Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080702f.jpg" width="353">
Job cut announcements fell 21.0% last month and reversed all of their rise during May, according to the Challenger, Grey &amp; Christmas survey. The three-month rise in layoffs surged, however, to its highest level since early 2006.
A rise in the three-month average of job cut announcements in the financial, automotive, transportation and telecommunication sectors led the recent strength.
During the last ten years there has been a 76% (inverse) correlation between the three-month moving average of announced job cuts and the three-month change payroll employment.
Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.
Challenger also reported that announced hiring plans again fell sharply (-63.7% y/y).
The Evolution of World Income Distribution from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/files/br/2008/q2/sill_evolution-of-world-income-distribution.pdf"> here</a>.

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<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">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>81,755</td>
<td>103,522</td>
<td>46.7%</td>
<td>768,264</td>
<td>839,822</td>
<td>1,072,054</td>
</tr>
</tbody>
</table>
</body>
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Job cut announcements fell 21.0% last month and reversed all of their rise during May, according to the Challenger, Grey & Christmas survey. The three-month rise in layoffs surged, however, to its highest level since early 2006. A [...]

Challenger Layoffs Fell in June, Trend Up Strongly

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080702d.jpg" width="353">
Factory inventories increased 0.5% in May after little change during the prior month. As a result of recent moderation, the three-month growth rate eased further to 5.9% (AR), which was half the growth rates of this past Winter.
The picture of more moderate rates of inventory accumulation was widespread. Automobile inventories, in fact, fell at a 34.3% rate during the last three months. Less the transportation sector altogether, inventories rose 0.5% in May but three-month growth fell to 4.4% from a double-digit rate of accumulation earlier this year.
Inventory accumulation in the machinery sector also eased to a 5.2% growth rate, which was half the earlier rate. Accumulation in the computer &amp; electronics areas also eased, but just slightly to an 8.4% rate of growth. In the nondurables area inventories rose 0.6% in May but three-month growth of 2.4% was down considerably versus the double digit growth rate earlier this year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080702e.jpg" width="353">
Factory shipments nudged up 0.1% after to 2.7% March surge. Shipments of petroleum surged again, in May by 4.0% (39.0% y/y). Less petroleum shipments fell 0.6% (+0.4% y/y). Growth of 5-7% had been the norm back from 2004-2006.
Total factory orders rose an expected 0.6% again reflecting stronger petroleum orders (which equal shipments). Less petroleum, shipments rose 0.1% and three-month growth was a moderate 2.6% (AR). Durable orders overall were unchanged, which was little different than reported in the advance report, after a 1.0% April decline.
Overall unfilled orders rose 0.9% in May and the three-month growth rate remained firm at 12.3%. Higher backlogs of civilian aircraft, which have been rising at a 25.3% rate, boosted the figure. Excluding the transportation sector altogether unfilled orders still rose 0.5% in May and at a 10.1% rate during the last three months. Accelerated growth in backlogs of machinery still account for much of that strength.
Why Are Goods So Cheap in Some Countries? from the Federal Reserve Bank of Philadelphia is available <a href="http://www.philadelphiafed.org/files/br/2008/q2/alessandria-kaboski_why-are-goods-so-cheap.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/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory Survey</a> (NAICS, %)</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>0.5</td>
<td>-0.0</td>
<td>6.1</td>
<td>3.7</td>
<td>6.4</td>
<td>8.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>0.5</td>
<td>-0.2</td>
<td>5.0</td>
<td>2.7</td>
<td>7.9</td>
<td>8.1</td>
</tr>
<tr class="odd">
<td class="firstcol">New Orders</td>
<td>0.6</td>
<td>1.3</td>
<td>5.0</td>
<td>1.9</td>
<td>6.2</td>
<td>11.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>0.4</td>
<td>2.8</td>
<td>7.4</td>
<td>1.2</td>
<td>7.4</td>
<td>11.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>0.1</td>
<td>2.7</td>
<td>4.7</td>
<td>1.2</td>
<td>5.9</td>
<td>10.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>0.6</td>
<td>2.9</td>
<td>7.2</td>
<td>1.5</td>
<td>6.7</td>
<td>11.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Unfilled Orders</td>
<td>0.9</td>
<td>0.7</td>
<td>15.8</td>
<td>17.1</td>
<td>15.3</td>
<td>15.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Transportation</td>
<td>0.5</td>
<td>1.1</td>
<td>8.5</td>
<td>8.2</td>
<td>16.0</td>
<td>9.2</td>
</tr>
</tbody>
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Factory inventories increased 0.5% in May after little change during the prior month. As a result of recent moderation, the three-month growth rate eased further to 5.9% (AR), which was half the growth rates of this past Winter. The [...]

