Tom Moeller

With just a 0.3% m/m uptick, the increase in U.S. sales of light vehicles last month did little to recover a 5.4% January drop. At a 15.38M unit annual selling rate, sales remained quite low. According to the Autodata Corporation [...]

U.S. Vehicle Sales in FebruaryRemained Low, Gasoline Price Up

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080303i.jpg" align="left" border="0" height="265" width="353">
The UK MFG sector rebounded slightly in February although it
remains a weak reading for the sector at 52.26. Readings above 50
indicated expansion on this measure. The MFG measure stands in the 61st
percentile of its range, a moderately expansionary reading. Construction and services sector are
still relatively weaker in their respective ranges but are as yet only
available through January, not February.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col">MFG, Construction and Services PMI CIPS/NTC </th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="2">Monthly readings</td>
<td colspan="3">Change over:</td>
<td>percentile</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>3MO</td>
<td>6MO</td>
<td>12MO</td>
<td>of range</td>
</tr>
<tr class="grey2">
<td class="firstcol">MFG</td>
<td>51.26</td>
<td>50.69</td>
<td>-2.02</td>
<td>-4.75</td>
<td>-3.09</td>
<td>61.8</td>
</tr>
<tr class="grey2">
<td class="firstcol">Construction</td>
<td>#N/A</td>
<td>53.87</td>
<td>-3.54</td>
<td>-7.95</td>
<td>-4.03</td>
<td>34.3</td>
</tr>
<tr class="grey2">
<td class="firstcol">Services*</td>
<td>#N/A</td>
<td>52.46</td>
<td>-0.62</td>
<td>-4.56</td>
<td>-6.76</td>
<td>35.8</td>
</tr>
<tr class="grey1">
<td colspan="7" class="firstcol">MFG range
since January
1992; Construction Since April 1997 Services Since July 1995.</td>
</tr>
<tr class="grey1">
<td colspan="7" class="firstcol">*Services
&amp;
construction changes and ranking: Jan-08 which is the most current date.</td>
</tr>
</tbody>
</table>
</body></html>

The UK MFG sector rebounded slightly in February although it remains a weak reading for the sector at 52.26. Readings above 50 indicated expansion on this measure. The MFG measure stands in the 61st percentile of its range, a [...]

UK MFG Sector Makes a Small Bounce

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080303h.jpg" align="left" border="0" height="265" width="353">
The new FLASH estimate of EMU inflation stands at 3.2%
year/year in February 2008 the same pace as in January.
Germany's own headline rate rose by 0.2% in February and
that is the rate implied by the new 3.2% for all of EMU (no month/month
rate is released but one can be calculated form the released data but
with less overall precision). Even
with flaring oil prices headline inflation is not accelerating over the
sequential monthly rates. AT 2.5% the 3-month pace is much better than
the 4.3% over six months and 3.2% year/year but still above the ECB&#8217;s
desired ceiling of 2%. German inflation data which are up-to-date show
the same dampening of inflation trends. Italy does not. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Trends
in EMU HICP; Flash Index</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% month/month</td>
<td colspan="4">% saar</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
</tr>
<tr>
<td class="firstcol">EMU-13</td>
<td>0.2%</td>
<td>0.3%</td>
<td>0.2%</td>
<td>2.5%</td>
<td> 4.3%</td>
<td> 3.2%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">Core</td>
<td>#N/A</td>
<td>0.1%</td>
<td>0.2%</td>
<td>2.5%</td>
<td> 2.7%</td>
<td> 2.3%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Goods</td>
<td>#N/A</td>
<td>-0.5%</td>
<td>0.1%</td>
<td>2.0%</td>
<td> 4.8%</td>
<td> 3.7%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>#N/A</td>
<td>-0.2%</td>
<td>0.9%</td>
<td> 2.4%</td>
<td>0.4%</td>
<td> 2.5%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol"> HICP</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>0.2%</td>
<td>0.3%</td>
<td>-0.2%</td>
<td>1.1%</td>
<td> 3.9%</td>
<td> 2.9%</td>
<td>2.0%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>#N/A</td>
<td>0.3%</td>
<td>0.4%</td>
<td> 5.9%</td>
<td> 4.6%</td>
<td> 3.2%</td>
<td>1.4%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>0.6%</td>
<td>0.1%</td>
<td>0.4%</td>
<td>4.2%</td>
<td> 4.7%</td>
<td> 3.1%</td>
<td>2.2%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>#N/A</td>
<td>0.2%</td>
<td>0.5%</td>
<td> 6.5%</td>
<td> 5.8%</td>
<td> 4.4%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td colspan="2" class="firstcol">
Core:xFE&amp;A</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td colspan="6" class="firstcol">Blue shaded
area data trail by one
month</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body></html>

The new FLASH estimate of EMU inflation stands at 3.2% year/year in February 2008 the same pace as in January. Germany's own headline rate rose by 0.2% in February and that is the rate implied by the new 3.2% for all of EMU (no [...]

