Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070803c.jpg" width="353">
Nonfarm payrolls grew 92,000 during July. The increase was a bit below the Consensus forecast for a 128,000 rise and the prior two months&#39; gains were revised slightly downward.
The three month change in payrolls slowed to 135,000 on average. That&#39;s about equal to the 136,000 average change so far this year but below the average of 189,000 last year and 212,000 during 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070803a.jpg" width="353">
The unemployment rate moved up to 4.6% last month from 4.5% during June. Household employment fell 30,000 (+1.2%) following a 197,000 rise during June. The labor force jumped another 159,000 (1.1% y/y). The labor force participation rate held steady at 66.1%.
From the establishment survey, private service sector jobs posted a 132,000 (2.0%) gain after a 114,000 June rise which was revised slightly higher. Last year&#146;s average gain was 159,000 per month. Retail employment actually fell a modest 1,200 (+0.5% y/y) during July and the average this year has been just 8,000 per month after an outright decline of 2,700 per month during 2006. In the financial sector, jobs recovered from the prior month&#39;s 2,000 decline and grew 27,000 (1.4% y/y) for an average gain of 7,000 this year versus 16,000 last year. Professional &amp; business services employment rose 26,000 after June&#39;s upwardly revised 7,000 increase. The average gain this year has been 19,000 per month, off from last year&#39;s average of 42,000.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070803b.jpg" width="353">
Factory sector payrolls fell 2,000 (-1.2 y/y) and jobs have fallen in every month during the last twelve. Construction employment reversed the prior month&#39;s downwardly revised 3,000 increase with a 12,000 (-0.7% y/y) decline. Construction jobs have fallen 5,000 per month this year versus an average 11,000 increase per month during 2006.
Government payrolls fell 28,000 (+1.1% y/y) and in 2007 have risen an average 16,000, near the per month average last year of 20,000.
Average hourly earnings increased 0.3% and the 0.4% gain in June was upwardly revised. Factory sector earnings rose 0.3% (3.0% y/y) and private service producing earnings rose a firm 0.4% (4.1% y/y) after June&#39;s upwardly revised 0.5% increase. The monthly average increase in overall average hourly earnings this year has been 0.3% versus, down from 0.4% per month last year.
Phillips Curve Instability and Optimal Monetary Policy from the Federal Reserve Bank Of Kansas City is available <a href="http://www.kansascityfed.org/Publicat/Reswkpap/PDF/RWP07-04.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/@EB01/@EB01.HTM">Employment</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>92,000</td>
<td>126,000</td>
<td>1.4%</td>
<td>1.9%</td>
<td>1.7%</td>
<td>1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-2,000</td>
<td>-13,000</td>
<td>-1.2%</td>
<td>-0.2%</td>
<td>-0.6%</td>
<td>-1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.8</td>
<td>33.9</td>
<td>33.9 (July &#39;06)</td>
<td>33.8</td>
<td>33.8</td>
<td>33.7</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.3%</td>
<td>0.4%</td>
<td>3.9%</td>
<td>3.9%</td>
<td>2.8%</td>
<td>2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>4.6%</td>
<td>4.5%</td>
<td>4.8% (July &#39;06)</td>
<td>4.6%</td>
<td>5.1%</td>
<td>5.5%</td>
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Nonfarm payrolls grew 92,000 during July. The increase was a bit below the Consensus forecast for a 128,000 rise and the prior two months' gains were revised slightly downward. The three month change in payrolls slowed to 135,000 on [...]

July Payrolls a Bit Light, Revisions Minor

Carol Stone, CBE

Higher crude oil prices were a contributing factor in the recent stock price gyrations, as West Texas Intermediate (WTI) looked to be approaching $80/barrel. The high spot price came Tuesday, July 31, at $78.22; by yesterday, it had [...]

