Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071126j.jpg" align="left" border="0" height="265" width="353">
UK GDP slipped in the current quarter to a growth rate of 3%
from 3.3% in Q2. And while it is a touch below its year/year pace of
late it is also a touch above its five year range. Private consumption
was strong in Q3 at an annualized quarterly pace of 4.1%. Above last
quarter&#8217;s pace and well above the five-year trend. Public spending at
1.2% was slow. Capital spending at 6.7% was a sharp rebound but the
year/year pace is slowing. Exports and imports each were up sharply on
the quarter. Their past trends are hard to compare due to special
factors in the historic pattern. Domestic demand remains solid in the
UK. At 4.7% the quarter was up sharply and the year/year erosion to a
pace of 3.5% was mild and is still above the five-year average. On
balance GDP trends seem to be holding up well. It is the path of
inflation that remains most in doubt, especially with oil prices
flaring. Housing is getting decidedly weaker but there is no evidence
of any knock-on impact on GDP.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">UK GDP
</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td colspan="3">Consumption</td>
<td>Capital Formation</td>
<td>&nbsp;</td>
<td></td>
<td>Domestic</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>GDP</td>
<td>Private</td>
<td>Public</td>
<td>Total</td>
<td>Housing</td>
<td>Exports</td>
<td>Imports</td>
<td>Demand</td>
</tr>
<tr class="grey2">
<td colspan="9" class="firstcol">%
change Q/Q</td>
</tr>
<tr class="grey1">
<td class="firstcol">Q3-07</td>
<td>3.0%</td>
<td>4.1%</td>
<td>1.2%</td>
<td>6.7%</td>
<td>#N/A</td>
<td>11.5%</td>
<td>16.7%</td>
<td>4.7%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Q2-07</td>
<td>3.3%</td>
<td>3.0%</td>
<td>1.4%</td>
<td>-3.7%</td>
<td>1.7%</td>
<td>0.6%</td>
<td>-1.6%</td>
<td>2.6%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Q1-07</td>
<td>3.2%</td>
<td>2.7%</td>
<td>1.9%</td>
<td>4.4%</td>
<td>10.5%</td>
<td>0.9%</td>
<td>4.6%</td>
<td>4.2%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Q4-06</td>
<td>3.3%</td>
<td>4.4%</td>
<td>2.7%</td>
<td>13.7%</td>
<td>-9.7%</td>
<td>0.9%</td>
<td>-1.8%</td>
<td>2.4%</td>
</tr>
<tr class="grey2">
<td colspan="9" class="firstcol">% change Yr/Yr</td>
</tr>
<tr class="grey1">
<td class="firstcol">Q3-07</td>
<td>3.2%</td>
<td>3.5%</td>
<td>1.8%</td>
<td>5.1%</td>
<td>#N/A</td>
<td>3.4%</td>
<td>4.2%</td>
<td>3.5%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Q2-07</td>
<td>3.1%</td>
<td>2.7%</td>
<td>2.0%</td>
<td>6.2%</td>
<td>3.7%</td>
<td>-12.4%</td>
<td>-9.9%</td>
<td>3.6%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Q1-07</td>
<td>3.1%</td>
<td>3.2%</td>
<td>1.2%</td>
<td>9.0%</td>
<td>6.6%</td>
<td>-10.2%</td>
<td>-7.1%</td>
<td>3.8%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Q4-06</td>
<td>3.2%</td>
<td>2.6%</td>
<td>1.9%</td>
<td>10.3%</td>
<td>6.4%</td>
<td>-2.4%</td>
<td>-0.6%</td>
<td>3.6%</td>
</tr>
<tr class="grey1">
<td class="firstcol">5-Yrs</td>
<td>2.8%</td>
<td>2.7%</td>
<td>2.6%</td>
<td>4.4%</td>
<td>#N/A</td>
<td>4.0%</td>
<td>4.7%</td>
<td>3.0%</td>
</tr>
</tbody>
</table>
</body></html>

UK GDP slipped in the current quarter to a growth rate of 3% from 3.3% in Q2. And while it is a touch below its year/year pace of late it is also a touch above its five year range. Private consumption was strong in Q3 at an annualized [...]

