Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090106e.jpg" width="353">
For December, the Composite Index for the nonmanufacturing sector from the Institute for Supply Management (ISM) improved slightly to 40.6 from an unrevised 37.3 during November. The figure was firmer than Consensus expectations for a reading of 37.0 but it was still near the lowest in the series&#39; relatively brief ten year history. A level of these ISM indices below 50 indicates declining activity.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090106f.jpg" width="353">
The nonmanufacturing business activity sub-index also made a bit more than half of the sharp November decline, but at 39.6 it was still near the record low for the series. Since the series&#39; inception in 1997 there has been a 48% correlation between the level of the business activity index for the nonmanufacturing sector and the Q/Q change in real GDP for the services and the construction sectors.
In addition, the employment index also edged higher to a reading of 34.7. However, that still indicated sharp layoffs and was near the low for the series. Since the series&#39; inception in 1997 there has been a 56% correlation between the level of the ISM nonmanufacturing employment index and the m/m change in payroll employment in the service-producing plus the construction industries.
The new orders sub-index edged up to a still low 39.9.
Pricing power fell further last month and the reading of 36.0 was a new record low for the series. Since its inception ten years ago, there has been a 60% correlation between the price index and the q/q change in the GDP services chain price index.
Beginning with the January 2008 Nonmanufacturing <cite>Report On Business</cite>&reg;, the composite index is calculated as an indicator of the overall economic condition for the non-manufacturing sector. It is a composite index based on the diffusion indexes for four of the indicators (business activity, new orders, employment and supplier deliveries) with equal weights. The latest report from the ISM can be found <a href="http://www.ism.ws/ISMReport/NonMfgROB.cfm">here</a>.
ISM surveys more than 370 purchasing managers in more than 62 industries including law firms, hospitals, government and retailers. The nonmanufacturing survey dates back to July 1997.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">December &#39;07</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Index</td>
<td>40.6</td>
<td>37.3</td>
<td>53.2</td>
<td>47.3</td>
<td>53.5</td>
<td>55.7</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>36.0</td>
<td>36.6</td>
<td>71.5</td>
<td>66.1</td>
<td>63.8</td>
<td>65.3</td>
</tr>
</tbody>
</table>


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For December, the Composite Index for the nonmanufacturing sector from the Institute for Supply Management (ISM) improved slightly to 40.6 from an unrevised 37.3 during November. The figure was firmer than Consensus expectations for a [...]

U.S. ISM Nonmanufacturing Index Improved Slightly

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090106d.jpg" align="left" border="0" height="265" width="353">
The EMU inflation rate fell sharply in December more sharply
than have been expected. Headline inflation &#8211;the measure that the ECB
sets a ceiling for -- is now below that ceiling of 2% at a Yr/Yr rate
of 1.6%. A Yr/Yr rise of 1.8% had been expected. Core (ex food and
energy inflation) has long been on a milder path than that of headline
inflation. But the ECB sets a ceiling for the headline alone. Still,
the headline pace is now more in line with the core where the pace
Yr/Yr is 2.2% (lagged by one month since the December Core is not yet
available- so the real up-to-date core rate is probably even lower).
Core inflation, even through November, shows the six- and three-month
rates of inflation are dropping fast. That is true for headline
inflation as well, as the chart above amply demonstrates. 
 

In short, the ECB now has a set of consistent signals about
inflation. Inflation is now inside its preferred boundaries and
falling. It faces an inflation pace that is well below its ceiling. It
faces a weakening economy. Clearly this inflation result allows for the
ECB policy to be much bolder and for its rhetoric to be much less
circumspect. Even stodgy old central bankers should see the message
clear and strong as indicating that economic weakness is more
pronounced than expected, pushing down prices and not just allowing,
but calling for more aggressive fiscal and monetary policy actions. The
euro weakened in the wake of this report on precisely those sorts of
conclusions by market participants. 
 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">Trends in
EMU HICP; Flash Index</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% mo/mo</td>
<td colspan="4">% saar</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Dec-08</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
</tr>
<tr>
<td class="firstcol">EMU-13</td>
<td>-0.3%</td>
<td>-0.3%</td>
<td>0.0%</td>
<td>-2.5%</td>
<td>-0.9%</td>
<td>1.6%</td>
<td>3.1%</td>
</tr>
<tr>
<td class="firstcol">Core</td>
<td>#N/A</td>
<td>0.1%</td>
<td>0.2%</td>
<td>1.6%</td>
<td>2.0%</td>
<td>2.2%</td>
<td>2.3%</td>
</tr>
<tr>
<td class="firstcol">Goods</td>
<td>#N/A</td>
<td>-0.8%</td>
<td>0.0%</td>
<td> 0.1%</td>
<td>-1.7%</td>
<td>1.8%</td>
<td>3.4%</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>#N/A</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>-2.7%</td>
<td>1.5%</td>
<td> 2.6%</td>
<td>2.5%</td>
</tr>
<tr class="even">
<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>
<td class="firstcol">Germany</td>
<td>-0.5%</td>
<td>-0.1%</td>
<td>-0.3%</td>
<td>-3.3%</td>
<td>-0.9%</td>
<td>1.1%</td>
<td>3.1%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>#N/A</td>
<td>-0.4%</td>
<td>0.1%</td>
<td>-1.4%</td>
<td>0.0%</td>
<td>1.9%</td>
<td>2.6%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>-0.1%</td>
<td>-0.5%</td>
<td>0.3%</td>
<td>-1.1%</td>
<td>0.0%</td>
<td>2.3%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>#N/A</td>
<td>-0.4%</td>
<td>-0.3%</td>
<td>-2.4%</td>
<td>0.5%</td>
<td>2.4%</td>
<td>4.1%</td>
</tr>
<tr class="even">
<td colspan="2"> Core:xFE&amp;A</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>#N/A</td>
<td>0.1%</td>
<td>-0.1%</td>
<td>0.0%</td>
<td> 1.3%</td>
<td>1.3%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>#N/A</td>
<td>0.0%</td>
<td>0.5%</td>
<td>1.9%</td>
<td>2.7%</td>
<td> 2.8%</td>
<td>2.2%</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>#N/A</td>
<td>0.2%</td>
<td>0.0%</td>
<td>0.8%</td>
<td>2.3%</td>
<td> 2.5%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>#N/A</td>
<td>0.1%</td>
<td>0.1%</td>
<td>1.5%</td>
<td>2.6%</td>
<td>2.7%</td>
<td>3.3%</td>
</tr>
<tr class="even">
<td colspan="8" class="firstcol">Blue shaded area data trail by one
month</td>
</tr>
</tbody>
</table>
</body></html>

