Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100602d.jpg" align="left" height="265" width="353">
According to the outplacement firm of Challenger, Grey
&amp; Christmas the level of layoffs rose slightly m/m during May
to 38,810. Nevertheless, the figure was off by roughly two-thirds from
last year and just slightly above the lowest level since 2000. Planned
layoffs announced during the first five months of 2010 totaled 258,319,
down 68.6% from the 822,282 announced during early-2009. In virtually
all industries except entertainment/leisure and pharmaceutical layoffs
were down last month versus May 2009.
Challenger also samples firms' hiring plans. During May plans
fell slightly after a strong gain during April. Versus May '09 plans
rose 83.7% but during the first five months of this year they've fallen
slightly y/y. Plans eased during May in the transportation, health care
&amp; financial sectors but strengthened in the auto, energy,
industrial goods &amp; services industries.
During the last ten years there has been a 67% (inverse)
correlation between the three-month moving average of announced job
cuts and the three-month change in payroll employment.
Job cut announcements differ from layoffs. Many are achieved through
attrition, early retirement or just never occur.
The Challenger figures are available in Haver's SURVEYS
database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a ;="" href="http://www.haverselect.com/dlx/SURVEYS/@S3/@S301/@S301.HTM">Challenger,
Gray &amp;
Christmas</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>38,810</td>
<td>38,326</td>
<td>67,611</td>
<td>-65.1%</td>
<td>1,288,030</td>
<td>1,223,993</td>
<td>768,264</td>
</tr>
<tr>
<td class="firstcol">Announced Hiring Plans</td>
<td>14,922</td>
<td>15,654</td>
<td>13,994</td>
<td>83.7%</td>
<td>272,573</td>
<td>118,600</td>
<td>365,583</td>
</tr>
</tbody>
</table>
</body></html>

According to the outplacement firm of Challenger, Grey & Christmas the level of layoffs rose slightly m/m during May to 38,810. Nevertheless, the figure was off by roughly two-thirds from last year and just slightly above the lowest [...]

Challenger Layoffs Near Lowest in Ten Years

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100602a.jpg" p align="left" height="265" width="353">
The National Association of Realtors (NAR) reported that
pending sales of existing single-family homes rose 6.0% during April
versus March. The gain left home sales up 37.8% from the low in January
of last year. The latest marginally beat Consensus expectations for a
5.0% increase.
The m/m performance of home sales continued to vary across the
country. Last month sales rose in the Northeast (24.4 y/y), Midwest
(18.0% y/y) and in the West (12.0% y/y). A modest decline in sales was
logged in the South but sales still rose by nearly one-third versus
last year.
Pending home sales figures are analogous to the new home sales
data from the Commerce Department in that they measure existing home
sales when the sales contract is signed, not at the time the sale is
closed. The series dates back to 2001 and the data is available in
Haver's PREALTOR database.

<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100602b.jpg" height="265" width="314"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100602c.jpg" height="265" width="314">
<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/WEEKLY/@W5/@W507/@W507.HTM">Pending Home Sales (2001=100)&nbsp;</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">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Total</td>
<td>110.9</td>
<td>104.6</td>
<td>97.7</td>
<td>22.4</td>
<td>95.1</td>
<td>86.9</td>
<td>95.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>97.9</td>
<td>75.6</td>
<td>77.7</td>
<td>24.4</td>
<td>76.7</td>
<td>73.0</td>
<td>86.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Midwest</td>
<td>104.2</td>
<td>100.1</td>
<td>97.7</td>
<td>18.0</td>
<td>88.8</td>
<td>80.7</td>
<td>89.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>123.9</td>
<td>124.6</td>
<td>107.5</td>
<td>31.4</td>
<td>98.9</td>
<td>90.3</td>
<td>107.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; West</td>
<td>107.9</td>
<td>100.4</td>
<td>98.0</td>
<td>12.0</td>
<td>109.9</td>
<td>99.2</td>
<td>92.1</td>
</tr>
</tbody>
</table>
</body></html>

The National Association of Realtors (NAR) reported that pending sales of existing single-family homes rose 6.0% during April versus March. The gain left home sales up 37.8% from the low in January of last year. The latest marginally [...]

