Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080502h.jpg" align="left" border="0" height="265" width="353">
The NTC MFG indices fell on broad front in April. Their
declines were steeper than they have been. Still only Germany, Greece
and the Netherlands are in the top half of their respective percentile
ranges. The EMU economy as a whole is in the lower portion of its range
of values since March of 2000. Italy, Spain and Ireland are showing
extreme weakness. Still half of the EMU area&#8217;s MFG PMIs are showing
expansion and are above the neutral 50 reading; the UK is another. EMU
is looking vulnerable to weakness. EMU and its indices peaked in mid
2006. They cycled to a low in September of 2007, rebounded through
early 2008 before taking a new leg down. The slide in Europe on the
back of the rising euro makes sense. We still do not have much idea why
Europe broke out of its declining phase from mid to late 2007 when the
Euro was still strong. But its return to weakness makes sense. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">NTC MFG
Indices </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Apr-08</td>
<td>Mar-08</td>
<td>Feb-08</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>Percentile</td>
</tr>
<tr>
<td class="firstcol">Euro-13</td>
<td>50.74</td>
<td>52.03</td>
<td>52.34</td>
<td>51.70</td>
<td>52.21</td>
<td>53.15</td>
<td>44.5%</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>53.62</td>
<td>55.14</td>
<td>54.28</td>
<td>54.35</td>
<td>54.13</td>
<td>54.79</td>
<td>61.4%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>51.12</td>
<td>51.88</td>
<td>53.81</td>
<td>52.27</td>
<td>52.86</td>
<td>52.68</td>
<td>39.9%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>48.24</td>
<td>49.41</td>
<td>50.64</td>
<td>49.43</td>
<td>50.20</td>
<td>51.74</td>
<td>29.5%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>45.19</td>
<td>46.42</td>
<td>46.72</td>
<td>46.11</td>
<td>48.06</td>
<td>50.21</td>
<td>12.4%</td>
</tr>
<tr>
<td class="firstcol">Austria</td>
<td>49.83</td>
<td>53.39</td>
<td>52.36</td>
<td>51.86</td>
<td>52.98</td>
<td>53.49</td>
<td>41.9%</td>
</tr>
<tr>
<td class="firstcol">Greece</td>
<td>54.38</td>
<td>52.73</td>
<td>52.35</td>
<td>53.15</td>
<td>52.98</td>
<td>53.50</td>
<td>57.9%</td>
</tr>
<tr>
<td class="firstcol">Ireland</td>
<td>44.69</td>
<td>46.01</td>
<td>49.78</td>
<td>46.83</td>
<td>48.12</td>
<td>50.73</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Netherlands</td>
<td>51.45</td>
<td>53.15</td>
<td>51.91</td>
<td>52.17</td>
<td>53.08</td>
<td>55.03</td>
<td>51.6%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">EU</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>50.96</td>
<td>51.25</td>
<td>51.24</td>
<td>51.15</td>
<td>51.73</td>
<td>53.18</td>
<td>50.6%</td>
</tr>
<tr class="grey1">
<td colspan="6" class="firstcol">percentile
is over range since March
2000</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body></html>

The NTC MFG indices fell on broad front in April. Their declines were steeper than they have been. Still only Germany, Greece and the Netherlands are in the top half of their respective percentile ranges. The EMU economy as a whole is [...]

The NTC MFG Index/Indices Continue to Drop

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080502g.jpg" align="left" border="0" height="265" width="353">
French producer prices again are showing over-the-top
inflation. The three-month overall rate is a 4.2% pace but that
represents some deceleration from 6.6% over six months and it is below
the 5.5% Yr/Yr rate. Still, inflation is up sharply from its year ago
annual rate of 2.1%. And, in the quarter-to-date the overall PPI rate
is still up at a 6% annual rate. The chart shows the halting roller
coaster that French PPI inflation has been riding. 
 

Consumer prices at the producer level have stayed subdued
throughout, partly because consumer demand has been slack. Intermediate
prices are running up strongly with all the increases in energy metals
and other commodity prices. Investment goods, which have been in the
booming sector in Europe, have generally kept price tends in check. But
investment goods prices have accelerated slightly over three-months and
at 1.4% are moderate. Core PPI inflation has reversed a declining trend
and accelerated to 2.6% over three-months. At 1.8%, its Yr/Yr pace is
still under the overall inflation ceiling desired by the ECB- a ceiling
that formally refers only to the HICP but is applicable up and down the
inflation transmission line. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">France PPI
</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">m/m</td>
<td colspan="5">Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>Mar-08</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>Yr/Yr</td>
<td>Y/Y Yr Ago</td>
<td>Qtr-2-Date</td>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>0.3%</td>
<td>0.3%</td>
<td>0.5%</td>
<td>4.2%</td>
<td>6.6%</td>
<td>5.2%</td>
<td>2.1%</td>
<td>6.0%</td>
</tr>
<tr>
<td class="firstcol">Consumer</td>
<td>0.2%</td>
<td>0.0%</td>
<td>-0.3%</td>
<td>-0.4%</td>
<td>-0.2%</td>
<td>0.4%</td>
<td>-0.3%</td>
<td>-1.2%</td>
</tr>
<tr>
<td class="firstcol">Intermediate</td>
<td>0.3%</td>
<td>0.7%</td>
<td>0.5%</td>
<td>6.0%</td>
<td>2.9%</td>
<td>3.2%</td>
<td>4.7%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">Investment</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>0.4%</td>
<td>1.5%</td>
<td>1.1%</td>
<td>1.2%</td>
<td>2.6%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">PPI excl&nbsp;
Food and Energy</td>
<td>0.1%</td>
<td>0.4%</td>
<td>0.2%</td>
<td>2.6%</td>
<td>1.6%</td>
<td>1.8%</td>
<td>2.7%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
</body></html>

French producer prices again are showing over-the-top inflation. The three-month overall rate is a 4.2% pace but that represents some deceleration from 6.6% over six months and it is below the 5.5% Yr/Yr rate. Still, inflation is up [...]