The EMU inflation rate fell sharply in December more sharply than have been expected. Headline inflation –the measure that the ECB sets a ceiling for -- is now below that ceiling of 2% at a Yr/Yr rate of 1.6%. A Yr/Yr rise of 1.8% had [...]

EMU Inflation: Now You See It; Now You Don't!

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090106c.jpg" align="left" border="0" height="265" width="353">
The services PMI index for Europe fell to 42.06 from 42.47.
All main reporting EMU members show very weak service sector indices.
France is at an all time low (the data above date from May 2000 a
period for which all these countries have observations). The EMU result
is a ten year low. 
 

Weakness continues to be the order of the day across Europe.
The chart at the top shows that the MFG and services PMI&#8217;s both are
dropping sharply, although the pace of decline in services hints at a
slowdown in the unraveling. 
 

The new wrinkle is the potential impact on Europe as gas
availability from the Russian pipeline is being curtailed stemming from
a dispute between Russia and the Ukraine. European nations are
suffering to various degrees but smaller countries with leaner
stockpiles are the most at risk. There is no sense yet that much
activity has been curtailed because of the light natural gas
deliveries, but an adverse economic impact remains a possibility if the
deliveries continue to be short or cut off entirely. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col">NTC Services Indices for EU/EMU</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Dec-08</td>
<td> Nov-08</td>
<td> Oct-08</td>
<td> 3Mo</td>
<td> 6Mo</td>
<td> 12Mo</td>
<td> Percentile</td>
</tr>
<tr>
<td class="firstcol"> Euro-13</td>
<td> 42.06</td>
<td> 42.47</td>
<td> 45.76</td>
<td> 43.43</td>
<td> 45.92</td>
<td> 48.47</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>46.57</td>
<td>45.14</td>
<td>48.31</td>
<td>46.67</td>
<td>49.13</td>
<td>50.73</td>
<td>18.5%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>40.57</td>
<td>46.17</td>
<td>47.54</td>
<td>44.76</td>
<td>46.65</td>
<td>50.44</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>40.30</td>
<td>39.46</td>
<td>45.68</td>
<td>41.81</td>
<td>44.82</td>
<td>46.59</td>
<td>3.6%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>32.10</td>
<td>28.23</td>
<td>32.22</td>
<td>30.85</td>
<td>34.12</td>
<td>38.20</td>
<td>11.9%</td>
</tr>
<tr>
<td class="firstcol">Ireland</td>
<td>34.14</td>
<td>32.60</td>
<td>36.05</td>
<td>34.26</td>
<td>37.47</td>
<td>42.01</td>
<td>4.3%</td>
</tr>
<tr class="odd">
<td class="firstcol"> EU only</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">UK (CIPs)</td>
<td>40.21</td>
<td>40.06</td>
<td>42.39</td>
<td>40.89</td>
<td>44.20</td>
<td>47.59</td>
<td>0.7%</td>
</tr>
</tbody>
</table>
</body></html>

The services PMI index for Europe fell to 42.06 from 42.47. All main reporting EMU members show very weak service sector indices. France is at an all time low (the data above date from May 2000 a period for which all these countries [...]

Europe's Services PMI At New Low

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090106a.jpg" width="353">
U.S. sales of light vehicles inched slightly higher last month but not by enough to prevent the twelve-month sales average from falling 18.5% to 13.18M, their lowest since 1993 according to the Autodata Corporation and Ward&#39;s Automotive News. (Seasonal adjustment of the figures is provided by the U.S. Bureau of Economic Analysis). The December-to-December figures were even bleaker. The 35.5% decline dropped sales to 10.32M, their lowest level since the recession year of 1982. The level of sales for December vehicle purchases was slightly better than Consensus expectations for sales of 10.0M.
Sales of domestically-made light vehicles edged 2.4% higher to 7.68M units and that recouped the November drop. Nevertheless, domestic vehicle sales are off 35.3% December-to-December and they fell 20.2% for the full year to their lowest since 1983. Continuing to show the effects from higher gasoline prices, sales of domestically made light trucks gave back most of their November gain to end the year down 39.6% December-to-December. They were down by one quarter for the full year. Doing a little better, sales of U.S. made cars recovered their November decline and rose 10.6%. That was not enough, however, to make up past declines. For the full year, sales of domestically made cars fell 12.7% to 4.42M units and that was down 41.3% from the peak during 1996.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090106b.jpg" width="353">
Sales of imported light vehicles continued to reflect economic recession in the U.S. and they fell 1.3% last month. The 36.0% y/y decline pulled sales for the full year down 13.2%, the first full year decline since 1996. The latest was the lowest level since December 1999.Sales of imported light vehicles fell another 5.0% (-38.4% y/y) to 1.62M units and they were down 9.1% for the full year.Sales of imported light trucks rose 5.2% (-31.8% y/y) but they were off 20.1% for 2008. For last year, imported car sales fell 9.1% from 2007 but at 2.29M they still were up 79.7% from the low in 1996.
Import&#39;s share of the U.S. light vehicle market fell slightly to 25.5% of the U.S. vehicle market in December. Nevertheless, imports&#39; share rose to a high of 26.3% for the year. (Imported vehicles are those produced outside the U.S. and do not include vehicles with the nameplate of a foreign manufacturer produced within the U.S.)