UK GDP Grows 3%

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071126d.jpg" width="353">
The National Activity Index (CFNAI) from the Federal Reserve Bank of Chicago during October ran negative for the third consecutive month at -0.73. It was the eight month in the last tenthat the index ran negative and it landed the three month moving average at its lowest level (-0.56) since 2003.
The Chicago Fed indicated that three of the four broad categories of indicators&#151;employment, production, and consumption and housing&#151;made negative contributions to the index.
A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth and during the last twenty years there has been a 68% correlation between the level of the CFNAI and q/q growth in real GDP.
The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production and income, the labor market, personal consumption and housing, manufacturing and trade sales, and inventories &amp; orders.
The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/cfnai.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/@S5/@S503/@S503.HTM">Chicago Fed</a></th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Oct. &#39;06</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-0.73</td>
<td>-0.30</td>
<td>-0.43</td>
<td>0.03</td>
<td>0.28</td>
<td>0.32</td>
</tr>
</tbody>
</table>
</body>
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The National Activity Index (CFNAI) from the Federal Reserve Bank of Chicago during October ran negative for the third consecutive month at -0.73. It was the eight month in the last tenthat the index ran negative and it landed the [...]

Chicago Fed National Activity Index Negative for Third Month

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071126a.jpg" width="353">
For all loans and leases during the third quarter, the Federal Reserve Board Reported that the delinquency rate increased to 2.12% from 1.86% during the second quarter of 2007. While a still low rate, delinquencies have risen to the highest level since late 2003.
The dollar value of these loans totaled $134 trillion, nearly double the level at the low during 2005 and double the running rate of $67 trillion during 1998.
Delinquent payments on residential real estate loans continued to power the overall rise. Rising to 2.37% of all real estate loans, the current rate is the highest since 1997. Commercial real estate loans remain fairly current with a delinquency rate of 1.94%, but late payments on residential real estate loans jumped to 2.74% last quarter, the highest since 2003.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071126b.jpg" width="353">
The dollar value of those delinquent residential real estate loans jumped to $52.1 trillion, more than four times the level ten years ago and more than one third the dollar value of late payments of bank&#39;s books. The crunch has come with the rise in short term interest rates as they have raised the reset rates on adjustable rate loans, notably those written for payments of interest only
For consumer loans delinquent payments also are up to a 3.14% rate versus 2.90% for all of last year. Delinquent payments on credit card debt rose to 4.29% from 4.01% last year but the gain is quite a bit larger for credit cards from the low of 3.54% late in 2005.
The dollar value of those delinquent credit card payments rose amounted to $15.1 trillion, triple the low in 1994.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071126c.jpg" width="353">
Delinquencies on C&amp;I loans rose slightly q/q to 1.22% from 1.18% during 2Q and from 1.27% last year.
The dollar values of the these loans amounted to $16.2 trillion during 3Q, up 15% from last year but equaled just roughly ten percent of total delinquencies of the bank&#39;s books.
These data series are available in Haver&#39;s USECON database.
Gauging the Uncertainty of the Economic Outlook from Historical Forecasting Errors is a very recent working paper from the Federal Reserve Board and it can be found <a href="http://www.federalreserve.gov/pubs/feds/2007/200760/200760pap.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">Loan Delinquency Rate (%)</th>
<th scope="col">3Q &#39;07</th>
<th scope="col">2Q &#39;07</th>
<th scope="col">3Q &#39;06</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 Loan &amp; Leases</td>
<td>2.12</td>
<td>1.86</td>
<td>1.57</td>
<td>1.57</td>
<td>1.56</td>
<td>1.80</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer Loans</td>
<td>3.14</td>
<td>2.99</td>
<td>2.93</td>
<td>2.90</td>
<td>2.81</td>
<td>3.08</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Real Estate Loans</td>
<td>2.37</td>
<td>2.02</td>
<td>1.48</td>
<td>1.48</td>
<td>1.37</td>
<td>1.44</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Commercial &amp; Industrial Loans</td>
<td>1.22</td>
<td>1.18</td>
<td>1.25</td>
<td>1.27</td>
<td>1.51</td>
<td>2.17</td>
</tr>
</tbody>
</table>
</body>
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For all loans and leases during the third quarter, the Federal Reserve Board Reported that the delinquency rate increased to 2.12% from 1.86% during the second quarter of 2007. While a still low rate, delinquencies have risen to the [...]

