Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080903d.jpg" align="left" border="0" height="265" width="353">
According to the International Council of Shopping Centers,
chain store sales inched up another 0.1% last week after the 0.2%
uptick during the week prior. For all of August sales rose 0.2% from
the July average after that month's 0.5% rise.
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.
The leading indicator of chain store sales from ICSC-UBS fell
0.3% (-4.4% y/y) and that reversed the prior week's increase.
The chain store sales figures are available in Haver's SURVEYW
database.
The Advantage of Flexible Targeting Rules
from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr339.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/surveyw/@S2/@S2.HTM">ICSC-UBS
(SA, 1977=100)</a></th>
<th scope="col">08/29/08</th>
<th scope="col">08/22/08</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>495.1</td>
<td>494.7</td>
<td>2.2%</td>
<td>2.8%</td>
<td>3.3%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
</body></html>

According to the International Council of Shopping Centers, chain store sales inched up another 0.1% last week after the 0.2% uptick during the week prior. For all of August sales rose 0.2% from the July average after that month's [...]

U.S. Chain Store Sales Ticked Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080903b.jpg" width="353">
The pump price for a gallon of regular gasoline was roughly unchanged last week at $3.68 per gallon, according to the U.S. Department of Energy survey. The price, nevertheless, has fallen by 44 cents, or more than ten percent from the peak in early July. For all grades of gasoline the average price fell last week by two cents to $3.72 per gallon.
Yesterday the spot market price for a gallon of regular gasoline dropped eight cents from Friday&#39;s level to $2.85 per gallon. Prices had run up, however, ahead of Hurricane Gustav. They have fallen now that oil facilities were largely missed by the storm. Prices are down another two cents this morning.
Weekly gasoline prices can be found in Haver&#39;s WEEKLY database, daily prices are in the DAILY database.
According to the U.S. Department of Energy, the demand for gasoline fell a slight 0.1% during the last four weeks and it was down 2.0% from a year earlier.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080903c.jpg" width="353">
The DOE figures are available in Haver&#39;s OILWKLY database.
The price for a barrel of West Texas Intermediate crude oil ticked up last week to an average $116.60 per barrel. That&#39;s down from the high early last month of $142.46.
Prices for natural gas ticked up w/w to an average $8.12 per mmbtu (+47.0% y/y). The high for natural gas prices was in early-July at $13.19/mmbtu.
What is the Monetary Standard, Or, How Did the Volcker-Greenspan FOMCs Tame Inflation? from the Federal Reserve Bank of Richmond can be found <a href="http://www.richmondfed.org/publications/economic_research/economic_quarterly/pdfs/spring2008/hetzel.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/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">09/01/08</th>
<th scope="col">08/25/08</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">Retail Regular Gasoline ($ per Gallon)</td>
<td>3.68</td>
<td>3.69</td>
<td>31.6%</td>
<td>2.80</td>
<td>2.57</td>
<td>2.27</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; ($ per bbl.)</td>
<td>116.55</td>
<td>115.60</td>
<td>59.8%</td>
<td>72.25</td>
<td>66.12</td>
<td>56.60</td>
</tr>
</tbody>
</table>
</body>
</html>

The pump price for a gallon of regular gasoline was roughly unchanged last week at $3.68 per gallon, according to the U.S. Department of Energy survey. The price, nevertheless, has fallen by 44 cents, or more than ten percent from the [...]

U.S. Gasoline Prices Unchanged Last Week, Down Eight Cents Yesterday

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080903a.jpg" width="353">
Job cut announcements fell a sharp 14.1% last month and reversed roughly all of their 26.4% jump during July, according to the Challenger, Grey &amp; Christmas survey.
The three-month level layoffs also fell but remained near the highest level since early-2006.
The decline in layoffs fell last month was led by fewer job cuts in the entertainment/leisure, media, and financial industries. Large increases were logged in the transportation, automotive and the industrial goods industries.
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 fell sharply m/m but they were up 17.1% y/y.
On the Evolution of Income Inequality in the United States from the Federal Reserve Bank of Richmond can be found <a href="http://www.richmondfed.org/publications/economic_research/economic_quarterly/pdfs/spring2008/bryan_martinez.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">August</th>
<th scope="col">July</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>88,736</td>
<td>103,312</td>
<td>11.7%</td>
<td>768,264</td>
<td>839,822</td>
<td>1,072,054</td>
</tr>
</tbody>
</table>


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Job cut announcements fell a sharp 14.1% last month and reversed roughly all of their 26.4% jump during July, according to the Challenger, Grey & Christmas survey. The three-month level layoffs also fell but remained near the highest [...]