French PPI Sees Gathering Momentum

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080502f.jpg" align="left" border="0" height="265" width="353">
The original weakness in German ex-auto retail sales in
February had already been revised up, leaving February in a small
decline. Now March sales are flat. The strength in the quarter stems
from the surge back in January. Real retail sales are up at a 4.9%
annual rate in the quarter. Nominal sales are up by an eye popping
8.1%. But all of the quarter&#8217;s gains stem from a surge in sales in
January &#8211; a surge that still seems in the process of being unwound.
While recent German surveys of consumer sentiment have been upbeat,
surveys of retailers have not. It appears that real retail sales
ex-autos are in a position to boost Q1 GDP but it does not seem that
this is any sort of a watershed event. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="9" scope="col"> German Real and Nominal Retail Sales</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Nominal</td>
<td>Mar-08</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>3-MO</td>
<td>6-MO</td>
<td>12-MO</td>
<td>YrAgo</td>
<td>QTR Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail excl Auto</td>
<td>0.0%</td>
<td>-0.2%</td>
<td>2.3%</td>
<td>8.8%</td>
<td>2.1%</td>
<td>1.5%</td>
<td>-0.1%</td>
<td>8.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food Beverage &amp; Tobacco</td>
<td>1.1%</td>
<td>-0.8%</td>
<td>3.1%</td>
<td>14.3%</td>
<td>0.4%</td>
<td>0.5%</td>
<td>0.8%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Clothing footwear</td>
<td>-8.7%</td>
<td>4.5%</td>
<td>1.7%</td>
<td>-11.6%</td>
<td>-20.6%</td>
<td>-5.1%</td>
<td>5.8%</td>
<td>7.8%</td>
</tr>
<tr>
<td class="firstcol">Real</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">Retail excl Auto</td>
<td>-0.1%</td>
<td>-0.7%</td>
<td>1.9%</td>
<td>4.5%</td>
<td>-1.2%</td>
<td>-1.2%</td>
<td>-0.7%</td>
<td>4.9%</td>
</tr>
</tbody>
</table>
</body></html>

The original weakness in German ex-auto retail sales in February had already been revised up, leaving February in a small decline. Now March sales are flat. The strength in the quarter stems from the surge back in January. Real retail [...]

German Retail Sales Show Some Life in Q1

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080502d.jpg" width="353">
U.S. sales of light vehicles during April dropped another 4.8% m/m to a 14.39M unit annual selling rate, according to the Autodata Corporation. So far this year vehicle sales have fallen 11.1% while, since December, gasoline prices have risen 20.9%.
Higher gas prices have weighed heaviest on sales of domestically made light trucks. They are relatively fuel inefficient and April sales fell 8.5% m/m. That brought the decline this year to 17.5%. In addition, sales of U.S. made cars fell 2.3% in April and they are down 9.4% in 2008. Overall, sales of domestically made light vehicles in April were at the lowest level since 1992.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080502e.jpg" width="353">
Sales of imported light vehicles fell a relatively moderate 2.1% m/m 4.00M units after a 7.4% March increase. Despite the April decline, the latest level of imported vehicle sales remained near the record. Sales of imported autos fell just 0.7% after the 11.5% surge in March. So far this year sales of imported cars rose 1.6%. Showing that sales of imported light trucks weren&#39;t immune to the softening of overall consumer spending, they fell last month by 4.6% and the decline lowered sales so far this year by 10.5%.
Import&#39;s share of the U.S. light vehicle market rose to another record level of 27.8%. (Imported vehicles are those produced outside the U.S. and does not include vehicles with the nameplate of a foreign manufacturer produced within the U.S.) Imports&#39; share of the U.S. car market rose to 35.9% and the share of the light truck market was 19.3%; both records and more than double the shares ten years ago.

<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">April</th>
<th scope="col">March</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>&nbsp;14.39</td>
<td>15.11</td>
<td>-11.7%</td>
<td>16.18</td>
<td>16.55</td>
<td>16.96</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>7.38</td>
<td>7.51</td>
<td>0.2%</td>
<td>7.58</td>
<td>7.77</td>
<td>7.65</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Domestic</td>
<td>4.73</td>
<td>4.84</td>
<td>-3.1%</td>
<td>5.07</td>
<td>5.31</td>
<td>5.40</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imported</td>
<td>2.65</td>
<td>2.67</td>
<td>6.7%</td>
<td>2.51</td>
<td>2.45</td>
<td>2.25</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Light Trucks</td>
<td>7.02</td>
<td>7.61</td>
<td>-21.4%</td>
<td>8.60</td>
<td>8.78</td>
<td>9.32</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Domestic</td>
<td>5.67</td>
<td>6.19</td>
<td>-23.9%</td>
<td>7.12</td>
<td>7.42</td>
<td>8.12</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imported</td>
<td>1.35</td>
<td>1.42</td>
<td>-9.0%</td>
<td>1.48</td>
<td>1.37</td>
<td>1.20</td>
</tr>
</tbody>
</table>
</body>
</html>

U.S. sales of light vehicles during April dropped another 4.8% m/m to a 14.39M unit annual selling rate, according to the Autodata Corporation. So far this year vehicle sales have fallen 11.1% while, since December, gasoline prices [...]