Inflation Continues to be too Strong in EMU in February

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080303d.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080303e.jpg" border="0" height="265" width="312">

Growth in the Canadian economy slowed in the fourth quarter of
2007 to 0.79% at an annual rate, the slowest rate of increase since the
second quarter of 2003 as can be seen in the first chart. For the year
as a whole, GDP increased 2.65% compared with 2.76% in 2006.
In addition to the traditional quarterly series of GDP, Canada
also maintains a monthly series that is less comprehensive than the
quarterly series. The two series are compared in the second chart. The
monthly series has been aggregated to a quarterly basis for comparison.
The monthly series shows that the rate of growth deteriorated
sharply in the months of the final quarter. GDP in December was .67%
below November, as can be seen in the third chart.
The strength of the Canadian dollar which has affected exports
adversely and has encouraged imports has accounted for some of the slow
down in the Canadian economy. Last Friday, Canada announced a deficit
on its current account of $513 million Canadian, the first since the
second quarter of 1999.
As a result of the slow growth, there is growing speculation
that when the central bank meets tomorrow it will lower its target rate
of 4%. The target interest rate of Canada is shown in the fourth chart
with that of the United States. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080303f.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080303g.jpg" border="0" height="265" width="312"> 


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">CANADA&nbsp;</th>
<th scope="col">Q4 07</th>
<th scope="col">Q3 07&nbsp;</th>
<th scope="col">Q2 07&nbsp;</th>
<th scope="col">Q1 07&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP Quarterly Series
(Percent Change at Annual Rate)</td>
<td>0.79</td>
<td>2.98</td>
<td>3.76</td>
<td>4.01</td>
</tr>
<tr class="odd">
<td class="firstcol">GDP Monthly Series
(Percent Change at Annual Rate)&nbsp;</td>
<td>0.80</td>
<td>2.25</td>
<td>3.41</td>
<td>4.23</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol"> &nbsp;Current
Account (Million C$)</td>
<td>-513</td>
<td>1335</td>
<td>6400</td>
<td>6960</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Dec&nbsp; 07</td>
<td>Nov 07&nbsp;</td>
<td>Oct 07&nbsp;</td>
<td>Sep 07&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">GDP Monthly (Percent
Change M/M)</td>
<td>-0.67</td>
<td>0.10</td>
<td>0.31</td>
<td>-0.02</td>
</tr>
</tbody>
</table>
</body></html>

Growth in the Canadian economy slowed in the fourth quarter of 2007 to 0.79% at an annual rate, the slowest rate of increase since the second quarter of 2003 as can be seen in the first chart. For the year as a whole, GDP increased [...]

Canadian GDP Report Fuels Speculation of a Rate Cut

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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/080303c.jpg" width="353">
The value of construction put in place fell 1.7% during January, roughly repeating its little revised 1.3% December downdraft. The latest decline was the forth consecutive monthly drop but the last two were by far the largest of the bunch. Activity during the opening month of 2008 was 1.7% below the 4Q07 average. A 0.7% decline had been generally expected in January construction activity.
For the first month since late 2006, the value of nonresidential building activity fell. Building in the lodging area fell 3.0% (+55.1 y/y) and roughly repeated its downwardly revised 2.7% December decline. Office construction rose a modest 0.7% (7.1% y/y) but a previously reported large December gain was revised away. Multi-unit retail (shopping malls) fell 2.3% (+1.6% y/y).
Growth in the nonresidential area continued with a 2.1% (21.8% y/y) rise in education. Spending in the factory sector ticked up 0.1% (31.7 y/y) after little revised, very strong gains during the prior four months. Spending in the transportation area fell 0.8% (+15.2% y/y) and spending in the health care industry fell 1.0% (+4.8% y/y).
Private construction in total fell another 2.2%, pulled down further by a 3.0% drop in residential building, the largest since last October. Construction activity on new single family units tumbled 5.2% (-32.1% y/y), about the rate of decline as during the prior five months. Building activity on multi-family units also fell a sharp 1.7% (-18.6% y/y) while spending on improvements ticked down 0.2% (+5.2% y/y).
Housing and the &quot;R&quot; Word from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/net/20080201/cover.pdf">here</a> .
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.
Public construction spending fell slightly, by 0.2%. Construction on highways &amp; streets fell 1.3% (+0.9% y/y) for the third consecutive monthly decline. The value of construction on highways &amp; streets is nearly one third of the value of total public construction spending.
These more detailed categories represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for Automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.</div>

<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">January</th>
<th scope="col">December</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>-1.7%</td>
<td>-1.3%</td>
<td>-3.3%</td>
<td>-2.7%</td>
<td>5.6%</td>
<td>10.7%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>-2.2%</td>
<td>-1.3%</td>
<td>-6.4%</td>
<td>-6.8%</td>
<td>4.7%</td>
<td>12.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>-3.0%</td>
<td>-2.6%</td>
<td>-19.7%</td>
<td>-18.1%</td>
<td>0.5%</td>
<td>13.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-1.2%</td>
<td>0.4%</td>
<td>17.3%</td>
<td>18.0%</td>
<td>15.2%</td>
<td>7.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>-0.2%</td>
<td>-1.6%</td>
<td>6.6%</td>
<td>12.3%</td>
<td>9.2%</td>
<td>6.2%</td>
</tr>
</tbody>
</table>
</body>
</html>

The value of construction put in place fell 1.7% during January, roughly repeating its little revised 1.3% December downdraft. The latest decline was the forth consecutive monthly drop but the last two were by far the largest of the [...]