U.S. Factory Inventories Rose With Shipments

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080702b.jpg" align="left" border="0" height="265" width="353">
The June EMU MFG PMI moved below 50 for the first time since
June of 2005. This signals EMU-wide MFG contraction. The dip comes
ahead of a meeting of the ECB when it is expected to hike rates. EMU
member finance ministers have been warning the ECB of the potential for
a rate hike to turn growth negative in the e-Zone. Meanwhile, in the
interest rate and exchange rate sensitive MFG sector it already has
happened- at least by one measure. 
 

Of the three largest EMU economies, two are registering
contraction in MFG by the Market PMI measures: Italy and France. The
Euro-Area&#8217;s strongest and largest economy, Germany remains in positive
territory &#8211; but is easing. 
 

The Euro Area plus Italy and France show that the economy is
losing momentum at a rapid pace. Germany, on the other hand, has
rebounded from its weakest reading and is losing momentum at a slower
pace. 
 

Still, the negative reading for the Euro Area's overall MFG
PMI does not make it easier for the ECB to do what it seems already to
have decided to do - that is to hike rates. Since the ECB began
considering a rate hike more seriously, inflation has overrun the ECB
ceiling by an even larger amount. Headline inflation is now is at more
that twice the pace that the ceiling allows, leaving the ECB chasing
after its own credibility. This is a race that the ECB is determined to
win. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col">NTC MFG Indices </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jun-08</td>
<td>May-08</td>
<td>Apr-08</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>Percentile</td>
</tr>
<tr>
<td class="firstcol">Euro-13</td>
<td>49.16</td>
<td>50.60</td>
<td>50.74</td>
<td>50.17</td>
<td>51.27</td>
<td>52.25</td>
<td>37.2%</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>52.56</td>
<td>53.57</td>
<td>53.62</td>
<td>53.25</td>
<td>53.93</td>
<td>54.18</td>
<td>60.3%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>49.24</td>
<td>51.48</td>
<td>51.12</td>
<td>50.61</td>
<td>51.91</td>
<td>52.07</td>
<td>31.7%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>46.91</td>
<td>48.05</td>
<td>48.24</td>
<td>47.73</td>
<td>49.01</td>
<td>50.57</td>
<td>24.2%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>40.61</td>
<td>43.79</td>
<td>45.19</td>
<td>43.20</td>
<td>45.42</td>
<td>48.21</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Austria</td>
<td>48.39</td>
<td>49.76</td>
<td>49.83</td>
<td>49.33</td>
<td>51.31</td>
<td>52.71</td>
<td>32.6%</td>
</tr>
<tr>
<td class="firstcol">Greece</td>
<td>53.81</td>
<td>53.77</td>
<td>54.38</td>
<td>53.99</td>
<td>53.08</td>
<td>53.50</td>
<td>63.6%</td>
</tr>
<tr>
<td class="firstcol">Ireland</td>
<td>44.71</td>
<td>45.21</td>
<td>44.69</td>
<td>44.87</td>
<td>46.13</td>
<td>49.39</td>
<td>0.2%</td>
</tr>
<tr>
<td class="firstcol">Netherlands</td>
<td>51.07</td>
<td>51.46</td>
<td>51.45</td>
<td>51.33</td>
<td>52.02</td>
<td>53.99</td>
<td>49.5%</td>
</tr>
<tr class="odd">
<td colspan="8">EU</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>45.79</td>
<td>49.46</td>
<td>50.34</td>
<td>48.53</td>
<td>49.65</td>
<td>52.02</td>
<td>2.8%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">percentile is over range since March
2000</td>
</tr>
</tbody>
</table>
</body></html>

The June EMU MFG PMI moved below 50 for the first time since June of 2005. This signals EMU-wide MFG contraction. The dip comes ahead of a meeting of the ECB when it is expected to hike rates. EMU member finance ministers have been [...]

