Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071130e.jpg" width="353">
The Chicago Purchasing Manager&#39;s Association reported that its November business barometer improved to 52.9 and the 3.2 point rise from October reversed most of that month&#39;s deterioration. The latest figure was better than expected. Nevertheless, during the last four months the readings remained near or well below the highs of earlier this year.
During the last ten years there has been a 66% correlation between the index and the three-month change in US factory sector industrial production. There has been an 85% correlation between the Chicago figure and the national ISM index (due for release on Monday) and that is the highest correlation of all the regional series with the Nat&#39;l index.
The production component of the Chicago measure gained back most of a sharp drop in October. New orders remained at the October level which was near the lowest since February. The employment index similarly rose but the gain followed three months of decline and the index was to nowhere near the high reached back in July.
The prices paid index rose sharply m/m to the highest level since July of 2006.

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<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S2/@S203/@S203.htm">Chicago PMI</a></th>
<th scope="col">&nbsp;November</th>
<th scope="col">&nbsp; October</th>
<th scope="col">Nov. &#39;06</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Chicago PMI Business Barometer Index</td>
<td>52.9</td>
<td>49.7</td>
<td>51.2</td>
<td>56.8</td>
<td>60.4</td>
<td>62.8</td>
</tr>
</tbody>
</table>
</body>
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The Chicago Purchasing Manager's Association reported that its November business barometer improved to 52.9 and the 3.2 point rise from October reversed most of that month's deterioration. The latest figure was better than expected. [...]

Chicago Purchasing Managers Survey Improved

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<div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071130c.jpg" width="353">
The value of construction put in place fell again October. The 0.8% decline followed a modest 0.2% uptick during September but the three month growth in activity has stabilized at -1.0% (AR), an improvement from the double digit rate of decline last Autumn.
Residential building dropped another 2.0% m/m and the three month change was -17.2% (AR), a stable rate of decline since the middle of last year. Building of new single family units, however, showed no sign of stabilizing or bottoming and produced a 4.0% (-26.4% y/y) fall m/m in October. To the upside, spending on improvements gained 0.7% (5.1% y/y) and the three month growth rate shot up to 23.5% (AR).
During the last twenty years there has been an 84% correlation between the q/q change in the value of residential building and its contribution to growth in real GDP.
Nonresidential building fell slightly for the first decline in about one year. Three month growth remained stable, however, at a positive 16.0% (AR). The 1.2% rise in office construction (20.3% y/y) lifted three month growth to 44.7%, and multi-retail building activity rose 1.6% (12.6% y/y). The shortfall in October nonresidential activity was due partly to a modest 0.1% (11.8% y/y) uptick in commercial construction which followed several months of little or negative change. Also, the 1.8% (20.9 y/y) rise in educational facility building followed two months of just slight increase.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071130d.jpg" width="353">
Strength in public construction spending was evident in a 0.8% October rise and the firm three month growth rate of 12.3% was stable. Construction on highways &amp; streets rose 0.8% (9.2% y/y) after two months of double digit gain. The value of construction on highways &amp; streets is nearly one third of the value of total public construction spending. Construction spending on education again was firm and grew 2.1% (18.2% y/y).
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. </div>

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<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-0.8%</td>
<td>0.2%</td>
<td>-0.6%</td>
<td>5.6%</td>
<td>10.7%</td>
<td>11.0%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>-1.4%</td>
<td>-0.1%</td>
<td>-4.9%</td>
<td>4.7%</td>
<td>12.0%</td>
<td>13.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>-2.0%</td>
<td>-1.1%</td>
<td>-16.2%</td>
<td>0.5%</td>
<td>13.7%</td>
<td>18.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-0.5%</td>
<td>1.5%</td>
<td>17.5%</td>
<td>15.2%</td>
<td>7.8%</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>0.8%</td>
<td>1.2%</td>
<td>14.6%</td>
<td>9.2%</td>
<td>6.2%</td>
<td>1.7%</td>
</tr>
</tbody>
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The value of construction put in place fell again October. The 0.8% decline followed a modest 0.2% uptick during September but the three month growth in activity has stabilized at -1.0% (AR), an improvement from the double digit rate [...]