Challenger Layoffs Fell Sharply

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080903g.jpg" align="left" border="0" height="265" width="353">
Factory inventories rose 0.5% during July, lifted by a 3.5%
surge in inventories of nondefense aircraft &amp; parts. Less the
transportation sector altogether the value of inventories rose 0.4%.
At petroleum refineries, inventories fell 1.9% (+37.1% y/y)
after a revised 10.0% jump during June. The value still was up by more
than one-half since December as prices have surged. Less petroleum,
factory inventories rose 0.7% (5.8% y/y) during July after an upwardly
revised 0.6 June increase. Inventories in the machinery sector rose
0.5% (5.8% y/y) while inventories of computers &amp; electronics
rose 0.4% (7.2 y/y).
Factory shipments jumped again last month. The 2.1% spike was
due to a 3.8% (-10.5% y/y) surge in shipments of transportation
equipment and a 2.0% (13.3% y/y) rise in apparel shipments.
Total factory orders surged 1.3% during July after the
upwardly revised 2.1% June jump. Expectations had been for a 1.0% rise.
The strength reflected stronger petroleum orders (which equal
shipments). They rose 0.6% (48.8% y/y). Less petroleum, orders rose
1.4% (0.3% y/y). Durable orders repeated their June strength and rose
1.3% which was the same as reported in the advance report.
Overall unfilled orders rose 0.7%, a rate of increase that was
down from the 1.0% June rise. Order backlogs for electronic computers
fell slightly but order backlogs of machinery surged (23.2% y/y).

<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">July</th>
<th scope="col">June</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>1.2</td>
<td>7.6</td>
<td>3.7</td>
<td>6.4</td>
<td>8.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding
Transportation</td>
<td>0.4</td>
<td>1.3</td>
<td>6.6</td>
<td>2.7</td>
<td>7.9</td>
<td>8.1</td>
</tr>
<tr class="odd">
<td class="firstcol">New Orders</td>
<td>1.3</td>
<td>2.1</td>
<td>5.3</td>
<td>1.9</td>
<td>6.2</td>
<td>11.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding
Transportation</td>
<td>1.0</td>
<td>2.7</td>
<td>10.6</td>
<td>1.2</td>
<td>7.4</td>
<td>11.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>2.1</td>
<td>1.9</td>
<td>7.8</td>
<td>1.2</td>
<td>5.9</td>
<td>10.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding
Transportation</td>
<td>1.8</td>
<td>1.9</td>
<td>10.8</td>
<td>1.5</td>
<td>6.7</td>
<td>11.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Unfilled Orders</td>
<td>0.7</td>
<td>1.0</td>
<td>13.7</td>
<td>17.1</td>
<td>15.3</td>
<td>15.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding
Transportation</td>
<td>1.0</td>
<td>1.4</td>
<td>10.0</td>
<td>8.2</td>
<td>16.0</td>
<td>9.2</td>
</tr>
</tbody>
</table>
Challenger Layoffs Fell Sharply 
by <a href="/comment/Moeller.html">Tom
Moeller</a> September 3, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080903a.jpg" align="left" border="0" height="265" width="353">
Job cut announcements fell a sharp 14.1% last month and
reversed roughly all of their 26.4% jump during July, according to the
Challenger, Grey &amp; Christmas survey.
The three-month level layoffs also fell but remained near the
highest level since early-2006.
The decline in layoffs fell last month was led by fewer job
cuts in the entertainment/leisure, media, and financial industries.
Large increases were logged in the transportation, automotive and the
industrial goods industries.
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 fell
sharply m/m but they were up 17.1% y/y.
On the Evolution of Income Inequality in the United
States from the Federal Reserve Bank of Richmond can be found
<a href="http://www.richmondfed.org/publications/economic_research/economic_quarterly/pdfs/spring2008/bryan_martinez.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">August</th>
<th scope="col">July</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>88,736</td>
<td>103,312</td>
<td>11.7%</td>
<td>768,264</td>
<td>839,822</td>
<td>1,072,054</td>
</tr>
</tbody>
</table>
U.S. Gasoline Prices Unchanged
Last Week, Down Eight Cents Yesterday 
by <a href="/comment/Moeller.html">Tom
Moeller</a> September 3, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080903b.jpg" align="left" border="0" height="265" width="353">




The pump price for a gallon of regular gasoline
was roughly unchanged last week at $3.68 per gallon, according to the
U.S. Department of Energy survey. The price, nevertheless, has fallen
by 44 cents, or more than ten percent from the peak in early July. For
all grades of gasoline the average price fell last week by two cents to
$3.72 per gallon. Yesterday the spot market price for a gallon of regular
gasoline dropped eight cents from Friday's level to $2.85 per gallon.
Prices had run up, however, ahead of Hurricane Gustav. They have fallen
now that oil facilities were largely missed by the storm. Prices are
down another two cents this morning. Weekly gasoline prices can be found in Haver's WEEKLY
database, daily prices are in the DAILY
database. According to the U.S. Department of Energy, the demand for
gasoline fell a slight 0.1% during the last four weeks and it was down
2.0% from a year earlier.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080903c.jpg" align="right" border="0" height="265" width="353"> The DOE figures are available in Haver's OILWKLY
database.