Markit Indices Continue to Show MFG Declines in Euro Area

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080702a.jpg" width="353">
The ADP National Employment Report, from the payroll processor, reported that private nonfarm payrolls fell 79,000 last month after a revised 25,000 increase during May. Declines in payrolls reported for earlier months this year were revised to show modest increases.
The U.S. Bureau of Labor Statistics will report on June nonfarm payrolls tomorrow. Last month, the 25,000 worker rise in ADP&#39;s measure of private nonfarm payrolls was accompanied by a 66,000 worker decline in the BLS measure of private sector payrolls.
According to ADP and Macro Advisers, the correlation between the monthly percentage change in the ADP estimate and that in the BLS data is 0.90.
The ADP sub-index for large payrolls fell 51,000 (-1.2% y/y) after a 19,000 worker decline during May.
Medium sized payrolls also were quite weak and posted a 35,000 (+0.4% y/y) decline.
A 7,000 worker increase (1.1% y/y) in small sized payrolls during June was much reduced after the 50,000 May increase.
Employment in the goods producing industries fell a huge 76,000 (-2.4% y/y) and the rate of decline has intensified as this year has progressed. Services payrolls also fell but by a lesser 3,000 (1.2% y/y).
ADP compiled the estimate from its database of individual companies&#39; payroll information. Macroeconomic Advisers, LLC, the St. Louis economic consulting firm, developed the methodology for transforming the raw data into an economic indicator.
The ADP National Employment Report data is maintained in Haver&#39;s USECON database; historical data go back to December 2000. The figures in this report cover only private sector jobs and exclude employment in the public sector, which rose an average 11,083 during the last twelve months. 
The full ADP National Employment Report can be found <a href="http://www.adpemploymentreport.com/PDF/FINAL_Report_june_09.pdf" title="blocked::http://www.adpemploymentreport.com/PDF/FINAL_Report_june_09.pdf">here</a>, and the ADP methodology is explained <a href="http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf" title="blocked::http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf">here</a>.<div> </div>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB25/@EB25.HTM">LAXEPA@USECON</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Nonfarm Private Payroll Employment (m/m Chg.)</td>
<td>-79,000</td>
<td>25,000</td>
<td>0.7%</td>
<td>1.1%</td>
<td>1.7%</td>
<td>1.8%</td>
</tr>
</tbody>
</table>


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The ADP National Employment Report, from the payroll processor, reported that private nonfarm payrolls fell 79,000 last month after a revised 25,000 increase during May. Declines in payrolls reported for earlier months this year were [...]