U.S. Construction Spending Fell. All Categories Down

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080303a.jpg" width="353">
For the second month in the last three, the Institute of Supply Management (ISM) reported that its Composite Index of Manufacturing Sector Activity was below the breakeven level of 50. The m/m decline to 48.3 was right in line with Consensus expectations for a drop to 48.4. Data points above 50 indicate growth in factory sector activity.
Last month&#39;s composite reading was down from 50.7 in January and 48.4 in December. The three month average level of 49.1 was its lowest since early 2003.
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.
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 being constructed using all of the absolute positive changes in activity added to one half of the no change in activity measures.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080303b.jpg" width="353">
Sharp declines in each of the five component series, excepting new orders, contributed to last month&#39;s decline in the composite index. Production fell 4.5 points and reversed most of its January recovery. The inventory component fell 3.7 points and reversed all of its January rise while the vendor deliveries component fell 2.7 points to the lowest level since 2003.
The employment index fell a sharp 1.1 points, repeating most of the January decline, to the lowest level since 2003. 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 new orders index fell a more moderate 0.4 points although domestic orders may have held up. The index of new export orders fell a sharp 2.5 points to 56.0, back to the average level during 4Q07 and 3Q07.
The prices paid index continued firm. A modest 0.5 point downtick during February followed very strong gains in three of the prior four months. That left the index at its highest level since August 2006. During the last twenty years there has been a 77% correlation between the price index and the three month change in the PPI for intermediate goods.
The Benefits of Systematic Monetary Policy is today&#39;s speech by Philadelphia Fed President Charles I. Plosser and it can be found <a href="http://www.philadelphiafed.org/publicaffairs/speeches/plosser/2008/03-03-08_natl-assn-business-economics.cfm"> 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">February</th>
<th scope="col">January</th>
<th scope="col">February &#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>48.3</td>
<td>50.7</td>
<td>51.5</td>
<td>51.1</td>
<td>53.1</td>
<td>54.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>49.1</td>
<td>49.5</td>
<td>55.4</td>
<td>54.3</td>
<td>53.4</td>
<td>57.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Employment Index</td>
<td>46.0</td>
<td>47.1</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>75.5</td>
<td>76.0</td>
<td>59.0</td>
<td>64.6</td>
<td>65.0</td>
<td>66.4</td>
</tr>
</tbody>
</table>
</body>
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For the second month in the last three, the Institute of Supply Management (ISM) reported that its Composite Index of Manufacturing Sector Activity was below the breakeven level of 50. The m/m decline to 48.3 was right in line with [...]

ISM Index Factory Sector Falls Below 50: Indicates Contraction

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080303a.jpg" align="left" border="0" height="265" width="353">
For the second month in the last three, the Institute of
Supply Management (ISM) reported that its Composite Index of
Manufacturing Sector Activity was below the breakeven level of 50. The
m/m decline to 48.3 was right in line with Consensus expectations for a
drop to 48.4. Data points above 50 indicate growth in factory sector
activity.
Last month's composite reading was down from 50.7 in January
and 48.4 in December. The three month average level of 49.1 was its
lowest since early 2003.
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.
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 being constructed using all
of the absolute positive changes in activity added to one half of the
no change in activity measures.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080303b.jpg" align="right" border="0" height="265" width="353">
Sharp declines in each of the five component series, excepting
new orders, contributed to last month's decline in the composite index.
Production fell 4.5 points and reversed most of its January recovery.
The inventory component fell 3.7 points and reversed all of its January
rise while the vendor deliveries component fell 2.7 points to the
lowest level since 2003.
The employment index fell a sharp 1.1 points, repeating most
of the January decline, to the lowest level since 2003. 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 new orders index fell a more moderate 0.4 points although
domestic orders may have held up. The index of new export orders fell a
sharp 2.5 points to 56.0, back to the average level during 4Q07 and
3Q07.
The prices paid index continued firm. A modest 0.5 point
downtick during February followed very strong gains in three of the
prior four months. That left the index at its highest level since
August 2006. During the last twenty years there has been a 77%
correlation between the price index and the three month change in the
PPI for intermediate goods.
The Benefits of Systematic Monetary Policy
is today's speech by Philadelphia Fed President Charles I. Plosser and
it can be found <a href="http://www.philadelphiafed.org/publicaffairs/speeches/plosser/2008/03-03-08_natl-assn-business-economics.cfm">
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">February</th>
<th scope="col">January</th>
<th scope="col">February '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>48.3</td>
<td>50.7</td>
<td>51.5</td>
<td>51.1</td>
<td>53.1</td>
<td>54.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>49.1</td>
<td>49.5</td>
<td>55.4</td>
<td>54.3</td>
<td>53.4</td>
<td>57.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Employment Index</td>
<td>46.0</td>
<td>47.1</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>75.5</td>
<td>76.0</td>
<td>59.0</td>
<td>64.6</td>
<td>65.0</td>
<td>66.4</td>
</tr>
</tbody>
</table>
U.S. Construction Spending Fell.
All Categories Down 
by <a href="/comment/Moeller.html">Tom
Moeller</a> March 3, 2008



<div align="left"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080303c.jpg" align="left" border="0" height="265" width="353">