Gasoline Prices Ease Further; Refining Margins Reduced

Robert Brusca

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070803l.jpg" width="353">
The NTC MFG survey shows that among EMU members in the table only Austria and Greece saw their MFG sectors improve month to month in July. Over three months you can add The Netherlands to that list. Over six months while EMU-wide MFG conditions eased in terms of the NTC index, only four EMU countries in the table saw their MFG sectors weaken (Germany, Italy, Spain and Austria). Over 12-months, however, all EMU members in this table except Greece are weaker. To be sure the slowdown in the EMU MFG sector is real and is widespread. It is also one that is in slow motion so that the overall MFG reading is still a relatively strong reading in the top 32 percent of its range (range since March of 2000). Previously the average EMU-wide drop in the NTC MFG index 13-months from its peak was 8%. In 2007 the drop 13-months after its peak is just 4.8%, the smallest by far. And although other cycles had peaked at a higher point (in 2000, for example) since 2000 this is still the highest index reading for Euro MFG 13 months after it had peaked. So the Euro-economy is proving itself to be very resilient even though the MFG slowing is quite widespread.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
NTC MFG Indexes
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jul-07</td>
<td>Jun-07</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Percentile*</td>
</tr>
<tr>
<td class="firstcol">Euro-13</td>
<td>54.90</td>
<td>55.56</td>
<td>55.16</td>
<td>55.31</td>
<td>55.89</td>
<td>68.2%</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>56.75</td>
<td>57.33</td>
<td>56.71</td>
<td>56.88</td>
<td>57.71</td>
<td>78.0%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>53.34</td>
<td>53.75</td>
<td>53.80</td>
<td>53.75</td>
<td>54.50</td>
<td>49.6%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>53.34</td>
<td>53.98</td>
<td>54.11</td>
<td>54.05</td>
<td>54.44</td>
<td>60.2%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>53.22</td>
<td>55.05</td>
<td>53.86</td>
<td>54.87</td>
<td>55.50</td>
<td>69.6%</td>
</tr>
<tr>
<td class="firstcol">Austria</td>
<td>53.81</td>
<td>53.54</td>
<td>53.80</td>
<td>54.61</td>
<td>56.07</td>
<td>67.5%</td>
</tr>
<tr>
<td class="firstcol">Greece</td>
<td>53.95</td>
<td>53.48</td>
<td>53.84</td>
<td>53.76</td>
<td>53.04</td>
<td>54.3%</td>
</tr>
<tr>
<td class="firstcol">Ireland</td>
<td>53.09</td>
<td>53.98</td>
<td>53.00</td>
<td>52.89</td>
<td>52.98</td>
<td>69.2%</td>
</tr>
<tr>
<td class="firstcol">Netherlands</td>
<td>58.19</td>
<td>58.84</td>
<td>57.72</td>
<td>57.66</td>
<td>57.09</td>
<td>90.3%</td>
</tr>
<tr>
<td class="firstcol">EU</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>55.74</td>
<td>54.74</td>
<td>55.11</td>
<td>54.85</td>
<td>54.00</td>
<td>95.2%</td>
</tr>
<tr>
<td colspan="5">*Percentile is over range since March 2000</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
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The NTC MFG survey shows that among EMU members in the table only Austria and Greece saw their MFG sectors improve month to month in July. Over three months you can add The Netherlands to that list. Over six months while EMU-wide MFG [...]