U.S. Pending Home Sales Strong Again

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100602a.jpg" p align="left" height="265" width="353">
The National Association of Realtors (NAR) reported that
pending sales of existing single-family homes rose 6.0% during April
versus March. The gain left home sales up 37.8% from the low in January
of last year. The latest marginally beat Consensus expectations for a
5.0% increase.
The m/m performance of home sales continued to vary across the
country. Last month sales rose in the Northeast (24.4 y/y), Midwest
(18.0% y/y) and in the West (12.0% y/y). A modest decline in sales was
logged in the South but sales still rose by nearly one-third versus
last year.
Pending home sales figures are analogous to the new home sales
data from the Commerce Department in that they measure existing home
sales when the sales contract is signed, not at the time the sale is
closed. The series dates back to 2001 and the data is available in
Haver's PREALTOR database.

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100602b.jpg" height="265" width="314"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100602c.jpg" height="265" width="314">
<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/WEEKLY/@W5/@W507/@W507.HTM">Pending
Home Sales (2001=100)&nbsp;</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">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Total</td>
<td>110.9</td>
<td>104.6</td>
<td>97.7</td>
<td>22.4</td>
<td>95.1</td>
<td>86.9</td>
<td>95.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>97.9</td>
<td>75.6</td>
<td>77.7</td>
<td>24.4</td>
<td>76.7</td>
<td>73.0</td>
<td>86.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Midwest</td>
<td>104.2</td>
<td>100.1</td>
<td>97.7</td>
<td>18.0</td>
<td>88.8</td>
<td>80.7</td>
<td>89.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>123.9</td>
<td>124.6</td>
<td>107.5</td>
<td>31.4</td>
<td>98.9</td>
<td>90.3</td>
<td>107.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; West</td>
<td>107.9</td>
<td>100.4</td>
<td>98.0</td>
<td>12.0</td>
<td>109.9</td>
<td>99.2</td>
<td>92.1</td>
</tr>
</tbody>
</table>
Challenger Layoffs Near Lowest in
Ten Years 
by <a href="/comment/Moeller.html">Tom
Moeller</a> June 2, 2010


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100602d.jpg" align="left" height="265" width="353">
According to the outplacement firm of Challenger, Grey
&amp; Christmas the level of layoffs rose slightly m/m during May
to 38,810. Nevertheless, the figure was off by roughly two-thirds from
last year and just slightly above the lowest level since 2000. Planned
layoffs announced during the first five months of 2010 totaled 258,319,
down 68.6% from the 822,282 announced during early-2009. In virtually
all industries except entertainment/leisure and pharmaceutical layoffs
were down last month versus May 2009.
Challenger also samples firms' hiring plans. During May plans
fell slightly after a strong gain during April. Versus May '09 plans
rose 83.7% but during the first five months of this year they've fallen
slightly y/y. Plans eased during May in the transportation, health care
&amp; financial sectors but strengthened in the auto, energy,
industrial goods &amp; services industries.
During the last ten years there has been a 67% (inverse)
correlation between the three-month moving average of announced job
cuts and the three-month change in payroll employment.
Job cut announcements differ from layoffs. Many are achieved through
attrition, early retirement or just never occur.
The Challenger figures are available in Haver's SURVEYS
database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a ;="" href="http://www.haverselect.com/dlx/SURVEYS/@S3/@S301/@S301.HTM">Challenger,
Gray &amp;
Christmas</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>38,810</td>
<td>38,326</td>
<td>67,611</td>
<td>-65.1%</td>
<td>1,288,030</td>
<td>1,223,993</td>
<td>768,264</td>
</tr>
<tr>
<td class="firstcol">Announced Hiring Plans</td>
<td>14,922</td>
<td>15,654</td>
<td>13,994</td>
<td>83.7%</td>
<td>272,573</td>
<td>118,600</td>
<td>365,583</td>
</tr>
</tbody>
</table>
Euro-Area PPI Takes Off Slowly I
Turn... Err Scratch That 
by <a href="/comment/Brusca.html">Robert
Brusca</a> June 2, 2010