The value of construction put in place fell 1.7% during
January, roughly repeating its little revised 1.3% December downdraft.
The latest decline was the forth consecutive monthly drop but the last
two were by far the largest of the bunch. Activity during the opening
month of 2008 was 1.7% below the 4Q07 average. A 0.7% decline had been
generally expected in January construction activity.
For the first month since late 2006, the value of
nonresidential building activity fell. Building in the lodging area
fell 3.0% (+55.1 y/y) and roughly repeated its downwardly revised 2.7%
December decline. Office construction rose a modest 0.7% (7.1% y/y) but
a previously reported large December gain was revised away. Multi-unit
retail (shopping malls) fell 2.3% (+1.6% y/y).
Growth in the nonresidential area continued with a 2.1% (21.8%
y/y) rise in education. Spending in the factory sector ticked up 0.1%
(31.7 y/y) after little revised, very strong gains during the prior
four months. Spending in the transportation area fell 0.8% (+15.2% y/y)
and spending in the health care industry fell 1.0% (+4.8% y/y).
Private construction in total fell another 2.2%, pulled down
further by a 3.0% drop in residential building, the largest since last
October. Construction activity on new single family units tumbled 5.2%
(-32.1% y/y), about the rate of decline as during the prior five
months. Building activity on multi-family units also fell a sharp 1.7%
(-18.6% y/y) while spending on improvements ticked down 0.2% (+5.2%
y/y).
Housing and the "R" Word from the Federal
Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/net/20080201/cover.pdf">here</a>
.
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.
Public construction spending fell slightly, by 0.2%.
Construction on highways &amp; streets fell 1.3% (+0.9% y/y) for
the third consecutive monthly decline. The value of construction on
highways &amp; streets is nearly one third of the value of total
public construction spending.
These more detailed categories represent the Census Bureau&#8217;s
reclassification of construction activity into end-use groups. Finer
detail is available for many of the categories; for instance,
commercial construction is shown for Automotive sales and parking
facilities, drugstores, building supply stores, and both commercial
warehouses and mini-storage facilities. Note that start dates vary for
some seasonally adjusted line items in 2000 and 2002 and that
constant-dollar data are no longer computed.
</div>


<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">January</th>
<th scope="col">December</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>-1.7%</td>
<td>-1.3%</td>
<td>-3.3%</td>
<td>-2.7%</td>
<td>5.6%</td>
<td>10.7%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>-2.2%</td>
<td>-1.3%</td>
<td>-6.4%</td>
<td>-6.8%</td>
<td>4.7%</td>
<td>12.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>-3.0%</td>
<td>-2.6%</td>
<td>-19.7%</td>
<td>-18.1%</td>
<td>0.5%</td>
<td>13.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-1.2%</td>
<td>0.4%</td>
<td>17.3%</td>
<td>18.0%</td>
<td>15.2%</td>
<td>7.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>-0.2%</td>
<td>-1.6%</td>
<td>6.6%</td>
<td>12.3%</td>
<td>9.2%</td>
<td>6.2%</td>
</tr>
</tbody>
</table>
Canadian GDP Report
FuelsSpeculation of a Rate Cut 
by <a href="/comment/Curley.html">Louise
Curley</a> March 3, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080303d.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080303e.jpg" border="0" height="265" width="312">

Growth in the Canadian economy slowed in the fourth quarter of
2007 to 0.79% at an annual rate, the slowest rate of increase since the
second quarter of 2003 as can be seen in the first chart. For the year
as a whole, GDP increased 2.65% compared with 2.76% in 2006.
In addition to the traditional quarterly series of GDP, Canada
also maintains a monthly series that is less comprehensive than the
quarterly series. The two series are compared in the second chart. The
monthly series has been aggregated to a quarterly basis for comparison.
The monthly series shows that the rate of growth deteriorated
sharply in the months of the final quarter. GDP in December was .67%
below November, as can be seen in the third chart.
The strength of the Canadian dollar which has affected exports
adversely and has encouraged imports has accounted for some of the slow
down in the Canadian economy. Last Friday, Canada announced a deficit
on its current account of $513 million Canadian, the first since the
second quarter of 1999.
As a result of the slow growth, there is growing speculation
that when the central bank meets tomorrow it will lower its target rate
of 4%. The target interest rate of Canada is shown in the fourth chart
with that of the United States.
 <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080303f.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080303g.jpg" border="0" height="265" width="312"> 