U.S. Higher Gasoline Prices Weigh on Light Vehicle Sales

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080502a.jpg" width="353">
The Bureau of Labor Statistics reported that for the fourth consecutive month nonfarm payrolls fell. The 20,000 worker decline in April fell short of expectations for a decline of 78,000 and it followed a little revised 81,000 drop in March.
From the household sector survey, the unemployment rate slipped to 5.0% from the elevated 5.1% in March. Household employment recovered the declines during the prior two months and rose 362,000 (0.4% y/y). The labor force rose 173,000 (0.9% y/y). The labor force participation rate held steady at 66.0%, about the level of the last year while the number of persons who want a job rose slightly after two months of sharp decline.
The average duration of unemployment rose to 16.9 weeks from 16.2 in March. Those figures are down from the averages of the prior several years.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080502c.jpg" width="353">
From the establishment survey, private nonfarm payrolls continued to indicate distress in the labor market. Private sector payrolls fell 29,000 last month, the fifth consecutive month of decline though it was less than the drops during the prior four months.
Factory sector jobs posted a 46,000 decline, which was about the same magnitude as declines during the prior three months. The three month rate of job loss of 4.0% was the fastest since 2003.
Construction sector employment declined 61,000 which was the largest decline since February &#39;07. The three month growth rate deteriorated to -7.9%, its worst since 1991.
Hiring in the private service sector rose and the 81,000 increase recouped the negligible declines during the prior three months. Health care &amp; education jobs were strongest on a one month basis. They rose 52,000 and the rate of increase has been steady near 3.0%. A 39,000 increase in professional &amp; business services jobs accounted for much of the rest of last month&#39;s job gain but the three month change in these jobs was still a negative 0.7%. Temporary help services jobs, often a leading indicator of employment growth, fell 9,300 and the three month change fell to -10.7% (AR). Employment in finance rose 3,000 but it&#39;s still off 1.5% from the late 2006 peak. Real estate sector jobs fell 1,100 in April and were off 2.7% from the 2006 peak.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080502b.jpg" width="353">
The one month diffusion index, which measures the breadth of job gain or loss (50 is the break even level), continued to indicate job loss and it stood at 45.4%. The three month index was even weaker at 42.9% which was near the lowest since 2003.
Average hourly earnings rose a negligible 0.1% after five consecutive months of 0.3% gain. Factory sector earnings fell 0.2% (+2.2% y/y) and that was the first monthly decline since 2004. Private service sector earnings rose 0.2% (3.7% y/y) after five consecutive months of 0.3% increase.
Today&#39;s announcement by the Federal Reserve that it, the European Central Bank and Swiss National Bank will expand liquidity measures can be found <a href="http://www.federalreserve.gov/newsevents/press/monetary/20080502a.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB01/@EB01.HTM">Employment: 000s</a></th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">February</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">Payroll Employment</td>
<td>-20</td>
<td>-81</td>
<td>-83</td>
<td>0.3%</td>
<td>1.1%</td>
<td>1.8%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Previous</td>
<td>--</td>
<td>-80</td>
<td>-76</td>
<td>--</td>
<td>1.3%</td>
<td>1.9%</td>
<td>1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-46</td>
<td>-48</td>
<td>-47</td>
<td>-2.3%</td>
<td>-1.9%</td>
<td>-0.5%</td>
<td>-0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>-61</td>
<td>-46</td>
<td>-44</td>
<td>-5.0%</td>
<td>-1.0%</td>
<td>4.9%</td>
<td>5.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.7</td>
<td>33.8</td>
<td>33.7</td>
<td>33.8 (April &#39;07)</td>
<td>33.8</td>
<td>33.9</td>
<td>33.8</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.1</td>
<td>0.3%</td>
<td>0.3%</td>
<td>3.4%</td>
<td>4.0%</td>
<td>3.9%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>5.0</td>
<td>5.1%</td>
<td>4.8%</td>
<td>4.6% (April &#39;07)</td>
<td>4.6%</td>
<td>4.6%</td>
<td>5.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

The Bureau of Labor Statistics reported that for the fourth consecutive month nonfarm payrolls fell. The 20,000 worker decline in April fell short of expectations for a decline of 78,000 and it followed a little revised 81,000 drop in [...]

U.S. Payrolls Declined For Fourth Straight Month, Unemployment Slipped

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080502a.jpg" align="left" border="0" height="265" width="353">
The Bureau of Labor Statistics reported that for the fourth
consecutive month nonfarm payrolls fell. The 20,000 worker decline in
April fell short of expectations for a decline of 78,000 and it
followed a little revised 81,000 drop in March.
From the household sector survey, the unemployment
rate slipped to 5.0% from the elevated 5.1% in March.
Household employment recovered the declines during the prior two months
and rose 362,000 (0.4% y/y). The labor force rose 173,000 (0.9% y/y).
The labor force participation rate held steady at 66.0%, about the
level of the last year while the number of persons who want a job rose
slightly after two months of sharp decline.
The average duration of unemployment rose to 16.9 weeks from
16.2 in March. Those figures are down from the averages of the prior
several years.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080502c.jpg" align="right" border="0" height="265" width="353">
From the establishment survey, private nonfarm payrolls
continued to indicate distress in the labor market. Private sector
payrolls fell 29,000 last month, the fifth consecutive month of decline
though it was less than the drops during the prior four months.
Factory sector jobs posted a 46,000 decline, which was about
the same magnitude as declines during the prior three months. The three
month rate of job loss of 4.0% was the fastest since 2003.
Construction sector employment declined 61,000 which was the
largest decline since February '07. The three month growth rate
deteriorated to -7.9%, its worst since 1991.
Hiring in the private service sector rose and the 81,000
increase recouped the negligible declines during the prior three
months. Health care &amp; education jobs were strongest on a one
month basis. They rose 52,000 and the rate of increase has been steady
near 3.0%. A 39,000 increase in professional &amp; business
services jobs accounted for much of the rest of last month's job gain
but the three month change in these jobs was still a negative 0.7%.
Temporary help services jobs, often a leading indicator of employment
growth, fell 9,300 and the three month change fell to -10.7% (AR).
Employment in finance rose 3,000 but it's still off 1.5% from the late
2006 peak. Real estate sector jobs fell 1,100 in April and were off
2.7% from the 2006 peak.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080502b.jpg" align="left" border="0" height="265" width="353">
The one month diffusion index, which measures the breadth of
job gain or loss (50 is the break even level), continued to indicate
job loss and it stood at 45.4%. The three month index was even weaker
at 42.9% which was near the lowest since 2003.
Average hourly earnings rose a negligible
0.1% after five consecutive months of 0.3% gain. Factory sector
earnings fell 0.2% (+2.2% y/y) and that was the first monthly decline
since 2004. Private service sector earnings rose 0.2% (3.7% y/y) after
five consecutive months of 0.3% increase.
Today's announcement by the Federal Reserve that it,
the European Central Bank and Swiss National Bank will
expand liquidity measures can be found <a href="http://www.federalreserve.gov/newsevents/press/monetary/20080502a.htm">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB01/@EB01.HTM">Employment:
000s</a></th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">February</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">Payroll Employment</td>
<td>-20</td>
<td>-81</td>
<td>-83</td>
<td>0.3%</td>
<td>1.1%</td>
<td>1.8%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Previous</td>
<td>--</td>
<td>-80</td>
<td>-76</td>
<td>--</td>
<td>1.3%</td>
<td>1.9%</td>
<td>1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-46</td>
<td>-48</td>
<td>-47</td>
<td>-2.3%</td>
<td>-1.9%</td>
<td>-0.5%</td>
<td>-0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>-61</td>
<td>-46</td>
<td>-44</td>
<td>-5.0%</td>
<td>-1.0%</td>
<td>4.9%</td>
<td>5.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.7</td>
<td>33.8</td>
<td>33.7</td>
<td>33.8 (April '07)</td>
<td>33.8</td>
<td>33.9</td>
<td>33.8</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.1</td>
<td>0.3%</td>
<td>0.3%</td>
<td>3.4%</td>
<td>4.0%</td>
<td>3.9%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>5.0</td>
<td>5.1%</td>
<td>4.8%</td>
<td>4.6% (April '07)</td>
<td>4.6%</td>
<td>4.6%</td>
<td>5.1%</td>
</tr>
</tbody>
</table>
U.S. Higher Gasoline Prices Weigh
on Light Vehicle Sales 
by <a href="/comment/Moeller.html">Tom
Moeller</a> May 2, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080502d.jpg" align="left" border="0" height="265" width="353">
U.S. sales of light vehicles during April dropped another 4.8%
m/m to a 14.39M unit annual selling rate, according to the Autodata
Corporation. So far this year vehicle sales have fallen 11.1% while,
since December, gasoline prices have risen 20.9%.
Higher gas prices have weighed heaviest on sales of
domestically made light trucks. They are relatively fuel
inefficient and April sales fell 8.5% m/m. That brought the decline
this year to 17.5%. In addition, sales of U.S. made cars fell 2.3% in
April and they are down 9.4% in 2008. Overall, sales of domestically
made light vehicles in April were at the lowest level since 1992.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080502e.jpg" align="right" border="0" height="265" width="353">
Sales of imported light vehicles fell a
relatively moderate 2.1% m/m 4.00M units after a 7.4% March increase.
Despite the April decline, the latest level of imported vehicle sales
remained near the record. Sales of imported autos fell just 0.7% after
the 11.5% surge in March. So far this year sales of imported cars rose
1.6%. Showing that sales of imported light trucks weren't immune to the
softening of overall consumer spending, they fell last month by 4.6%
and the decline lowered sales so far this year by 10.5%.
Import's share of the U.S. light vehicle
market rose to another record level of 27.8%. (Imported vehicles are
those produced outside the U.S. and does not include vehicles with the
nameplate of a foreign manufacturer produced within the U.S.) Imports'
share of the U.S. car market rose to 35.9% and the share of the light
truck market was 19.3%; both records and more than double the shares
ten years ago.