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED09/@ED0901/@ED0901.HTM">Light Vehicle Sales (SAAR, Mil. Units)</a></th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Dec. / Dec.</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>10.32</td>
<td>10.18</td>
<td>-35.5%</td>
<td>13.18</td>
<td>16.16</td>
<td>16.54</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>5.21</td>
<td>4.95</td>
<td>-32.6</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>3.59</td>
<td>3.24</td>
<td>-29.5</td>
<td>4.42</td>
<td>5.07</td>
<td>5.31</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imported</td>
<td>1.62</td>
<td>1.71</td>
<td>-38.4</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>5.11</td>
<td>5.23</td>
<td>-38.2</td>
<td>6.47</td>
<td>8.60</td>
<td>8.78</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Domestic</td>
<td>4.10</td>
<td>4.26</td>
<td>-39.6</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>1.02</td>
<td>0.97</td>
<td>-31.8</td>
<td>1.18</td>
<td>1.47</td>
<td>1.37</td>
</tr>
</tbody>
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">December 2008 (Y/Y, %)</th>
<th scope="col">Market Share, Cars (%)</th>
<th scope="col">Market Share, Trucks (%)</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">General Motors</td>
<td>-24.9</td>
<td>16</td>
<td>25</td>
</tr>
<tr>
<td class="firstcol">Ford</td>
<td>&nbsp;-29.4</td>
<td>11</td>
<td>22</td>
</tr>
<tr class="odd">
<td class="firstcol">Chrysler</td>
<td>&nbsp;-59.2</td>
<td>6</td>
<td>17</td>
</tr>
<tr>
<td class="firstcol">Toyota</td>
<td>&nbsp;-34.8</td>
<td>21</td>
<td>14</td>
</tr>
<tr class="odd">
<td class="firstcol">Honda</td>
<td>&nbsp;-30.4</td>
<td>13</td>
<td>8</td>
</tr>
<tr>
<td class="firstcol">Nissan</td>
<td>&nbsp;-26.8</td>
<td>8</td>
<td>5</td>
</tr>
<tr class="odd">
<td class="firstcol">Volkswagen</td>
<td>-20.1</td>
<td>5</td>
<td>1</td>
</tr>
</tbody>
</table>


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U.S. sales of light vehicles inched slightly higher last month but not by enough to prevent the twelve-month sales average from falling 18.5% to 13.18M, their lowest since 1993 according to the Autodata Corporation and Ward's [...]

U.S. Light Vehicle Sales Inched Up in December; Down 18.5% For The Full Year

U.S. Light Vehicle Sales Inched Upin December; Down 18.5% For The Full Year

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090105h.jpg" align="left" border="0" height="265" width="353">
Among the data released today were the Consumer Price Indexes
in December for a number of countries--Spain and Italy in Europe and
Indonesia, Thailand and Taiwan in Asia. The year to year percentage
changes in the indexes show that inflation has come down dramatically
in all but Indonesia since mid year. And even in Indonesia, which has
experienced relatively high inflation, partly as a result of the
natural disasters that have plagued the nation since the devastating
tsunami of 2004, inflation has fallen in each month since September.
The first chart show inflation in Spain and Italy and the second,
inflation in Thailand, Taiwan and Indonesia.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090105i.jpg" align="right" border="0" height="265" width="353">
Much of the decline in inflation is due to the decline in the
price of oil. Brent crude was $144 a barrel on July 11 and $35 on
December 30. But increasingly it has been the performance of the
economy that is exerting downward pressure on prices. Residential
construction is way down, consumer demand is falling as is business
investment. Fear of deflation is beginning to replace fear of
inflation. Inflation in Thailand, for example, was less than 0.5% in
the month of December, down from 9.2% in July. Less dramatic but still
significant is the decline in inflation in Spain from 5.3% in July to
1.5% in December.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">INFLATION
Y/Y % CHANGE IN CPI</th>
<th scope="col">Dec 08</th>
<th scope="col">Nov 08&nbsp;</th>
<th scope="col">Oct&nbsp; 08&nbsp;</th>
<th scope="col">Sep 08&nbsp;</th>
<th scope="col">Aug 08&nbsp;</th>
<th scope="col">July 08</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>2.26</td>
<td>2.74</td>
<td>3.60</td>
<td>3.92</td>
<td>4.23</td>
<td>4.03</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>1.50</td>
<td>2.40</td>
<td>3.60</td>
<td>4.60</td>
<td>4.90</td>
<td>5.30</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Thailand</td>
<td>0.42</td>
<td>2.19</td>
<td>3.89</td>
<td>6.05</td>
<td>6.43</td>
<td>9.21</td>
</tr>
<tr class="odd">
<td class="firstcol">Taiwan</td>
<td>1.21</td>
<td>1.88</td>
<td>2.39</td>
<td>3.10</td>
<td>4.68</td>
<td>5.81</td>
</tr>
<tr class="odd">
<td class="firstcol">Indonesia</td>
<td>11.06</td>
<td>11.42</td>
<td>11.77</td>
<td>12.15</td>
<td>11.85</td>
<td>11.90</td>
</tr>
</tbody>
</table>
</body></html>

Among the data released today were the Consumer Price Indexes in December for a number of countries--Spain and Italy in Europe and Indonesia, Thailand and Taiwan in Asia. The year to year percentage changes in the indexes show that [...]