U.S. Loan Delinquencies Up, Real Estate Soared

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071126a.jpg" align="left" border="0" height="265" width="353">
For all loans and leases during the third quarter, the Federal
Reserve Board Reported that the delinquency rate increased to 2.12%
from 1.86% during the second quarter of 2007. While a still low rate,
delinquencies have risen to the highest level since late 2003.
The dollar value of these loans totaled $134 trillion, nearly
double the level at the low during 2005 and double the running rate of
$67 trillion during 1998.
Delinquent payments on residential real estate loans continued
to power the overall rise. Rising to 2.37% of all real estate loans,
the current rate is the highest since 1997. Commercial real
estate loans remain fairly current with a delinquency rate of
1.94%, but late payments on residential real estate loans
jumped to 2.74% last quarter, the highest since 2003.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071126b.jpg" align="right" border="0" height="265" width="353">
The dollar value of those delinquent residential real estate
loans jumped to $52.1 trillion, more than four times the level ten
years ago and more than one third the dollar value of late payments of
bank's books. The crunch has come with the rise in short term interest
rates as they have raised the reset rates on adjustable rate loans,
notably those written for payments of interest only
For consumer loans delinquent payments also are up to a 3.14%
rate versus 2.90% for all of last year. Delinquent payments on credit
card debt rose to 4.29% from 4.01% last year but the gain is quite a
bit larger for credit cards from the low of 3.54% late in 2005.
The dollar value of those delinquent credit card payments rose
amounted to $15.1 trillion, triple the low in 1994.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071126c.jpg" align="left" border="0" height="265" width="353">
Delinquencies on C&amp;I loans rose slightly q/q to 1.22%
from 1.18% during 2Q and from 1.27% last year.
The dollar values of the these loans amounted to $16.2
trillion during 3Q, up 15% from last year but equaled just roughly ten
percent of total delinquencies of the bank's books.
These data series are available in Haver's USECON
database.
Gauging the Uncertainty of the Economic Outlook
from Historical Forecasting Errors is a very recent
working paper from the Federal Reserve Board and it can be found <a href="http://www.federalreserve.gov/pubs/feds/2007/200760/200760pap.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">Loan
Delinquency Rate (%)</th>
<th scope="col">3Q '07</th>
<th scope="col">2Q '07</th>
<th scope="col">3Q '06</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 Loan &amp; Leases</td>
<td>2.12</td>
<td>1.86</td>
<td>1.57</td>
<td>1.57</td>
<td>1.56</td>
<td>1.80</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer Loans</td>
<td>3.14</td>
<td>2.99</td>
<td>2.93</td>
<td>2.90</td>
<td>2.81</td>
<td>3.08</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Real Estate Loans</td>
<td>2.37</td>
<td>2.02</td>
<td>1.48</td>
<td>1.48</td>
<td>1.37</td>
<td>1.44</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Commercial &amp;
Industrial Loans</td>
<td>1.22</td>
<td>1.18</td>
<td>1.25</td>
<td>1.27</td>
<td>1.51</td>
<td>2.17</td>
</tr>
</tbody>
</table>
Chicago Fed National Activity
Index Negative for Third Month 
by <a href="/comment/Moeller.html">Tom
Moeller</a> November 26, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071126d.jpg" align="left" border="0" height="265" width="353">
The National Activity Index (CFNAI) from the Federal Reserve
Bank of Chicago during October ran negative for the third consecutive
month at -0.73. It was the eight month in the last tenthat the index
ran negative and it landed the three month moving average at its lowest
level (-0.56) since 2003.
The Chicago Fed indicated that three of the four broad
categories of indicators&#8212;employment, production, and consumption and
housing&#8212;made negative contributions to the index.
A zero value of the CFNAI indicates that the economy is
expanding at its historical trend rate of growth and during the last
twenty years there has been a 68% correlation between the level of the