<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">April</th>
<th scope="col">March</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>&nbsp;14.39</td>
<td>15.11</td>
<td>-11.7%</td>
<td>16.18</td>
<td>16.55</td>
<td>16.96</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>7.38</td>
<td>7.51</td>
<td>0.2%</td>
<td>7.58</td>
<td>7.77</td>
<td>7.65</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Domestic</td>
<td>4.73</td>
<td>4.84</td>
<td>-3.1%</td>
<td>5.07</td>
<td>5.31</td>
<td>5.40</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Imported</td>
<td>2.65</td>
<td>2.67</td>
<td>6.7%</td>
<td>2.51</td>
<td>2.45</td>
<td>2.25</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Light Trucks</td>
<td>7.02</td>
<td>7.61</td>
<td>-21.4%</td>
<td>8.60</td>
<td>8.78</td>
<td>9.32</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Domestic</td>
<td>5.67</td>
<td>6.19</td>
<td>-23.9%</td>
<td>7.12</td>
<td>7.42</td>
<td>8.12</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Imported</td>
<td>1.35</td>
<td>1.42</td>
<td>-9.0%</td>
<td>1.48</td>
<td>1.37</td>
<td>1.20</td>
</tr>
</tbody>
</table>
German Retail Sales Show Some
Life in Q1&nbsp; 
by <a href="/comment/Brusca.html">Robert
Brusca</a> May 2, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080502f.jpg" align="left" border="0" height="265" width="353">
The original weakness in German ex-auto retail sales in
February had already been revised up, leaving February in a small
decline. Now March sales are flat. The strength in the quarter stems
from the surge back in January. Real retail sales are up at a 4.9%
annual rate in the quarter. Nominal sales are up by an eye popping
8.1%. But all of the quarter&#8217;s gains stem from a surge in sales in
January &#8211; a surge that still seems in the process of being unwound.
While recent German surveys of consumer sentiment have been upbeat,
surveys of retailers have not. It appears that real retail sales
ex-autos are in a position to boost Q1 GDP but it does not seem that
this is any sort of a watershed event. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col"> German
Real and Nominal Retail Sales</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Nominal</td>
<td>Mar-08</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>3-MO</td>
<td>6-MO</td>
<td>12-MO</td>
<td>YrAgo</td>
<td>QTR Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail excl Auto</td>
<td>0.0%</td>
<td>-0.2%</td>
<td>2.3%</td>
<td>8.8%</td>
<td>2.1%</td>
<td>1.5%</td>
<td>-0.1%</td>
<td>8.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food Beverage &amp; Tobacco</td>
<td>1.1%</td>
<td>-0.8%</td>
<td>3.1%</td>
<td>14.3%</td>
<td>0.4%</td>
<td>0.5%</td>
<td>0.8%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Clothing footwear</td>
<td>-8.7%</td>
<td>4.5%</td>
<td>1.7%</td>
<td>-11.6%</td>
<td>-20.6%</td>
<td>-5.1%</td>
<td>5.8%</td>
<td>7.8%</td>
</tr>
<tr>
<td class="firstcol">Real</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">Retail excl Auto</td>
<td>-0.1%</td>
<td>-0.7%</td>
<td>1.9%</td>
<td>4.5%</td>
<td>-1.2%</td>
<td>-1.2%</td>
<td>-0.7%</td>
<td>4.9%</td>
</tr>
</tbody>
</table>
French PPI Sees Gathering
Momentum&nbsp; 
by <a href="/comment/Brusca.html">Robert
Brusca</a> May 2, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080502g.jpg" align="left" border="0" height="265" width="353">
French producer prices again are showing over-the-top
inflation. The three-month overall rate is a 4.2% pace but that
represents some deceleration from 6.6% over six months and it is below
the 5.5% Yr/Yr rate. Still, inflation is up sharply from its year ago
annual rate of 2.1%. And, in the quarter-to-date the overall PPI rate
is still up at a 6% annual rate. The chart shows the halting roller
coaster that French PPI inflation has been riding. 
 