ADP Report: June Private Sector Payrolls Down, Earlier Figures Revised Up

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080702d.jpg" align="left" border="0" height="265" width="353">
Factory inventories increased 0.5% in May after little change
during the prior month. As a result of recent moderation, the
three-month growth rate eased further to 5.9% (AR), which was half the
growth rates of this past Winter.
The picture of more moderate rates of inventory accumulation
was widespread. Automobile inventories, in fact, fell at a 34.3% rate
during the last three months. Less the transportation sector
altogether, inventories rose 0.5% in May but three-month growth fell to
4.4% from a double-digit rate of accumulation earlier this year.
Inventory accumulation in the machinery sector also eased to a
5.2% growth rate, which was half the earlier rate. Accumulation in the
computer &amp; electronics areas also eased, but just slightly to
an 8.4% rate of growth. In the nondurables area inventories rose 0.6%
in May but three-month growth of 2.4% was down considerably versus the
double digit growth rate earlier this year.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080702e.jpg" align="right" border="0" height="265" width="353">
Factory shipments nudged up 0.1% after to 2.7% March surge.
Shipments of petroleum surged again, in May by 4.0% (39.0% y/y). Less
petroleum shipments fell 0.6% (+0.4% y/y). Growth of 5-7% had been the
norm back from 2004-2006.
Total factory orders rose an expected 0.6% again reflecting
stronger petroleum orders (which equal shipments). Less petroleum,
shipments rose 0.1% and three-month growth was a moderate 2.6% (AR).
Durable orders overall were unchanged, which was little different than
reported in the advance report, after a 1.0% April decline.
Overall unfilled orders rose 0.9% in May and the three-month
growth rate remained firm at 12.3%. Higher backlogs of civilian
aircraft, which have been rising at a 25.3% rate, boosted the figure.
Excluding the transportation sector altogether unfilled orders still
rose 0.5% in May and at a 10.1% rate during the last three months.
Accelerated growth in backlogs of machinery still account for much of
that strength.
Why Are Goods So Cheap in Some Countries?
from the Federal Reserve Bank of Philadelphia is available <a href="http://www.philadelphiafed.org/files/br/2008/q2/alessandria-kaboski_why-are-goods-so-cheap.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/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory
Survey</a> (NAICS, %)</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>0.5</td>
<td>-0.0</td>
<td>6.1</td>
<td>3.7</td>
<td>6.4</td>
<td>8.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding
Transportation</td>
<td>0.5</td>
<td>-0.2</td>
<td>5.0</td>
<td>2.7</td>
<td>7.9</td>
<td>8.1</td>
</tr>
<tr class="odd">
<td class="firstcol">New Orders</td>
<td>0.6</td>
<td>1.3</td>
<td>5.0</td>
<td>1.9</td>
<td>6.2</td>
<td>11.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding
Transportation</td>
<td>0.4</td>
<td>2.8</td>
<td>7.4</td>
<td>1.2</td>
<td>7.4</td>
<td>11.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>0.1</td>
<td>2.7</td>
<td>4.7</td>
<td>1.2</td>
<td>5.9</td>
<td>10.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding
Transportation</td>
<td>0.6</td>
<td>2.9</td>
<td>7.2</td>
<td>1.5</td>
<td>6.7</td>
<td>11.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Unfilled Orders</td>
<td>0.9</td>
<td>0.7</td>
<td>15.8</td>
<td>17.1</td>
<td>15.3</td>
<td>15.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding
Transportation</td>
<td>0.5</td>
<td>1.1</td>
<td>8.5</td>
<td>8.2</td>
<td>16.0</td>
<td>9.2</td>
</tr>
</tbody>
</table>
Challenger Layoffs Fell in June,
Trend Up Strongly 
by <a href="/comment/Moeller.html">Tom
Moeller</a> July 2, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080702f.jpg" align="left" border="0">
Job cut announcements fell 21.0% last month and reversed all
of their rise during May, according to the Challenger, Grey &amp;
Christmas survey. The three-month rise in layoffs surged, however, to
its highest level since early 2006.
A rise in the three-month average of job cut announcements in
the financial, automotive, transportation and telecommunication sectors
led the recent strength.
During the last ten years there has been a 76% (inverse)
correlation between the three-month moving average of announced job
cuts and the three-month change payroll employment.
Job cut announcements differ from layoffs. Many are achieved
through attrition, early retirement or just never occur.
Challenger also reported that announced hiring plans again
fell sharply (-63.7% y/y).
The Evolution of World Income Distribution
from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/files/br/2008/q2/sill_evolution-of-world-income-distribution.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/SURVEYS/@S3/@S301/@S301.HTM">Challenger,
Gray &amp; Christmas</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>81,755</td>
<td>103,522</td>
<td>46.7%</td>
<td>768,264</td>
<td>839,822</td>
<td>1,072,054</td>
</tr>
</tbody>
</table>
ADP Report: June Private Sector
Payrolls Down, Earlier Figures Revised Up 
by <a href="/comment/Moeller.html">Tom
Moeller</a> July 2, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080702a.jpg" align="left" border="0" height="265" width="353">
The ADP National Employment Report, from the payroll
processor, reported that private nonfarm payrolls fell 79,000 last
month after a revised 25,000 increase during May. Declines in payrolls
reported for earlier months this year were revised to show modest
increases.
The U.S. Bureau of Labor Statistics will report on June nonfarm payrolls tomorrow. Last month, the
25,000 worker rise in ADP's measure of private nonfarm payrolls was
accompanied by a 66,000 worker decline in the BLS measure of private
sector payrolls.
According to ADP and Macro Advisers, the correlation between
the monthly percentage change in the ADP estimate and that in the BLS
data is 0.90.
The ADP sub-index for large payrolls fell 51,000 (-1.2% y/y)
after a 19,000 worker decline during May.
Medium sized payrolls also were quite weak and posted a 35,000
(+0.4% y/y) decline.
A 7,000 worker increase (1.1% y/y) in small sized payrolls
during June was much reduced after the 50,000 May increase.
Employment in the goods producing industries fell a huge
76,000 (-2.4% y/y) and the rate of decline has intensified as this year
has progressed. Services payrolls also fell but by a lesser 3,000 (1.2%
y/y).
ADP compiled the estimate from its database of individual
companies' payroll information. Macroeconomic Advisers, LLC, the St.
Louis economic consulting firm, developed the methodology for
transforming the raw data into an economic indicator.
The ADP National Employment Report data is maintained in
Haver's 
USECON database;
historical data go back to December 2000. The figures in this report
cover only private sector jobs and exclude employment in the public
sector, which rose an average 11,083 during the last twelve months.

