Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050901g.jpg" width="353">
The value of construction put in place dipped slightly in July following a 0.6% decline in June, although figures for May were revised sharply higher. Consensus expectations had been for a 0.5% increase.
Private residential building activity rose slightly as did the value of residential building. New single family building rose 0.1% (9.0% y/y) following gains of 1.0% and 1.3% during the prior two months. The y/y growth in residential building is down by more than half from the peak growth rates of 2004.
Nonresidential building rose 0.2% following the downwardly revised 1.6% June decline but office construction (-1.0% y/y) fell hard for the third straight month.
Public construction spending fell for the second consecutive month as construction activity on highways &amp; streets, nearly one third of the value of public construction spending, fell 2.4% (+7.0% y/y) for the fifth decline this year. While states&#39; spending on highways &amp; streets is up 8.0% y/y, federal spending is down by more than half versus last year.
These more detailed categories represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for Automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E907/@E90701/@E90701.HTM">Construction Put-in-place</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-0.0%</td>
<td>-0.6%</td>
<td>6.0%</td>
<td>10.9%</td>
<td>5.4%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>0.2%</td>
<td>-0.6%</td>
<td>6.6%</td>
<td>13.6%</td>
<td>6.3%</td>
<td>-0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>0.2%</td>
<td>-0.2%</td>
<td>8.5%</td>
<td>18.2%</td>
<td>12.9%</td>
<td>8.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>0.2%</td>
<td>-1.6%</td>
<td>2.0%</td>
<td>3.9%</td>
<td>-5.4%</td>
<td>-13.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>-0.8%</td>
<td>-0.6%</td>
<td>3.9%</td>
<td>2.5%</td>
<td>2.7%</td>
<td>5.7%</td>
</tr>
</tbody>
</table>
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The value of construction put in place dipped slightly in July following a 0.6% decline in June, although figures for May were revised sharply higher. Consensus expectations had been for a 0.5% increase. Private residential building [...]

U.S. Construction Spending Losing Steam

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050901f.jpg" width="353">
Initial claims for unemployment insurance rose 3,000 last week to 320,000 and reversed the prior week&#39;s revised 2,000 decline. Consensus expectations had been for 315,000 claims.
The latest figure should have little bearing on Consensus expectations for a 190,000 increase in August nonfarm payrolls, to be reported tomorrow morning by the Bureau of Labor Statistics.
The four-week moving average of initial claims rose slightly to 316,750 (-7.0% y/y).
Continuing claims for unemployment insurance rose 36,000 in the latest week to the highest level since early July.
For the seventh consecutive week, the insured unemployment rate remained at its four-year low of 2.0%.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">08/27/05</th>
<th scope="col">08/20/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>320</td>
<td>317</td>
<td>-9.6%</td>
<td>343</td>
<td>402</td>
<td>404</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,607</td>
<td>-9.0%</td>
<td>2,926</td>
<td>3,531</td>
<td>3,570</td>
</tr>
</tbody>
</table>
</body>
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Initial claims for unemployment insurance rose 3,000 last week to 320,000 and reversed the prior week's revised 2,000 decline. Consensus expectations had been for 315,000 claims. The latest figure should have little bearing on [...]

Initial Claims for Jobless Insurance Up a Bit

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050901d.jpg" width="353">
The Composite Index of activity in the manufacturing sector, reported by the Institute of Supply Management, backpedaled three points in August to 53.6 following a like-sized increase in July. The decline outpaced Consensus expectations for a modest increase to 57.0. (In light of this week&#39;s published decline in the Chicago PMI, Consensus expectations may have ratcheted down.)
During the last twenty years there has been a 64% correlation between the level of the Composite Index and the three month growth in factory sector industrial production.
Pricing in the factory sector firmed to the strongest since April. The prices paid index rose to 62.5 following three months of decline. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050901e.jpg" width="353">
Production gave back nearly all of the prior month&#39;s gain with a 5.3 drop. Likewise, the new orders index fell 4.2 points and reversed more than all of the July increase as the export order index also fell. Inventory restocking eased as the inventory index fell for the second month to the lowest level since October 2003. 
The rate of job creation eased slightly in August though the index level of 52.6 continued to indicate positive growth. During the last twenty years there has been a 67% correlation between the level of the ISM Employment Index and the three month growth in factory sector employment.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF02/@EF02.HTM">ISM Manufacturing Survey</a></th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">Aug &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Index</td>
<td>53.6</td>
<td>56.6</td>
<td>59.6</td>
<td>60.5</td>
<td>53.3</td>
<td>52.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>56.4</td>
<td>60.6</td>
<td>62.2</td>
<td>63.5</td>
<td>57.9</td>
<td>56.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>62.5</td>
<td>48.5</td>
<td>81.5</td>
<td>79.8</td>
<td>59.6</td>
<td>57.6</td>
</tr>
</tbody>
</table>
</body>
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The Composite Index of activity in the manufacturing sector, reported by the Institute of Supply Management, backpedaled three points in August to 53.6 following a like-sized increase in July. The decline outpaced Consensus [...]