Consumer prices at the producer level have stayed subdued
throughout, partly because consumer demand has been slack. Intermediate
prices are running up strongly with all the increases in energy metals
and other commodity prices. Investment goods, which have been in the
booming sector in Europe, have generally kept price tends in check. But
investment goods prices have accelerated slightly over three-months and
at 1.4% are moderate. Core PPI inflation has reversed a declining trend
and accelerated to 2.6% over three-months. At 1.8%, its Yr/Yr pace is
still under the overall inflation ceiling desired by the ECB- a ceiling
that formally refers only to the HICP but is applicable up and down the
inflation transmission line. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">France PPI
</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">m/m</td>
<td colspan="5">Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>Mar-08</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>Yr/Yr</td>
<td>Y/Y Yr Ago</td>
<td>Qtr-2-Date</td>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>0.3%</td>
<td>0.3%</td>
<td>0.5%</td>
<td>4.2%</td>
<td>6.6%</td>
<td>5.2%</td>
<td>2.1%</td>
<td>6.0%</td>
</tr>
<tr>
<td class="firstcol">Consumer</td>
<td>0.2%</td>
<td>0.0%</td>
<td>-0.3%</td>
<td>-0.4%</td>
<td>-0.2%</td>
<td>0.4%</td>
<td>-0.3%</td>
<td>-1.2%</td>
</tr>
<tr>
<td class="firstcol">Intermediate</td>
<td>0.3%</td>
<td>0.7%</td>
<td>0.5%</td>
<td>6.0%</td>
<td>2.9%</td>
<td>3.2%</td>
<td>4.7%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">Investment</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>0.4%</td>
<td>1.5%</td>
<td>1.1%</td>
<td>1.2%</td>
<td>2.6%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">PPI excl&nbsp;
Food and Energy</td>
<td>0.1%</td>
<td>0.4%</td>
<td>0.2%</td>
<td>2.6%</td>
<td>1.6%</td>
<td>1.8%</td>
<td>2.7%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
The NTC MFG Index/Indices Continue
to Drop&nbsp; 
by <a href="/comment/Brusca.html">Robert
Brusca</a> May 2, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080502h.jpg" align="left" border="0" height="265" width="353">
The NTC MFG indices fell on broad front in April. Their
declines were steeper than they have been. Still only Germany, Greece
and the Netherlands are in the top half of their respective percentile
ranges. The EMU economy as a whole is in the lower portion of its range
of values since March of 2000. Italy, Spain and Ireland are showing
extreme weakness. Still half of the EMU area&#8217;s MFG PMIs are showing
expansion and are above the neutral 50 reading; the UK is another. EMU
is looking vulnerable to weakness. EMU and its indices peaked in mid
2006. They cycled to a low in September of 2007, rebounded through
early 2008 before taking a new leg down. The slide in Europe on the
back of the rising euro makes sense. We still do not have much idea why
Europe broke out of its declining phase from mid to late 2007 when the
Euro was still strong. But its return to weakness makes sense. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">NTC MFG
Indices </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Apr-08</td>
<td>Mar-08</td>
<td>Feb-08</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>Percentile</td>
</tr>
<tr>
<td class="firstcol">Euro-13</td>
<td>50.74</td>
<td>52.03</td>
<td>52.34</td>
<td>51.70</td>
<td>52.21</td>
<td>53.15</td>
<td>44.5%</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>53.62</td>
<td>55.14</td>
<td>54.28</td>
<td>54.35</td>
<td>54.13</td>
<td>54.79</td>
<td>61.4%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>51.12</td>
<td>51.88</td>
<td>53.81</td>
<td>52.27</td>
<td>52.86</td>
<td>52.68</td>
<td>39.9%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>48.24</td>
<td>49.41</td>
<td>50.64</td>
<td>49.43</td>
<td>50.20</td>
<td>51.74</td>
<td>29.5%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>45.19</td>
<td>46.42</td>
<td>46.72</td>
<td>46.11</td>
<td>48.06</td>
<td>50.21</td>
<td>12.4%</td>
</tr>
<tr>
<td class="firstcol">Austria</td>
<td>49.83</td>
<td>53.39</td>
<td>52.36</td>
<td>51.86</td>
<td>52.98</td>
<td>53.49</td>
<td>41.9%</td>
</tr>
<tr>
<td class="firstcol">Greece</td>
<td>54.38</td>
<td>52.73</td>
<td>52.35</td>
<td>53.15</td>
<td>52.98</td>
<td>53.50</td>
<td>57.9%</td>
</tr>
<tr>
<td class="firstcol">Ireland</td>
<td>44.69</td>
<td>46.01</td>
<td>49.78</td>
<td>46.83</td>
<td>48.12</td>
<td>50.73</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Netherlands</td>
<td>51.45</td>
<td>53.15</td>
<td>51.91</td>
<td>52.17</td>
<td>53.08</td>
<td>55.03</td>
<td>51.6%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">EU</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>50.96</td>
<td>51.25</td>
<td>51.24</td>
<td>51.15</td>
<td>51.73</td>
<td>53.18</td>
<td>50.6%</td>
</tr>
<tr class="grey1">
<td colspan="6" class="firstcol">percentile
is over range since March
2000</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body></html>

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<div align="left"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080501j.jpg" align="left" border="0" height="265" width="353">

The NTC and CBI indices show that the UK MFG sector is on the
decline. The CBI industrial total orders reading is placed in its range
percentile at 55 the fifty-fifth percentile, nearly the same relative
position as for the overall NTC MFG index at 51 the fifty-first
percentile. Both indices have fallen sharply &#8216;recently although for the
NTC PMI index the drop came several months ago, while the CBI orders
series took its sharp drop just this month. There is some evidence that
suggests the NTC index has moved in advance of the CBI orders index in
the past. Note that while the two indices seem to track each other
fairly well, their respective &#8216;zero&#8217; or neutral points do not match up
on this two scale chart. For the CBI neutral is at zero, for the NTC
report neutral is at 50. Looking at our &#8216;percentile of range
statistics&#8217; gets us away from this sort of dilemma. We can se that the
CBI points to surging inflation on top of weakening growth. 