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">CANADA&nbsp;</th>
<th scope="col">Q4 07</th>
<th scope="col">Q3 07&nbsp;</th>
<th scope="col">Q2 07&nbsp;</th>
<th scope="col">Q1 07&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP Quarterly Series
(Percent Change at Annual Rate)</td>
<td>0.79</td>
<td>2.98</td>
<td>3.76</td>
<td>4.01</td>
</tr>
<tr class="odd">
<td class="firstcol">GDP Monthly Series
(Percent Change at Annual Rate)&nbsp;</td>
<td>0.80</td>
<td>2.25</td>
<td>3.41</td>
<td>4.23</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol"> &nbsp;Current
Account (Million C$)</td>
<td>-513</td>
<td>1335</td>
<td>6400</td>
<td>6960</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Dec&nbsp; 07</td>
<td>Nov 07&nbsp;</td>
<td>Oct 07&nbsp;</td>
<td>Sep 07&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">GDP Monthly (Percent
Change M/M)</td>
<td>-0.67</td>
<td>0.10</td>
<td>0.31</td>
<td>-0.02</td>
</tr>
</tbody>
</table>
Inflation Continues to be too
Strong in EMU in February 
by <a href="/comment/Brusca.html">Robert
Brusca</a> March 3, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080303h.jpg" align="left" border="0" height="265" width="353">
The new FLASH estimate of EMU inflation stands at 3.2%
year/year in February 2008 the same pace as in January.
Germany's own headline rate rose by 0.2% in February and
that is the rate implied by the new 3.2% for all of EMU (no month/month
rate is released but one can be calculated form the released data but
with less overall precision). Even
with flaring oil prices headline inflation is not accelerating over the
sequential monthly rates. AT 2.5% the 3-month pace is much better than
the 4.3% over six months and 3.2% year/year but still above the ECB&#8217;s
desired ceiling of 2%. German inflation data which are up-to-date show
the same dampening of inflation trends. Italy does not. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Trends
in EMU HICP; Flash Index</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% month/month</td>
<td colspan="4">% saar</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
</tr>
<tr>
<td class="firstcol">EMU-13</td>
<td>0.2%</td>
<td>0.3%</td>
<td>0.2%</td>
<td>2.5%</td>
<td> 4.3%</td>
<td> 3.2%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">Core</td>
<td>#N/A</td>
<td>0.1%</td>
<td>0.2%</td>
<td>2.5%</td>
<td> 2.7%</td>
<td> 2.3%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Goods</td>
<td>#N/A</td>
<td>-0.5%</td>
<td>0.1%</td>
<td>2.0%</td>
<td> 4.8%</td>
<td> 3.7%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>#N/A</td>
<td>-0.2%</td>
<td>0.9%</td>
<td> 2.4%</td>
<td>0.4%</td>
<td> 2.5%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol"> HICP</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>0.2%</td>
<td>0.3%</td>
<td>-0.2%</td>
<td>1.1%</td>
<td> 3.9%</td>
<td> 2.9%</td>
<td>2.0%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>#N/A</td>
<td>0.3%</td>
<td>0.4%</td>
<td> 5.9%</td>
<td> 4.6%</td>
<td> 3.2%</td>
<td>1.4%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>0.6%</td>
<td>0.1%</td>
<td>0.4%</td>
<td>4.2%</td>
<td> 4.7%</td>
<td> 3.1%</td>
<td>2.2%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>#N/A</td>
<td>0.2%</td>
<td>0.5%</td>
<td> 6.5%</td>
<td> 5.8%</td>
<td> 4.4%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td colspan="2" class="firstcol">
Core:xFE&amp;A</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td colspan="6" class="firstcol">Blue shaded
area data trail by one
month</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
UK MFG Sector Makes a Small Bounce 
by <a href="/comment/Brusca.html">Robert
Brusca</a> March 3, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080303i.jpg" align="left" border="0" height="265" width="353">
The UK MFG sector rebounded slightly in February although it
remains a weak reading for the sector at 52.26. Readings above 50
indicated expansion on this measure. The MFG measure stands in the 61st
percentile of its range, a moderately expansionary reading. Construction and services sector are
still relatively weaker in their respective ranges but are as yet only
available through January, not February.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col">MFG,
Construction and Services PMI CIPS/NTC </th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="2">Monthly readings</td>
<td colspan="3">Change over:</td>
<td>percentile</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>3MO</td>
<td>6MO</td>
<td>12MO</td>
<td>of range</td>
</tr>
<tr class="grey2">
<td class="firstcol">MFG</td>
<td>51.26</td>
<td>50.69</td>
<td>-2.02</td>
<td>-4.75</td>
<td>-3.09</td>
<td>61.8</td>
</tr>
<tr class="grey2">
<td class="firstcol">Construction</td>
<td>#N/A</td>
<td>53.87</td>
<td>-3.54</td>
<td>-7.95</td>
<td>-4.03</td>
<td>34.3</td>
</tr>
<tr class="grey2">
<td class="firstcol">Services*</td>
<td>#N/A</td>
<td>52.46</td>
<td>-0.62</td>
<td>-4.56</td>
<td>-6.76</td>
<td>35.8</td>
</tr>
<tr class="grey1">
<td colspan="7" class="firstcol">MFG range
since January
1992; Construction Since April 1997 Services Since July 1995.</td>
</tr>
<tr class="grey1">
<td colspan="7" class="firstcol">*Services
&amp;
construction changes and ranking: Jan-08 which is the most current date.</td>
</tr>
</tbody>
</table>
</body></html>

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

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

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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Andrew Cates

**Global equity markets and economic data surprises**
The surge in global equity markets over recent weeks has been eye-catching and underscores a degree of optimism that seems only loosely connected to incoming macroeconomic data. While data surprises have turned mildly positive, the scale and speed of the equity rally suggest markets could be pricing in a far more robust global growth outlook than current fundamentals warrant. This disconnect may reflect the influence of other powerful forces — heightened optimism over AI-driven productivity gains, expectations of further central bank easing following softer inflation prints, and a general revival of risk appetite after earlier geopolitical and policy scares. Still, the danger is that if economic data fail to catch up with these elevated expectations, markets could be vulnerable to sharp reversals.

250814Z1.jpg

**The US growth and investment consensus for 2026**
Notwithstanding the buoyant narrative around AI-driven investment, US economic forecasters have steadily pared back their expectations for non-residential (i.e. business) investment growth in 2026 over recent months. Consensus projections have dropped sharply from around 3% at the start of the year to well below 1% by mid-summer, signalling growing caution about the durability of capital spending momentum. This arguably suggests that AI-related enthusiasm has yet to translate into a broad-based uplift in corporate capex plans — at least in the near term.

250814Z2.jpg

**The global growth consensus for 2026**
Looking more broadly at the global outlook, consensus GDP forecasts for 2026 have been trimmed across most major economies since the start of the year. While the downgrades are modest for many, the steepest revisions have been concentrated in the US and in economies with high exposure to US trade, including Canada and Mexico. This pattern suggests that the escalation of US tariff measures — both enacted and threatened — is emerging as a drag on medium-term growth expectations, amplifying uncertainty around trade flows, investment planning, and supply chain stability.

250814Z3.jpg

**US inflation drivers**
A relatively benign US inflation report this week has strengthened market conviction that the Fed could deliver another rate cut at its September meeting. The data underline a broader trend in recent months: most of the remaining inflationary pressure is concentrated in services and, in particular, housing. However, housing’s contribution is now easing and may largely reflect the lagged impact of earlier monetary tightening rather than a persistent source of upward pressure. That said, the picture is not without risks — in particular, US tariff policies raise the prospect of renewed goods price inflation in the months ahead, as higher import costs filter through supply chains.