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100602e.jpg" align="left" height="265" width="353">
Producer price trends have been rising sharply in EMU over the
past few months. The PPI has taken a decided and sharp turn for the
worse. Prices are accelerating in two of the three main sectors of the
PPI. Only consumer prices fail to show acceleration from three-months
to six months. Consumer prices and intermediate prices are still lower
Yr/Yr but their trends are nonetheless rising sharply. Intermediate
goods prices are up very strongly from past weakness.
Germany and France show manufacturing prices ex-energy or
ex-energy and ex-food trends (the former for Germany, the latter for
France) with accelerations in train. UK manufactures prices are
accelerating (the UK is an EU member). Italy&#8217;s prices are actually
decelerating over three months compared to stronger pressures earlier.
While the PPI is not the price a gauge of choice for the ECB,
having such pressures stirred up will not be good news. The dropping
euro undoubtedly has something to do with this.
Still Yr/Yr prices are contained for consumer goods and
capital goods. Intermediate goods prices are the biggest problem. There
the rise in the dollar price of oil and the dropping euro form a
double-whammy on prices. If these trends develop in the HICP they will
put the ECB on the spot since growth in the Zone is not doing well and
the ECB will not want inflation trends like this to take hold in
consumer prices.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th colspan="7" scope="col">Euro-Area and UK
PPI Trends </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="2">M/M</td>
<td colspan="4">Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro-Area</td>
<td>Apr-10</td>
<td>Mar-10</td>
<td>3-Mo</td>
<td>6-MO</td>
<td>Yr/Yr</td>
<td>Y/Y Yr Ago</td>
</tr>
<tr>
<td class="firstcol">TotalxConstruct</td>
<td>0.7%</td>
<td>0.6%</td>
<td>5.8%</td>
<td>6.4%</td>
<td>2.8%</td>
<td>-4.7%</td>
</tr>
<tr>
<td class="firstcol">Capital Gds</td>
<td>0.2%</td>
<td>0.1%</td>
<td>1.1%</td>
<td>0.4%</td>
<td>-0.2%</td>
<td>1.2%</td>
</tr>
<tr>
<td class="firstcol">Consurmer Gds</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.5%</td>
<td>0.7%</td>
<td>-0.3%</td>
<td>-1.7%</td>
</tr>
<tr>
<td class="firstcol">Intermediate&amp;Cap
Gds</td>
<td>1.0%</td>
<td>0.8%</td>
<td>8.1%</td>
<td>6.8%</td>
<td>2.7%</td>
<td>-5.1%</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>0.4%</td>
<td>0.6%</td>
<td>3.9%</td>
<td>6.2%</td>
<td>3.7%</td>
<td>-5.9%</td>
</tr>
<tr class="odd">
<td colspan="7" class="firstcol">Germany</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Gy
ExEnergy</td>
<td>0.5%</td>
<td>0.2%</td>
<td>4.3%</td>
<td>3.1%</td>
<td>1.1%</td>
<td>-1.9%</td>
</tr>
<tr class="odd">
<td colspan="7">France:Tot</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Fr
ExF&amp;Energy</td>
<td>0.6%</td>
<td>0.3%</td>
<td>4.2%</td>
<td>3.3%</td>
<td>1.0%</td>
<td>-1.6%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>0.5%</td>
<td>0.5%</td>
<td>3.7%</td>
<td>6.7%</td>
<td>4.1%</td>
<td>-6.2%</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>0.9%</td>
<td>0.6%</td>
<td>8.1%</td>
<td>7.1%</td>
<td>5.8%</td>
<td>1.3%</td>
</tr>
<tr class="even">
<td colspan="7" class="firstcol">Euro-Area
Harmonized
PPI ex construction</td>
</tr>
</tbody>
</table>
</body></html>