The price for a barrel of West Texas Intermediate crude oil
ticked up last week to an average $116.60 per barrel. That's down from
the high early last month of $142.46. Prices for natural gas ticked up w/w to an average $8.12 per
mmbtu (+47.0% y/y). The high for natural gas prices was in early-July
at $13.19/mmbtu. What is the Monetary Standard, Or, How Did the
Volcker-Greenspan FOMCs Tame Inflation? from the Federal
Reserve Bank of Richmond can be found <a href="http://www.richmondfed.org/publications/economic_research/economic_quarterly/pdfs/spring2008/hetzel.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/WEEKLY/@W4/@W4.HTM">Weekly
Prices</a></th>
<th scope="col">09/01/08</th>
<th scope="col">08/25/08</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">Retail Regular Gasoline ($ per
Gallon)</td>
<td>3.68</td>
<td>3.69</td>
<td>31.6%</td>
<td>2.80</td>
<td>2.57</td>
<td>2.27</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil,
WTI&nbsp; ($ per bbl.)</td>
<td>116.55</td>
<td>115.60</td>
<td>59.8%</td>
<td>72.25</td>
<td>66.12</td>
<td>56.60</td>
</tr>
</tbody>
</table>
U.S. Chain Store Sales Ticked Up 
by <a href="/comment/Moeller.html">Tom
Moeller</a> September 3, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080903d.jpg" align="left" border="0" height="265" width="353">
According to the International Council of Shopping Centers,
chain store sales inched up another 0.1% last week after the 0.2%
uptick during the week prior. For all of August sales rose 0.2% from
the July average after that month's 0.5% rise.
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.
The leading indicator of chain store sales from ICSC-UBS fell
0.3% (-4.4% y/y) and that reversed the prior week's increase./p&gt;
The chain store sales figures are available in Haver's SURVEYW
database.
The Advantage of Flexible Targeting Rules
from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr339.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/surveyw/@S2/@S2.HTM">ICSC-UBS
(SA, 1977=100)</a></th>
<th scope="col">08/29/08</th>
<th scope="col">08/22/08</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>495.1</td>
<td>494.7</td>
<td>2.2%</td>
<td>2.8%</td>
<td>3.3%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
Retail Sales Trend are Slipping
Everywhere in the Euro Area 
by <a href="/comment/Brusca.html">Robert
Brusca</a> September 3, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080903h.jpg" align="left" border="0" height="265" width="353">
Euro Area 15 retail sales are off by 0.4% in July their second
straight month of declining. Food and nonfood sales each are off for
two months running as well. In the current quarter to date sales
volumes overall are falling at a 4.8% annual rate. For food alone the
new in-quarter drop is at a pace of -7.5% while nonfood sales are
contracting at a -2.3% annual rate.
The detail on sales lags the headline availability by one
month. Since May was a bit of an &#8216;up month&#8217; even the declines in June
do not produce much of a trend of weakness for the area by detailed
group. But by July the back-to-back declines in overall sales should
make the withering trends by retail sales component more apparent.
German sales volume trends ex autos are clearly pointing lower as are
even the lagged Italian trends. For the UK, however, sales trends are
still holding up as of July. May and June brought horrific sales swings
(offsetting) to the UK and will make trend reading a bit harder to make
sense of in the coming months.
The consumer is an important part of the Euro Area economy and
now retail sales are off sharply. Private consumption is 56% of Euro
Area GDP. But capital
spending at 23% is another huge chunk of it. Euro exports and imports
are each about 45% of GDP while in the US the comparable ratio is about
15%. So while the consumer is important for Europe at 56% of GDP the US
ratio of 70% makes the consumer relatively more of a force there.
Still, having such weakness for 56% of your economy is not a good sign.
And Europe is showing slowing across private consumption as well as
capital formation. Net exports have been gradually supplying less and
less of a boost to GDP. Losing
the consumer to the forces of negative growth will be a blow to the
European economies.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup><thead><tr>
<th colspan="7" scope="col"> Euro
Area 15 Retail Sales Volume</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jul-08</td>
<td>Jun-08</td>
<td>May-08</td>
<td>3-Mo</td>
<td>6-MO</td>
<td>12-Mo</td>
</tr>
<tr>
<td class="firstcol">Euro Area 15 Total</td>
<td>-0.4%</td>
<td>-0.8%</td>
<td>0.6%</td>
<td>-2.9%</td>
<td>-4.4%</td>
<td>-3.0%</td>
</tr>
<tr>
<td class="firstcol">Food</td>
<td>-0.8%</td>
<td>-0.7%</td>
<td>0.0%</td>
<td>-5.9%</td>
<td>-4.6%</td>
<td>-3.6%</td>
</tr>
<tr>
<td class="firstcol">NonFood</td>
<td>-0.1%</td>
<td>-0.9%</td>
<td>1.0%</td>
<td>-0.1%</td>
<td>-3.9%</td>
<td>-2.4%</td>
</tr>
<tr>
<td class="firstcol">Textiles</td>
<td>#N/A</td>
<td>-2.6%</td>
<td>6.1%</td>
<td>11.3%</td>
<td>-0.7%</td>
<td>-2.7%</td>
</tr>
<tr>
<td class="firstcol">Books news, etc</td>
<td>#N/A</td>
<td>-1.0%</td>
<td>-0.2%</td>
<td>0.6%</td>
<td>-0.1%</td>
<td>-1.6%</td>
</tr>
<tr>
<td class="firstcol">Pharmaceutical</td>
<td>#N/A</td>
<td>0.5%</td>
<td>-0.4%</td>
<td>2.9%</td>
<td>1.7%</td>
<td>2.3%</td>
</tr>
<tr>
<td class="firstcol">Other NonSpec</td>
<td>#N/A</td>
<td>-1.7%</td>
<td>0.6%</td>
<td>-1.0%</td>
<td>-1.8%</td>
<td>-2.8%</td>
</tr>
<tr>
<td class="firstcol">Mail Order</td>
<td>#N/A</td>
<td>-1.2%</td>
<td>-1.0%</td>
<td>1.1%</td>
<td>-5.3%</td>
<td>-3.4%</td>
</tr>
<tr class="odd">
<td colspan="7" class="firstcol">Country
detail;Volume</td>
</tr>
<tr>
<td class="firstcol">Germany:VolxAuto</td>
<td>-1.5%</td>
<td>-1.4%</td>
<td>1.3%</td>
<td>-6.2%</td>
<td>-5.4%</td>
<td>-3.2%</td>
</tr>
<tr>
<td class="firstcol">Italy(Total; Value)</td>
<td>#N/A</td>
<td>-0.5%</td>
<td>0.2%</td>
<td>-1.1%</td>
<td>-1.3%</td>
<td>-1.0%</td>
</tr>
<tr>
<td class="firstcol">UK(EU):Vol</td>
<td>0.8%</td>
<td>-4.3%</td>
<td>4.0%</td>
<td>1.2%</td>
<td>0.4%</td>
<td>2.0%</td>
</tr>
<tr class="grey2">
<td colspan="7" class="firstcol">Shaded areas
calculated on a
one-month lag due to lagging data.</td>
</tr>
</tbody>
</table>
</body></html>