U.S. Construction Spending Down in October, But Stabilizing?

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<div align="left"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071130b.jpg" align="left" border="0" height="265" width="353">

Personal income during October rose 0.2%
and the increase fell slightly short of Consensus forecasts for a 0.4%
gain. The rise followed two months of 0.4% increased it lowered the
three month growth in income to 4.3% (AR), its worst since June.
A shortfall in wages &amp; salaries accounted for much of
October's easier income performance with a 0.1% (5.2% y/y) rise after a
0.6% September increase. Three month growth dipped to 4.1%, also the
lowest since June. Factory sector wages fell 0.2% (+1.9% y/y) following
downwardly revised gains in prior months.Wage &amp; salary income
in the private service-producing industries rose a slim 0.1% (6.1%
y/y), also after downwardly revised earlier results, and wages in the
government sector rose 0.4% (4.5% y/y).
Interest income grew just 0.1% (5.7% y/y) after a 0.6%
September rise and dividend income popped another 0.9% (13.0% y/y).
Personal current taxes rose 0.5% (8.6% y/y). As a result, disposable
personal income rose only 0.1% (5.7% y/y) but adjusted for
inflation, disposable personal income fell 0.2%
(+2.7% y/y) after a 0.2% September increase. That left the three month
growth in real DPI at 2.1%, its lowest since June.
Personal consumption expenditures rose
0.2% in October and the gain matched expectations. Adjusted for
inflation spending fell very slightly m/m and the three month growth of
1.8% was its weakest since May.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071130a.jpg" align="right" border="0" height="265" width="353">
Spending on discretionary items seemed to ease as real
spending on motor vehicles fell 0.9% (+2.7% y/y) and spending on
household furniture &amp; appliances dropped 0.3% (+7.4% y/y).
Spending on apparel was unchanged (+4.2% y/y) and spending on
recreation fell 0.3% (+2.5% y/y). These detailed spending figures are
available in Haver's USNA database.
The PCE chain price index rose 0.3% and
the y/y increase of 2.9% was its quickest since the middle of last
year. The core PCE price index gained 0.2%, the same as in September.
While y/y growth in core prices has been stable at 1.9%, a pickup to
2.3% (AR) over the last three months does not bode well for overall
pricing pressure even given the recent easing of the upward march in
oil prices.
Can Social Security Survive the Baby Boomers? from
the Federal reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/net/20070901/cover.pdf">here</a>.
National and regional economic overview is
yesterday's presentation by Fed ChairmanBen S. Bernanke and it is
available <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20071129a.htm">
here</a>.
</div>


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<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">October</th>
<th scope="col">September</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.2%</td>
<td>0.4%</td>
<td>6.0%</td>
<td>6.6%</td>
<td>5.9%</td>
<td>6.2%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.2%</td>
<td>0.3%</td>
<td>5.4%</td>
<td>5.9%</td>
<td>6.2%</td>
<td>6.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Saving Rate</td>
<td>0.5%</td>
<td>0.7%</td>
<td>0.4% (Oct. 06)</td>
<td>0.4%</td>
<td>0.5%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.3%</td>
<td>0.3%</td>
<td>2.9%</td>
<td>2.8%</td>
<td>2.9%</td>
<td>2.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food
&amp; energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>1.9%</td>
<td>2.2%</td>
<td>2.2%</td>
<td>2.1%</td>
</tr>
</tbody>
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Personal income during October rose 0.2% and the increase fell slightly short of Consensus forecasts for a 0.4% gain. The rise followed two months of 0.4% increased it lowered the three month growth in income to 4.3% (AR), its worst [...]