NTC Shows Euro MFG is Slowing… but oh so slowly

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<div align="left"> <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070802i.jpg" width="353">
Sweden&#39;s GDP expanded by a 1.0% quarterly amount in Q2, Statistics Sweden reported this morning, a pickup from 0.7% in Q1. Year-on-year growth was 3.5%, compared to 3.0% in Q1. The gain during 2006 was 4.2%.
Two demand sectors dominated: fixed investment and exports of services. Investment actually slowed a bit from Q1, but at 2.0%, still had a sizable gain; Q1 had been 3.2%. The later figure is 9.2% ahead of the year earlier. The growth was concentrated in the private sector, which saw a 10.2% gain from Q2 2006. Consumer spending by households rose 0.6% in both Q1 and Q2 and was ahead of early 2006 by 2.5%, in line with the last several years. In the graph here, the &quot;recession shading&quot; covers periods of recession in Sweden, one of 17 countries besides the United States included in the &quot;recession country&quot; feature of DLXVG3; this item is not new, it&#39;s been part of Haver&#39;sa software for several years. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070802j.jpg" width="353">
Sweden is a very &quot;open&quot; economy; its exports and imports added together made 97% of GDP in Q1, measured in nominal terms. For comparison, the EA-13 countries together have just over 80% of GDP involved with exports or imports, and in the US, the figure is a modest 28%. [All of these shares are calculated using nominal data in local currency.] So Sweden&#39;s trade is important. We see that the performance of exports during the first half of this year is divided: goods exports fell, by 0.2% in Q1 and 0.6% in Q2 [growth rates compare values in chained 2000 Swedish Kronor], while services surged by 3.1% in Q1 and 4.4% in Q2. These strong gains put Q2&#39;s volume of services exports more than 13% ahead of a year ago. They have increased at a double-digit year-on-year pace continuously since Q4 2003. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070802k.jpg" width="353">
On the import side, goods imports also fell in Q2, by 0.6%, although they had expanded 2.1% in Q1. Imports of services have also been growing, but not nearly as fast as exports. Their annualized growth has averaged 8.7% since the first quarter of 2005.
The detail in this early GDP report does not permit us to see which services exports are making for the category&#39;s strength. However, the data on value added by industry do show that the transportation &amp; communications sector and the hotel-restaurant sector have seen sizable increases. So have the construction and business services industries. So Swedish firms working abroad or working for international clients are adding significantly to growth in Sweden, and it looks that travel and tourism in Sweden are also on the rise. Notably, unlike a number of other countries&#39; economies, the finance and insurance sector has not experienced particularly vigorous expansion. It is keeping up, as seen in the last graph here, but it is not the growth leader as it is elsewhere. Sweden&#39;s comparative advantages lie in other areas. </div>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">SWEDEN</th>
Q2 2007
Q1 2007
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Qtr/Qtr*</td>
<td>Yr/Yr</td>
<td>Qtr/Qtr*</td>
<td>Yr/Yr</td>
</tr>
<tr>
<td class="firstcol">Total GDP, Bil.SEK</td>
<td colspan="2">668.2</td>
<td colspan="2">661.9</td>
<td>2595.6</td>
<td>2848.6</td>
<td>2415.1</td>
</tr>
<tr>
<td class="firstcol">1.0</td>
<td>3.5</td>
<td>0.7</td>
<td>3.0</td>
<td>4.2</td>
<td>2.9</td>
<td>4.1</td>
</tr>
<tr>
<td class="firstcol">Household Consumption</td>
<td>0.6</td>
<td>2.5</td>
<td>0.6</td>
<td>2.5</td>
<td>2.8</td>
<td>2.4</td>
<td>2.2</td>
</tr>
<tr>
<td class="firstcol">Gross Fixed Investment</td>
<td>2.0</td>
<td>9.2</td>
<td>3.2</td>
<td>12.7</td>
<td>7.9</td>
<td>8.1</td>
<td>6.4</td>
</tr>
<tr>
<td class="firstcol">Exports: Goods</td>
<td>-0.6</td>
<td>3.4</td>
<td>-0.2</td>
<td>3.8</td>
<td>8.0</td>
<td>5.1</td>
<td>10.2</td>
</tr>
<tr>
<td class="firstcol">Exports: Services</td>
<td>4.4</td>
<td>13.2</td>
<td>3.1</td>
<td>10.7</td>
<td>10.7</td>
<td>11.5</td>
<td>14.4</td>
</tr>
<tr>
<td class="firstcol">Imports: Goods</td>
<td>-0.6</td>
<td>7.4</td>
<td>2.1</td>
<td>10.6</td>
<td>7.7</td>
<td>7.9</td>
<td>7.6</td>
</tr>
<tr>
<td class="firstcol">Imports: Services</td>
<td>1.7</td>
<td>9.1</td>
<td>3.2</td>
<td>10.8</td>
<td>8.5</td>
<td>4.0</td>
<td>5.3</td>
</tr>
<tr>
<td class="firstcol">GVA: Industry</td>
<td>1.3</td>
<td>3.9</td>
<td>0.6</td>
<td>3.1</td>
<td>4.9</td>
<td>3.5</td>
<td>9.3</td>
</tr>
<tr>
<td class="firstcol">GVA: Services</td>
<td>1.6</td>
<td>4.3</td>
<td>0.7</td>
<td>3.8</td>
<td>5.5</td>
<td>3.8</td>
<td>2.7</td>
</tr>
</tbody>
</table>
</body>
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Sweden's GDP expanded by a 1.0% quarterly amount in Q2, Statistics Sweden reported this morning, a pickup from 0.7% in Q1. Year-on-year growth was 3.5%, compared to 3.0% in Q1. The gain during 2006 was 4.2%. Two demand sectors [...]