Factory inventories rose 0.5% during July, lifted by a 3.5% surge in inventories of nondefense aircraft & parts. Less the transportation sector altogether the value of inventories rose 0.4%. At petroleum refineries, inventories fell [...]

U.S. Factory Inventories Rose Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080902f.jpg" width="353">
The value of construction put in place fell 0.6% during July and that reversed the 0.3% increases during the prior two months. The decline was as-expected.
Year-to-year, construction was down 4.8% but the level of activity so far this year continued roughly stable.
As in prior months, however, residential building activity continued to decline sharply, by 2.1% in July. Since it&#39;s peak it has fallen by just over one half. Single-family construction dropped an even larger 3.7% (-0.9% y/y) in July and that level is off by nearly two-thirds from its peak in early 2006. Building activity on multi-family units ticked up 0.2% (-1.7% y/y) while spending on improvements gave back the June gain and fell 1.0% (-5.5% y/y).
During the last twenty years there has been an 84% correlation between the q/q change in the value of residential building and its contribution to growth in real GDP.
The value of nonresidential building activity fell 0.7% after increasing in each month of this year. Despite the latest dip, office construction continued firm and increased 1.7% (13.7% y/y). Lodging spending dipped, however, by 0.1% but it was up by more than one-third from last year&#39;s level. Spending on multi-retail building rose 3.1% (4.7% y/y) while spending on health care facilities dipped 0.2% (+6.7% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080902g.jpg" width="353">
Public construction continued firm and rose by 1.4% (8.1% y/y). The value of construction spending on highways &amp; streets fell modestly for the third consecutive month but remained up 6.9% from last year. (The value of construction on highways &amp; streets is roughly one third of the value of total public construction spending.) Building activity of educational facilities surged 2.5% (7.4% y/y) during July.
The more detailed categories of construction represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.
The United States in the International Financial System: A Separate Reality? Resolving Two Puzzles in the International Accounts is yesterday&#39;s speech by Fed Governor Randall S. Kroszner and it can be found <a href="http://www.federalreserve.gov/newsevents/speech/kroszner20080901a.htm">here</a>.
Regional Variation in the Potential Economic Effects of Climate Change from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2008/el2008-26.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/@E9/@E907/@E907.HTM">Construction</a> (%)</th>
<th scope="col">July</th>
<th scope="col">June</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>-0.6</td>
<td>0.3</td>
<td>-4.8</td>
<td>-2.7</td>
<td>6.3</td>
<td>11.2</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>-1.4</td>
<td>0.2</td>
<td>-9.2</td>
<td>-6.9</td>
<td>5.5</td>
<td>12.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>-2.3</td>
<td>-1.4</td>
<td>-27.5</td>
<td>-19.8</td>
<td>1.0</td>
<td>14.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-0.7</td>
<td>1.7</td>
<td>16.0</td>
<td>19.6</td>
<td>16.2</td>
<td>7.8</td>
</tr>
<tr>
<td class="firstcol">Public</td>
<td>1.4</td>
<td>0.4</td>
<td>8.1</td>
<td>12.3</td>
<td>9.3</td>
<td>6.2</td>
</tr>
</tbody>
</table>
</body>
</html>

The value of construction put in place fell 0.6% during July and that reversed the 0.3% increases during the prior two months. The decline was as-expected. Year-to-year, construction was down 4.8% but the level of activity so far this [...]

