td>
<td>1.0%</td>
<td>7.6%</td>
<td>2.2%</td>
<td>2.6%</td>
<td>1.3%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Services</td>
<td>#N/A</td>
<td>0.0%</td>
<td>-0.5%</td>
<td>-1.5%</td>
<td>1.8%</td>
<td>2.5%</td>
<td>2.1%</td>
</tr>
<tr class="grey3">
<td colspan="8" class="firstcol">*Monthly
Flash data are derived from
Yr/Yr presentation</td>
</tr>
<tr class="grey2">
<td class="firstcol">HICP</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey3">
<td class="firstcol">Germany</td>
<td>0.9%</td>
<td>0.2%</td>
<td>0.7%</td>
<td>7.1%</td>
<td>4.1%</td>
<td>3.3%</td>
<td>1.5%</td>
</tr>
<tr class="grey3">
<td class="firstcol">France</td>
<td>#N/A</td>
<td>0.2%</td>
<td>0.1%</td>
<td>2.6%</td>
<td>2.3%</td>
<td>2.1%</td>
<td>1.2%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Italy</td>
<td>0.2%</td>
<td>0.7%</td>
<td>0.3%</td>
<td>4.7%</td>
<td>3.1%</td>
<td>2.4%</td>
<td>2.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">UK</td>
<td>#N/A</td>
<td>0.5%</td>
<td>0.1%</td>
<td>2.7%</td>
<td>1.5%</td>
<td>2.0%</td>
<td>2.5%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Spain</td>
<td>#N/A</td>
<td>0.7%</td>
<td>0.4%</td>
<td>4.3%</td>
<td>3.7%</td>
<td>3.7%</td>
<td>2.6%</td>
</tr>
<tr class="grey2">
<td colspan="8">Core:xFE&amp;A</td>
</tr>
<tr class="grey3">
<td class="firstcol">Germany</td>
<td>#N/A</td>
<td>0.2%</td>
<td>0.3%</td>
<td>2.4%</td>
<td>2.4%</td>
<td>2.2%</td>
<td>0.9%</td>
</tr>
<tr class="grey3">
<td class="firstcol">France</td>
<td>#N/A</td>
<td>0.2%</td>
<td>0.1%</td>
<td>2.7%</td>
<td>1.9%</td>
<td>1.7%</td>
<td>1.3%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Italy</td>
<td>#N/A</td>
<td>0.5%</td>
<td>0.4%</td>
<td>4.3%</td>
<td>2.7%</td>
<td>2.1%</td>
<td>2.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">UK</td>
<td>#N/A</td>
<td>0.2%</td>
<td>0.1%</td>
<td>2.0%</td>
<td>1.6%</td>
<td>1.8%</td>
<td>1.6%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Spain</td>
<td>#N/A</td>
<td>0.7%</td>
<td>0.2%</td>
<td>4.8%</td>
<td>3.5%</td>
<td>3.1%</td>
<td>2.8%</td>
</tr>
<tr class="grey1">
<td colspan="8" class="firstcol">Blue shaded area data trail by one
month</td>
</tr>
</tbody>
</table>
</body></html>

The monthly HICP has finally done it. It has moved up 3% and the ECB is stuck on the horns of a real dilemma. Prices are zooming up across the Euro area and most of it is oil. But 3% is a long way from 2%, the ECB’s oft stated limit [...]

Trichet on a Hot Tin Roof

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<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071130g.jpg" align="left" border="0" height="265" width="353">
Consumer confidence is taking a hit and an ongoing one in EMU.
The percentiles tell an interesting story of these unfolding
developments. It is no surprise (final column of the table) that the
strongest correlation with Consumer Confidence is expected
unemployment. Expected unemployment is rising but is only in its 15th
percentile. Expected savings is also a very weak percentile reading as
is &#8216;major purchases now&#8217;. The later figure is plotted in the chart
along with the consumer confidence main index. &#8216;Major purchases now&#8217;
responses seem to lead the overall index -- and this series is very
weak. 
 

The strongest range readings are for price trends (past 12
months and future 12 months) and for the &#8216;economic situation past 12
months&#8217;. In other words the more topical the categories, the weaker the
responses. 
 

Across countries Germany&#8217;s responses are still quite strong in
the top 17 percent of its range. The UK in the 68th percentile is next
followed by France in the 60th percentile. Italy and Spain are weak
with readings below the 50th percentile. 
 