More Evidence of Declining Inflation

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090105f.jpg" width="353">
During November, the value of construction put in place fell another 0.6% though the decline during October was lessened to 0.4%. So far this year total construction spending is down 1.4%. The 20.7% decline in the value of residential building has been mitigated by an 11.6% gain in the nonresidential category and an 8.8% rise in public construction. Consensus expectations had been for a 1.2% November decline.
Residential building activity led the latest monthly decline. The 4.2% drop was the third in a row and activity remained off by one quarter from last year. Single-family construction activity fell 6.6% and it&#39;s off by nearly one half year-to-year. Building activity on multi-family units also was weak and it posted a 1.8% decline (-2.6 y/y), off 20% from the early-2007 peak. Spending on improvements fell a sharp 2.1% m/m (+8.1% y/y).
During the last twenty years there has been an 84% correlation between the q/q change in the value of residential building and its contribution to growth in real GDP.
The value of nonresidential building activity has remained firm relative to the residential sector. During November it posted a 0.7% gain and that pulled activity up 10.3% y/y, though that momentum is down by half from last year. Spending on office construction rose about as it did during October, by 0.9%, but the y/y gain of 5.0% is much reduced from the near 20% growth of the prior two years. Building in the multi-retail sector was unchanged m/m and it was down 15.0% y/y after a 17.0% gain last year and a 28.3% pop during 2006. Spending on health care facilities reversed much of an October decline with a 0.8% increase and y/y growth near 8.6% has been steady.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090105g.jpg" width="353">
Public construction rose another 1.4% and the 1.7% October gain was revised sharply upward from the preliminary report. Spending on public safety surged by 10.2% and it&#39;s up by one-third year-to-year. The value of spending on transportation facilities fell 1.9% but the y/y increase of 5.4% remained firm. Spending on highways &amp; streets rose 1.3% (8.3% y/y). The value of construction on highways &amp; streets is roughly one-third of the value of total public construction spending.
The more detailed categories of construction represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002, and that constant-dollar data are no longer computed.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E907/@E907.HTM">Construction</a> (%)</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-0.6</td>
<td>-0.4</td>
<td>-3.3</td>
<td>-2.7</td>
<td>6.3</td>
<td>11.2</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>-1.5</td>
<td>-1.2</td>
<td>-7.4</td>
<td>-6.9</td>
<td>5.5</td>
<td>12.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>-4.2</td>
<td>-2.1</td>
<td>-23.4</td>
<td>-19.8</td>
<td>1.0</td>
<td>14.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonresidential</td>
<td>0.7</td>
<td>-0.4</td>
<td>10.3</td>
<td>19.6</td>
<td>16.2</td>
<td>7.8</td>
</tr>
<tr>
<td class="firstcol">Public</td>
<td>1.4</td>
<td>1.7</td>
<td>7.9</td>
<td>12.3</td>
<td>9.3</td>
<td>6.2</td>
</tr>
</tbody>
</table>
</body>
</html>

During November, the value of construction put in place fell another 0.6% though the decline during October was lessened to 0.4%. So far this year total construction spending is down 1.4%. The 20.7% decline in the value of residential [...]