U.S. Construction Spending Fell in July

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080903e.jpg" align="left" border="0" height="265" width="353">
Brazilian industrial production rose 1% in July from June and
was 7% above July, 2007. Capital goods production was up 20% over July
2007. Consumer durable goods production was up 7.5% and consumer
semidurable and nondurable goods production was up 3%. The first chart
shows these major categories of total industrial production over the
past few years.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080903f.jpg" align="right" border="0" height="265" width="353">
The quarterly year-to-year changes in industrial production
have proven to be good indicators of the quarterly changes in real GDP
as shown in the second chart where the correlation between the two
series is .87 and the R2 is .76. The industrial
production data precedes the GDP data by a month or more. The
year-to-year increase in the second quarter industrial production was
5.1% down from the 6.6% of the first quarter when the year-to-year
increase in GDP was 5.8%. If the correlation holds, we should expect a
year-to-year increase of 5% second quarter increase of around 5% over
the second quarter of 2007. The actual figure will be published
September 10.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">BRAZIL:&nbsp;Industrial
Production&nbsp; (2002=100)</th>
<th scope="col">Jul 08</th>
<th scope="col">Jun&nbsp; 08&nbsp;</th>
<th scope="col">Jul&nbsp;&nbsp;
07&nbsp;</th>
<th scope="col">M/M % chg&nbsp;</th>
<th scope="col">Y/Y % chg&nbsp;</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>130.63</td>
<td>129.28</td>
<td>121.63</td>
<td>1.04</td>
<td>7.40</td>
<td>121.29</td>
<td>114.98</td>
<td>111.79</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>188.86</td>
<td>186.65</td>
<td>157.07</td>
<td>1.18</td>
<td>20.24</td>
<td>159.48</td>
<td>133.97</td>
<td>126.78</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Durable Goods</td>
<td>176.22</td>
<td>185.81</td>
<td>163.93</td>
<td>-5.16</td>
<td>7.50</td>
<td>160.92</td>
<td>148.13</td>
<td>139.99</td>
</tr>
<tr>
<td class="firstcol">Consumer Semi and Non
Durable Goods</td>
<td>113.90</td>
<td>113.87</td>
<td>110.44</td>
<td>0.03</td>
<td>3.13</td>
<td>110.98</td>
<td>107.41</td>
<td>104.78</td>
</tr>
</tbody>
</table>
</body></html>

Brazilian industrial production rose 1% in July from June and was 7% above July, 2007. Capital goods production was up 20% over July 2007. Consumer durable goods production was up 7.5% and consumer semidurable and nondurable goods [...]

Brazil's Industrial Production Points to a 5% Y/Y Increase in GDP in Q2

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080902c.jpg" width="353">
The Institute for Supply Management reported that it&#39;s Composite Index of Manufacturing Sector Activity was about unchanged from its July level at 49.9. It thus remained up slightly from the monthly lows near 48 this past winter. Consensus expectations had been for more of a decline to 49.1 in July.
Despite the very recent improvement, the index&#39;s average level so far this year of 49.5 was near its lowest since early-2003. The index level is consistent with a roughly unchanged level in industrial sector activity.
During the last twenty years there has been a 64% correlation between the level of the Composite Index and the three-month growth in factory sector industrial production.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080902d.jpg" width="353">
It is appropriate to correlate the ISM index level with factory sector growth because the ISM index is a diffusion index. It measures growth by using all of the positive changes in activity added to one half of the zero change in activity measures.
The new orders index recovered most of its sharp drop in July. However, the two month average of the index at 46.6 was near this cycle&#39;s low. The new export orders sub-series recovered most of its July drop with a 3.0 point rise to 57.0. During the last ten years there has been a 53% correlation between the index and the q/q change in real exports of goods in the GDP accounts.
The employment index fell 2.2 points to 49.7 but that retraced just a piece of the July rise. During the last twenty years there has been a 67% correlation between the level of the ISM employment index and the three-month growth in factory sector employment.
The production index dipped to 52.1 and still indicated a rising level of output. The inventories series rose sharply to 49.3 and that recovered most of its July decline.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080902e.jpg" width="353">
Order backlogs remained near the lowest level (43.5) this year as the index rose just slightly in August. It averaged 48.9 during all of 2007.
Prices paid fell sharply. The index fell 11.5 points to 77.0, its lowest level since February. That followed the recent decline in oil prices. During the last twenty years there has been a 79% correlation between the price index and the three-month change in the PPI for intermediate goods.
Oil and the U.S. macroeconomy: an update and a simple forecasting exercise from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/wp/2008/2008-009.pdf">here</a>.
The Menace of Inflation from the Center for Economic and Policy Research is available <a href="http://www.cepr.net/index.php/op-eds-&amp;-columns/op-eds-&amp;-columns/the-menace-of-inflation">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/@S2/@S201/@S201.HTM">ISM Mfg</a></th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">August &#39;07</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">Composite Index</td>
<td>49.9</td>
<td>50.0</td>
<td>51.2</td>
<td>51.1</td>
<td>53.1</td>
<td>54.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>48.3</td>
<td>45.0</td>
<td>54.5</td>
<td>54.3</td>
<td>55.4</td>
<td>57.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Employment Index</td>
<td>49.7</td>
<td>51.9</td>
<td>50.9</td>
<td>50.5</td>
<td>51.7</td>
<td>53.6</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>77.0</td>
<td>88.5</td>
<td>63.0</td>
<td>64.6</td>
<td>65.0</td>
<td>66.4</td>
</tr>
</tbody>
</table>
</body>
</html>

The Institute for Supply Management reported that it's Composite Index of Manufacturing Sector Activity was about unchanged from its July level at 49.9. It thus remained up slightly from the monthly lows near 48 this past winter. [...]