It should not be a surprise that (apart from the UK) all these
countries are in the same currency union and are experiencing the same
pains of a strong currency. Germany, a county used to a strong
currency, finds its consumers faring best. Italy and Spain, two
previously weak currency countries, are having a much more difficult
time making the adjustment to the strong euro.

<table border="0" cellspacing="0" width="100%">
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="12" scope="col"> EMU
Consumer Confidence and Country Performance</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">EMU</td>
<td>Nov 
07</td>
<td>Oct 
07</td>
<td>Sep 
07</td>
<td>Aug 
07</td>
<td>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
<td>R-SQ 
w/ 
Confid</td>
</tr>
<tr>
<td class="firstcol">Consumer Confidence</td>
<td>-8</td>
<td>-6</td>
<td>-6</td>
<td>-4</td>
<td>67.7</td>
<td>67</td>
<td>2</td>
<td>-29</td>
<td>31</td>
<td>-12</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Fin Situation Next 12</td>
<td>-4</td>
<td>-3</td>
<td>-3</td>
<td>-2</td>
<td>43.8</td>
<td>128</td>
<td>5</td>
<td>-11</td>
<td>16</td>
<td>-2</td>
<td>0.85</td>
</tr>
<tr>
<td class="firstcol">Econ Sit Next 12</td>
<td>-11</td>
<td>-6</td>
<td>-7</td>
<td>-2</td>
<td>61.5</td>
<td>90</td>
<td>4</td>
<td>-35</td>
<td>39</td>
<td>-12</td>
<td>0.91</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Expect</td>
<td>7</td>
<td>5</td>
<td>6</td>
<td>3</td>
<td>15.9</td>
<td>183</td>
<td>60</td>
<td>-3</td>
<td>63</td>
<td>26</td>
<td>0.94</td>
</tr>
<tr>
<td class="firstcol">Savings Next 12m</td>
<td>-11</td>
<td>-10</td>
<td>-7</td>
<td>-7</td>
<td>17.6</td>
<td>186</td>
<td>3</td>
<td>-14</td>
<td>17</td>
<td>-6</td>
<td>0.55</td>
</tr>
<tr class="odd">
<td class="firstcol">Fin Sit Past12m</td>
<td>-13</td>
<td>-12</td>
<td>-10</td>
<td>-10</td>
<td>36.8</td>
<td>121</td>
<td>-1</td>
<td>-20</td>
<td>19</td>
<td>-11</td>
<td>0.53</td>
</tr>
<tr>
<td class="firstcol">Econ Sit Past 12m</td>
<td>-17</td>
<td>-14</td>
<td>-13</td>
<td>-9</td>
<td>69.6</td>
<td>54</td>
<td>-3</td>
<td>-49</td>
<td>46</td>
<td>-24</td>
<td>0.87</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings-Now</td>
<td>30</td>
<td>31</td>
<td>33</td>
<td>32</td>
<td>33.3</td>
<td>79</td>
<td>46</td>
<td>22</td>
<td>24</td>
<td>35</td>
<td>0.03</td>
</tr>
<tr>
<td class="firstcol">Major Purchase-Now</td>
<td>-23</td>
<td>-18</td>
<td>-16</td>
<td>-15</td>
<td>17.6</td>
<td>101</td>
<td>5</td>
<td>-29</td>
<td>34</td>
<td>-12</td>
<td>0.54</td>
</tr>
<tr class="odd">
<td class="firstcol">Major Purchase Next 12m</td>
<td>-18</td>
<td>-16</td>
<td>-17</td>
<td>-17</td>
<td>33.3</td>
<td>92</td>
<td>-12</td>
<td>-21</td>
<td>9</td>
<td>-16</td>
<td>0.43</td>
</tr>
<tr>
<td class="firstcol">Price trends past 12m</td>
<td>55</td>
<td>50</td>
<td>45</td>
<td>41</td>
<td>88.1</td>
<td>9</td>
<td>63</td>
<td>-4</td>
<td>67</td>
<td>31</td>
<td>0.10</td>
</tr>
<tr class="odd">
<td class="firstcol">Price Trends Next 12m</td>
<td>28</td>
<td>26</td>
<td>28</td>
<td>26</td>
<td>76.5</td>
<td>14</td>
<td>36</td>
<td>2</td>
<td>34</td>
<td>17</td>
<td>0.02</td>
</tr>
<tr class="grey3">
<td colspan="12" class="firstcol">By
Country</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>3</td>
<td>4</td>
<td>3</td>
<td>6</td>
<td>83.8</td>
<td>16</td>
<td>9</td>
<td>-28</td>
<td>37</td>
<td>-10</td>
<td>0.82</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>-11</td>
<td>-7</td>
<td>-5</td>
<td>-3</td>
<td>60.5</td>
<td>50</td>
<td>4</td>
<td>-34</td>
<td>38</td>
<td>-17</td>
<td>0.78</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>-22</td>
<td>-21</td>
<td>-19</td>
<td>-20</td>
<td>40.0</td>
<td>189</td>
<td>2</td>
<td>-38</td>
<td>40</td>
<td>-14</td>
<td>0.53</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>-17</td>
<td>-16</td>
<td>-14</td>
<td>-12</td>
<td>46.5</td>
<td>174</td>
<td>6</td>
<td>-37</td>
<td>43</td>
<td>-11</td>
<td>0.64</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>-4</td>
<td>-2</td>
<td>-3</td>
<td>-2</td>
<td>68.6</td>
<td>75</td>
<td>7</td>
<td>-28</td>
<td>35</td>
<td>-7</td>
<td>0.21</td>
</tr>
<tr class="grey1">
<td class="firstcol" colspan="3">Since 1990</td>
<td>208</td>
<td colspan="2">-Count</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>
</body></html>