U.S. Construction Spending Off Further Due to Housing Decline

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090105c.jpg" width="353">
Federal Reserve Board Chairman Ben S. Bernanke recently addressed <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20081201a.htm">the effects of the housing market&#39;s contraction on the financial markets</a>. In reaction to the market&#39;s meltdown, and the depressing effects on consumer &amp; business spending, the U.S. Federal Reserve has eased monetary policy quite aggressively. Though targeted at 0.5% to 1.0%, the effective Federal funds rate now trades near 0.2% or lower, the lowest in fifty years. Also, the Fed created a new lending facility called the <a href="http://www.federalreserve.gov/newsevents/press/monetary/20081125a.htm">Term Asset-Backed Securities Loan Facility (TALF).</a>
In reaction, the adjusted monetary base has surged. It has nearly doubled to $1.5 trillion as the Federal Reserve has provided banks with billions of added liquidity to shore up balance sheets and provide lending. Moreover, the Fed has accommodated an increase in the demand for cash balances. That has prompted the money stock (M2) to rise at an accelerated 13.6% annual rate during the last three months, up from little growth this passed summer.
As of yet, the current round of easing has paid few economic dividends. Consumer spending has collapsed as have corporate profits and business spending. A crisis of confidence, consumer and business, is in evidence. Is the Fed pushing on the proverbial string? Monetary ease does not usually generate an economic impact for three-to-six months after rates are lowered. But these are not normal times. Credit creation played a large part in the U.S. economy&#39;s growth during the last several years and the unwinding of that leverage should similarly take some time. Just how much leverage was created during the last few years and might now need to be unwound? Since the last recession occurred in 2001, and it was a mild one, the growth in assets (debt) held by commercial U.S. banks averaged 9.2% per year. That was the quickest growth since the mid-1980s, a time of faster growth in productive capacity, both of labor and of capital. Finance companies extended credit at an average rate of 11.5% annually. Therefore credit extension could be modest for the foreseeable future.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090105d.jpg" width="353">
So why was there the overshoot of debt creation for which there now is a period of payback? Interest rates were held low from 2002 to 2004 as worries about price inflation subsided. In 2003, FOMC meeting minutes indicate a focus on economic growth that had been below its potential lifted by strong productivity gains, declining inflation expectations and a general absence of pricing power. Indeed inflation was more than under control. Occasionally, in the early-2000&#39;s, there was use of the word deflation and a modest concern on the part of the Fed that as inflation fell, monetary policy was tightening. Low interest rates were deemed appropriate. After 2004, debt growth surged as new credit vehicles were created, employment rose and home prices surged.
Will the Fed&#39;s current flood of liquidity be successful in stimulating economic growth? The answer is eventually, but most forecasters suggest not until the middle of next year. Chairman Bernanke recently <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20081204a.htm">observed</a> that even if financial markets start to improve, consumer spending would remain depressed by the fall in household wealth and a lack of credit availability. Most agree that it will not be a V-shaped recovery. Credit extension could be under wraps for some time.
Typically, the Fed might worry that aggressive easing (flooding the economy with money) would eventually spur inflation higher. In fact the credit markets already are worrying. The spread between the yield on 10-year Treasury notes and the Fed funds rate has widened to 207 basis points. Though that&#39;s down in recent weeks from its steepest spread of over 300 basis points, it compares to a zero or negative spread during 2006 and 2007. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090105e.jpg" width="353">
With regard to the more steeply sloped interest rate yield curve, is the market&#39;s concern about a rise in inflation justified? The definitive answer is &quot;probably not.&quot; A pickup in inflation would normally be expected to appear after economic growth exceeded its &quot;potential&quot; for some time. Current potential growth in GDP, which is labor force growth plus productivity growth, likely is 2.5%. Thus, in this case given the current multi-year period of moderate growth that seems yet to come, inflation should not pick up for years. The recent collapse in oil prices, if sustained, certainly will diffuse inflationary pressure. However, there is a wild card scenario ... one of &quot;stagflation.&quot; It could colloquially be described as too much money chasing too few goods. We&#39;ll have to keep our eyes open for that is a threat.
From one respected source for comprehensive economic forecasts, go to the Haver database MA4CAST which has forecasts from <a href="http://www.macroadvisers.com/"> Macroeconomic Advisers</a> in St. Louis, MO. They foresee inflation declining through the end of next year then picking up slightly. As for economic growth, modest after the current recession ends next quarter then a healthy rebound later in 2010.
The data used for the charts above can be found in Haver&#39;s USECON and USWEEKLY databases. Go to <a href="http://www.haver.com/">http://www.haver.com/</a> to learn more.
Globalization and the Changing Nature of the U.S. Economy&#146;s Influence in the World from the Federal Reserve Bank of Dallas is available <a href="http://dallasfed.org/research/eclett/2008/el0811.html">here</a>.

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</html>

Federal Reserve Board Chairman Ben S. Bernanke recently addressed the effects of the housing market's contraction on the financial markets. In reaction to the market's meltdown, and the depressing effects on consumer & business [...]

U.S. Monetary Policy: Pushing On A String?

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

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

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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

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

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The Industrial Materials Price Index from the Foundation for International Business and Economic Research (FIBER) jumped 2.3% (0.2% y/y) during the four weeks ended July 4, 2025. The improvement followed declines since early spring.

Prices in the Metals group surged 4.0% (-2.3% y/y) over the most recent four weeks. Price strength was broad-based. Tin prices jumped 7.9% (2.2% y/y) while aluminum costs surged 5.6% (4.2% y/y). Copper scrap prices rose 3.8% (5.0% y/y) in four weeks as lead prices surged 3.4% in four weeks (-7.4% y/y). The cost zinc rose 3.0% (-6.0% y/y) and steel scrap rose 1.4% (-11.4% y/) in four weeks.

Crude Oil & Benzene group prices moved 3.1% higher (-15.7% y/y) in the latest four week period. The cost of West Texas Intermediate crude oil rose 5.2% higher to $65.86 per barrel and remained 20.6% lower y/y. It fell to a low of $58.50 per barrel in the second week of May. The cost of the petrol-chemical benzene, used for making plastics & synthetic fibers, strengthened 6.0% (-35.3% y/y). Excluding crude oil, the industrial commodity price index rose 2.1% (1.6% y/y) during the last four weeks.

Miscellaneous group prices increased 1.5% (9.8% y/y) in the latest period. The price of tallow (used in the soap industry) rose 5.9% (15.7% y/y) in four weeks. Framing lumber prices gained 4.3% (38.3% y/y) while natural rubber prices improved 0.3% (12.5% y/y) in four weeks.


Prices in the Textile group edged 0.8% higher (1.7% y/y) during the last four weeks. Cotton prices rose 4.4% and also 4.4% y/y. Burlap costs rose 1.3% in four weeks and 10.1% y/y.

The Foundation for International Business and Economic Research (FIBER) develops economic measurement techniques as applied to business cycles and inflation in the U.S. and other market economies. The commodity price data can be found in Haver's **DAILY**, **WEEKLY**, **USECON** and **CMDTY** databases.

250707B2.jpg

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- Prices increase broadly after earlier declines.
- Metals prices lead upturn.
- Textile price rise but rubber prices are little changed.