ISM Index About Unchanged

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

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

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Nonfarm payrolls increased 73,000 during July after rising 14,000 in June, revised from 147,000, and 19,000 in May, revised from 144,000. Expectations had been for a 102,000 rise in the Action Economics Forecast Survey. The three-month average change in payrolls of 35,000 compared to 64,000 in June. The Bureau of Labor Statistics indicates that monthly revisions result from additional reports received from businesses and government agencies since the last published estimates.

Average hourly earnings rose an expected 0.3% during July after unrevised gains of 0.2% and 0.4% in June & May. Earnings growth of 3.9% y/y is little changed over twelve months, but has been trending lower from its 5.9% high in March 2022.

The unemployment rate, measured in the household survey, edged up m/m to an expected 4.2% from 4.1% and compared to 4.2% in the previous three months. It reached a low of 3.4% in April 2023. The unemployment rate, including employees working part-time for economic reasons plus all marginally-attached workers, rose to 7.9% last month from 7.7% In June. It was 6.6% in April 2023.

In the **establishment survey**, private-sector employment in July rose 83,000, factory sector jobs declined 11,000, off for the third straight month. Construction sector employment increased 2,000, after rising 3,000 in June. The number of mining & logging industry jobs declined 4,000 after falling in both of the prior two months. 

Private service sector employment increased 96,000 July after improving 16,000 in June. Increases varied greatly amongst service sector categories. Private education & health sector employment rose 79,000 last month, following a 52,000 increase in June. The number of trade, transportation & utilities jobs gained 11,000, following a 22,000 decline and financial activities employment improved 15,000 after a 2,000 drop, while leisure & hospitality employment rose just 5,000 after a 4,000 gain. The number of professional & business services jobs fell 14,000, down for the third straight month.  Information sector employment fell 2,000, after holding steady in June.

Government sector payrolls declined 10,000 last month and revered June’s 11,000 rise. Federal government employment weakened 12,000 and has fallen for six straight months. Local government employment eased 3,000 after rising 10,000 in June while state government payrolls rose 5,000 after increasing 10,000.

Private-sector average hourly earnings rose 0.3% (3.9% y/y) in July. Earnings in the goods-producing sector edged up 0.1% (3.6% y/y). In construction, earnings rose 0.2% (3.7% y/y) following a 0.4% rise, but factory sector earnings eased 0.1% (+3.6% y/y). In the service sector, earnings rose 0.4% (4.0% y/y) in July after increasing 0.2% in June.

250801C4.jpg

The length of the average workweek rose to 34.3 hours in July from 34.2 hours in June. The workweek in the goods-producing sector lengthened to 39.9 hours from 39.7 hours. The construction sector average workweek rose to 39.1 hours from 38.9 while the factory sector workweek held steady at 40.1 hours. The average workweek in the private service sector edged up to 33.2 hours from 33.1 hours.

In the **household survey**, the unemployment rate increased to 4.2% in July after falling to 4.1% as employment fell 260,000 after rising 93,000 in June and the size of the labor force declined 38,000, off for the third straight month. The labor force participation rate eased to 62.2% last month from 62.3% and remained below the high of 63.3% early in 2020. The rate for teenagers declined to 35.0%, after plunging to 35.1%. For workers aged 20-24, the rate declined to 70.9%. For workers aged 25-54, the participation rate eased to 83.4%. For individuals 55 and over, the rate improved slightly to 38.1% but remained near a 20-year low of 38.0% in June.

The employment/population ratio for all workers slipped to 59.6% last month. It remained below the peak reading of 61.1% in February, 2020 just prior to the pandemic. For men, the rate fell to 64.7% in July from 64.9% and for women, the rate eased to 54.7% from 54.8% in June.

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

250801X4.jpg

250801F4.jpg

- Recent job growth reduced by fewer factory & government jobs.
- Earnings gain remains steady y/y.
- Jobless rate reverses June decline.

U.S. Employment Report Shows Weakness in July, While Revisions Reduce Earlier Gains; Jobless Rate Picks Up

250801F20.jpg

250801G20.jpg

U.S. light vehicle sales increased 7.6% (6.0% y/y) to 16.87 million units (SAAR) in July after falling 0.3% to 15.68 million units in June. The gain followed three straight months of decline. The improvement in July vehicle sales accompanied a 1.7% y/y rise in real disposable income through June, which compared to 2.1% growth last year.

Increases in sales were broad-based last month. Light truck sales rose 7.7% (10.0% y/y) in July to 14.02 million units, after easing 0.2% to 13.02 million in June and weakening 8.7% in May to 13.04 million. Purchases of domestically-made light trucks improved 7.1% (12.0% y/y) to 10.79 million units, after falling 1.0% in June to 10.07 million. Sales of imported light trucks rose 9.8% (3.8% y/y) to 3.24 million units, following a 3.9% rise in June.