Consumer confidence is taking a hit and an ongoing one in EMU. The percentiles tell an interesting story of these unfolding developments. It is no surprise (final column of the table) that the strongest correlation with Consumer [...]

Euro-Consumer Confidence Hits the Skids

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071130f.jpg" align="left" border="0" height="265" width="353">
Mixed but weakening, conditions. The
monthly EU sectors show that weakness still stalks the EU region. Still
some sectors have improved this month. The EU industrial index improved
in November to +3 from +2. The retail index improved from +2 to +4.
Despite that consumer confidence slipped to -7 from -5. The
construction sector also switched from being flat to a -1 reading. But
the largest drop was in services where the index fell to +14 from +19.
The services readings now stand only in the 52nd percentile of its
range. Retailing and construction are still in the 90th-something
percentiles of their respective ranges. The industrial sector is now in
its 88th percentile. But consumer confidence has slipped to the 69th
percentile. While there is some mixture in these figures it is clear
that the consumer is beset with concerns while the MFG sector has held
up. Construction, not having ever been very strong, give us a very high
positive range ranking on a raw reading of -1. 
 

The good, the bad and the ugly. Across EMU
countries we find weaker conditions in general. The overall sentiment
is at a ranking of only the 71st percentile. France still ranks in its
81st percentile. Germany has slipped to its 64th. Italy and Spain hover
around the 50% mark for overall sentiment. 
 

Risk of action&#8230;and inaction. On balance,
Europe is slipping but not yet doing poorly. But we know that exchange
rates work with a lag and there is more of that strong euro impact in
train. Also, that the recent inflation headline of 3% will send chills
up the spine of the ECB. Despite concerns of an overly strong EURO the
ECB with too-strong money and credit growth will have a hard time
balancing the things it wants to do (hike rates and fight inflation)
with the things it does not want to do (weaken already weakening growth
and spur an even stronger euro). 