CFNAI and q/q growth in real GDP.
The CFNAI is a weighted average of 85 indicators of economic
activity. The indicators reflect activity in the following categories:
production and income, the labor market, personal consumption and
housing, manufacturing and trade sales, and inventories &amp;
orders.
The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/cfnai.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/@S5/@S503/@S503.HTM">Chicago
Fed</a></th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Oct. '06</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-0.73</td>
<td>-0.30</td>
<td>-0.43</td>
<td>0.03</td>
<td>0.28</td>
<td>0.32</td>
</tr>
</tbody>
</table>
UK GDP Grows 3% 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 26, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071126j.jpg" align="left" border="0" height="265" width="353">
UK GDP slipped in the current quarter to a growth rate of 3%
from 3.3% in Q2. And while it is a touch below its year/year pace of
late it is also a touch above its five year range. Private consumption
was strong in Q3 at an annualized quarterly pace of 4.1%. Above last
quarter&#8217;s pace and well above the five-year trend. Public spending at
1.2% was slow. Capital spending at 6.7% was a sharp rebound but the
year/year pace is slowing. Exports and imports each were up sharply on
the quarter. Their past trends are hard to compare due to special
factors in the historic pattern. Domestic demand remains solid in the
UK. At 4.7% the quarter was up sharply and the year/year erosion to a
pace of 3.5% was mild and is still above the five-year average. On
balance GDP trends seem to be holding up well. It is the path of
inflation that remains most in doubt, especially with oil prices
flaring. Housing is getting decidedly weaker but there is no evidence
of any knock-on impact on GDP.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">UK GDP
</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td colspan="3">Consumption</td>
<td>Capital Formation</td>
<td>&nbsp;</td>
<td></td>
<td>Domestic</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>GDP</td>
<td>Private</td>
<td>Public</td>
<td>Total</td>
<td>Housing</td>
<td>Exports</td>
<td>Imports</td>
<td>Demand</td>
</tr>
<tr class="grey2">
<td colspan="9" class="firstcol">%
change Q/Q</td>
</tr>
<tr class="grey1">
<td class="firstcol">Q3-07</td>
<td>3.0%</td>
<td>4.1%</td>
<td>1.2%</td>
<td>6.7%</td>
<td>#N/A</td>
<td>11.5%</td>
<td>16.7%</td>
<td>4.7%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Q2-07</td>
<td>3.3%</td>
<td>3.0%</td>
<td>1.4%</td>
<td>-3.7%</td>
<td>1.7%</td>
<td>0.6%</td>
<td>-1.6%</td>
<td>2.6%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Q1-07</td>
<td>3.2%</td>
<td>2.7%</td>
<td>1.9%</td>
<td>4.4%</td>
<td>10.5%</td>
<td>0.9%</td>
<td>4.6%</td>
<td>4.2%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Q4-06</td>
<td>3.3%</td>
<td>4.4%</td>
<td>2.7%</td>
<td>13.7%</td>
<td>-9.7%</td>
<td>0.9%</td>
<td>-1.8%</td>
<td>2.4%</td>
</tr>
<tr class="grey2">
<td colspan="9" class="firstcol">%
change Yr/Yr</td>
</tr>
<tr class="grey1">
<td class="firstcol">Q3-07</td>
<td>3.2%</td>
<td>3.5%</td>
<td>1.8%</td>
<td>5.1%</td>
<td>#N/A</td>
<td>3.4%</td>
<td>4.2%</td>
<td>3.5%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Q2-07</td>
<td>3.1%</td>
<td>2.7%</td>
<td>2.0%</td>
<td>6.2%</td>
<td>3.7%</td>
<td>-12.4%</td>
<td>-9.9%</td>
<td>3.6%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Q1-07</td>
<td>3.1%</td>
<td>3.2%</td>
<td>1.2%</td>
<td>9.0%</td>
<td>6.6%</td>
<td>-10.2%</td>
<td>-7.1%</td>
<td>3.8%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Q4-06</td>
<td>3.2%</td>
<td>2.6%</td>
<td>1.9%</td>
<td>10.3%</td>
<td>6.4%</td>
<td>-2.4%</td>
<td>-0.6%</td>
<td>3.6%</td>
</tr>
<tr class="grey1">
<td class="firstcol">5-Yrs</td>
<td>2.8%</td>
<td>2.7%</td>
<td>2.6%</td>
<td>4.4%</td>
<td>#N/A</td>
<td>4.0%</td>
<td>4.7%</td>
<td>3.0%</td>
</tr>
</tbody>
</table>
&nbsp;Mexico and Chile:
Balances of Payments 
by <a href="/comment/Curley.html">Louise
Curley</a> November 26, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071126e.jpg" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071126f.jpg" border="0" height="265" width="312">