Trucks’ record 83.1% share of the light vehicle market last month compared to 83.0% in June and 80.1% in July of last year. The share averaged 80.3% during all of 2024 versus 53.3% ten years earlier.

Auto sales rose 6.4% last month, down 9.8% y/y, to 2.84 million units (SAAR) following a 0.4% June decline. Purchases of domestically-produced cars rebounded 10.1% (-6.4% y/y) last month to 2.18 million units, after declining 2.5% in June. Sales of imported autos fell 2.9% (-20.5% y/y) to 0.66 million units, after a 4.6% June gain.

Imports' 23.1% share of the U.S. light vehicle market edged down from 23.2% in June. These compare to a May 2023 low of 22.9% and a high of 26.3% in November of 2023. Imports' share of the passenger car market fell to 23.2% last month and compared to 26.4% in July of last year. It reached a high of 38.7% in September 2021. Imports' share of the light truck market rose to 23.1% last month after rising to 22.7% in June.

U.S. vehicle sales figures can be found in Haver's **USECON** database. Additional detail by manufacturer is in the **INDUSTRY** database.

250801H20.jpg

250801I20.jpg

- Both light truck and auto sales recover.
- Domestic and imports each increase.
- Imports' market share steadies.

U.S. Light Vehicle Sales Rebound in July

Winnie Tapasanun

250801A.jpg

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The ISM U.S. manufacturing PMI fell to 48.0 in July from 49.0 in June and 48.5 in May, according to the Institute for Supply Management. The July manufacturing PMI, below the 50 expansion-contraction dividing line, indicated that the U.S. manufacturing sector contracted for the fifth consecutive month and to the lowest level since October 2024. The July reading, while slightly higher than a low of 46.9 in October and 47.0 in July of last year, was below its recent high of 50.9 in January and a peak of 63.8 in March 2021. A reading of 49.5 for July had been expected in the Action Economics Forecast Survey.

The production index rose to 51.4 in July after rising to 50.3 in June, suggesting production expanded for the second successive month and to the highest level since January; it was up from its most recent low of 44.0 in April but slightly below a high of 53.7 in March 2024. Twenty percent (NSA) of respondents reported higher production in July while 19.2% reported lower.

The new orders index increased to 47.1 in July after falling to 46.4 in June, indicating new orders contracted for the sixth straight month but at a slightly less severe pace. The Index, while below its recent high of 55.1 in January, was up from a low of 42.7 in January 2023. Nearly nineteen percent (NSA) of respondents reported higher new orders in July while 25.9% reported declines. The inventories index, however, fell to 48.9 in July after rising to 49.2 in June, showing inventories contracted for the third consecutive month. The index was down from its recent high of 53.4 in March and a high of 56.5 in July 2022. Meanwhile, the supplier deliveries index fell to 49.3 in July from 54.2 in June, indicating faster delivery performance following seven straight months in slower territory. An 8.7% (NSA) of respondents reported slower delivery speeds in July while an increased 10.2% reported faster speeds.

On the labor front, the employment index fell to 43.4 in July after falling to 45.0 in June, indicating employment contracted for the sixth straight month and to the lowest level since June 2020. The index was down from its recent high of 50.3 in January and a high of 56.5 in March 2022. A 12.6% (NSA) of respondents reported higher employment in July while an increased 25.0% reported less hiring.

On the pricing front, the prices paid index declined to 64.8 (NSA) in July after rising to 69.7 in June, indicating raw materials prices rose for the 10th straight month but at the slowest rising rate since February. The July index remained well above a low of 39.4 in December 2022 but meaningfully below a high of 87.1 in March 2022 and a peak of 92.1 in June 2021. A decreased 35.4% (NSA) of respondents reported higher prices in July while 5.8% reported price declines.

In other ISM series not included in the composite index, the new export orders index slipped to 46.1 in July after increasing to 46.3 in June, indicating new export orders contracted for the fifth straight month. It was down from its recent high of 52.4 in January and a high of 57.1 in February 2022. The imports index edged up to 47.6 in July after rising to 47.4 in June, remaining at a contraction level for the fourth consecutive month; it was down from its recent high of 52.6 in February and a high of 55.4 in February 2022. The order backlog index increased to 46.8 (NSA) in July after declining to 44.3 in June, indicating falling backlog levels since October 2022. It was up from a low of 37.5 in May 2023 but down from a peak of 70.6 in May 2021.

The ISM figures are based on responses from over 400 purchasing and supply executives from 18 industries, which are weighted according to each industry’s contribution to GDP. These data are diffusion indexes where a reading above 50 indicates expansion; below 50 indicates contraction. The ISM Manufacturing PMI is a composite index based on the diffusion indexes of five of the indexes (seasonally adjusted) with equal weights: New Orders, Production, Employment, Supplier Deliveries, and Inventories. The figures from the Institute for Supply Management can be found in Haver’s **USECON** database; further detail is found in the **SURVEYS** database. The expectations number is available in Haver’s **AS1REPNA** database.