</div>


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col">UK
Industrial volume data CBI Survey </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Reported:</td>
<td>Apr-08</td>
<td>Mar-08</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>12Mo Avg</td>
<td>Pcntle</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Orders</td>
<td>-13</td>
<td>7</td>
<td>3</td>
<td>2</td>
<td>2</td>
<td>55%</td>
<td>9</td>
<td>-40</td>
<td>49</td>
</tr>
<tr class="odd">
<td class="firstcol">Export Orders</td>
<td>-12</td>
<td>3</td>
<td>-8</td>
<td>-4</td>
<td>-4</td>
<td>72%</td>
<td>3</td>
<td>-50</td>
<td>53</td>
</tr>
<tr class="odd">
<td class="firstcol">Stocks: Final Goods</td>
<td>12</td>
<td>12</td>
<td>11</td>
<td>7</td>
<td>9</td>
<td>50%</td>
<td>26</td>
<td>-2</td>
<td>28</td>
</tr>
<tr class="odd">
<td class="firstcol">Output Volume: Next 3M</td>
<td>11</td>
<td>18</td>
<td>11</td>
<td>9</td>
<td>12</td>
<td>70%</td>
<td>28</td>
<td>-28</td>
<td>56</td>
</tr>
<tr class="odd">
<td class="firstcol">Avg Prices for next 3M</td>
<td>25</td>
<td>25</td>
<td>22</td>
<td>21</td>
<td>19</td>
<td>100%</td>
<td>25</td>
<td>-30</td>
<td>55</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="10">From end 2000</td>
</tr>
<tr>
<td colspan="10" class="firstcol">Compare
to CIPS MFG</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Apr-08</td>
<td>Mar-08</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>12 Mo Avg</td>
<td>Pcntle</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
</tr>
<tr class="odd">
<td class="firstcol">UK MFG</td>
<td>50.96</td>
<td>51.25</td>
<td>51.24</td>
<td>50.60</td>
<td>53.18</td>
<td>51%</td>
<td>56.32</td>
<td>45.46</td>
<td>11</td>
</tr>
</tbody>
</table>
</body></html>

The NTC and CBI indices show that the UK MFG sector is on the decline. The CBI industrial total orders reading is placed in its range percentile at 55 the fifty-fifth percentile, nearly the same relative position as for the overall [...]

Both NTC/CIPS and CBI Index Show Withering UK MFG/Industrial Sector

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<div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080501g.jpg" width="353">
The value of construction put in place in March fell a more-than-expected 1.1% but February&#39;s level was revised up. The latest decline was the fifth in the last six months and the March level was 8.4% below the peak two years ago.
The value of residential building activity cratered 4.6% in March led by a 5.3% (-36.1% y/y) decline in building of single family units. That was similar to the decline in the prior several months. Building activity on multi-family units also slipped 0.5% (-17.0% y/y) and spending on improvements reversed nearly all of the prior month&#39;s jump and fell 4.8% (+10.4% 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.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080501h.jpg" width="353">
The value of nonresidential building activity jumped 1.9% but three month growth of 9.5% is down from an 18.0% rise last year. A decline in multi-retail building of 2.7% (AR) during the last three months compared with a 14.5% rise last year. A 1.6% 3-month gain in commercial building was down from 13.4% growth last year. Growth in office building remained firm at 13.3% versus 19.6% growth last year.
Growth in public construction over the last three months of 5.0% compared to a 12.2% rise last year. Construction on highways &amp; streets rose at a 10.1% rate during the last three months after last year&#39;s rise of 7.4%. (The value of construction on highways &amp; streets is nearly one third of the value of total public construction spending.) Building activity of educational facilities fell at a 3.8% rate after last year&#39;s 12.6% rise.
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.
Maps and data that illustrate subprime and alt-A mortgage loan conditions across the United States, from the Federal Reserve, can be found <a href="http://www.federalreserve.gov/newsevents/press/other/20080401a.htm">here</a>.</div>

<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">March</th>
<th scope="col">February</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>-1.1%</td>
<td>0.4%</td>
<td>-3.4%</td>
<td>-2.7%</td>
<td>5.6%</td>
<td>10.7%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>-1.7%</td>
<td>0.3%</td>
<td>-6.7%</td>
<td>-6.8%</td>
<td>4.7%</td>
<td>12.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>-4.6%</td>
<td>0.2%</td>
<td>-19.9%</td>
<td>-18.1%</td>
<td>0.5%</td>
<td>13.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonresidential</td>
<td>1.9%</td>
<td>0.6%</td>
<td>15.4%</td>
<td>18.0%</td>
<td>15.2%</td>
<td>7.8%</td>
</tr>
<tr>
<td class="firstcol">Public</td>
<td>0.6%</td>
<td>0.4%</td>
<td>7.0%</td>
<td>12.2%</td>
<td>9.2%</td>
<td>6.2%</td>
</tr>
</tbody>
</table>
</body>
</html>

The value of construction put in place in March fell a more-than-expected 1.1% but February's level was revised up. The latest decline was the fifth in the last six months and the March level was 8.4% below the peak two years ago. The [...]

U.S. Construction Spending Off Sharply

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

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

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Consumer credit outstanding increased $7.4 billion (2.1% y/y) during June after rising an unrevised $5.1 billion in May, and strengthening $16.4 billion in April, revised from $16.9 billion. A $9.0 billion June rise had been expected in the Action Economics Forecast Survey. As a percentage of disposable personal income, consumer credit of 22.4% in June compared to 22.5% in May and 22.9% one year earlier. It reached a high of 26.4% during all of 2017. The figures are reported by the Federal Reserve Board.

Nonrevolving credit outstanding rose $8.4 billion (1.9% y/y) during June after rising $8.9 billion in May, revised from $8.6 billion and an unrevised $9.4 billion in April. Nonrevolving credit held by depository institutions declined 6.8% y/y in June after falling 7.2% y/y in May. Finance company debt holdings eased 0.4% y/y after slipping 0.2% y/y in May, while credit union holdings rose 11.2% y/y in June after a 10.8% y/y May strengthening. Nonrevolving debt of the federal government rose 4.1% y/y in June following a 4.0% y/y rise in May.

In June, revolving credit outstanding, which includes credit cards, fell $1.0 billion (+2.5% y/y) after declining $3.8 billion in May, revised from -$3.5 billion and rising 7.0 billion in April, revised from $7.5 billion. Revolving credit outstanding held by depository institutions fell a steady 2.9% y/y. Revolving credit held by finance companies fell 15.0% y/y after a 14.3% y/y drop in May, while credit union debt rose a fairly steady 4.1% y/y in June.

In Q2’25, student loans rose $8.2 billion (4.2% y/y) while motor loans increased $5.1 billion (0.3% y/y).

The consumer credit figures from the Federal Reserve Board are break-adjusted and calculated by Haver Analytics. The breaks in the series in 2005, 2010 and 2015 are the result of the incorporation of data from the Census and the Survey of Finance Companies, as well as changes in the seasonal adjustment methodology. The consumer credit data are available in Haver’s **USECON** database. The Action Economics forecast figures are contained in the **AS1REPNA** database.