FIBER: Industrial Commodity Prices Surge in Latest Four Weeks

Tian Yong Woon

This week, we look at the latest US trade developments and their implications for Asia, as the US’ 90-day tariff pause expires on Wednesday (July 9). Market sentiment had already turned cautious ahead of the deadline, reflecting heightened uncertainty around US trade policy (chart 1). This unease was reinforced by President Trump’s announcement that tariff notices would be sent to trading partners, starting with 12 to 15 to be sent on Monday. A modest source of relief came from US Treasury Secretary Bessent, who indicated that some countries could be granted an extra three weeks to negotiate. However, any resulting tariffs are still set to take effect on August 1. Bessent also confirmed that around 100 economies will now face a baseline 10% tariff. If this is upheld—and if 10% remains the floor—it implies that more than 20 economies have lost their previous preferential treatment, further worsening their trade position (chart 2).

In contrast, Vietnam reached a deal last week, cutting its tariff rate from 46% to 20%, though the agreement includes a 40% tariff on “transshipments.” In return, the US secured tariff-free access to Vietnamese markets. While 20% is a clear improvement, it remains high relative to the current 10% reprieve and could feed through to higher US consumer prices—particularly given Vietnam’s key role in electronics exports (chart 3). Japan, meanwhile, is under pressure to open its rice market or face tariffs of up to 35%. However, any concessions would be politically sensitive, particularly with upper house elections approaching. In the meantime, Japan has already ramped up rice imports to help ease domestic shortages (chart 4). All this comes as central banks in Australia, New Zealand, South Korea, and Malaysia meet this week. The Reserve Bank of Australia is widely expected to cut rates amid easing inflation to further support growth (chart 5), while South Korea’s central bank is seen likely to hold steady, wary of rising home prices and mortgage growth (chart 6).

**Latest US tariff developments**
Market sentiment turned cautious late last week as the US’ tariff pause neared its end. Understandably, this unease was reinforced by President Trump’s announcement that tariff notices would be sent to trading partners, starting with 12 to 15 to be sent on Monday. The earlier sense of relief—when tariffs appeared to have been delayed—has faded, giving way to renewed uncertainty. As this shift in sentiment takes hold, equity performance across advanced Asia has weakened in recent days, as shown in chart 1. Amid the resurfacing uncertainty, there is a modest point of reprieve. While this Wednesday (July 9) marks the end of the US' 90-day tariff pause, US Treasury Secretary Scott Bessent has indicated that some countries may be granted an additional three weeks to continue negotiations. Furthermore, any new resulting tariff rates will only take effect on August 1. The extension offers more time to talk—but not a delay in implementation. That said, progress on trade discussions with the US has been limited for most Asian economies—and may even have deteriorated for some, such as Japan, which will be addressed in a later section.

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Digging deeper into the details, Bessent also noted that around 100 economies and territories will now face a baseline tariff of 10%. If this is accurate—and if the 10% rate remains the floor—it suggests that many of the economies and territories originally assigned that baseline rate, roughly 20 or more, have now been excluded. In effect, their relative position has worsened. In the Asia-Pacific region, key economies to watch in this context include Australia, New Zealand, and Singapore, among others, as shown on chart 2. Notably, these countries have not been actively engaged in substantive trade negotiations with the US—perhaps understandably so. Furthermore, based on recent messaging from the US, it appears that the original “Liberation Day” tariff schedule may no longer apply. This raises a broader and more consequential question: Will the new rates be grounded in a clear justification or mechanism—and if so, what might that be?

250707T2.jpg

**Vietnam**
While trade deals with the US have been few and far between since the beginning of the tariff pause, Vietnam has stood out following the announcement of a new trade agreement with the US late last week. Originally facing a reciprocal tariff rate of 46%, Vietnam has reached a deal to reduce that rate to 20%. However, the agreement also includes a 40% tariff on so-called “transshipments”—a measure aimed at addressing US concerns that goods may be routed through Vietnam from other economies, possibly China, to circumvent higher tariffs or trade restrictions. In return, the US has secured tariff-free access to Vietnamese markets. While the 20% rate is a significant improvement over the initially proposed 46%, it remains relatively high—especially compared to the 10% reprieve level. This will likely translate into higher costs for American consumers unless the increase is absorbed by producers or suppliers. On the positive side, tariff-free access to Vietnam offers some offset, particularly for US input goods sent to Vietnam for further processing, which would avoid additional tariffs on that leg of trade. That said, there is still uncertainty around how the “transshipment” clause will be defined and enforced in practice. Given Vietnam’s role as a major supplier of electronics—including smartphones—to the US (chart 3), the increase from the 10% pause rate to 20% is significant. If the added costs are passed through the supply chain, it could lead to a noticeable impact on US consumer prices.

250707T3.jpg

**Japan**
Turning to Japan, the country is walking a tightrope between avoiding the economic fallout of renewed US tariffs and being seen as capitulating to US trade demands. Among those demands is a push for Japan to open up its market further—particularly for US rice. President Trump has criticized Japan as being “spoiled” for resisting such moves and has threatened tariffs of 30–35%, significantly higher than the 24% “Liberation Day” rate. Complying with US demands could be politically costly for the Japanese government. Any concession on rice would likely be viewed as a blow to Japanese farmers—a key part of Prime Minister Ishiba’s political base. The issue is especially sensitive with upper house elections approaching. At the same time, Japan is grappling with a domestic rice shortage that has been driving prices higher. Given rice’s central role in the Japanese diet, the shortage is a major cost-of-living concern. In response, Japan has already ramped up rice imports, as shown in chart 4, including by bringing forward a tariff-free tender—originally scheduled for September—for 30,000 tons from the US, Australia, and Thailand. However, relative to Japan’s actual consumption needs, this incremental supply is just a drop in the bucket.