Mexico and Chile released third quarter data on their balances
of payments today. Mexico's account balance continues to run between a
little below and a little above -1% of GDP while that of Chile has been
positive for the past three years and has ranged between 4-7% of GDP so
far this year. The trends in the Current account as percentage of GDP
are shown in the first chart.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071126g.jpg" align="right" border="0" height="265" width="312">

In dollar terms, Mexico's current account was -$1768 million
US in the third quarter of this year, an improvement over the deficits
of $2844 and $2624 million in the second and first quarters of the
year. In Chile, the current account was $1869 in the third quarter. The
trend in the current account of each country is shown in the second
chart.
In both cases, but to a far greater degree in Mexico than in
Chile, remittances from their nationals working abroad have been
significant factors in reducing the current account balances. The third
charts shows the relative magnitudes of net transfers in the two
countries and the fourth chart shows the current account of each
country excluding net transfers.
Another striking feature of Mexico's current account is the
dominance of US trade. In the third quarter the total balance of trade
in goods was-$2,926 million, but the balance of trade in goods with the
US was a positive $20994 million as shown in the fifth chart.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071126h.jpg" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071126i.jpg" height="265" width="312">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Balances
of Payments (Mil. US$)&nbsp;</th>
<th scope="col">Q3 07</th>
<th scope="col">Q2&nbsp;07&nbsp;</th>
<th scope="col">Q1 07&nbsp;</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">CHILE</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;
Current Account&nbsp; (% of&nbsp;&nbsp; GDP)&nbsp;</td>
<td>4.52</td>
<td>3.67</td>
<td>7.05</td>
<td>3.59</td>
<td>1.02</td>
<td>2.16</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;
Current Account (Mil. US$)</td>
<td>1869</td>
<td>1497</td>
<td>2759</td>
<td>5256</td>
<td>1315</td>
<td>2074</td>
</tr>
<tr>
<td class="firstcol"> &nbsp;&nbsp;
Net Transfer (Mil. US$)</td>
<td>905</td>
<td>589</td>
<td>589</td>
<td>3357</td>
<td>1791</td>
<td>1072</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;
Current Account ex Net Transfers&nbsp;</td>
<td>964</td>
<td>782</td>
<td>2170</td>
<td>1899</td>
<td>-476</td>
<td>1003</td>
</tr>
<tr class="odd">
<td class="firstcol">MEXICO&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;
Current Account (% of GDP)&nbsp;&nbsp;</td>
<td>-0.78</td>
<td>-1.30</td>
<td>-1.22</td>
<td>-0.22</td>
<td>-0.70</td>
<td>-0.95</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;
Current Account (Mil. US$)</td>
<td>-1768</td>
<td>-2844</td>
<td>-2624</td>
<td>-1928</td>
<td>-5179</td>
<td>-6576</td>
</tr>
<tr>
<td class="firstcol"> &nbsp;&nbsp;
Net Transfer (Mil. US$)</td>
<td>6091</td>
<td>5934</td>
<td>6268</td>
<td>24127</td>
<td>20736</td>
<td>17162</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;
Current Account ex Net Transfers&nbsp;</td>
<td>-8859</td>
<td>-8778</td>
<td>-8892</td>
<td>-26055</td>
<td>-25915</td>
<td>-23738</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Balance on
Trade in Goods&nbsp;</td>
<td>-2926</td>
<td>-3083</td>
<td>-3049</td>
<td>-6242</td>
<td>-7655</td>
<td>-8755</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Balance on
Trade in Goods with USA</td>
<td>20994</td>
<td>19776</td>
<td>19624</td>
<td>81466</td>
<td>65019</td>
<td>53698</td>
</tr>
</tbody>
</table>
</body></html>