ISM Factory Index Backpedaled

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050901c.jpg" width="353">
Personal income rose just 0.3% in July following an unrevised 0.5% increase in June. Consensus expectations had been for a 0.5% increase. Combined with a similarly modest gain in May, the three-month growth in income slowed to 4.4% (AR) from 6.9% in January.
The Trimmed-Mean PCE Inflation rate reflects new research from the Federal Reserve Bank of Dallas. The measure indicates that core price inflation may be running one-half of a percentage faster than what is being indicated by other measures. It is now available in USECON and the Dallas Fed&#39;s research is available <a href="http://www.dallasfed.org/research/papers/2005/wp0506.pdf">here</a>.
The PCE chain price index, from the US Bureau of Economic Analysis, rose 0.3% following a June dip. Gasoline prices rose 6.1% after two months of decline and rose another 8.6% in August. Less food &amp; energy, prices ticked just 0.1% higher following no change in June. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050901a.jpg" width="353">
Wages &amp; salaries rose 0.5% (6.9% y/y), the strongest monthly increase since April. Factory sector wages rose 0.5% (5.7% y/y) and prior month&#39;s figures were revised up. Sector wages rose 0.6% (8.0% y/y), the strongest since April.
Disposable personal income increased 0.3% (5.1% y/y) after a 0.5% June increase. Adjusted for price inflation take home pay was unchanged (2.5% y/y), the first month of no growth since March.
Personal consumption expenditures surged another 1.0% owing to a 10.6% jump in sales of light vehicles. That followed a 7.5% spike in June vehicle sales. Spending on durables overall rose 4.7% (9.4% y/y) and nondurables spending rose 0.6% (8.0% y/y). Services spending increased 0.4% (5.7% y/y).
The personal savings rate went negative for the first time since 2001 although the household sector&#39;s net worth (from the Flow of Funds Accounts) has been rising, helped by a 16% increase in owners&#39; equity in real estate. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050901b.jpg" width="353">
Understanding the Term Structure of Interest Rates from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/review/05/09/Poole.pdf">here</a>.

<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/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.3%</td>
<td>0.5%</td>
<td>6.3%</td>
<td>5.9%</td>
<td>3.2%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>1.0%</td>
<td>1.0%</td>
<td>6.9%</td>
<td>6.5%</td>
<td>4.9%</td>
<td>4.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>-0.6%</td>
<td>0.0%</td>
<td>1.1%</td>
<td>1.7%</td>
<td>2.1%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.3%</td>
<td>-0.0%</td>
<td>2.5%</td>
<td>2.6%</td>
<td>1.9%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.1%</td>
<td>0.0%</td>
<td>1.8%</td>
<td>2.0%</td>
<td>1.3%</td>
<td>1.8%</td>
</tr>
</tbody>
</table>
</body>
</html>

Personal income rose just 0.3% in July following an unrevised 0.5% increase in June. Consensus expectations had been for a 0.5% increase. Combined with a similarly modest gain in May, the three-month growth in income slowed to 4.4% [...]