250814Z4.jpg

**The UK labour market**
This week’s UK labour market data added to evidence of a cooling jobs backdrop, with employment growth slowing (and on some measures falling), unemployment drifting higher, and vacancy levels continuing their steady decline. As the chart below shows, the vacancies-to-unemployment ratio has fallen sharply from its post-pandemic highs, a trend that typically leads private sector pay growth lower. Even though the BoE cut policy rates by 25bps last week, the accompanying commentary was distinctly hawkish. These labour market readings, however, arguably strengthen the case for another rate cut in the months ahead, particularly if inflation continues to drift toward target.

250814Z5.jpg

**Energy prices and monetary policy**
Energy price swings will remain a key determinant of the global inflation and interest rate trajectory in the months ahead. As the final chart below shows, movements in energy prices have historically led shifts in policy rates, underscoring their influence on central bank decision-making. While tariff-related pressures threaten to re-ignite goods price inflation, energy dynamics act as a critical counterweight — with the recent sharp decline offering potential disinflationary relief. The balance between these opposing forces will be central to whether global policy rates can ease meaningfully or remain constrained by renewed cost-push pressures.

250814Z6.jpg

Global financial markets head into late summer buoyed by resilient risk appetite, underpinned by hopes that AI will boost productivity and growth alongside expectations for further central bank policy easing (chart 1). Yet this optimism has not been fully mirrored in the macro outlook: US non-residential investment forecasts for 2026 have been marked down in recent months, and global growth projections — particularly for US-exposed economies — have also softened, arguably reflecting tariff-related uncertainty (charts 2 and 3). This week’s data have nevertheless been friendly for the idea that further policy easing will be enacted in the months ahead. In the US, a benign July inflation report has, for example, bolstered expectations of a September Fed rate cut (chart 4). And in the UK, weaker labour market data have raised hopes of further BoE easing despite the hawkish tone that accompanied last week’s rate cut (chart 5). Meanwhile, falling global energy prices are also providing an important counterweight to the inflationary risks posed by US tariff measures, a balance that could be central in shaping the path of interest rates into year-end (chart 6).

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/2kvKTvareFbNAuAplH12RO?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: What Gives?

250813A2.jpg

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Mortgage applications increased 10.9% (11.9% y/y) in the week ending August 8, after rising 3.1% in the prior week, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications for loan refinancing surged 23.0% (7.5% y/y) last week, following a 5.2% gain in the prior week. Applications for loans to purchase a home rose 1.4% (16.3% y/y) last week, following a 1.5% rise in the week of August 1.

The effective interest rate on a 30-year fixed-rate loan eased to 6.86% in the week ending August 8 after falling to 6.94%	 in the prior week. It was the lowest rate since the first week of March, down from a high of 7.28% in the second week of January. The rate on 15-year fixed-rate mortgages declined to 6.09% in the latest week from 6.19% in the week of August 1. Conversely, the rate on 30-year Jumbo loans increased to 6.86% last week from 6.82% one week earlier. The rate on a 5-year ARM dropped to 6.05% in the week of August 8 after falling to 6.25% in the prior week. It was the lowest rate since the second week of March.

The share of applications for refinancing an existing loan jumped to 46.5% of total applications in the week ending August 8, from 41.5% in the prior week. The share hit a low of 34.6% in the fourth week of May. The adjustable-rate mortgage (ARM) share of activity rose to 9.60% in the latest week from 8.50% in the week of August 1.

The average size of a mortgage loan jumped 4.5% (-1.1% y/y) to $398,700 in the week of August 8, following a 1.9% rise in the prior week. The average size of a purchase loan fell 1.2%, little changed y/y, to $426,900 in the latest week after gaining 0.7% in the week ending August 1. The average size of a loan to refinance a mortgage surged 18.3% (-3.0% y/y) to $366,400 last week, after rising 5.2% in the prior week. It was increased from $277,900 in the last week of May.

The Mortgage Bankers Association Survey covers 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver’s **SURVEYS** database.

- Loan refinancing continues to strengthen as purchase applications rise slightly.
- Effective fixed-interest rate on 30-year loans falls to four-month low.
- Average loan size continues to increase.

U.S. Mortgage Applications Surge Last Week as Interest Rates Slip

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In what is becoming a more common global story, confidence in Norway is rebounding after an earlier significant setback as countries recalibrate their circumstances under the revised Trump's tariff format. Norwegian consumer confidence had slipped in the second quarter to -19.1 from -5.4 in the first quarter, but now in the third quarter, confidence is snapping back to a -3.2 reading, the strongest reading since the first quarter of 2022.

Of course, there's a lot in the mix for this important northern European economy. Norway is an oil economy, and it also is one of the economies that is more vulnerable to relations with Russia. It has a relatively short but direct common border with Russia in the far north; otherwise, the borders are with Sweden and Finland. Still, with conditions in Russia touch and go and with Russian aircraft occasionally testing the air defenses the Baltic region, this is a geopolitically sensitive location.

On the economic front, inflation has been creeping up but the headline and core inflation rates are above the 2% mark and largely occupying space between 2.5% and 3%. Economic performance has been a bit uneven with the unemployment rate beginning to move up, as that rate has been notching steadily higher as 2025 has progressed. The last move by the central bank was to cut its key interest rate on site deposits. With the unemployment rate rising, there was little reaction in the bond market to this, especially in the environment where the manufacturing sector continues to be under pressure as it is for the most part globally with output in Norway contracting over the past two months (Y/Y).