The full ADP National Employment Report can be found <a href="http://www.adpemploymentreport.com/PDF/FINAL_Report_june_09.pdf" title="blocked::http://www.adpemploymentreport.com/PDF/FINAL_Report_june_09.pdf">here</a>,
and the ADP methodology is explained <a href="http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf" title="blocked::http://www.adpemploymentreport.com/PDF/ADPNERMethodology.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/@EB/@EB25/@EB25.HTM">LAXEPA@USECON</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Nonfarm Private Payroll
Employment (m/m Chg.)</td>
<td>-79,000</td>
<td>25,000</td>
<td>0.7%</td>
<td>1.1%</td>
<td>1.7%</td>
<td>1.8%</td>
</tr>
</tbody>
</table>
Markit Indices Continue to Show
MFG Declines in Euro Area 
by <a href="/comment/Brusca.html">Robert
Brusca</a> July 2, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080702b.jpg" align="left" border="0" height="265" width="353">
The June EMU MFG PMI moved below 50 for the first time since
June of 2005. This signals EMU-wide MFG contraction. The dip comes
ahead of a meeting of the ECB when it is expected to hike rates. EMU
member finance ministers have been warning the ECB of the potential for
a rate hike to turn growth negative in the e-Zone. Meanwhile, in the
interest rate and exchange rate sensitive MFG sector it already has
happened- at least by one measure. 
 

Of the three largest EMU economies, two are registering
contraction in MFG by the Market PMI measures: Italy and France. The
Euro-Area&#8217;s strongest and largest economy, Germany remains in positive
territory &#8211; but is easing. 
 

The Euro Area plus Italy and France show that the economy is
losing momentum at a rapid pace. Germany, on the other hand, has
rebounded from its weakest reading and is losing momentum at a slower
pace. 
 

Still, the negative reading for the Euro Area's overall MFG
PMI does not make it easier for the ECB to do what it seems already to
have decided to do - that is to hike rates. Since the ECB began
considering a rate hike more seriously, inflation has overrun the ECB
ceiling by an even larger amount. Headline inflation is now is at more
that twice the pace that the ceiling allows, leaving the ECB chasing
after its own credibility. This is a race that the ECB is determined to
win. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup><thead><tr>
<th colspan="8" scope="col">NTC MFG
Indices </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jun-08</td>
<td>May-08</td>
<td>Apr-08</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>Percentile</td>
</tr>
<tr>
<td class="firstcol">Euro-13</td>
<td>49.16</td>
<td>50.60</td>
<td>50.74</td>
<td>50.17</td>
<td>51.27</td>
<td>52.25</td>
<td>37.2%</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>52.56</td>
<td>53.57</td>
<td>53.62</td>
<td>53.25</td>
<td>53.93</td>
<td>54.18</td>
<td>60.3%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>49.24</td>
<td>51.48</td>
<td>51.12</td>
<td>50.61</td>
<td>51.91</td>
<td>52.07</td>
<td>31.7%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>46.91</td>
<td>48.05</td>
<td>48.24</td>
<td>47.73</td>
<td>49.01</td>
<td>50.57</td>
<td>24.2%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>40.61</td>
<td>43.79</td>
<td>45.19</td>
<td>43.20</td>
<td>45.42</td>
<td>48.21</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Austria</td>
<td>48.39</td>
<td>49.76</td>
<td>49.83</td>
<td>49.33</td>
<td>51.31</td>
<td>52.71</td>
<td>32.6%</td>
</tr>
<tr>
<td class="firstcol">Greece</td>
<td>53.81</td>
<td>53.77</td>
<td>54.38</td>
<td>53.99</td>
<td>53.08</td>
<td>53.50</td>
<td>63.6%</td>
</tr>
<tr>
<td class="firstcol">Ireland</td>
<td>44.71</td>
<td>45.21</td>
<td>44.69</td>
<td>44.87</td>
<td>46.13</td>
<td>49.39</td>
<td>0.2%</td>
</tr>
<tr>
<td class="firstcol">Netherlands</td>
<td>51.07</td>
<td>51.46</td>
<td>51.45</td>
<td>51.33</td>
<td>52.02</td>
<td>53.99</td>
<td>49.5%</td>
</tr>
<tr class="odd">
<td colspan="8">EU</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>45.79</td>
<td>49.46</td>
<td>50.34</td>
<td>48.53</td>
<td>49.65</td>
<td>52.02</td>
<td>2.8%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">percentile
is over range since March
2000</td>
</tr>
</tbody>
</table>
PPI Inflation Trends Continue
Strong in the Euro Area 
by <a href="/comment/Brusca.html">Robert
Brusca</a> July 2, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080702c.jpg" align="left" border="0" height="265" width="353">
The charts show that trends in the PPI are still working their
way higher. The table shows that energy and manufacturing sector
inflation trends as well as the total excluding construction embody
accelerating trends. Headline inflation is accelerating in Germany,
Italy, France and the UK. Core inflation is accelerating steadily in
those countries too, except for France and Germany. In Germany core
inflation accelerated over 6-mo compared to 12 months then leveled off
at 4%. In France Inflation accelerated to 4.2% over six months from
3.5% over 12-months then backed off to 4% over three-months. So
countries where the core is not accelerating are not showing much in
the way of hopeful trends either. 
 