250707T4.jpg

**Central bank decisions this week**
This week’s renewed US trade uncertainty threatens to complicate a series of central bank decisions across the region. The central banks of Australia, New Zealand, South Korea, and Malaysia are all set to announce policy rate decisions just as the US’ 90-day tariff pause expires. If the so-called “Liberation Day” tariffs are reinstated, they could pose fresh downside risks to regional trade and growth, forcing policymakers to reassess their outlooks. Some central banks already have a clear easing bias. For example, the Reserve Bank of Australia is widely expected to cut rates this week—its third cut in the current cycle—as inflation continues to moderate (chart 5) and domestic growth remains sluggish.

250707T5.jpg

Lastly, turning to South Korea, the central bank (BoK) has already lowered rates four times since beginning its easing cycle last October and maintained a dovish tone at its most recent meeting in response to weakening growth momentum. However, the BoK is widely expected to hold rates steady this week. It is aiming to strike a balance between supporting growth—particularly with the potential reinstatement of US tariffs looming—and avoiding overheating in segments of the domestic economy. In particular, the BoK remains concerned about the property market, where housing prices have resumed their upward trend, and the household loan sector—especially mortgage lending—where loan growth has once again accelerated, as shown in chart 6.

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Asia

Economic Letter from Asia: The Final Countdown?

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Nonfarm payrolls increased 147,000 (1.1% y/y) during June after rising 144,000 in May, revised from 139,000, and 158,000 in April, revised from 147,000. Expectations had been for a 113,000 rise in the Action Economics Forecast Survey. The three-month average change of 150,000 in June compared to 232,000 in January.

Average hourly earnings rose 0.2% during June after an unrevised 0.4% May gain, and a 0.2% April increase. Earnings growth of 3.7% y/y is down from a high of 4.2% last November, and has been trending lower from the 5.9% high in March 2022. A 0.3% increase expected for June.

The unemployment rate, measured in the household survey, fell m/m to 4.1%. It compared to 4.2% in May where it had been for three straight months. A rise to 4.3% was expected. It reached a low of 3.4% in April 2023. The unemployment rate, including employees working part-time for economic reasons plus all marginally-attached workers, eased to 7.7% last month from 7.8% In May. It was 6.6% in April 2023.

In the **establishment survey**, private-sector employment in June rose 74,000 (1.0% y/y) after a 137,000 May increase. Factory sector jobs declined 7,000 (-0.7% y/y) for the second consecutive month. Construction sector employment increased 15,000 (1.4% y/y), after rising 6,000 in May.

Private service-producing sector employment increased 68,000 (1.2% y/y) in June after improving 141,000 in May. Increases varied greatly amongst service sector categories. Private education & health sector employment rose 51,000 (3.3% y/y) last month while leisure & hospitality employment rose 20,000 (1.4% y/y). Trade, transportation & utilities employment gained 3,000 (0.6% y/y) and financial activities employment improved 3,000 (1.0% y/y).

Government sector payrolls strengthened 73,000 (1.5% y/y) last month following a 7,000 rise in May. State government employment increased 47,000 (2.8% y/y) while the number of local government jobs rose 33,000 (1.7% y/y). Federal government payrolls fell 7,000 (-2.1% y/y), the fifth straight monthly decline.

Private-sector average hourly earnings rose 0.2% (3.7% y/y) in June following unrevised increases of 0.4% in May and 0.2% in April. Earnings in the goods-producing sector edged 0.1% (3.6% y/y) higher. In construction earnings rose 0.4% (3.9% y/y) but factory sector earnings eased 0.1% (+3.5% y/y). In the private services-sector, earnings rose 0.2% (3.7% y/y) in June.

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The length of the average workweek shortened to 34.2 hours in June from 34.3 hours in May. The workweek in the goods-producing sector was unchanged at 39.8 hours. The construction sector average workweek eased to 38.9 hours while the factory sector workweek held steady at 40.1 hours. The average workweek in the private service sector eased to 33.1 hours.

In the **household survey**, the unemployment rate dipped to 4.1% in June from 4.2% in May as employment rose 96,000 and the size of the labor force declined 130,000, off for the second straight month. The labor force participation rate eased to 62.3% last month and remained below the high of 63.3% early in 2020. The rate for teenagers plunged to 35.1%, a five-year low. For workers aged 20-24, the rate declined to 71.0%. For workers aged 25-54, the participation rate edged up to 83.5%. For individuals 55 and over, the rate eased to nearly a 20-year low of 38.0% in June.

The employment/population ratio for all workers held steady at 59.7% last month. It remained below the peak reading of 61.1% in February, 2020 just prior to the pandemic.

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

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- Job growth improves with strength in state & local gov’t hiring.
- Earnings gain decelerates.
- Jobless rate falls to four-month low.

U.S. Employment Growth Firms in June, While Earnings Growth & Jobless Rate Decline

Sandy Batten

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The U.S. trade deficit in goods and services (BOP basis) widened to $71.5 billion in May from a downwardly revised $60.3 billion in April (previously -$61.6 billion), according to the U.S. Census Bureau. The actual widening met the Action Economics Forecast Survey expectation. Exports fell 4.0% m/m (+5.3% y/y), the first monthly decline in five months, led by a 5.7% m/m decline in goods exports. Imports edged down 0.1% m/m (+3.3% y/y) in May after a 16.3% m/m plunge in April. Imports of goods have cooled markedly in the past two months after surging during Q1 as importers attempted to front run expected increases in tariffs.