Carol Stone, CBE

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<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071123b.jpg" align="left" border="0" height="265" width="353">
The British Bankers' Association (BBA) this morning reported
significant declines in mortgage lending activity for October. These
data cover the nine members of the "Major British Banking Groups",
which account for some two-thirds of all UK mortgage loans outstanding.
The net change in loans outstanding at these big banks was
£4.95 billion in October, markedly less than September's £5.88 billion
and the smallest monthly amount since December 2005, £4.90 billion. The
peak month was December 2006 at £6.04 billion.
The accompanying loan approval information is valuable, of
course, as a leading indicator of the actual loans made. This showed
distinct weakness in October, with the number of loans approved for
home purchase at just 44,100 (absolute figure, not rounded or
annualized), compared with almost 54,000 in September. The year-ago
number was 70,458 and the recent peak was 78,301 in November 2006. Loan
approvals for remortgaging and for "other" purposes -- this last
importantly including equity withdrawal -- also decreased
significantly. As seen in the second graph here, the last "other"
category has been drifting downward since a peak in late 2003. But
straight refinancing loans have more or less paralleled home purchase
loans since early 2003. Both of these loan groups retrenched somewhat
with the Bank of England tightening during 2004, but held up well
during more interest rate hikes from mid-2006. Finally, both purchase
and remortgaging loan approvals began to come down more decisively in
May this year and have continued to decrease since then despite the
BoE's steady rate policy beginning in August.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071123c.jpg" align="right" border="0" height="265" width="353">
These lending data for October reflect the first full month
following the international credit crunch of late August and September.
In the UK, this directly involved Northern Rock, one of the nine "Major
British Bank Groups" and a "Top 5" mortgage lender, which experienced
massive deposit runs in September. The October figures thus illustrate
clearly the impact of reversals in the global mortgage security market.
Additionally, press reports today also indicate that Northern Rock's
own delinquency experience has been worsening. Broader data on mortgage
possession actions from the UK's Council of Mortgage Lenders show a
sharp uptrend in such proceedings beginning in 2006. So while we may be
disturbed by loan performance in the US, it is certainly not the only
country where borrowers are faltering, contributing to an eventual
slowdown in the entire home financing system.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col">UK BBA</th>
<th scope="col">Oct 2007</th>
<th scope="col">Sept 2007</th>
<th scope="col">Aug 2007</th>
<th scope="col">Year Ago</th>
<th scope="col" colspan="3">Monthly
Averages</th>
</tr>
<tr>
<th scope="col" colspan="5"></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">Mortgage Loans,
Net Change, Bil.&#163;</td>
<td>4.95</td>
<td>5.88</td>
<td>5.75</td>
<td>5.84</td>
<td>5.50</td>
<td>4.59</td>
<td>5.05</td>
</tr>
<tr>
<td colspan="8" class="firstcol">Number of Loan Approvals</td>
</tr>
<tr class="odd">
<td class="firstcol">Home Purchase</td>
<td>44,100</td>
<td>53,997</td>
<td>56,811</td>
<td>70,458</td>
<td>68,961</td>
<td>62,754</td>
<td>68,888</td>
</tr>
<tr class="odd">
<td class="firstcol">Remortgaging</td>
<td>54,881</td>
<td>66,519</td>
<td>62,559</td>
<td>66,238</td>
<td>64,149</td>
<td>65,014</td>
<td>67,989</td>
</tr>
<tr class="odd">
<td class="firstcol">Other (incl "Equity Withdrawal")</td>
<td>38,471</td>
<td>43,143</td>
<td>40,744</td>
<td>48,298</td>
<td>48,557</td>
<td>52,127</td>
<td>64,924</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Value, Loans
Approved for Home Purchase*, &#163;</td>
<td>153,500</td>
<td>152,300</td>
<td>153,800</td>
<td>144,600</td>
<td>139,167</td>
<td>128,250</td>
<td>112,100</td>
</tr>
</tbody>
</table>
</body></html>