U.S. Pending Home Sales StrongAgain

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100601e.jpg" align="left" height="265" width="353">
The market MFG barometers for EMU fell across the bard in May.
Only Ireland among the main reports showed a month-to-month boost and
the EU&#8217;s UK edged higher. Greece the well-know troubled EMU ember shows
what troubled straits it is in as it is the only example of a MFG PMI
that is down over three-, six- and twelve-months. Moreover, every other
EU/EMU report in the table is up by 20 index points (or almost) from
its respective cycle low. Greece is not. Notably Greece&#8217;s MFG index is
up by just 3.6 points from its low. The whole of the e-Zone is not even
down that much from its cycle peak! Greece&#8217;s problems are not just
problems with debt but are about problems in getting economic growth
going and improving its tax revenues. The manufacturing sector has been
leading EMU into recovery.
Today EMU unemployment was reported and it ticked up by 0.1%.
In Germany the rate fell and the number unemployed fell by more than
expected as Greece&#8217;s woes are helping German growth by having knocked
down the value of the euro. Germany is benefitting from export
strength. Still it is well recognized that Greece&#8217;s problems could
become a net negative for the Zone. And, of course, Greece is not the
only thing Europe is worried about.
Spain was downgraded by Fitch just before the weekend at the
end of the US trading day. Over the weekend the ECB released estimates
for the first time on the amount of bank loan losses that the Zone&#8217;s
banking system probably faces. The ECB pointed to 195bln euros in loan
losses for 2010 and 2011 saying that it could be worse if growth were
hit hard. Add to this to the news of China slowing and we have a
US-holiday shortened week that has just begun and already is jam-packed
full of negative news. Welcome back!

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th colspan="9" scope="col"> Changes in Markit
MFG Indices</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Changes Mo/Mo</td>
<td colspan="3">Change on Frequency</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>May-10</td>
<td>Apr-10</td>
<td>Mar-10</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>From Peak</td>
<td>From Low</td>
</tr>
<tr class="even">
<td class="firstcol">Euro-13</td>
<td>-1.69</td>
<td>0.90</td>
<td>2.42</td>
<td>1.63</td>
<td>4.66</td>
<td>15.18</td>
<td>-2.9</td>
<td>22.3</td>
</tr>
<tr class="even">
<td class="firstcol">Germany</td>
<td>-3.14</td>
<td>1.34</td>
<td>3.02</td>
<td>1.22</td>
<td>5.99</td>
<td>18.85</td>
<td>-3.1</td>
<td>26.5</td>
</tr>
<tr class="even">
<td class="firstcol">France</td>
<td>-0.77</td>
<td>0.08</td>
<td>1.59</td>
<td>0.90</td>
<td>1.38</td>
<td>12.46</td>
<td>-8.2</td>
<td>21.0</td>
</tr>
<tr class="even">
<td class="firstcol">Italy</td>
<td>-0.28</td>
<td>0.57</td>
<td>2.10</td>
<td>2.39</td>
<td>3.93</td>
<td>12.91</td>
<td>-3.6</td>
<td>19.4</td>
</tr>
<tr class="even">
<td class="firstcol">Spain</td>
<td>-1.80</td>
<td>1.46</td>
<td>2.75</td>
<td>2.41</td>
<td>6.23</td>
<td>11.68</td>
<td>-5.7</td>
<td>23.0</td>
</tr>
<tr class="even">
<td class="firstcol">Austria</td>
<td>-2.11</td>
<td>3.62</td>
<td>1.31</td>
<td>2.82</td>
<td>8.29</td>
<td>18.92</td>
<td>-2.1</td>
<td>25.1</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;Greece</td>
<td>-1.85</td>
<td>0.71</td>
<td>-1.26</td>
<td>-2.40</td>
<td>-5.45</td>
<td>-4.28</td>
<td>-14.2</td>
<td>3.6</td>
</tr>
<tr class="even">
<td class="firstcol">Ireland</td>
<td>0.67</td>
<td>0.42</td>
<td>4.35</td>
<td>5.44</td>
<td>5.29</td>
<td>14.73</td>
<td>-1.3</td>
<td>20.9</td>
</tr>
<tr class="grey3">
<td colspan="9" class="firstcol">EU</td>
</tr>
<tr class="even">
<td class="firstcol">UK</td>
<td>0.02</td>
<td>0.69</td>
<td>0.67</td>
<td>1.38</td>
<td>5.38</td>
<td>12.92</td>
<td>0.0</td>
<td>22.8</td>
</tr>
<tr class="grey1">
<td colspan="9" class="firstcol">percentile
is over
range since March 2000</td>
</tr>
</tbody>
</table>
</body></html>