Swedish GDP Grows 1.0% in Q2, Led by Fixed Investment and Exports of Services

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<div align="left"> <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070802g.jpg" width="353">
Factory inventories rose 0.3% during June following a 0.4% gain during May. While moderate, the increases are up from the 0.1% three month average growth ended February.
Growth in primary metals inventories picked up during the past three months as did growth in light truck inventories. Growth in inventories of nondefense aircraft &amp; parts also has soared. In most other durable goods categories, however, growth in inventories has slowed recently. Many industries have seen outright decumulation such as in furniture and computers &amp; electronic products. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070802h.jpg" width="353">
A slowdown in growth of factory shipments caused the recent inventory back-up. Shipments have fallen in three of this year&rsquo;s months. For June the three month growth rate fell to 1.2%, helped by a 0.6% decline in June. The same pattern of recovery then a fall in growth is evident in shipments less the transportation sector.
Total factory orders rose 0.6% in June and that reversed the prior month&rsquo;s 0.5% decline. Durable goods orders jumped 1.3%. The rise, however, only recovered some of the prior month&rsquo;s 2.4% decline. Factory orders less transportation fell 0.5% (-1.3% y/y) while orders (shipments really) to petroleum refineries were unchanged (-5.5% y/y.
Unfilled orders continued their rise with a 1.4% gain during June. Less the transportation sector, where backlogs of civilian aircraft are up 43.3% y/y, backlogs rose 0.1% (9.6% y/y). </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/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory Survey</a> (NAICS)</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>0.3%</td>
<td>0.4%</td>
<td>3.7%</td>
<td>6.4%</td>
<td>8.9%</td>
<td>7.7%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>0.6%</td>
<td>-0.5%</td>
<td>-0.7%</td>
<td>5.1%</td>
<td>11.6%</td>
<td>6.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>-0.6%</td>
<td>0.8%</td>
<td>-0.9%</td>
<td>4.3%</td>
<td>10.3%</td>
<td>6.9%</td>
</tr>
<tr>
<td class="firstcol">Unfilled Orders</td>
<td>1.4%</td>
<td>0.9%</td>
<td>19.6%</td>
<td>20.0%</td>
<td>15.0%</td>
<td>3.9%</td>
</tr>
</tbody>
</table>
</body>
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Factory inventories rose 0.3% during June following a 0.4% gain during May. While moderate, the increases are up from the 0.1% three month average growth ended February. Growth in primary metals inventories picked up during the past [...]