None of these inflation rates is acceptable to the ECB. For
the PPI even core inflation rates are running DOUBLE the ceiling that
has been set for headline HICP inflation rate. No wonder the ECB is
widely believed to be readying a rate hike. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup><thead><tr>
<th colspan="7" scope="col"> Euro
Area and UK PPI Trends</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="2">M/M</td>
<td colspan="4">Saar</td>
</tr>
<tr class="grey3">
<td class="firstcol">Euro Area 13</td>
<td>May-08</td>
<td>Apr-08</td>
<td>3-Mo</td>
<td>6-MO</td>
<td>Yr/Yr</td>
<td>Y/Y Yr Ago</td>
</tr>
<tr class="grey3">
<td class="firstcol">Total excl Construction</td>
<td>1.2%</td>
<td>0.9%</td>
<td>11.7%</td>
<td>9.2%</td>
<td>7.1%</td>
<td>2.4%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Excl Energy</td>
<td>0.3%</td>
<td>0.4%</td>
<td>4.5%</td>
<td>4.9%</td>
<td>3.8%</td>
<td>3.2%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Capital Goods</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.2%</td>
<td>2.7%</td>
<td>1.8%</td>
<td>2.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Consumer Goods</td>
<td>0.1%</td>
<td>0.2%</td>
<td>2.6%</td>
<td>3.8%</td>
<td>4.5%</td>
<td>1.7%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Intermediate &amp; Capital
Goods</td>
<td>0.4%</td>
<td>0.5%</td>
<td>5.5%</td>
<td>5.5%</td>
<td>3.4%</td>
<td>4.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Energy</td>
<td>4.1%</td>
<td>2.1%</td>
<td>36.7%</td>
<td>23.7%</td>
<td>18.2%</td>
<td>-0.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">MFG</td>
<td>1.3%</td>
<td>0.6%</td>
<td>11.2%</td>
<td>8.0%</td>
<td>6.3%</td>
<td>2.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Germany</td>
<td>1.0%</td>
<td>1.1%</td>
<td>11.6%</td>
<td>8.8%</td>
<td>6.0%</td>
<td>1.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Germany Ex Energy</td>
<td>0.4%</td>
<td>0.4%</td>
<td>4.0%</td>
<td>4.0%</td>
<td>2.9%</td>
<td>2.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">France</td>
<td>1.3%</td>
<td>0.8%</td>
<td>11.0%</td>
<td>7.9%</td>
<td>6.7%</td>
<td>1.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">France Ex Energy</td>
<td>0.3%</td>
<td>0.4%</td>
<td>4.0%</td>
<td>4.2%</td>
<td>3.5%</td>
<td>2.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Italy</td>
<td>1.5%</td>
<td>0.4%</td>
<td>11.9%</td>
<td>9.2%</td>
<td>7.5%</td>
<td>3.0%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Italy Ex Energy</td>
<td>0.2%</td>
<td>0.5%</td>
<td>5.5%</td>
<td>5.3%</td>
<td>3.8%</td>
<td>3.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">UK</td>
<td>1.7%</td>
<td>2.3%</td>
<td>21.1%</td>
<td>17.9%</td>
<td>16.5%</td>
<td>0.2%</td>
</tr>
<tr class="grey2">
<td class="firstcol">UK Ex Energy</td>
<td>1.2%</td>
<td>1.0%</td>
<td>11.8%</td>
<td>9.7%</td>
<td>6.3%</td>
<td>3.2%</td>
</tr>
<tr class="grey1">
<td colspan="7" class="firstcol">Euro Area 13
Harmonized PPI
excluding Construction</td>
</tr>
<tr class="grey1">
<td colspan="7" class="firstcol">The EA 13
countries are Austria,
Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,
the Netherlands, Portugal, Slovenia</td>
</tr>
</tbody>
</table>
</body></html>