The market MFG barometers for EMU fell across the bard in May. Only Ireland among the main reports showed a month-to-month boost and the EU’s UK edged higher. Greece the well-know troubled EMU ember shows what troubled straits it is [...]

Market Indices For MFG Drop Sharply Off-Peak

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100601a.jpg" height="265" width="314"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100601b.jpg" height="265" width="314">
Rising trends don't have unending momentum. And the current
rebound in factory sector activity appears to be no exception. The
Institute for Supply Management indicated that their May composite
index of factory sector activity slipped to 59.7 from 60.4 in April.
While May's figure was higher than Consensus expectation's for a
decline to 59.0, recent levels have been historically hard to sustain.
Still, the latest figure is up from the low of 32.5 reached in December
'08. (Any figure above the break-even point of 50 suggests rising
activity.) The ISM data is available in Haver's USECON database.
A slower rate of inventory accumulation was the main source of
the composite index's May weakness. The new orders, production and
vendor performance components were roughly unchanged. Notable, however,
was the slight gain in the employment index to 59.8. It was the highest
level since early-2004. During the last ten years there has been an 89%
correlation between the ISM employment index and the m/m change in
factory sector payrolls.
Also showing lift was the separate index of export orders to
62.0 which was the highest level since 1988. During the last ten years
there has been an 88% correlation between the level of the index and
the quarterly change in merchandise exports. Twenty-eight percent of
respondents reported higher export orders while fourteen reported lower
orders.
The separate index of prices paid slipped to 77.5 from its
high for this recovery. It remained up from the December '08 low of
18.0. Sixty percent of respondents reported higher prices while only 5%
indicated lower prices. During the last twenty years there has been an
83% correlation between the price index and the three-month change in
the PPI for intermediate goods.
The ISM data are available in Haver's USECON
database.
The Policy Response to the Crisis in Korea and Other
Emerging Market Economies is Saturday's speech by Fed
Chairman Ben S. Bernanke and it can be found <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20100530a.htm">here</a>.

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100601c.jpg" height="265" width="314"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100601d.jpg" height="265" width="312">
<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/SURVEYS/@S2/@S201/@S201.HTM" style="color: black;">ISM Mfg</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">May '09</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Index</td>
<td>59.7</td>
<td>60.4</td>
<td>59.6</td>
<td>43.2</td>
<td>46.2</td>
<td>45.5</td>
<td>51.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders</td>
<td>65.7</td>
<td>65.7</td>
<td>61.5</td>
<td>51.4</td>
<td>51.6</td>
<td>42.1</td>
<td>54.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Employment</td>
<td>59.8</td>
<td>58.5</td>
<td>55.1</td>
<td>35.1</td>
<td>40.5</td>
<td>43.3</td>
<td>50.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Production</td>
<td>66.6</td>
<td>66.9</td>
<td>61.1</td>
<td>47.0</td>
<td>50.4</td>
<td>45.2</td>
<td>54.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Supplier Deliveries</td>
<td>61.0</td>
<td>61.3</td>
<td>64.9</td>
<td>50.0</td>
<td>51.4</td>
<td>51.6</td>
<td>51.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventories</td>
<td>45.6</td>
<td>49.4</td>
<td>55.3</td>
<td>32.7</td>
<td>37.1</td>
<td>45.5</td>
<td>45.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>77.5</td>
<td>78.0</td>
<td>75.0</td>
<td>43.5</td>
<td>48.3</td>
<td>66.5</td>
<td>64.6</td>
</tr>
</tbody>
</table>
</body></html>

Rising trends don't have unending momentum. And the current rebound in factory sector activity appears to be no exception. The Institute for Supply Management indicated that their May composite index of factory sector activity slipped [...]