U.S. Factory Inventory Growth Recovered

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<div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070802f.jpg" width="353">
Headline rise in June is +0.1% after +0.3% in May. 
Core trends pointing right directions but still at strong pace.
While the ECB may be happy with the direction for inflation, the pace is nonetheless too high and the rate of reduction is still slow (except in Italy where this partial &#145;core measure&#146; of inflation is falling from a much higher pace). 
For all of EMU, PPI excluding energy and construction peaked at 3.6% in August of 2006 and has edged lower to 3.1% in June of 2007. That&#146;s a reduction of 0.5% in the annual rate over a period of 10 months. That means it will take this quasi-core measure ( Q-core) about 22 months to get back to the CEILING rate of acceptability at 2%. That is a long wait for an inflation rate that already has been over the 2% limit for 36 months already. It would make one-half of a decade that the ECB &#145;allowed&#146; Q-core inflation to run at a pace above its expressed ceiling. 
The various key countries in the second graph do not have characteristics much different from this.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070802e.jpg" width="353"> 
The table below gives us a sense of some of the details of the EMU PPI and some country level trends for overall and excluding energy PPI inflation. We express in RED those inflation rates where the pace is lower than in the previous period provided in the table. For example, nearly all categories and countries show inflation lower over the recent 12 months than in the previous 12 months. But only the UK shows inflation lower in the recent six month compared to the previous 12 months as well. And while some countries show lower inflation in the past three months than in the past six months, the general speed up for inflation in the six month pace compared to a year-ago does not make the current step down look like it is part of a fundamental trend. And that is a problem.
For the EMU PPI categories, only capital goods prices are below the 2% mark over three months although capital goods almost makes the grade for six months and the index is well below 2% for the past and previous 12 months. But this category stands alone in those respects. Capital goods prices have remained well behaved and have only one small and technical violation of the 2% ceiling. Of course I don&#146;t mean to imply that the ECB &#145;targets&#146; inflation below 2% for each price category; the rate ceiling applies to only headline inflation. But it is instructive to look at member countries as well as various categories to see where the outliers are.
Among countries only the Non EMU member EU-member UK has sequentially lower inflation rates with inflation falling steadily across all horizons in the table. UK ex-energy inflation trend does not do so well but it is on a better track than any EMU member.
On balance, neither overall nor country level trends in the PPI can encourage the ECB on inflation. And theses figure are for the PPI; services sector inflation, a key ingredient in national CPI (HICP) inflation rates is generally a bit more stubborn.</div>

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Euro area and UK PPI Trends
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="2">M/M</td>
<td colspan="4">SAAR</td>
</tr>
<tr>
<td class="firstcol">EA 13</td>
<td>Jun-07</td>
<td>May-07</td>
<td>3-Mo</td>
<td>6-MO</td>
<td>Yr/Yr</td>
<td>Y/Y Yr Ago</td>
</tr>
<tr>
<td class="firstcol">Total ex Construction</td>
<td>0.1%</td>
<td>0.3%</td>
<td>3.8%</td>
<td>3.8%</td>
<td>2.3%</td>
<td>5.8%</td>
</tr>
<tr>
<td class="firstcol">Excl Energy</td>
<td>0.1%</td>
<td>0.3%</td>
<td>3.6%</td>
<td>3.8%</td>
<td>3.1%</td>
<td>3.0%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>0.0%</td>
<td>0.1%</td>
<td>0.7%</td>
<td>2.1%</td>
<td>1.9%</td>
<td>1.3%</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.7%</td>
<td>2.6%</td>
<td>1.6%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Intermediate &amp;Capital Goods</td>
<td>0.1%</td>
<td>0.3%</td>
<td>3.8%</td>
<td>4.5%</td>
<td>3.9%</td>
<td>3.7%</td>
</tr>
<tr>
<td class="firstcol">Energy</td>
<td>0.1%</td>
<td>0.6%</td>
<td>4.9%</td>
<td>3.8%</td>
<td>-0.5%</td>
<td>15.9%</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>0.2%</td>
<td>0.4%</td>
<td>6.0%</td>
<td>5.1%</td>
<td>2.6%</td>
<td>3.9%</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>0.2%</td>
<td>0.3%</td>
<td>2.4%</td>
<td>2.2%</td>
<td>1.7%</td>
<td>6.1%</td>
</tr>
<tr>
<td class="firstcol">Ex Energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>3.3%</td>
<td>2.9%</td>
<td>2.8%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>0.2%</td>
<td>0.2%</td>
<td>3.6%</td>
<td>3.4%</td>
<td>1.9%</td>
<td>3.9%</td>
</tr>
<tr>
<td class="firstcol">Ex Energy</td>
<td>0.1%</td>
<td>0.2%</td>
<td>3.0%</td>
<td>3.0%</td>
<td>2.6%</td>
<td>2.3%</td>
</tr>
<tr>
<td class="firstcol">Itlay</td>
<td>0.2%</td>
<td>0.4%</td>
<td>4.4%</td>
<td>3.9%</td>
<td>2.8%</td>
<td>6.2%</td>
</tr>
<tr>
<td class="firstcol">Ex Energy</td>
<td>0.1%</td>
<td>0.3%</td>
<td>3.5%</td>
<td>4.1%</td>
<td>3.2%</td>
<td>3.7%</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>-0.2%</td>
<td>0.2%</td>
<td>-7.6%</td>
<td>-7.1%</td>
<td>0.6%</td>
<td>9.8%</td>
</tr>
<tr>
<td class="firstcol">Ex Energy</td>
<td>0.1%</td>
<td>0.2%</td>
<td>1.4%</td>
<td>3.6%</td>
<td>2.9%</td>
<td>3.1%</td>
</tr>
<tr>
<td colspan="4">EA 13 Harmonized PPI excluding Construction</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td colspan="6">The EA 13 countries are Austria, Belgium, Finland, France,&nbsp; Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Slovenia.</td>
<td></td>
</tr>
<tr>
<td class="firstcol">6COLSPAN</td>
<td></td>
</tr>
</tbody>
</table>
</body>
</html>