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080701k.jpg" width="353">
At 13.64 mil. (SAAR), U.S. sales of light vehicles in June fell 4.6% from May and they were down 13.1% from June of last year, according to the Autodata Corporation. The latest level was the lowest since early-1993 and it pulled sales down 15.8% so far this year. The level of vehicle sales also was lower than Consensus expectations for sales of 14.0M.
Overall, sales of domestically made light vehicles fell 6.0% last month and were off 19.7% YTD. They were at the lowest level since 1991.
Higher gasoline prices continued to hit sales of relatively fuel inefficient domestically made light trucks. Sales fell 2.5% after May&#39;s 9.8% decline. That brought the decline this year to 27.4%. Sales of U.S. made cars reversed all of their May gain with a 9.5% decline to the lowest level in the series&#39; history which dates back to 1990.
Sales of imported light vehicles again fell more moderately, by 1.0% to 3.93 million, after May&#39;s 0.7% decline.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080701l.jpg" width="353">
Sales of imported autos rose 1.8% following a 3.8% May gain. So far this year sales of imported cars are up 7.7%. Conversely, sales of imported light trucks also felt the effect from higher gasoline prices and fell 7.3%; off 25.5% since December.
Import&#39;s share of the U.S. light vehicle market rose again to another record level of 28.9%. (Imported vehicles are those produced outside the U.S. and does not include vehicles with the nameplate of a foreign manufacturer produced within the U.S.) Imports&#39; share of the U.S. car market rose to a record 37.3% but import&#39;s share of the light truck market slipped from the prior month&#39;s record to 18.4%.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED09/@ED0901/@ED0901.HTM">Light Vehicle Sales (SAAR, Mil. Units)</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>13.64</td>
<td>14.30</td>
<td>-13.1%</td>
<td>16.17</td>
<td>16.54</td>
<td>16.96</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>7.53</td>
<td>7.98</td>
<td>-1.3%</td>
<td>7.58</td>
<td>7.77</td>
<td>7.65</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Domestic</td>
<td>4.72</td>
<td>5.22</td>
<td>-7.0%</td>
<td>5.07</td>
<td>5.31</td>
<td>5.40</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imported</td>
<td>2.81</td>
<td>2.76</td>
<td>10.0%</td>
<td>2.51</td>
<td>2.45</td>
<td>2.25</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Light Trucks</td>
<td>6.11</td>
<td>6.32</td>
<td>-24.3%</td>
<td>8.60</td>
<td>8.78</td>
<td>9.32</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Domestic</td>
<td>4.98</td>
<td>5.11</td>
<td>-24.6%</td>
<td>7.12</td>
<td>7.42</td>
<td>8.12</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imported</td>
<td>1.13</td>
<td>1.21</td>
<td>-22.8%</td>
<td>1.48</td>
<td>1.37</td>
<td>1.20</td>
</tr>
</tbody>
</table>
</body>
</html>

At 13.64 mil. (SAAR), U.S. sales of light vehicles in June fell 4.6% from May and they were down 13.1% from June of last year, according to the Autodata Corporation. The latest level was the lowest since early-1993 and it pulled sales [...]