U.S. Personal Income Light, Real DPI Down and Real PCE Easier

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071129l.jpg" align="left" border="0" height="265" width="353">
The UK retail sector is stuck more or less mid range. Various
components are generally at or above the mid point of their respective
ranges. Orders, the relative strongest component, resides in the 70th
percentile of its range. Sales are in the 52nd
percentile. Sales for the time of year are in the 44th
percentile. The stock-to-sales ratio is a touch high in the 60th
percentile of its range. The various expected sales and orders are
generally in the same relative positions. See the table below. The chart on the left shows that
while variables remain mid range there has been some slippage recently
in the trend for sales, while orders trends have held a bit firmer. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="10" scope="col">UK Retail Volume Data CBI Survey </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Reported:</td>
<td>Nov-07</td>
<td>Oct-07</td>
<td>Sep-07</td>
<td>Aug-07</td>
<td>12MO Avg</td>
<td>Pcntle</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
</tr>
<tr class="odd">
<td class="firstcol">Sales/Yr Ago</td>
<td>13</td>
<td>10</td>
<td>12</td>
<td>15</td>
<td>22</td>
<td>52%</td>
<td>57</td>
<td>-35</td>
<td>92</td>
</tr>
<tr class="odd">
<td class="firstcol">Orders/Yr Ago</td>
<td>18</td>
<td>16</td>
<td>11</td>
<td>15</td>
<td>17</td>
<td>70%</td>
<td>42</td>
<td>-38</td>
<td>80</td>
</tr>
<tr class="odd">
<td class="firstcol">Sales: Time/Yr</td>
<td>-3</td>
<td>0</td>
<td>-1</td>
<td>-7</td>
<td>5</td>
<td>44%</td>
<td>41</td>
<td>-37</td>
<td>78</td>
</tr>
<tr class="odd">
<td class="firstcol">Stocks: Sales</td>
<td>18</td>
<td>13</td>
<td>12</td>
<td>14</td>
<td>12</td>
<td>60%</td>
<td>30</td>
<td>0</td>
<td>30</td>
</tr>
<tr>
<td class="firstcol">Expected:</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Sales/Yr Ago</td>
<td>15</td>
<td>16</td>
<td>17</td>
<td>14</td>
<td>18</td>
<td>53%</td>
<td>49</td>
<td>-23</td>
<td>72</td>
</tr>
<tr class="odd">
<td class="firstcol">Orders/Yr Ago</td>
<td>12</td>
<td>16</td>
<td>18</td>
<td>6</td>
<td>12</td>
<td>64%</td>
<td>38</td>
<td>-34</td>
<td>72</td>
</tr>
<tr class="odd">
<td class="firstcol">Sales: Time/Yr</td>
<td>2</td>
<td>-9</td>
<td>2</td>
<td>-5</td>
<td>3</td>
<td>53%</td>
<td>29</td>
<td>-29</td>
<td>58</td>
</tr>
<tr class="odd">
<td class="firstcol">Stocks: Sales</td>
<td>12</td>
<td>5</td>
<td>10</td>
<td>6</td>
<td>9</td>
<td>50%</td>
<td>21</td>
<td>3</td>
<td>18</td>
</tr>
</tbody>
</table>
</body></html>

The UK retail sector is stuck more or less mid range. Various components are generally at or above the mid point of their respective ranges. Orders, the relative strongest component, resides in the 70th percentile of its range. Sales [...]

UK: CBI Retail Sales Hold Steady and Strengthen

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071129k.jpg" align="left" border="0" height="265" width="353">
Japan continued to see its textile business eaten alive by
international competition in October. Still, manufacturing output rose
by 1.6% month-to-month and stands higher year/year by 3.5% after rising
6.6% the year before. 
 

Consumer goods and intermediate goods continue to show solid
gains. Investment goods output is off by 1.7% year/year and is off at a
4.3% annual rate over three months. 
 

On the whole, Japan&#8217;s industrial sector is doing well, living
off exports while domestic demand is still trying to find its way. 
 