Headline rise in June is +0.1% after +0.3% in May. Core trends pointing right directions but still at strong pace. While the ECB may be happy with the direction for inflation, the pace is nonetheless too high and the rate of reduction [...]

PPI Trends Flatten Out and Decline Across EMU

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<div align="left"> <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070802c.jpg" width="353">
During July, U.S. sales of light vehicles fell for the seventh consecutive month this year. The decline was attributed by manufactures to spillover effects from weak housing &amp; construction activity.
The 0.4% m/m decline to an annualized selling rate of 15.5M units, according to the Autodata Corporation, was slight but it dropped sales nearly 10% below the year earlier level. The decline was to the lowest since October 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070802d.jpg" width="353">
Sales of imported vehicles dropped a very slight 0.2% m/m to 3.99M (-5.3% y/y), again propped up by sharp discounting. Sales of imported cars ticked up by 0.6% m/m but that was not enough to prevent an 8.6% decline versus a year ago. Sales of imported light trucks fell 1.7% m/m (+1.5% y/y).
Domestic car sales again suffered a steep decline with a hard 5.4%m/m drop (-11.2% y/y). Sales of domestic light trucks recovered a bit of the prior two month&#146;s steep declines with a 3.3% m/m increase (-10.8% y/y).
U.S Exporters: A Rare Breed from the Federal Reserve Bank of St. Louis is available <a href="http:/research.stlouisfed.org/publications/net/20070801/cover.pdf">here</a>. </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/@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">2006 </th>
<th scope="col">2005 </th>
<th scope="col">2004 </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total </td>
<td>15.54 </td>
<td>15.60 </td>
<td>-9.6% </td>
<td>16.55 </td>
<td>16.96 </td>
<td>16.87 </td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos </td>
<td>7.37</td>
<td>7.63</td>
<td>-10.3% </td>
<td>7.77 </td>
<td>7.65 </td>
<td>7.49 </td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Trucks </td>
<td>8.16 </td>
<td>7.97 </td>
<td>-8.9% </td>
<td>8.78 </td>
<td>9.32 </td>
<td>9.37 </td>
</tr>
</tbody>
</table>
</body>
</html>

During July, U.S. sales of light vehicles fell for the seventh consecutive month this year. The decline was attributed by manufactures to spillover effects from weak housing & construction activity. The 0.4% m/m decline to an [...]

U.S. Vehicle Sales Suffer Housing Market Woes

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

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

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Sandy Batten

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

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

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

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

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

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

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

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

U.S. Trade Deficit Widened in May

Kathleen Stephansen, CBE

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

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

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

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

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

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

U.S. Initial Jobless Claims Decreased in Latest Week

Andrew Cates

**The Blue Chip interest rate consensus**
The latest Blue Chip Financial Forecasts survey suggests that monetary policy across most major advanced economies is expected to loosen modestly over the next six months. Central banks in the US, Canada, UK, Australia, and the euro area are all forecast to cut rates to varying degrees, with Australia expected to deliver the largest reduction. In contrast, Japan continues to stand out as the only major economy where forecasters see scope for a slight increase in rates, highlighting its unique position in the global policy cycle. Overall, the chart reflects a broad but uneven tilt towards monetary easing as policymakers respond to softer inflation and growth signals.