U.S. Vehicle Sales in June Lowest Since 1993

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080701i.jpg" width="353">
The European Central Bank (ECB) meets on this Thursday, July 3rd. It is expected to raise the base rate of 4% by 25 basis points. Yesterday, Eurostat, the European Union&#39;s Statistical office announced that inflation data for the Euro Area as a whole was 4% in June, fully 2% above the ECB&#39;s target of 2%. June data for the individual countries of the Euro Area are not yet available, but the first chart showing steady rises in the rates of inflation in Germany, France, Italy and Spain from mid 2007 through May of this year is enough to suggest action by the central bank may be forthcoming.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080701j.jpg" width="353">
If the ECB were looking for additional data to shore up their decision to raise rates, they might consider the decline in Germany&#39;s unemployment rate, released today. Instead of rising as expected, the rate of registered unemployment fell to 7.8% in June from 7.9%. This is the lowest rate of unemployment in Germany since 2001, as can be seen in the second chart, showing the registered rate of unemployment together with the widely used International Labor Organization ILO rate. The registered rate of unemployment is typically higher than that of the (ILO) as the former includes those with a new job, but not yet at work and those working less than 15 hours a week, both of which are excluded in the ILO definition of unemployment.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">EUR0 AREA INFLATION &nbsp;(y/y % change in CPI)&nbsp;&nbsp;</th>
<th scope="col">Jun 08</th>
<th scope="col">May 08&nbsp;</th>
<th scope="col">Apr 08&nbsp;</th>
<th scope="col">Mar&nbsp;08&nbsp;</th>
<th scope="col">Feb 08&nbsp; &nbsp;</th>
<th scope="col">Jan 08</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Euro Area</td>
<td>4.0</td>
<td>3.7</td>
<td>3.3</td>
<td>3.6</td>
<td>3.3</td>
<td>3.2</td>
<td>2.1</td>
<td>2.2</td>
<td>2.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Germany</td>
<td>--</td>
<td>3.1</td>
<td>2.6</td>
<td>3.3</td>
<td>3.0</td>
<td>2.9</td>
<td>2.2</td>
<td>1.8</td>
<td>1.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; France</td>
<td>--</td>
<td>3.7</td>
<td>3.4</td>
<td>3.5</td>
<td>3.2</td>
<td>3.2</td>
<td>1.6</td>
<td>1.9</td>
<td>1.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Italy</td>
<td>--</td>
<td>3.7</td>
<td>3.6</td>
<td>3.6</td>
<td>3.1</td>
<td>3.1</td>
<td>2.0</td>
<td>2.2</td>
<td>2.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Spain</td>
<td>--</td>
<td>4.7</td>
<td>4.2</td>
<td>4.6</td>
<td>4.4</td>
<td>4.4</td>
<td>2.8</td>
<td>3.6</td>
<td>3.4</td>
</tr>
<tr>
<td class="firstcol">UNEMPLOYMENT RATES (%) GERMANY</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Registered&nbsp;</td>
<td>7.8</td>
<td>7.9</td>
<td>7.9</td>
<td>7.9</td>
<td>8.0</td>
<td>8.2</td>
<td>9.0</td>
<td>10.8</td>
<td>11.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;ILO</td>
<td>--</td>
<td>7.4</td>
<td>7.4</td>
<td>7.4</td>
<td>7.6</td>
<td>7.7</td>
<td>9.0</td>
<td>10.8</td>
<td>11.7</td>
</tr>
</tbody>
</table>
</body>
</html>

The European Central Bank (ECB) meets on this Thursday, July 3rd. It is expected to raise the base rate of 4% by 25 basis points. Yesterday, Eurostat, the European Union's Statistical office announced that inflation data for the Euro [...]

Inflation in the Euro Area, the Unemployment Rate in Germany and the ECB

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080701h.jpg" width="353">
The International Council of Shopping Centers reported that chain store sales increased all of 0.1% last week after the prior week&#39;s 0.6% decline.
During all of June sales look to have risen 0.5% after a 0.9% May decline.
During the last ten years there has been a 45% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
During the latest week, the leading indicator of chain store sales from ICSC-UBS fell again, by 0.4% (-2.8% y/y).
The chain store sales figures are available in Haver&#39;s SURVEYW database.

<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/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">06/28/08</th>
<th scope="col">06/21/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>490.7</td>
<td>490.0</td>
<td>2.2%</td>
<td>2.8%</td>
<td>3.3%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>


</html>

The International Council of Shopping Centers reported that chain store sales increased all of 0.1% last week after the prior week's 0.6% decline.

U.S. Chain Store Sales Nudged Up

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

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

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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

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

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

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

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

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

U.S. Consumer Credit Picks Up in June

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

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

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

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

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

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

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

Japan

Japan’s Economy Watchers Index Rebounds

Andrew Cates

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

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

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

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

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

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

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

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

Charts of the Week: Downside Risks

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

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

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

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

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

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

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

U.S. Wholesale Inventories Edge Higher in June

Sandy Batten

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

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

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

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

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

Economy in Brief: July 2008

Jump to:

Challenger Layoffs Fell in June, Trend Up Strongly

U.S. Factory Inventories Rose With Shipments

Markit Indices Continue to Show MFG Declines in Euro Area

ADP Report: June Private Sector Payrolls Down, Earlier Figures Revised Up

U.S. Factory Inventories Rose With Shipments

U.S. Vehicle Sales in June Lowest Since 1993

Inflation in the Euro Area, the Unemployment Rate in Germany and the ECB

U.S. Chain Store Sales Nudged Up