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- 48.0 in July vs. 49.0 in June; the fifth consecutive month of contraction.
- Production (51.4) expands to a six-month high.
- New orders (47.1) contract for the sixth successive month.
- Employment (43.4) contracts to the lowest level since June ’20.
- Prices Index (64.8) indicates prices rise for the 10th straight month; exports & imports contracting.

U.S. ISM Manufacturing PMI Contracts in July to a Nine-Month Low

Michael J. Moran

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Total construction activity fell 0.4 percent in June, continuing a soft trend that began in the middle of last year. After peaking in May 2024, total outlays have declined 3.6%. The retreat was modest at first, but the softness began to intensify last fall. Activity has now declined in nine of the past ten months, with the drop over this span totaling 3.1%. The private sector accounts for nearly all of the softness, with both residential and nonresidential contributing; public construction has continued to advance, although gains in recent months have been modest.

Private residential construction fell 0.7% in June, marking the 12th decline in the past 13 months and leaving activity 7.3% below the peak in May 2024. Hints of softness in private residential construction first appeared in mid-2023, when multi-family construction first stalled and then moved notably downward throughout 2024. Following the swoon in 2024, multi-family activity has stabilized in recent months.

However, single family building has taken the lead in pulling activity lower, declining for four consecutive months with pronounced retreats in the past three (average of -1.8%). Prospects for single-family construction do not seem bright, as the ups and downs in single-family housing starts have left little net growth in the past year; the past four months have been especially soft.

Improvements to existing structures contributed to weakness with sharp declines early in the year, but this area has posted small gains in the past three months. Home improvements (i.e. additions and renovations) should not be ignored in assessing residential construction, as they typically represent 35 to 40 percent of private activity.

Private nonresidential construction fell 0.3 percent in June, reinforcing the downward drift that has been in place since the start of 2024. This sector has posted 11 declines in the past 18 months. While activity grew in several months over this span, most of the increases were minuscule. The net effect of the ups and downs was a drop of 6.6% (annual rate of 4.4%). Total nonresidential activity has several components, and some have advanced in the past year or so, but none has posted an impressive performance. Two areas, lodging (hotel, motels, resorts) and commercial (retail and wholesale), have been notably soft.

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The public sector has started to sputter after two years of strong activity. Building was vigorous in 2023, growing 21.8% (December to December), and activity advanced an additional 2.4% in 2024. Growth so far this year has been modest on balance. Most months have registered gains, but they offset declines in the closing months of last year by only a small margin. Activity in June was 0.1% above the reading in October (the high point in 2024). Both state and Local governments and the federal sector have posted similar performances: robust in 2023, moderate in 2024, and hesitating this year.

The construction figures can be found in Haver's **USECON** database. The expectations figure is from the Action Economics Forecast Survey in **AS1REPNA**.

- Private building, both residential and nonresidential, drifting lower.
- Public construction hesitating after two strong years.

U.S. Construction: Sluggish in June

Robert Brusca

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Manufacturing PMIs in the S&P framework were mixed in July. However, the median reading edged slightly higher rising to 48.6 in July from 48.5 in June. But both of these are significantly weaker than the 49.1 reading in May. Manufacturing continues to post PMI readings that are below 50 indicating sector contraction on a fairly broad basis in July among the 17 reporting countries in the table plus the euro area. Only India and Vietnam reported PMI readings above 50 indicating sector expansion in July. In June, three of these jurisdictions showed readings above 50; in May, only three had readings above 50 as well. It remains a difficult time for manufacturing globally.

The readings for the manufacturing PMIs also show slippage in the medians from 12-months to six-months to three-months. The 12-month median is 49.2, the six-month median at 48.8, and the three-month median at 48.7. The bottom line is that most manufacturing sectors show contraction, and the contractions are generally getting slightly worse.

However, on an individual basis over three months about two-thirds of the reporters showed an improvement. Over six months just under 40% showed improvement and over a year about 44% of them showed improvement compared to the year before. Only the three-month versus six-month comparison shows a majority of reporters indicating better performance in July.

The ranked or queue standings metrics that place these individual readings for July in their queue of data over the last 4 ½ years, show standings above 50% which put the individual readings above their medians for this period. And only six of these eighteen reporting jurisdictions sported readings above 50%. Those were for the euro area, Germany, France, and India. India has a rating well above 50% at its 96th percentile; Malaysia has a reading above 50% and Vietnam has a reading well above 50% at its 74th percentile.

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The global economy has been put through the ringer with shocks from a war in Ukraine, stepped up military action in the Middle East, threats in the Straits of Hormuz, and an aggressive tariff policy from the United States, affecting global trade- a significant factor for manufacturing. These events have wrong-footed manufacturing globally. During this period, the inflation threat has dissipated; however, in most countries, inflation still slightly overshoots its target where central banks have such targets.

The U.S. has a particularly large number of policy changes afoot. Its manufacturing sector is still struggling. And recent employment data there indicate what appears to be a broader slowdown in the economy. Job growth in the U.S. has slowed and U.S. trends now show consumer spending slowing along with weaker and downwardly revised job growth. Put together, these are signals to watch closely.

Economy in Brief: September 2008

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