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**The US dollar and data surprises** 
This next chart shows that the recent bout of US dollar weakness has coincided with a period in which US economic data surprises have turned more negative relative to the euro area. The surprise index differential between the US and euro area —measuring US growth surprises minus euro surprises—has declined, pointing to a run of weaker-than-expected US data and stronger euro area outturns. Historically, this has tended to pull the euro higher relative to the dollar. However, the scale of the dollar’s recent slide appears larger than the data surprises alone would imply, suggesting that other forces are potentially weighing on the currency as well.

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**US stagflation risk**
Latest ISM manufacturing survey data highlight a worrying decoupling between input costs and underlying demand that points to potential stagflation pressures in the US economy. Historically, the ISM New Orders Index and the Prices Paid Index have tended to move broadly in sync, reflecting cycles where stronger demand drives both production and cost pressures higher. However, the chart shows that while prices paid have recently rebounded sharply, new orders have remained subdued and stuck near contractionary territory. This breakdown suggests that firms are facing rising input costs without a corresponding pickup in demand—an imbalance that could be amplified by US tariff measures, which tend to push up costs for imported materials and components while weighing on new orders through weaker trade flows.

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**US Supply Chain Risks** 
Added to this, the number of vessels queuing at the Los Angeles and Long Beach harbours has climbed to elevated levels in recent weeks, highlighting supply chain bottlenecks on the US West Coast. While various factors may be driving this congestion—including seasonal trade patterns and shifts in global shipping routes—recent tariff measures could be contributing as well. New or increased tariffs sometimes distort normal trade flows by prompting importers to front-load shipments ahead of cost increases or reroute sourcing strategies in ways that strain particular ports.

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**Global warming** 
Pivoting to more structural issues, the next chart highlights the persistent upward trend in global surface temperature anomalies over the past century, with both land and ocean temperatures now averaging well over one degree Celsius. This long-term warming signal continues to manifest in extreme weather events and record-breaking heat waves, including the unusually high temperatures that have swept parts of Europe in recent days, pushing June readings to historic highs in several regions.

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**Climate change and productivity** 
This final chart illustrates the projected impact of heat stress on labour productivity in Europe under current climate policy scenarios, highlighting how rising temperatures could steadily erode worker efficiency over the coming decades. As shown, the median estimates from the Climate Analytics group suggest that productivity losses could deepen from around 0.3 percentage points today to nearly 0.9 percentage points by mid-century if climate conditions remain unchanged. These figures reflect the physical limits of the human body’s capacity to perform work in increasingly hot and humid environments, a challenge that will become more acute if climate change continues on its current path. With recent record-high June temperatures across parts of Europe underscoring the reality of more frequent heat extremes, these projections serve as a clear reminder of the economic stakes involved in addressing climate risks and investing in adaptation measures to protect labour productivity and economic resilience.

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Financial markets have remained generally buoyant in recent days, with global equity indices advancing on the back of relatively upbeat global growth data, benign European inflation readings and the prospect of further policy easing from major central banks. At the same time, the US dollar has continued to weaken, reflecting a run of disappointing US economic data and rising investor concerns about the fiscal outlook, even as European growth surprises have turned more positive. This divergence, combined with the prospect of lower US policy rates relative to some (though not all) peers, has added to the dollar’s drift lower (charts 1 and 2). Supply chain strains—highlighted by elevated vessel queues at US West Coast ports—also feed into the narrative that US tariff measures may be contributing to sticky input costs and stagflation risks (charts 3 and 4). Meanwhile, record temperatures in parts of Europe this week have reinforced the climate challenge facing policymakers, with the final two charts illustrating how rising global temperatures and heat stress could increasingly weigh on productivity and growth potential if left unchecked. With trading volumes light ahead of the July 4th holiday and markets awaiting tomorrow’s US non-farm payrolls report, the interplay between softer US data, resilient equities, a weaker dollar, and climate-related risks remains firmly in focus.

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Charts of the Week: Headwinds and Heatwaves

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The ADP National Employment Report reported that nonfarm private sector payrolls declined 33,000 (+1.1% y/y) during June after rising 29,000 in May, revised from 37,000 and increasing an unrevised 60,000 in April. It was the first monthly decline since March 2023. A 110,000 June rise had been expected in the in the Action Economics Forecast Survey.