<table border="0" cellspacing="0" width="100%">
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="12" scope="col"> EU
Sectors and Country level Overall Sentiment&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">EU</td>
<td>Nov 
07</td>
<td>Oct 
07</td>
<td>Sep 
07</td>
<td>Aug 
07</td>
<td>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
<td>R-SQ 
w/ 
Overall</td>
</tr>
<tr class="grey2">
<td class="firstcol">Overall</td>
<td>107.6</td>
<td>109.6</td>
<td>110.6</td>
<td>113.1</td>
<td>78.5</td>
<td>62</td>
<td>117</td>
<td>74</td>
<td>43</td>
<td>100</td>
<td>1.00</td>
</tr>
<tr>
<td class="firstcol">Industrial</td>
<td>3</td>
<td>2</td>
<td>3</td>
<td>5</td>
<td>88.2</td>
<td>19</td>
<td>7</td>
<td>-27</td>
<td>34</td>
<td>-7</td>
<td>0.89</td>
</tr>
<tr>
<td class="firstcol">Consumer Confidence</td>
<td>-7</td>
<td>-5</td>
<td>-4</td>
<td>-3</td>
<td>69.0</td>
<td>60</td>
<td>2</td>
<td>-27</td>
<td>29</td>
<td>-10</td>
<td>0.82</td>
</tr>
<tr>
<td class="firstcol">Retail</td>
<td>4</td>
<td>2</td>
<td>1</td>
<td>6</td>
<td>92.6</td>
<td>7</td>
<td>6</td>
<td>-21</td>
<td>27</td>
<td>-6</td>
<td>0.47</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>-1</td>
<td>0</td>
<td>1</td>
<td>0</td>
<td>91.1</td>
<td>17</td>
<td>3</td>
<td>-42</td>
<td>45</td>
<td>-18</td>
<td>0.44</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>14</td>
<td>19</td>
<td>19</td>
<td>22</td>
<td>52.6</td>
<td>75</td>
<td>32</td>
<td>-6</td>
<td>38</td>
<td>17</td>
<td>0.80</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td colspan="4">% M/M</td>
<td colspan="2">Based on 
Level</td>
<td colspan="4">Level</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">EMU</td>
<td style="color: red;">-1.1%</td>
<td style="color: red;">-0.8%</td>
<td style="color: red;">-2.8%</td>
<td style="color: red;">-0.9%</td>
<td>71.2</td>
<td>80</td>
<td>117</td>
<td>74</td>
<td>44</td>
<td>100</td>
<td>0.94</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>0.1%</td>
<td style="color: red;">-0.6%</td>
<td style="color: red;">-3.3%</td>
<td style="color: red;">-0.9%</td>
<td>64.0</td>
<td>62</td>
<td>121</td>
<td>79</td>
<td>42</td>
<td>100</td>
<td>0.62</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td style="color: red;">-0.4%</td>
<td>0.5%</td>
<td style="color: red;">-1.5%</td>
<td style="color: red;">-1.2%</td>
<td>81.6</td>
<td>27</td>
<td>119</td>
<td>72</td>
<td>47</td>
<td>100</td>
<td>0.80</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td style="color: red;">-4.2%</td>
<td style="color: red;">-0.2%</td>
<td style="color: red;">-0.8%</td>
<td style="color: red;">-3.0%</td>
<td>52.7</td>
<td>125</td>
<td>121</td>
<td>72</td>
<td>49</td>
<td>100</td>
<td>0.79</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td style="color: red;">-0.2%</td>
<td style="color: red;">-2.7%</td>
<td style="color: red;">-3.4%</td>
<td>1.1%</td>
<td>50.0</td>
<td>178</td>
<td>118</td>
<td>67</td>
<td>50</td>
<td>100</td>
<td>0.65</td>
</tr>
<tr>
<td class="firstcol">Memo: UK</td>
<td style="color: red;">-4.4%</td>
<td style="color: red;">-2.0%</td>
<td>1.1%</td>
<td>4.5%</td>
<td>78.2</td>
<td>60</td>
<td>119</td>
<td>69</td>
<td>50</td>
<td>101</td>
<td>0.40</td>
</tr>
<tr class="grey2">
<td colspan="4" class="firstcol">Since 1990
except Services(Oct 1996)</td>
<td>208</td>
<td colspan="2">-Count</td>
<td colspan="2">Services:</td>
<td>126</td>
<td colspan="2">-Count</td>
</tr>
<tr class="grey1">
<td colspan="12" class="firstcol">Sentiment
is an index, sector
readings are net balance diffusion measures</td>
</tr>
</tbody>
</table>
</body></html>

Mixed but weakening, conditions. The monthly EU sectors show that weakness still stalks the EU region. Still some sectors have improved this month. The EU industrial index improved in November to +3 from +2. The retail index improved [...]

EU Sentiment is Fading Fast

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

Falling oil prices aren't pulling down inflation expectations, pointing to a boost from increased tariffs

Equity market exuberance outpacing macroeconomic data

Apart from Japan, Blue Chip forecasters expect further sizable monetary easing

US production rebounded in Q2, but demand continued to slow

US leader, Germany trailer for real GDP growth over past 3 years

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

With escalation of Israel/Iran conflict, geopolitical risk has recently surged while US trade policy uncertainty has ebbed

Renewed supply chain pressures point to a rebound in global inflation ahead

Apart from Japan, Blue Chip forecasters look for further significant monetary policy easing

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

Even with expected tariff-induced increases in inflation, BCFF forecasters look for a more aggressive round of monetary easing

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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Andrew Cates

**The US labour market**
The latest data highlight a growing sense of fragility in the US labour market. The unemployment rate, while still relatively low by historical standards, has been edging higher through the course of this year. More telling, however, is the signal from this week’s consumer confidence survey from Conference Board and specifically the labour market differential — the gap between the share of consumers saying jobs are plentiful versus those saying jobs are hard to get. That balance has narrowed sharply, moving back toward levels historically associated with softer labour demand and rising unemployment.