U.S. ISM Index Indicates Topping Of Factory Sector Growth

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100601a.jpg" height="265" width="314"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100601b.jpg" height="265" width="314">
Rising trends don't have unending momentum. And the current
rebound in factory sector activity appears to be no exception. The
Institute for Supply Management indicated that their May composite
index of factory sector activity slipped to 59.7 from 60.4 in April.
While May's figure was higher than Consensus expectation's for a
decline to 59.0, recent levels have been historically hard to sustain.
Still, the latest figure is up from the low of 32.5 reached in December
'08. (Any figure above the break-even point of 50 suggests rising
activity.) The ISM data is available in Haver's USECON database.
A slower rate of inventory accumulation was the main source of
the composite index's May weakness. The new orders, production and
vendor performance components were roughly unchanged. Notable, however,
was the slight gain in the employment index to 59.8. It was the highest
level since early-2004. During the last ten years there has been an 89%
correlation between the ISM employment index and the m/m change in
factory sector payrolls.
Also showing lift was the separate index of export orders to
62.0 which was the highest level since 1988. During the last ten years
there has been an 88% correlation between the level of the index and
the quarterly change in merchandise exports. Twenty-eight percent of
respondents reported higher export orders while fourteen reported lower
orders.
The separate index of prices paid slipped to 77.5 from its
high for this recovery. It remained up from the December '08 low of
18.0. Sixty percent of respondents reported higher prices while only 5%
indicated lower prices. During the last twenty years there has been an
83% correlation between the price index and the three-month change in
the PPI for intermediate goods.
The ISM data are available in Haver's USECON
database.
The Policy Response to the Crisis in Korea and Other
Emerging Market Economies is Saturday's speech by Fed
Chairman Ben S. Bernanke and it can be found <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20100530a.htm">here</a>.

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100601c.jpg" height="265" width="314"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100601d.jpg" height="265" width="312">
<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/SURVEYS/@S2/@S201/@S201.HTM" style="color: black;">ISM Mfg</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">May '09</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Index</td>
<td>59.7</td>
<td>60.4</td>
<td>59.6</td>
<td>43.2</td>
<td>46.2</td>
<td>45.5</td>
<td>51.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders</td>
<td>65.7</td>
<td>65.7</td>
<td>61.5</td>
<td>51.4</td>
<td>51.6</td>
<td>42.1</td>
<td>54.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Employment</td>
<td>59.8</td>
<td>58.5</td>
<td>55.1</td>
<td>35.1</td>
<td>40.5</td>
<td>43.3</td>
<td>50.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Production</td>
<td>66.6</td>
<td>66.9</td>
<td>61.1</td>
<td>47.0</td>
<td>50.4</td>
<td>45.2</td>
<td>54.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Supplier Deliveries</td>
<td>61.0</td>
<td>61.3</td>
<td>64.9</td>
<td>50.0</td>
<td>51.4</td>
<td>51.6</td>
<td>51.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventories</td>
<td>45.6</td>
<td>49.4</td>
<td>55.3</td>
<td>32.7</td>
<td>37.1</td>
<td>45.5</td>
<td>45.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>77.5</td>
<td>78.0</td>
<td>75.0</td>
<td>43.5</td>
<td>48.3</td>
<td>66.5</td>
<td>64.6</td>
</tr>
</tbody>
</table>
Market Indices For MFG Drop
Sharply Off-Peak 
by <a href="/comment/Brusca.html">Robert
Brusca</a> June 1, 2010