The British Bankers' Association (BBA) this morning reported significant declines in mortgage lending activity for October. These data cover the nine members of the "Major British Banking Groups", which account for some two-thirds of [...]

UK Banks Sharply Restrain Mortgage Lending in October

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071123a.jpg" align="left" border="0" height="265" width="353">
The NTC-Reuter Flash PMIs for November show an unexpected
bounce for Manufacturing and slip for Services. Both readings are weak,
however. Placed in the past 23-month range (the whole of the life of
the services index) services are the weakest ever at a reading of
53.72. The MFG index is in the 18.5 percentile of its range for this
period. Although taking MFG back to 1997, we find it resides in the
55th percentile of its much longer range experience. That experience
includes episodes of recession whereas for services and MFG the shorter
comparison does not. 

The graph, however, underscores that the peaking and dropping
of the indices dates from super-peaking in 2006 then to a dropping from
a lower plateau in mid 2007. Currently the indices are chopping around
at a much lower level that barely indicates continuing growth (above a
level of 50). 

We know that the strong euro is part of the problem, but
interestingly the outlook and slowing has spread though the services
industries just as fast even though MFG is sure to be affected first by
foreign exchange issues. With exports plus imports accounting for 40%
of GDP in some EMU nations it is no wonder that the impact of a strong
currency spreads faster that in the US where the sum is so much smaller. 