250828Z1.jpg

**Goods and services inflation** 
Haver’s breakdown of goods and services CPI inflation in the advanced economies highlights where fresh risks are emerging. Goods inflation, which had been receding sharply after the pandemic supply shocks, has recently shown signs of firming again. Some of this probably reflects the impact of US tariff policies, which are raising import costs and putting renewed upward pressure on traded goods prices. While services inflation remains the more stubborn component in most advanced economies, the risk is that tariffs could reintroduce stickiness into goods prices, slowing the overall disinflation process.

250828Z2.jpg

**China, Europe and US trade policy**
A consequence of US tariff policies has been a sharp contraction in Chinese exports to the US market, with much of the surplus redirected elsewhere. Europe in particular has recorded near double-digit import growth in recent months, raising concerns that Beijing is deflecting its industrial overcapacity problem rather than resolving it, effectively transferring the pressure onto trading partners. China’s authorities, however, have begun to push back, introducing measures to curb excess supply and rein in so-called “involution,” including clampdowns on price wars across several industries.

250828Z3.jpg

**China’s excess capacity and Europe**
A closer look at Europe–China trade shows that electric vehicles remain a key flashpoint. Import volumes from China have continued to rise even as per-unit prices fall sharply from a year ago —evidence suggesting that industrial overcapacity persists, with low-cost Chinese EVs increasingly challenging European automakers. The surge has carried on despite EU tariffs of up to 45% on battery EVs, as Chinese producers have adapted by pushing plug-in hybrids and expanding onshore production in Europe to bypass duties and defend market share.

250828Z4.jpg

**Wage growth in the US and Europe** 
Turning back to inflation dynamics, the UK stands out for its persistent wage pressures. While posted wage growth has cooled across the US and euro area, the UK measure has remained elevated at around 6% year-on-year, well above pre-pandemic norms. This stickiness reflects a still-tight labour market in key service sectors, even as broader activity has slowed and unemployment has edged higher. For the Bank of England, it underscores the dilemma: headline inflation is easing, but underlying pay growth risks keeping services inflation uncomfortably high, complicating the timing and scale of policy easing.

250828Z5.jpg

**The UK economy**
The UK’s net international investment position has deteriorated noticeably in recent years, with both direct investment and portfolio flows showing persistent weakness. The latest data underline how net FDI has turned increasingly negative, while the portfolio investment balance has also eroded, leaving the UK more reliant on volatile short-term funding sources. This deterioration comes against a backdrop of heightened investor unease about the riskiness of UK debt markets, where elevated gilt yields and rising debt-servicing costs have amplified concerns over fiscal sustainability. Taken together, these trends underscore the vulnerability of the UK’s external position at a time when global capital is arguably proving more selective and risk sensitive.

250828Z6.jpg

Global markets have continued to rally into late summer, buoyed by AI optimism, dovish signals from central bankers at Jackson Hole, and expectations of easier policy ahead. Yet beneath the surface, risks to the world economy are accumulating. In the US, labour market indicators point to softening conditions (chart 1), while tariff-driven pressures are beginning to push goods prices higher (chart 2). Global trade flows are being reshaped by US policy, with China’s excess capacity increasingly diverted toward Europe, most visibly through surging exports of electric vehicles (EVs) (charts 3 and 4). At the same time, wage growth remains stubbornly elevated in the UK, complicating disinflation (chart 5), while concerns are mounting over the country’s external vulnerabilities as net FDI and portfolio positions weaken against the backdrop of jittery debt markets (chart 6). Together, these dynamics highlight the tension between buoyant market performance and a global economy still grappling with structural fragilities.

Charts of the Week: Riskbusters

250828N8.jpg

250828C8.jpg

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

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

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

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

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

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

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

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

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

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

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

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

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

Sandy Batten

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

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

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

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

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

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

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

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

FRB Kansas City Manufacturing Index Unchanged in August

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

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

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

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

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

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


U.S. Pending Home Sales Decline in July

Kathleen Stephansen, CBE

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

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

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

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

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

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

Economy in Brief: 2007

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