U.S. Personal Income Light, Price Inflation Firmed

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050901g.jpg" width="353">
The value of construction put in place dipped slightly in July following a 0.6% decline in June, although figures for May were revised sharply higher. Consensus expectations had been for a 0.5% increase.
Private residential building activity rose slightly as did the value of residential building. New single family building rose 0.1% (9.0% y/y) following gains of 1.0% and 1.3% during the prior two months. The y/y growth in residential building is down by more than half from the peak growth rates of 2004.
Nonresidential building rose 0.2% following the downwardly revised 1.6% June decline but office construction (-1.0% y/y) fell hard for the third straight month.
Public construction spending fell for the second consecutive month as construction activity on highways &amp; streets, nearly one third of the value of public construction spending, fell 2.4% (+7.0% y/y) for the fifth decline this year. While states&#39; spending on highways &amp; streets is up 8.0% y/y, federal spending is down by more than half versus last year.
These more detailed categories represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for Automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E907/@E90701/@E90701.HTM">Construction Put-in-place</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-0.0%</td>
<td>-0.6%</td>
<td>6.0%</td>
<td>10.9%</td>
<td>5.4%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>0.2%</td>
<td>-0.6%</td>
<td>6.6%</td>
<td>13.6%</td>
<td>6.3%</td>
<td>-0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>0.2%</td>
<td>-0.2%</td>
<td>8.5%</td>
<td>18.2%</td>
<td>12.9%</td>
<td>8.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>0.2%</td>
<td>-1.6%</td>
<td>2.0%</td>
<td>3.9%</td>
<td>-5.4%</td>
<td>-13.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>-0.8%</td>
<td>-0.6%</td>
<td>3.9%</td>
<td>2.5%</td>
<td>2.7%</td>
<td>5.7%</td>
</tr>
</tbody>
</table>
ISM Factory Index Backpedaled 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 1, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050901d.jpg" width="353">
The Composite Index of activity in the manufacturing sector, reported by the Institute of Supply Management, backpedaled three points in August to 53.6 following a like-sized increase in July. The decline outpaced Consensus expectations for a modest increase to 57.0. (In light of this week&#39;s published decline in the Chicago PMI, Consensus expectations may have ratcheted down.)
During the last twenty years there has been a 64% correlation between the level of the Composite Index and the three month growth in factory sector industrial production.
Pricing in the factory sector firmed to the strongest since April. The prices paid index rose to 62.5 following three months of decline. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050901e.jpg" width="353">
Production gave back nearly all of the prior month&#39;s gain with a 5.3 drop. Likewise, the new orders index fell 4.2 points and reversed more than all of the July increase as the export order index also fell. Inventory restocking eased as the inventory index fell for the second month to the lowest level since October 2003. 
The rate of job creation eased slightly in August though the index level of 52.6 continued to indicate positive growth. During the last twenty years there has been a 67% correlation between the level of the ISM Employment Index and the three month growth in factory sector employment.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF02/@EF02.HTM">ISM Manufacturing Survey</a></th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">Aug &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Index</td>
<td>53.6</td>
<td>56.6</td>
<td>59.6</td>
<td>60.5</td>
<td>53.3</td>
<td>52.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>56.4</td>
<td>60.6</td>
<td>62.2</td>
<td>63.5</td>
<td>57.9</td>
<td>56.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>62.5</td>
<td>48.5</td>
<td>81.5</td>
<td>79.8</td>
<td>59.6</td>
<td>57.6</td>
</tr>
</tbody>
</table>
Initial Claims for Jobless Insurance Up a Bit 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 1, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050901f.jpg" width="353">
Initial claims for unemployment insurance rose 3,000 last week to 320,000 and reversed the prior week&#39;s revised 2,000 decline. Consensus expectations had been for 315,000 claims.
The latest figure should have little bearing on Consensus expectations for a 190,000 increase in August nonfarm payrolls, to be reported tomorrow morning by the Bureau of Labor Statistics.
The four-week moving average of initial claims rose slightly to 316,750 (-7.0% y/y).
Continuing claims for unemployment insurance rose 36,000 in the latest week to the highest level since early July.
For the seventh consecutive week, the insured unemployment rate remained at its four-year low of 2.0%.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">08/27/05</th>
<th scope="col">08/20/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>320</td>
<td>317</td>
<td>-9.6%</td>
<td>343</td>
<td>402</td>
<td>404</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,607</td>
<td>-9.0%</td>
<td>2,926</td>
<td>3,531</td>
<td>3,570</td>
</tr>
</tbody>
</table>
U.S. Personal Income Light, Price Inflation Firmed 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 1, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050901c.jpg" width="353">
Personal income rose just 0.3% in July following an unrevised 0.5% increase in June. Consensus expectations had been for a 0.5% increase. Combined with a similarly modest gain in May, the three-month growth in income slowed to 4.4% (AR) from 6.9% in January.
The Trimmed-Mean PCE Inflation rate reflects new research from the Federal Reserve Bank of Dallas. The measure indicates that core price inflation may be running one-half of a percentage faster than what is being indicated by other measures. It is now available in USECON and the Dallas Fed&#39;s research is available <a href="http://www.dallasfed.org/research/papers/2005/wp0506.pdf">here</a>.
The PCE chain price index, from the US Bureau of Economic Analysis, rose 0.3% following a June dip. Gasoline prices rose 6.1% after two months of decline and rose another 8.6% in August. Less food &amp; energy, prices ticked just 0.1% higher following no change in June. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050901a.jpg" width="353">
Wages &amp; salaries rose 0.5% (6.9% y/y), the strongest monthly increase since April. Factory sector wages rose 0.5% (5.7% y/y) and prior month&#39;s figures were revised up. Sector wages rose 0.6% (8.0% y/y), the strongest since April.
Disposable personal income increased 0.3% (5.1% y/y) after a 0.5% June increase. Adjusted for price inflation take home pay was unchanged (2.5% y/y), the first month of no growth since March.
Personal consumption expenditures surged another 1.0% owing to a 10.6% jump in sales of light vehicles. That followed a 7.5% spike in June vehicle sales. Spending on durables overall rose 4.7% (9.4% y/y) and nondurables spending rose 0.6% (8.0% y/y). Services spending increased 0.4% (5.7% y/y).
The personal savings rate went negative for the first time since 2001 although the household sector&#39;s net worth (from the Flow of Funds Accounts) has been rising, helped by a 16% increase in owners&#39; equity in real estate. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050901b.jpg" width="353">
Understanding the Term Structure of Interest Rates from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/review/05/09/Poole.pdf">here</a>.