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<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Japan
Industrial Production Trends</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">m/m %</td>
<td colspan="3">Saar %</td>
<td>Yr/Yr</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td> Oct-07</td>
<td> Sep-07</td>
<td> Aug-07</td>
<td> 3-mo</td>
<td> 6-mo</td>
<td> 12-mo</td>
<td> Yr-Ago</td>
</tr>
<tr>
<td class="firstcol">Mining &amp; Manufacturing</td>
<td>1.6%</td>
<td> -1.4%</td>
<td>3.5%</td>
<td>15.6%</td>
<td>8.9%</td>
<td>3.5%</td>
<td>6.6%</td>
</tr>
<tr>
<td class="firstcol">Total Industry</td>
<td>1.4%</td>
<td> -1.3%</td>
<td>3.8%</td>
<td>16.5%</td>
<td>7.6%</td>
<td>3.3%</td>
<td>6.3%</td>
</tr>
<tr>
<td class="firstcol">Manufacturing</td>
<td>1.6%</td>
<td> -1.4%</td>
<td>3.5%</td>
<td>15.6%</td>
<td>8.9%</td>
<td>3.5%</td>
<td>6.6%</td>
</tr>
<tr>
<td class="firstcol">Textiles</td>
<td> -0.3%</td>
<td> -1.0%</td>
<td> -1.0%</td>
<td> -8.8%</td>
<td> -4.2%</td>
<td> -5.5%</td>
<td> -2.3%</td>
</tr>
<tr>
<td class="firstcol">Transport</td>
<td>6.7%</td>
<td> -6.3%</td>
<td>19.1%</td>
<td>101.5%</td>
<td>32.3%</td>
<td>11.5%</td>
<td>14.2%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol"> Product Group</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods</td>
<td>1.6%</td>
<td> -2.2%</td>
<td>8.8%</td>
<td>36.5%</td>
<td>5.7%</td>
<td>2.9%</td>
<td>5.7%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>1.2%</td>
<td>0.0%</td>
<td>2.8%</td>
<td>17.3%</td>
<td>11.9%</td>
<td>5.9%</td>
<td>7.1%</td>
</tr>
<tr>
<td class="firstcol">Investment Goods</td>
<td>1.9%</td>
<td> -5.3%</td>
<td>2.5%</td>
<td> -4.3%</td>
<td>1.6%</td>
<td> -1.7%</td>
<td>6.3%</td>
</tr>
<tr>
<td class="firstcol">Mining</td>
<td> -2.9%</td>
<td>2.9%</td>
<td> -0.6%</td>
<td> -2.9%</td>
<td>6.7%</td>
<td>4.7%</td>
<td>6.4%</td>
</tr>
<tr>
<td class="firstcol">Electricity &amp; Gas</td>
<td> -3.0%</td>
<td>1.8%</td>
<td>8.7%</td>
<td>32.7%</td>
<td> -0.3%</td>
<td>2.5%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>
</body></html>

Japan continued to see its textile business eaten alive by international competition in October. Still, manufacturing output rose by 1.6% month-to-month and stands higher year/year by 3.5% after rising 6.6% the year before. Consumer [...]

Japan IP Sharply High in the Month of October

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071129j.jpg" align="left" border="0" height="265" width="353">
The abrupt drop in French consumer confidence in the INSEE
survey is sharp and as strong a reversal as appeared in early 2001.
Confidence itself at -28 in the 11 percentile of that variable&#8217;s range
&#8211; very weak showing. Living standards over the past 12 months as well
as those expected in the next twelve months rank in the bottom eight
percent of the range for such responses historically. Expected
unemployment in the next 12 months is barely below the mid point of its
historic range at a level of 13. 

Price developments over the past 12 months have given the
second highest reading ever (since January 1990). Expected price
developments in the 12 months ahead are still elevated in the 57th
percentile of their range. 

Oddly the &#8216;favorable to save&#8217; response ranks above its
midpoint at the sixty-first percentile. But &#8216;the ability to save&#8217; ranks
in the bottom third of its range. 

The financial situation is assessed as being in its 57th
percentile at a reading of +15, a slippage from October&#8217;s 16. But the
past 12 months are assessed as having been in the 40th percentile of
their range; what&#8217;s worse is that the next 12 months are assessed as
being in the bottom third of theirs. 