The real (inflation adjusted) goods trade deficit widened to $92.5 billion (2017$) in May from $84.4 billion in April. The real trade deficit had widened to record levels during the first quarter with net exports subtracting 4.6%-points from Q1 GDP. The April/May figures put the real balance on course to narrow by roughly $150 billion in Q2 (at a quarterly rate), which would mean that net exports in the national accounts could add 2-1/2 to 3%-points to Q2 GDP.

The trade deficit in goods widened to $97.5 billion in May from $86.3 billion in April. Goods exports fell 5.7% m/m, the first monthly decline in five months. Exports of nonmonetary gold fell $5.5 billion (-56.4% m/m) while exports of finished metal shapes (which includes other forms of nonmonetary gold) fell $1.0 billion (-10.0% m/m). Both of these had surged in April, reflecting re-exports of previous nonmonetary gold imports that had risen markedly in Q1 in an attempt to front run expected tariff increases. More generally, exports of industrial supplies and materials slumped 13.3% m/m in May after a 16.1% m/m jump in April. Capital goods ex autos declined 3.1% m/m, and food exports fell 2.5% m/m, the fifth monthly decline in the past six months. In contrast, auto exports rebounded, rising 3.6% m/m, but failed to come close to reversing the 21.5% plunge in April. Exports of nonfood consumer goods ex autos posted a solid 6.9% monthly gain after having declined in each of the preceding two months.

Imports of goods edged down 0.1% m/m (+2.8% y/y) in May on top of a 19.9% monthly plunge in April, indicating that the surge in imports in Q1 ahead of expected tariff hikes has run its course. Auto imports jumped 10.3% m/m after a 19.9% monthly decline in April. Imports of “other” goods rebounded 8.4% m/m in May following a 3.3% m/m decline in April. In contrast, imports of industrial supplies and materials fell 1.8% m/m, the fourth consecutive monthly decline. Imports of nonfood consumer goods ex autos fell 5.7% m/m on top of a 32.0% drop in April. Food imports posted a small monthly decline while imports of capital goods ex autos posted a small increase.

The services trade surplus narrowed marginally to $25.99 billion in May from $26.05 billion in April. Exports of services slid 0.2% m/m after a 2.2% monthly increase in April. Exports of transport services fell 2.0% m/m, the third monthly decline in the past four months. Travel exports declined 1.8% m/m, the fourth monthly decline in the past five months. In contrast, maintenance services exports rose 2.1% m/m; exports of insurance services increased 1.5% m/m; exports of intellectual property rose 0.9% m/m; and construction service exports gained 1.4% m/m. Services imports declined 0.2% m/m in May, the first monthly decline in three months. Imported transport services fell 3.3% m/m, the fourth monthly decline in the past five months. Travel imports declined 1.0% m/m, also the fourth monthly decline in the past five months. In contrast, imported construction services jumped 3.9% m/m and imported intellectual property rose 1.6% m/m.

The U.S. goods trade deficit with China narrowed markedly to a seasonally adjusted $14.0 billion from $19.7 billion in April and $24.2 billion March. This is the smallest monthly deficit with China in the history of the series, which dates back to 2009. Exports to China plunged 19.9% m/m while imports from China plummeted 26.3% m/m. The trade deficit with the European Union widened to $22.5 billion from $17.9 billion in April. The trade deficit with Japan narrowed marginally to $5.77 billion in May from $5.81 billion in April.

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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- Trade deficit widened in May on decline in goods exports.
- Still, the real deficit in April/May points to net exports making a meaningful positive contribution to Q2 GDP.
- Both exports and imports declined in May.
- Series low trade deficit with China.

U.S. Trade Deficit Widened in May

Kathleen Stephansen, CBE

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Initial claims for unemployment insurance were 233,000 in the week of June 28, down 4,000 from 237,000 in the week ending June 21, revised from 236,000. The Action Economics Forecast Survey expected 240,000. These data are seasonally adjusted by the Department of Labor. The 4-week moving average was 241,500, a decrease of 3,750 from the previous week’s average of 245,250, revised from 245,000.

The total number of unemployment insurance beneficiaries – also known as “continuing claims” – in the week ended June 21 was 1.964 million, unchanged from the prior week’s level, which was revised down from 1.974 million. The 4-week moving average was 1.954 million, up from 1.938 million in the previous week, revised from 1.941 million. This is the highest level for this average since November 20, 2021, when it was 2.004 million.

The insured unemployment rate for the week ending June 21, that is, the number of unemployment beneficiaries as a % of covered employment, was unchanged at 1.3% for the fourth consecutive week.

Economic conditions vary widely across states and territories. In the week ended June 14, the highest unemployment rates were in New Jersey (2.23%), Minnesota (2.22%), Puerto Rico (2.20%), California (2.16%), Washington (1.98%), and Rhode Island (1.95%). The lowest rates were in South Dakota (0.27%), Florida (0.41%), North Carolina (0.47%), and Alabama (0.48%). Rates in other notable states include Pennsylvania (1.71%), Illinois (1.67%), New York (1.55%), and Texas (1.26%). 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 for unemployment insurance declined by 4,000 in the week ended June 28.
- Total number of beneficiaries was unchanged in the week of June 21 week.
- The insured unemployment rate was unchanged at 1.3%.

Economy in Brief: January 2009

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