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- Moderate increases in last two months follow strong April gain.
- Nonrevolving credit usage strengthens as revolving credit eases.

U.S. Consumer Credit Picks Up in June

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Japan's economy watchers index is showing some rebound after a period of weakness. The economy is not breaking out into sharply improved readings; however, the monthly readings have now increased and improved for three months in a row for both the current and the future indexes. The increase for the current index over three months is 2.6 diffusion points; for the future index it's 4.6 diffusion points. Over 12 months, both readings are still lower on balance.

**Percentile standings-rankings**
Both headline readings are still below their historic medians, but the current index has a 34.8 percentile standing and the future index has a 39.5 percentile standing. The headline queue standings in both cases are below 50%- a reading below 50% indicates a reading below its historic median.

**Diffusion readings**
Current index components all have diffusion readings below their respective 50 marks, which tells us that they're all showing contraction. The surveys show a headline reading of 45.2 for the current index in July, compared to 47.3 for the future index in July. For the current index, all of the component rankings are below 50 for July, June and May. For the future index, there are three readings above 50 in July and none for June or May.

**July’s Future Index improvement**
The improvement in July for the future index is concentrated in eating and drinking places, services, and employment – all are households or individual-linked readings. That may reflect some sense of relief that Japan’s tariff negotiations with the United States were progressing and finally a deal was struck. The future index, in addition to having several diffusion readings above 50 in July, shows three readings that have queue standings, above the 50th percentile, putting them above their historic medians. Those are readings for eating and drinking places, services, and for housing. The reading for housing takes on a 59.3 percentile queue standing even though its diffusion index remains below 50 at 47. In July it moved up to 47, making a relatively sharp gain from a reading of 42.7 in June.

There is, therefore, relatively more evidence of improvement going on in the future index compared to the current index where monthly gains were generally smaller.

**The breadth of improvement**
Month-to-month the current index improved in 60% of the categories in July compared to 70% in May and June. The future index components improved across the board in July, 80% of them improved in June, and gains were across the board again in May. Looking at the changes over three months, six months, and 12 months according to average data, over three months 60% of the current categories improved compared to none over six months and 80% over 12 months. For average future data, 100% improve over three months, none improve over six months and 60% improve over 12 months.

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**Summing up**
The improvement in the most recent months is clear cut, whether it can be sustained is another matter. It likely reflects some release of anxiety over the tension created by the tariff negotiations with the United States; however, the Bank of Japan is still trying to corral inflation, and on the political side the LDP lost its upper house election and Japanese politics is being reorganized. As far as consumer confidence and expectations are concerned, we can expect that a lot is still in flux in Japan.

Japan

Japan’s Economy Watchers Index Rebounds

Andrew Cates

**Capacity pressures in the US and Europe**
Output gaps in advanced economies (the US and euro area) are estimated to have narrowed sharply in recent months and could be on the verge of turning negative. This reflects a prior period of weaker growth and a growing degree of slack in the economy—conditions that typically translate into softer inflation and heightened pressure on central banks to ease policy. Labour markets are certainly showing greater signs of weakness in the US. A big caveat to this is that estimating output gaps is inherently difficult, especially after recent supply shocks and structural shifts in labour markets. Still, most real-time indicators now suggest aggregate demand is slipping below potential. And that, alongside weakening job data, is strengthening the case for further policy easing and hints at continued disinflation in the months ahead.

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**The US housing market**
US housing has long been a bellwether for broader economic conditions, largely because of its deep ties to credit creation, household balance sheets, and interest rates. That’s why the latest data showing a renewed slump in builder sentiment and a more sustained drop in house price momentum has been of note. With mortgage rates still elevated and lending standards – as we discuss below – still tight, the housing sector looks increasingly fragile—raising fresh concerns about the durability of US growth.

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**US bank lending standards**
This week’s latest Fed Senior Loan Officer Survey confirms that US credit conditions remain restrictive. Banks are still tightening lending standards for companies and consumers while loan demand continues to weaken—a pattern historically associated with periods of economic downturn. Although the net percentage of banks tightening standards has eased somewhat from 2023 peaks (see chart below), it remains elevated, and credit demand is now falling across most categories, from small business to commercial real estate. This tightening in credit supply and fall in demand suggests that monetary policy is still transmitting forcefully through the banking sector.

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**Global growth momentum** 
Until recently, global economic surprises and sentiment surveys were broadly supportive, suggesting the global cycle still had momentum. But this week’s Sentix survey revealed a renewed drop in expectations for August. That decline, coupled with a fading Citi Economic Surprise Index, hints that global momentum may be weakening again. As forward-looking indicators start to roll over, investors and policymakers alike should be alert to a potential shift toward a more pronounced downturn.

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**Global shipping costs and supply chain pressures** 
One additional area of heightened investor concern of late has been the potential inflationary fallout from recent US tariff measures. But so far, there is little evidence – at the global level - to suggest that global supply chains or freight costs have been meaningfully disrupted. The Baltic Exchange Dry Index and the NY Fed’s Global Supply Chain Pressure Index both remain relatively subdued, indicating that logistics bottlenecks have not re-emerged.

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**China’s excess capacity**
China’s economic influence remains pivotal in shaping global goods inflation. The latest data show that producer prices in China continue to contract, extending a prolonged period of deflation that reflects both domestic weakness and excess industrial capacity. This ongoing slack not only suppresses China’s export prices but also exerts downward pressure on global manufacturing input costs. At a time when central banks (most notably in the US) are weighing the risk of reacceleration in inflation, China’s persistent deflation in upstream prices acts as a powerful counterforce—reinforcing the view that goods inflation risks could remain subdued for now.

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Last week’s weaker-than-expected US labour market report—marked by sluggish payroll growth, rising unemployment, and downward revisions to prior months—sparked a notable shift in financial markets. Bond yields fell sharply as investors repriced the outlook for Fed easing, with rate cut expectations brought forward. This recalibration arguably reflects growing awareness of mounting downside risks across the US and broader global economy. Several indicators reinforce this view. Output gaps in many major economies are narrowing or turning negative, signalling that demand is falling short of potential (chart 1). The US housing market looks fragile, amidst weak builder sentiment and falling prices (chart 2). US bank lending standards are still restrictive, with implications for credit availability, household and business investment, and overall economic momentum (chart 3). Some (though not all) global sentiment surveys have softened, and positive growth surprises are now fading. Meanwhile, and despite earlier fears, US tariffs have not triggered renewed supply chain stress or inflationary pressures (chart 5). Add to that the ongoing deflation in China’s producer prices, and the macro narrative could be tilting more decisively toward slower growth and diminishing inflation risks—leaving policymakers with more space to continue easing monetary policy (chart 6).