<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/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.3%</td>
<td>0.5%</td>
<td>6.3%</td>
<td>5.9%</td>
<td>3.2%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>1.0%</td>
<td>1.0%</td>
<td>6.9%</td>
<td>6.5%</td>
<td>4.9%</td>
<td>4.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>-0.6%</td>
<td>0.0%</td>
<td>1.1%</td>
<td>1.7%</td>
<td>2.1%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.3%</td>
<td>-0.0%</td>
<td>2.5%</td>
<td>2.6%</td>
<td>1.9%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.1%</td>
<td>0.0%</td>
<td>1.8%</td>
<td>2.0%</td>
<td>1.3%</td>
<td>1.8%</td>
</tr>
</tbody>
</table>
</body>
</html>

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

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

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

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

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

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

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


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

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

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

FIBER: Industrial Commodity Prices Surge in Latest Four Weeks

Robert Brusca

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German industrial production rose by a sharp 1.2% in May but only after a 1.6% plunge in April which followed a 2.3% surge in March. This has been an unusually turbulent period for industrial production. However, on balance, German IP shows acceleration (from 12-months to 6-months to 3-months) for headline IP, for consumer goods output, for capital goods output, as well as for manufacturing overall and for real manufacturing orders.

**Data trends**
This collected pattern of accelerating trends is exceptionally good news and tends to push the volatility in output into the background. Typically, volatility tends to reduce the meaning of any trend since depending on where you are in a volatility, up-vs-down pattern, the trend will be not just exaggerated but even switched in direction. However, with not just growth but acceleration in play and with accelerating trends in play for so many categories- including real orders- the uptrend appears to be solidly established even in the face of volatility. And the chart seems to confirm that (drawn on year-over-year sector trends).

**Knowledge beyond data**
In addition, we know that there are other conditions stirring in Europe that give us cause to think that output solidifying is a real event not just the luck of the draw on one month’s volatility. The shift is to get NATO countries to pay for more of their own defense and to pay more period. At the recent NATO meeting, member countries pledged to spend 5% of GDP on defense that should help to light a fire of demand across Europe. At the same time, the good news is that inflation headlines in the EMU and across major member countries are mostly on target while core inflation remains stubborn at an elevated pace near 2.5%, mostly across the EMU.