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100601e.jpg" align="left" height="265" width="353">
The market MFG barometers for EMU fell across the bard in May.
Only Ireland among the main reports showed a month-to-month boost and
the EU&#8217;s UK edged higher. Greece the well-know troubled EMU ember shows
what troubled straits it is in as it is the only example of a MFG PMI
that is down over three-, six- and twelve-months. Moreover, every other
EU/EMU report in the table is up by 20 index points (or almost) from
its respective cycle low. Greece is not. Notably Greece&#8217;s MFG index is
up by just 3.6 points from its low. The whole of the e-Zone is not even
down that much from its cycle peak! Greece&#8217;s problems are not just
problems with debt but are about problems in getting economic growth
going and improving its tax revenues. The manufacturing sector has been
leading EMU into recovery.
Today EMU unemployment was reported and it ticked up by 0.1%.
In Germany the rate fell and the number unemployed fell by more than
expected as Greece&#8217;s woes are helping German growth by having knocked
down the value of the euro. Germany is benefitting from export
strength. Still it is well recognized that Greece&#8217;s problems could
become a net negative for the Zone. And, of course, Greece is not the
only thing Europe is worried about.
Spain was downgraded by Fitch just before the weekend at the
end of the US trading day. Over the weekend the ECB released estimates
for the first time on the amount of bank loan losses that the Zone&#8217;s
banking system probably faces. The ECB pointed to 195bln euros in loan
losses for 2010 and 2011 saying that it could be worse if growth were
hit hard. Add to this to the news of China slowing and we have a
US-holiday shortened week that has just begun and already is jam-packed
full of negative news. Welcome back!

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup><thead><tr>
<th colspan="9" scope="col"> Changes in Markit
MFG Indices</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Changes Mo/Mo</td>
<td colspan="3">Change on Frequency</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>May-10</td>
<td>Apr-10</td>
<td>Mar-10</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>From Peak</td>
<td>From Low</td>
</tr>
<tr class="even">
<td class="firstcol">Euro-13</td>
<td>-1.69</td>
<td>0.90</td>
<td>2.42</td>
<td>1.63</td>
<td>4.66</td>
<td>15.18</td>
<td>-2.9</td>
<td>22.3</td>
</tr>
<tr class="even">
<td class="firstcol">Germany</td>
<td>-3.14</td>
<td>1.34</td>
<td>3.02</td>
<td>1.22</td>
<td>5.99</td>
<td>18.85</td>
<td>-3.1</td>
<td>26.5</td>
</tr>
<tr class="even">
<td class="firstcol">France</td>
<td>-0.77</td>
<td>0.08</td>
<td>1.59</td>
<td>0.90</td>
<td>1.38</td>
<td>12.46</td>
<td>-8.2</td>
<td>21.0</td>
</tr>
<tr class="even">
<td class="firstcol">Italy</td>
<td>-0.28</td>
<td>0.57</td>
<td>2.10</td>
<td>2.39</td>
<td>3.93</td>
<td>12.91</td>
<td>-3.6</td>
<td>19.4</td>
</tr>
<tr class="even">
<td class="firstcol">Spain</td>
<td>-1.80</td>
<td>1.46</td>
<td>2.75</td>
<td>2.41</td>
<td>6.23</td>
<td>11.68</td>
<td>-5.7</td>
<td>23.0</td>
</tr>
<tr class="even">
<td class="firstcol">Austria</td>
<td>-2.11</td>
<td>3.62</td>
<td>1.31</td>
<td>2.82</td>
<td>8.29</td>
<td>18.92</td>
<td>-2.1</td>
<td>25.1</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;Greece</td>
<td>-1.85</td>
<td>0.71</td>
<td>-1.26</td>
<td>-2.40</td>
<td>-5.45</td>
<td>-4.28</td>
<td>-14.2</td>
<td>3.6</td>
</tr>
<tr class="even">
<td class="firstcol">Ireland</td>
<td>0.67</td>
<td>0.42</td>
<td>4.35</td>
<td>5.44</td>
<td>5.29</td>
<td>14.73</td>
<td>-1.3</td>
<td>20.9</td>
</tr>
<tr class="grey3">
<td colspan="9" class="firstcol">EU</td>
</tr>
<tr class="even">
<td class="firstcol">UK</td>
<td>0.02</td>
<td>0.69</td>
<td>0.67</td>
<td>1.38</td>
<td>5.38</td>
<td>12.92</td>
<td>0.0</td>
<td>22.8</td>
</tr>
<tr class="grey1">
<td colspan="9" class="firstcol">percentile
is over
range since March 2000</td>
</tr>
</tbody>
</table>
U.S. Construction Activity
Rebounds Across-the-Board 
by <a href="/comment/Moeller.html">Tom
Moeller</a> June 1,2010 