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/7i7Y1SpHPmWN4WbPNCd9Tg?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: Downside Risks

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Wholesale inventories increased 0.1% (1.3% y/y) during June after falling an unrevised 0.3% decline in May. The rise was revised from a 0.3% increase in the advance release issued last week and matched expectations in the Informa Global Markets survey. Durable goods inventories rose 0.1% during June (0.2% y/y) after falling 0.7% in May. Furniture & home furnishings inventories eased slightly (+4.9% y/y) after weakening 2.1% in May. Professional & business equipment inventories were off 0.5% (+6.4% y/y) after falling 2.1% in May. Motor vehicle & parts inventories were off 1.2% (-4.7% y/y) for the second consecutive month. Machinery inventories also slipped m/m (-2.4% y/y), after falling 0.8%. Electrical equipment inventories jumped 2.6% (0.7% y/y) after increasing 0.6% in May. Hardware & plumbing equipment inventories rose 0.3% (8.4% y/y) following a 1.2% increase.

Inventories of nondurable goods also edged 0.1% higher during June (3.3% y/y) after rising 0.4% in May. Drug inventories increased 0.6% (5.8% y/y) after a 1.9% gain but apparel inventories declined 2.6% (-3.9% y/y) following a 0.4% fall. Grocery inventories increased 0.7% (10.4% y/y) after no change in May. Paper inventories were off 0.7% (+5.0% y/y) following a 0.2% rise while chemical inventories rose 1.9% (-1.0% y/y), the third straight month of sharp decline. Petroleum & petroleum product inventories rose 6.0% (-3.2% y/y) following a 2.9% increase.

Wholesale sales increased 0.3% (5.5% y/y) in June after falling 0.4% in May. A 0.2% increase had been expected in the Action Economics Forecast Survey. Sales of durable goods rose 0.5% (7.6% y/y) in June after rising 0.2% in May. Auto sales fell 0.7% (+4.3% y/y) after a 3.5% rise. Sales of electrical equipment improved 0.2% (15.3% y/y) following a 1.1% rise. Metals & minerals sales gained 0.6% (4.3% y/y) following a 1.2% gain. Furniture sales declined 2.2% (-3.0% y/y) after falling 2.3%. Professional equipment sales improved 0.3% (7.6% y/y) following a 0.3% decline. Machinery sales rose 0.8% (6.5% y/y) after declining 0.9% in May.

Sales of nondurable goods edged 0.1% higher (3.5% y/y) during June after falling 1.0% in May. Paper sales slumped 1.4% (+0.3% y/y) after falling 1.0% in May. Drug sales rose 0.8% (11.2% y/y) after falling 0.3% in May. Petroleum sales increased 0.9% (-7.4% y/y) after declining 3.0%. Sales of apparel rose 0.9% (9.3% y/y) after rising 1.9%. Grocery store sales decreased 	0.7% (+5.1% y/y) after rising 0.7% in May.

The June inventory-to-sales ratio in the wholesale sector stood at 1.3 for the fifth straight month. The durable goods I/S ratio eased to 1.66, down from the 1.81 high in March of last year. The ratio ranged from 2.84 for machinery to 0.98 for electrical equipment. The nondurable goods I/S ratio held at 0.95. The I/S ratio for apparel was 2.03 in June while for petroleum it was 0.35.

The wholesale trade figures are available in Haver's **USECON** database. The expectations figure for inventories is contained in the **MMSAMER** database. Expectations for sales are from the **AS1REPNA** database.

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- Slight inventory gain masks divergent industry patterns.
- Sales increase is first since March.
- I/S ratio steadies at three-year low.

U.S. Wholesale Inventories Edge Higher in June

Sandy Batten

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Nonfarm business labor productivity (output per hour) rebounded in Q2, increasing 2.4% q/q (SAAR) after having fallen 1.8% in Q1 (revised down from -1.5%). A 2.0% quarterly increase in Q2 was expected by the Action Economics Forecast Survey. Compared to a year ago, productivity growth edged up to 1.3% in Q2 from 1.2% in Q1.

Real value added (output) advanced 3.7% q/q in Q2 after declining 0.6% in Q1. Hours worked increased 1.3% q/q, up only marginally from a 1.2% gain in Q1. Compensation growth slowed to 4.0% q/q in Q2 from 5.0% in Q1 and 5.5% in last year’s Q4. As a result, unit labor costs advanced only 1.6% q/q in Q2, down markedly from a 6.9% quarterly gain in Q1. However, on a y/y basis, unit labor costs increased 2.6% y/y in Q2 versus 2.0% in Q1. Annual unit labor costs have been on an uptrend since the middle of last year.

Factory sector productivity slowed to 2.1% q/q (SAAR) in Q2 from a downwardly revised 3.3% in Q1 (previously 4.4%). Compared with a year ago, manufacturing productivity increased 1.5% in Q2, its fastest annual advance since Q2 2021. Manufacturing compensation growth slowed to 3.8% q/q in Q2 from 6.3% in Q1. Accordingly, unit labor cost growth slowed to 1.7% q/q in Q1, its slowest pace in four quarters, from 2.9% in Q1.

The productivity and labor cost data are available in Haver’s **USECON** database. The Action Economics expectations figures are in the **AS1REPNA** database.

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- Nonfarm business productivity increased 2.4% q/q annualized in Q2, more than reversing the 1.8% quarterly decline in Q1.
- Compensation growth slowed to 4.0% from 5.0% in Q1.
- Consequently, unit labor cost growth slowed markedly to 1.6% from 6.9% in Q1.

Economy in Brief: May 2008

Jump to:

The NTC MFG Index/Indices Continue to Drop

French PPI Sees Gathering Momentum

German Retail Sales Show Some Life in Q1

U.S. Higher Gasoline Prices Weigh on Light Vehicle Sales

U.S. Payrolls Declined For Fourth Straight Month, Unemployment Slipped

U.S. Payrolls Declined For Fourth Straight Month, Unemployment Slipped

Both NTC/CIPS and CBI Index Show Withering UK MFG/Industrial Sector

U.S. Construction Spending Off Sharply