Consumers’ rating of the environment for spending improved in the third quarter after deteriorating sharply in Q2. Its improvement brings it to a level above where it was in the first quarter as well; however, on ranked data back to the early 1990s the environment for making a major purchase still only has an 11.4 percentile standing, a relatively weak performance.

The assessment of the overall economy for the next year improved sharply once again after falling sharply in the second quarter. This metric had a value of 5.1 in the first quarter that slipped back to -21.2 in the second quarter; since then, the third quarter has gained some of that back at a survey reading of -3.3. It's still not back to its first quarter level, and it still is a reading that represents relatively weak performance as it has a 28.8 percentile standing which leaves it clearly in the bottom third of its queue of values since the early 1990s.

However, the personal finance readings do pick up for conditions expected for next year as the index evolves from a reading of 21.5 in the first quarter to 11.2 in the second quarter and back up to 21.8 in the third quarter of 2025. This reading brings the personal finance assessment to a 47-percentile standing, just slightly below its median for the period; at a level of 21.8, it's above its mean value of 20.1 for the period. This news on the personal finance front is better than anywhere else in the survey.

Consumer confidence is also rated according to age. And while there are some differences among the age-cohorts, for the most part they move and evaluated in unison. The queue rankings range from 16.7% (with the youngest growth at the low end) to 25.8% with the oldest group at the high end. Over 4 quarters, the changes in the age-cohort evaluations range from +11.1 to +18.7.

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On balance, Norway’s economy is experiencing some significant strains and it's unclear exactly where it stands trying to draw conclusions from quarterly data after these sharp gyrations as the economy tries to accustom itself to a new global tariff environment, the economic cycle, and deal with the geopolitical realities of the day. There's certainly a lot for Norwegians to sort out, for now confidence has made some recovery, and the economy is experiencing a bit of a soft spot. Consumers are managing to make the best of it, but they're still dealing with consumer confidence readings that have been weaker than this, only about 20% of the time so it's still a difficult slog for consumers.

Norway

Norway’s Confidence Steps Back Up in Q3 After Q2 Stumble

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The Consumer Price Index increased 0.2% in July after rising 0.3% in June and 0.1% in May. The July increase matched the forecast in the Action Economics Forecast Survey. The 2.7% y/y increase in the headline CPI in July held steady with June, but was increased from 2.3% in April. It remained below the 9.1% peak in June 2022. The CPI excluding food & energy increased an expected 0.3% last month after a 0.2% June rise and a 0.1% uptick in May. The 3.1% y/y July rise compared to 2.8% from March through May, still well below the 6.6% peak in September 2022.

Energy prices declined 1.1% (-1.6% y/y) last month after rising 0.9% in June. Gasoline prices weakened 2.2% (-9.5% y/y) after rising 1.0% in June. Fuel oil prices improved 1.8% (-2.9% y/y) after rising 1.3% in May. Natural gas prices fell 0.9% (+13.8% y/y) following a 0.5% gain, and electricity prices eased 0.1% (5.5% y/y) after rising 1.0% in June.

Food prices held steady in July (+2.9% y/y) following two straight 0.3% increases. Egg prices fell 3.9% (+16.4% y/y), off for the fourth straight month. Meat, poultry & fish prices rose 0.7% (4.6% y/y) after increasing 0.8%, while dairy product prices gained 0.7% (1.5% y/y), after easing in four of the last five months. Cereal & bakery product costs eased 0.2% (+1.0% y/y) for the second straight month while fruit & vegetable prices held steady (0.2% y/y), following a 0.9% gain. Nonalcoholic beverage prices declined 0.5% (+3.6% y/y) in July after rising 1.4% in June.

Goods prices less food and energy rose 0.2% in July for the second straight month. The 1.2% y/y price gain is up from slight y/y declines in the first three months of this year. Prices of used cars and trucks rose 0.5% (+4.8% y/y) last month, after falling 0.7% in June, while new vehicle costs held steady (+0.4% y/y) after falling 0.3% for two consecutive months. Apparel prices edged 0.1% higher (-0.2% y/y) in July after rising 0.4%. Appliance prices fell 0.9% (-0.3% y/y), after strengthening 1.9%. Home furnishings prices increased 0.7% (2.4% y/y) after rising 1.0%. Recreation product costs rose 0.4% (-0.1% y/y) in July, after a 0.8% increase. Education & communication product costs declined 1.3% (-4.3% y/y) after holding steady in June. Medical care goods prices rose 0.1% (NSA, 0.1% y/y) for the second straight month.

Services prices less energy strengthened 0.4% (3.6% y/y) after rising 0.3% in June. Shelter prices rose 0.2% (3.7% y/y), the same as in June, as owners’ equivalent rent of primary residences increased 0.3% (4.1% y/y) for the third straight month. The cost of lodging away from home declined 1.0% (-3.5% y/y), the fifth straight month of decline. Rents of primary residences gained 0.3% (3.5% y/y), after two consecutive 0.2% increases. Transportation service prices jumped 0.8% (3.5% y/y) after gaining 0.2% and the cost of motor vehicle insurance edged up 0.1% (5.3% y/y) in July, the same as in June. Public transportation costs increased 3.0% (0.7% y/y) after rising 0.4% during June. The cost of medical services increased 0.8% (4.3% y/y) after a 0.6% rise, and the cost of recreation services rose 0.4% (3.9% y/y) after rising 0.2% in June. Education & communication services prices rose 0.2% (1.1% y/y) after edging 0.1% higher in June.