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100601f.jpg" align="left" height="265" width="353">
Perhaps busting out of its malaise, construction activity
rebounded a sharp 2.7% during April after a 0.4% March uptick. The
latest increase vastly exceeded Consensus expectations for a 0.1%
uptick. The impetus for the April rise was a 2.9% jump in private
sector building off the March low. Nevertheless, private sector
building was off 13.5 y/y and 41.2% from the early-2006 high.
Higher residential building activity provided the impetus
behind the gain in the total with a 4.4% increase. A 6.3% jump (2.7%
y/y) in spending on home improvements led the April gain. It was
followed by single-family construction activity which rose 3.4% rise
(29.0% y/y) and was the eleventh consecutive monthly increase. It
lifted activity by more than one-third from last year's low. However,
building remained off three-quarters from the 2006 high. Multi-family
building fell another 1.9% during April to a new series' low (-57.4%
y/y).
Nonresidential building activity also recovered 1.7%, though
that was the cycle's first meaningful monthly gain. Since the 2008
peak, activity has fallen by 29.0%. Higher factory sector building led
the April gain with a 2.7 increase (-31.3% y/y) followed by a 1.3% rise
(-15.7% y/y) in health-care building. Office building (-36.4% y/y) and
educational construction (-16.6% y/y) both fell sharply. In the public
sector, building activity also firmed by 2.4% (-4.4% y/y) led by a 3.6%
jump in spending on highways &amp; streets (5.1% y/y).
The construction put-in-place figures are available in Haver's
USECON database.
Policy Challenges for Central Banks in the Aftermath
of the Crisis is last week's speech by St. Louis Fed
President James Bullard and it can be found here <a href="http://www.stlouisfed.org/newsroom/displayNews.cfm?article=688">here</a>.

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100601g.jpg" height="265" width="314"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100601h.jpg" height="265" width="314">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Construction
Put In Place (%)</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">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Total</td>
<td>2.7</td>
<td>0.4</td>
<td>-2.4</td>
<td>-10.5</td>
<td>-12.5</td>
<td>-6.9</td>
<td>-1.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Private</td>
<td>2.9</td>
<td>-0.5</td>
<td>-2.9</td>
<td>-13.5</td>
<td>-18.8</td>
<td>-11.1</td>
<td>-5.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Residential</td>
<td>4.4</td>
<td>0.0</td>
<td>-4.4</td>
<td>4.1</td>
<td>-28.0</td>
<td>-29.1</td>
<td>-19.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>1.7</td>
<td>-0.9</td>
<td>-1.7</td>
<td>-24.6</td>
<td>-11.1</td>
<td>13.2</td>
<td>23.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>2.4</td>
<td>2.0</td>
<td>-1.3</td>
<td>-4.4</td>
<td>3.3</td>
<td>5.6</td>
<td>13.1</td>
</tr>
</tbody>
</table>
</body></html>

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

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

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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Andrew Cates

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

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

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

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

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

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

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

Charts of the Week: Riskbusters

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

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

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

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

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

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

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

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

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

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

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

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

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

Sandy Batten

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

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

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

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

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

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

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

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

FRB Kansas City Manufacturing Index Unchanged in August

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

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

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

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

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

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


U.S. Pending Home Sales Decline in July

Kathleen Stephansen, CBE

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

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

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

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

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

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

Economy in Brief: June 2010

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