Small business hiring (less than 50 employees) declined 47,000 (+0.4% y/y), after falling 13,000 in May. These were the first back-to-back monthly declines since the end of 2023. Employment at medium-sized firms (50-499,000 employees) declined 15,000 (1.1% y/y), after rising 46,000 in May, revised from 49,000. Large business hiring (500+ employees) increased 30,000 (2.7% y/y) after easing 4,000 in May.

Goods-producing employment rose 32,000 (1.4% y/y) in June after falling a minimally revised 3,000 in May. Manufacturing jobs increased 15,000, unchanged y/y, following a 6,000 decline in May. The number of construction sector jobs rose 9,000 (2.8% y/y) after increasing 6,000 in May. Natural resources & mining jobs rose 8,000 (4.3% y/y) in June after falling 3,000 in May.

The decline in payrolls overall reflected weakness in the service sector where the number of service-producing jobs declined 66,000 last month (+1.1% y/y) after increasing 32,000 in May, revised from 36,000. Professional & business services employment fell 56,000 (+0.2% y/y), after declining 13,000 in May. These weak readings came after a 1,000 April gain and a 46,000 March increase. Education & health services employment declined 52,000 (+0.8% y/y), the third consecutive month of decline. Employment in the financial industry weakened 14,000 (+1.8% y/y) last month, after rising 17,000 in May.

Offsetting these declines, leisure & hospitality employment increased 32,000 in June (3.2% y/y), following a 43,000 May gain. Monthly increases have averaged 36,000 this year. Trade, transportation & utilities employment increased 14,000 (0.3% y/y) after falling 8,000 in May. Information sector employment rose 5,000 (0.2% y/y) after a 4,000 May increase and a 10,000 April decline. Employment in “other” services sectors rose 5,000 in June (2.9% y/y), the same as in May.

Growth in median annual pay for "job stayers" slipped to 4.4% y/y in June, down from a high of 7.8% in September 2022. Manufacturing sector pay grew 4.6% y/y, steady with May. Construction sector pay also rose a steady 4.6% y/y. Natural resource & mining sector pay grew 4.5% y/y last month. Financial sector earnings rose an improved 5.2% y/y, while education & health services pay rose a lessened 4.6% y/y. Leisure & hospitality pay increased 4.7% y/y in June. Professional & business service sector pay increased a lessened 4.2% y/y as did trade, transportation & utilities pay, up 4.2% y/y. Information pay rose a lessened 4.1% y/y. Median annual pay for “job changers” rose 6.8% y/y in June, down from a high of 16.1% y/y in April 2022.

By region, employment in the Midwest declined 24,000 (+1.3% y/y) to 28,761 million after a 17,000 rise in May. Employment in the West, declined 20,000 to 31,363 million (+0.5% y/y) last month, and reversed a 31,000 rise during May. Employment in the Northeast fell 3,000 to 24,116 million (+1.4% y/y) in June, following a 23,000 decline in May. Partially offsetting these declines, in the South employment increased 13,000 to 50,092 million (1.0% y/y) in June, after rising 2,000 in May.

The ADP National Employment Report and Pay Insights data can be found in Haver's **USECON** database. Historical figures date back to January 2010 for private employment. Pay data date back to October 2020. The expectation figure is available in Haver's **AS1REPNA** database.

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- Employment declines in several service industries; factory & building industry jobs rise.
- Wage growth moderates further.
- Small- & medium-sized shed jobs.

Economy in Brief: August 2007

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July Payrolls a Bit Light, Revisions Minor

Gasoline Prices Ease Further; Refining Margins Reduced

NTC Shows Euro MFG is Slowing… but oh so slowly

NTC Shows Euro MFG is Slowing… but oh so slowly

Swedish GDP Grows 1.0% in Q2, Led by Fixed Investment and Exports of Services

U.S. Factory Inventory Growth Recovered

PPI Trends Flatten Out and Decline Across EMU

U.S. Vehicle Sales Suffer Housing Market Woes