The French consumer has shed all the post election visions of
nirvana and Sarkozy&#8217;s honeymoon is over. The strong euro, ongoing
budget fights, and racial unrest in Paris&#8217; suburbs are taking their
toll despite the spirit of optimism that swept him into office and
lingered&#8230;for a while. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="11" scope="col"> INSEE Household Monthly Survey</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td colspan="2">Since Jan 1990</td>
<td colspan="4">Since Jan 1990</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Oct 07</td>
<td>Sep 07</td>
<td>Aug 07</td>
<td>Jul 07</td>
<td>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
</tr>
<tr class="odd">
<td class="firstcol">Household Confidence</td>
<td>-22</td>
<td>-21</td>
<td>-17</td>
<td>-15</td>
<td>25.6</td>
<td>118</td>
<td>10</td>
<td>-33</td>
<td>43</td>
<td>-17</td>
</tr>
<tr>
<td class="firstcol" colspan="11">Living Standards</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Past 12-Mos</td>
<td>-53</td>
<td>-50</td>
<td>-47</td>
<td>-46</td>
<td>15.5</td>
<td>153</td>
<td>18</td>
<td>-66</td>
<td>84</td>
<td>-37</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Next 12-Mos</td>
<td>-24</td>
<td>-26</td>
<td>-17</td>
<td>-11</td>
<td>31.6</td>
<td>103</td>
<td>15</td>
<td>-42</td>
<td>57</td>
<td>-18</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment: Next 12</td>
<td>11</td>
<td>11</td>
<td>0</td>
<td>-7</td>
<td>43.6</td>
<td>155</td>
<td>73</td>
<td>-37</td>
<td>110</td>
<td>30</td>
</tr>
<tr>
<td class="firstcol" colspan="11">Price Developments</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Past 12-Mos</td>
<td>14</td>
<td>10</td>
<td>5</td>
<td>1</td>
<td>81.6</td>
<td>22</td>
<td>30</td>
<td>-57</td>
<td>87</td>
<td>-20</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Next 12-Mos</td>
<td>-18</td>
<td>-15</td>
<td>-20</td>
<td>-26</td>
<td>46.2</td>
<td>19</td>
<td>31</td>
<td>-60</td>
<td>91</td>
<td>-34</td>
</tr>
<tr>
<td class="firstcol" colspan="11">Savings</td>
</tr>
<tr class="odd">
<td class="firstcol">Favorable to save</td>
<td>32</td>
<td>36</td>
<td>35</td>
<td>32</td>
<td>77.8</td>
<td>23</td>
<td>40</td>
<td>4</td>
<td>36</td>
<td>23</td>
</tr>
<tr class="odd">
<td class="firstcol">Ability to save Next 12</td>
<td>-6</td>
<td>-5</td>
<td>-5</td>
<td>-4</td>
<td>58.6</td>
<td>67</td>
<td>6</td>
<td>-23</td>
<td>29</td>
<td>-8</td>
</tr>
<tr>
<td class="firstcol" colspan="11">Spending</td>
</tr>
<tr class="odd">
<td class="firstcol">Favorable for major purchase</td>
<td>-10</td>
<td>-8</td>
<td>-6</td>
<td>-3</td>
<td>55.2</td>
<td>62</td>
<td>16</td>
<td>-42</td>
<td>58</td>
<td>-12</td>
</tr>
<tr>
<td class="firstcol" colspan="11">Financial Situation</td>
</tr>
<tr class="odd">
<td class="firstcol">Current</td>
<td>16</td>
<td>16</td>
<td>15</td>
<td>15</td>
<td>61.9</td>
<td>39</td>
<td>24</td>
<td>3</td>
<td>21</td>
<td>12</td>
</tr>
<tr class="odd">
<td class="firstcol">Past 12-Mos</td>
<td>-16</td>
<td>-15</td>
<td>-14</td>
<td>-14</td>
<td>50.0</td>
<td>85</td>
<td>-5</td>
<td>-27</td>
<td>22</td>
<td>-16</td>
</tr>
<tr class="odd">
<td class="firstcol">Next 12-Mos</td>
<td>-5</td>
<td>-4</td>
<td>-3</td>
<td>-1</td>
<td>40.7</td>
<td>172</td>
<td>11</td>
<td>-16</td>
<td>27</td>
<td>0</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td colspan="6">Number of observations in the period</td>
<td>208</td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>
</body></html>

The abrupt drop in French consumer confidence in the INSEE survey is sharp and as strong a reversal as appeared in early 2001. Confidence itself at -28 in the 11 percentile of that variable’s range – very weak showing. Living [...]