**Quarter-to-date (QTD)**
The volatility leaves German IP growing at less than a 1% annual rate in Q2 over the Q1 average (quarter-to-date, or QTD)– a far less portent reading than the three-month rate of 7.7% (saar). But manufacturing, unimpeded by the weakness in construction, shows a QTD annual rate rise of 2.9%. Real manufacturing orders are advancing at a 16.4% annual rate in the quarter while real sales are declining.

Surveys show improvements over three months compared to six-months, but all of them also show some slippage over six months compared to 12-months. Yet, all of the three-month averages are above the 12-month averages. Survey data generally show momentum is turning higher, but not markedly.

**Queue standings – longer term comparisons**
The queue standing data compare current growth rates (Y/Y) or (in the case of surveys) levels to past performance. Total IP, consumer goods, capital goods, manufacturing output, and real orders all have May readings above their historic median growth rates/or levels (rankings over 50%). But construction and intermediate goods sectors lag badly. Real sales are weak, and the surveys all show weak signal compared to all levels since January 2000. This tells us that the momentum in German industry (12-month growth) is solid and strong, but that the level of activity is weak – and quite weak- compared to past performance. This is also clear from the far-right column that measures current output relative to output in January 2020, just before Covid. These are aggregate changes. Germany’s output is still 1.7% lower in May 2025 than it was in January 2020 – nearly five- and one-half years down the road. This has been a very weak period for Germany. Only capital goods output among sectors is higher, rising by 4.9% over a period of five-plus years and making most of that in the last 12 months. The surveys show conditions have weakened on balance over this period as well.

**Some other Europe**
Portugal and Norway give us a look at two other European economies. Both show growth in May as well as QTD. Norway is supercharged with the strong oil market in play as a tailwind. Its queue standing for growth has a 99-percentile reading. Both Portugal and Norway are stronger relative to January 2020; Portugal by 11.8% and Norway by 8.3%.

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**Summing up**
The production situation in the EMU and in Germany appears to be solidifying. However, supply needs demand. Retail sales in May fell in the EMU for the first time since December. German retail sales volume has been up by 2% or more by months in its year-over-year growth rates since May 2024… until this month. The 1.6% rise in real German retail sales (ex-autos) in May 2025 is the weakest rise since German retail sales fell year-over-year in May 2024. Six of ten early reporting countries in Europe show real retail sales drops in May as well. So, just as one series begins to look solid another begins to raise question marks. It has been like that for a while in Europe.

Germany

German IP Is Making Progress Across Most Sectors

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

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

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

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

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

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

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

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

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

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

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

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

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

Sandy Batten

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

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

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

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

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

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

The international trade data, including relevant data on oil prices, can be found in Haver’s **USECON** database. Detailed figures on international trade are available in the **USINT** and **USTRADE** databases. The expectations figures are from the Action Economics Forecast Survey in **AS1REPNA**.

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

U.S. Trade Deficit Widened in May

Kathleen Stephansen, CBE

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

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

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

Economic conditions vary widely across states and territories. In the week ended June 14, the highest unemployment rates were in New Jersey (2.23%), Minnesota (2.22%), Puerto Rico (2.20%), California (2.16%), Washington (1.98%), and Rhode Island (1.95%). The lowest rates were in South Dakota (0.27%), Florida (0.41%), North Carolina (0.47%), and Alabama (0.48%). Rates in other notable states include Pennsylvania (1.71%), Illinois (1.67%), New York (1.55%), and Texas (1.26%). These state data are not seasonally adjusted.

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

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- Initial claims for unemployment insurance declined by 4,000 in the week ended June 28.
- Total number of beneficiaries was unchanged in the week of June 21 week.
- The insured unemployment rate was unchanged at 1.3%.

U.S. Initial Jobless Claims Decreased in Latest Week

Economy in Brief: September 2005

Jump to:

U.S. Construction Spending Losing Steam

Initial Claims for Jobless Insurance Up a Bit

ISM Factory Index Backpedaled

U.S. Personal Income Light, Price Inflation Firmed

U.S. Construction Spending Losing Steam