The Consumer Price figures can be found in Haver's **USECON** database. The expectations figure is contained in the **AS1REPNA** database.

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- Decline in energy & stable food prices reduce overall strength.
- Core inflation picks up with tariff effects.
- Core goods prices strengthen but core services inflation steadies.

U.S. Consumer Price Inflation Eases in July

Winnie Tapasanun

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The NFIB Small Business Optimism Index increased to 100.3 in July, the highest level since February, from 98.6 in June and 98.8 in May, according to the Small Business Economic Trends survey conducted by the National Federation of Independent Business. This was the third consecutive month that the index was above the 52-year average of 98. The index was down from its recent peak of 105.1 in December but up from 93.7 in July 2024 and a low of 88.5 in March 2024. Six of the 10 index components rose, two fell, and two were unchanged. Amid high uncertainty (with tariffs, inflation, and international conflicts), the NFIB Small Business Uncertainty Index rose to 97 in July, the highest reading in five months, after a five-point decline to 89 in June. The index, while down from its record high of 110 in October, was above its recent low of 86 in December and a low of 65 in November 2023.

The outlook for business conditions in the next six months remained positive for the ninth straight month in the latest survey. The net balance of respondents expecting the economy to improve rose to 36% in July, the highest level since February, following a three-point decline to 22% in June; thus, having remained significantly above a record low of -61% in June 2022. Expected real sales slipped to a net 6% in July after a three-point decrease to 7% in June, posting the lowest of three successive positive readings. The latest figure was above its recent low of -18% in August 2024. A net -9% of respondents reported higher nominal sales in the past three months, down from -5% in June. The latest result was below the most recent positive reading of 1% in May 2022 and a peak of 9% in June 2021.

Plans to expand the business rose to 16% in July, the highest reading since January, from 11% in June; the latest figure, while down from its most recent high of 20% in December, was up from a low of 2% in March 2023. Plans to make capital outlays rebounded to 22% in July following a one-point dip to 21% in June; these numbers were down from their recent high of 28% in November and a high of 31% in October 2021. Meanwhile, expected credit conditions registered at -4% for the third consecutive month in July; this steady reading was slightly below its recent high of -2% in December but above a low of -11% in November 2023.

On the labor front, forty-eight percent of respondents reported that qualified workers to fill job openings were hard to find in July, down from 50% in June. These numbers were below their recent high of 56% in August 2024, a high of 57% in September 2023, and a peak of 62% in September 2021. A net 14% planned to increase employment in July, slightly up from 13% in June and posting the highest reading since February; it was above its recent low of 11% in March 2024 but below a high of 26% in May 2022 and a peak of 32% in August 2021. Notably, 33% reported positions not able to be filled in July, down from 36% in June and registering the lowest reading since January 2021; these figures remained below a high of 51% in May 2022.

Overall earnings trends had remained in negative territory since December 2019. The figure held at -22% in July and June, a poor reading, following a five-point drop to -26% in May. These readings, while up from a low of -37% in August 2024, remained below a high of -18% in March 2023 and a high of -5% in June 2021.

On the pricing front, actual and expected selling prices, while trending down, remained at an inflationary level; thus, suggesting continued inflationary pressures. The net percent of firms raising their average selling prices fell to 24% in July, the lowest reading since January, after a four-point rise to 29% in June. These numbers were up from 22% in July 2024 but well below a high of 66% in March 2022. The percentage planning to raise prices fell to a three-month-low 28% in July following a one-point increase to 32% in June; these figures were above 24% in July 2024 but below a high of 33% in March 2024 and a high of 52% in March 2022.

Wage inflation, while relatively high, eased in the July survey. A net 27% of respondents raised compensation during the last three months, down from 33% reported in the June survey. It was down from a high of 46% in February 2023 and a peak of 50% in January 2022. A net 17% of firms planned to raise worker compensation in the next three months, down from 19% reported in June and posting the lowest reading in three months; these numbers were below a high of 28% in November, a high of 30% in November 2023, and a high of 32% in October 2022.

The quality of labor was reported as the single most important problem facing small businesses, as reported by 21% of NFIB members in July, up five points from 16% in June; it registered the highest reading since August 2024 and the biggest m/m increase since August 2022. Taxes were reported as the next most important problem, with 17% reported in July vs. 19% in June. Inflation continued to be a problem facing small businesses, as reported by 11% in July and June, the lowest reading since September 2021; the figure was well below a peak of 37% in July 2022. Other concerns (in July vs. June) included poor sales (11% vs. 10%), the cost of labor (9% vs. 10%), government requirements (8% vs. 9%), insurance cost/availability (8% vs. 8%), and competition from large businesses (6% vs. 7%).

According to the Small Business Administration, there are 33 million small businesses in the United States, which employ 62 million workers. The NFIB surveys anywhere from 500 to 2000 respondents each month and the typical firm employs 10 people and reports gross sales of about $500,000 a year. The NFIB figures can be found in Haver’s **SURVEYS** database.

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- July NFIB Small Business Optimism Index up 1.7 pts. to 100.3.
- Uncertainty Index up 8 pts. to a 5-month-high 97.
- Expectations for economy up 14 pts. to 36%, the highest since Feb.
- Plans to expand business up 5 pts. to 16%, the highest since Jan.
- Expected real sales down 1 pt. to 6%, still positive for the third straight month.
- Percent of firms raising avg. selling prices down 5 pts. to a 6-month-low 24%.
- Quality of labor (21%), taxes (17%), and inflation (11%) are the top three business concerns.

Economy in Brief: March 2008

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