French Consumer Confidence in Abrupt About Face

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071129h.jpg" width="353">
According to the Office of Federal Housing Enterprise Oversight (OFHEO), home prices in the U.S. fell last quarter and that was the first q/q decline since 1994. The decline pulled the y/y change in prices to a still positive 1.7% but that overall rate of appreciation is down from the double digit rates of gain during 2004 and 2005.
The House Price Indices in this report are weighted indexes based on repeat sales or refinancings using data provided by Fannie Mae or Freddie Mac. The overall figures are available in Haver&#39;s USECON data base and the state figures are in USREGIONAL<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071129i.jpg" width="353">
Price declines were scattered throughout the country. Job cutbacks in the auto industry helped lower prices in Michigan for the sixth consecutive quarter and in New York prices fell 0.5%. Prices in Florida fell for only the second quarter but the y/y rate of gain of 1.3% compares to staggering rates of growth in earlier years. Prices also fell in Massachusetts for the fourth quarter in the last five (-1.0% y/y) and prices in Nevada fell 1.6% (-1.5% y/y).
The latest report from the Office of Federal Housing Enterprise Oversight (OFHEO) can be found <a href="http://www.ofheo.gov/media/pdf/3q07hpi.pdf">here</a>.
Defining and Detecting Predatory Lending from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr273.html"> 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/REGIONAL/@R11/@R1101/@R1101.HTM">House Price Index (OFHEO)</a></th>
<th scope="col">3Q &#39;07</th>
<th scope="col">2Q &#39;07</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">United States</td>
<td>-0.4%</td>
<td>0.1%</td>
<td>1.8%</td>
<td>8.8%</td>
<td>12.9%</td>
<td>10.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; California</td>
<td>-1.2%</td>
<td>-0.7%</td>
<td>-1.4%</td>
<td>11.7%</td>
<td>23.3%</td>
<td>22.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; New Jersey</td>
<td>-0.3%</td>
<td>0.5%</td>
<td>1.9%</td>
<td>10.2%</td>
<td>16.0%</td>
<td>14.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New York</td>
<td>-0.5%</td>
<td>0.6%</td>
<td>2.1%</td>
<td>8.5%</td>
<td>13.6%</td>
<td>13.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Michigan</td>
<td>-1.4%</td>
<td>-0.3%</td>
<td>-1.4%</td>
<td>0.2%</td>
<td>4.0%</td>
<td>4.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Florida</td>
<td>-0.8%</td>
<td>-0.2%</td>
<td>1.3%</td>
<td>17.6%</td>
<td>25.7%</td>
<td>17.0%</td>
</tr>
</tbody>
</table>
</body>
</html>

According to the Office of Federal Housing Enterprise Oversight (OFHEO), home prices in the U.S. fell last quarter and that was the first q/q decline since 1994. The decline pulled the y/y change in prices to a still positive 1.7% but [...]

Home Price Appreciation Slowest in Three Years

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

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

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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Andrew Cates

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

250828Z1.jpg

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

250828Z2.jpg

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

250828Z3.jpg

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

250828Z4.jpg

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

250828Z5.jpg

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

250828Z6.jpg

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

Charts of the Week: Riskbusters

250828N8.jpg

250828C8.jpg

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

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

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

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

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

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

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

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

250828O8.jpg

250828P8.jpg

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**.

250828Q8.jpg

250828S8.jpg

- 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

250828J2.jpg

250828K2.jpg

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.

250828L2.jpg

250828M2.jpg

- 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

250828F0.jpg

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

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

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

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

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

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


U.S. Pending Home Sales Decline in July

Kathleen Stephansen, CBE

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

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

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

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

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

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

Economy in Brief: 2007

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