In Germany the export association says firms can still export
at an exchanger rate to the dollar of 1.50 but Merkel is registering
worry already and orders of all sorts across the Euro Area members are
slowing if not weakening. The NTC indices memorialize and underscore
that Europe is slowing and is well off peak. They tell us more
topically what other indices will hold for us in the months ahead.
While certain groups of exports may be more resilient than others some
line seems to have been crossed that says that a the euro has risen
above a critical level that is taking business prospects down a notch
for some critical mass of companies. In part this means that US-based
firms should benefit form the exact factor that is hurting European
business (FX competitiveness), but due to the weakness in Europe that
the euro strength also engenders, that the amount of benefit will be
limited. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="3" scope="col">FLASH Readings </th>
</tr>
<tr>
<th colspan="3" scope="col">NTC PMIs for the Euro Area
13</th>
</tr>
</thead>
<tbody>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Manufacturing</td>
<td>Services</td>
</tr>
<tr class="grey2">
<td class="firstcol">Nov-07</td>
<td>52.60</td>
<td>53.72</td>
</tr>
<tr class="grey2">
<td class="firstcol">Oct-07</td>
<td>51.46</td>
<td>55.56</td>
</tr>
<tr class="grey2">
<td class="firstcol">Sep-07</td>
<td>53.21</td>
<td>54.04</td>
</tr>
<tr class="grey2">
<td class="firstcol">Aug-07</td>
<td>54.16</td>
<td>57.91</td>
</tr>
<tr class="grey1">
<td colspan="3" class="firstcol">Averages</td>
</tr>
<tr class="grey2">
<td class="firstcol">3-Mo</td>
<td>52.42</td>
<td>54.44</td>
</tr>
<tr class="grey2">
<td class="firstcol">6-Mo</td>
<td>53.61</td>
<td>56.28</td>
</tr>
<tr class="grey2">
<td class="firstcol">12-Mo</td>
<td>54.56</td>
<td>56.74</td>
</tr>
<tr class="grey1">
<td colspan="3" class="firstcol">23-Mo Range</td>
</tr>
<tr class="grey2">
<td class="firstcol">High</td>
<td>57.61</td>
<td>61.21</td>
</tr>
<tr class="grey2">
<td class="firstcol">Low</td>
<td>51.46</td>
<td>53.72</td>
</tr>
<tr class="grey2">
<td class="firstcol">% Range</td>
<td>18.5%</td>
<td>0.0%</td>
</tr>
</tbody>
</table>
</body></html>

The NTC-Reuter Flash PMIs for November show an unexpected bounce for Manufacturing and slip for Services. Both readings are weak, however. Placed in the past 23-month range (the whole of the life of the services index) services are [...]

Services Slip: E-zone PMIs are Weak

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071123b.jpg" align="left" border="0" height="265" width="353">
The British Bankers' Association (BBA) this morning reported
significant declines in mortgage lending activity for October. These
data cover the nine members of the "Major British Banking Groups",
which account for some two-thirds of all UK mortgage loans outstanding.
The net change in loans outstanding at these big banks was
£4.95 billion in October, markedly less than September's £5.88 billion
and the smallest monthly amount since December 2005, £4.90 billion. The
peak month was December 2006 at £6.04 billion.
The accompanying loan approval information is valuable, of
course, as a leading indicator of the actual loans made. This showed
distinct weakness in October, with the number of loans approved for
home purchase at just 44,100 (absolute figure, not rounded or
annualized), compared with almost 54,000 in September. The year-ago
number was 70,458 and the recent peak was 78,301 in November 2006. Loan
approvals for remortgaging and for "other" purposes -- this last
importantly including equity withdrawal -- also decreased
significantly. As seen in the second graph here, the last "other"
category has been drifting downward since a peak in late 2003. But
straight refinancing loans have more or less paralleled home purchase
loans since early 2003. Both of these loan groups retrenched somewhat
with the Bank of England tightening during 2004, but held up well
during more interest rate hikes from mid-2006. Finally, both purchase
and remortgaging loan approvals began to come down more decisively in
May this year and have continued to decrease since then despite the
BoE's steady rate policy beginning in August.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071123c.jpg" align="right" border="0" height="265" width="353">
These lending data for October reflect the first full month
following the international credit crunch of late August and September.
In the UK, this directly involved Northern Rock, one of the nine "Major
British Bank Groups" and a "Top 5" mortgage lender, which experienced
massive deposit runs in September. The October figures thus illustrate
clearly the impact of reversals in the global mortgage security market.
Additionally, press reports today also indicate that Northern Rock's
own delinquency experience has been worsening. Broader data on mortgage
possession actions from the UK's Council of Mortgage Lenders show a
sharp uptrend in such proceedings beginning in 2006. So while we may be
disturbed by loan performance in the US, it is certainly not the only
country where borrowers are faltering, contributing to an eventual
slowdown in the entire home financing system.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col">UK BBA</th>
<th scope="col">Oct 2007</th>
<th scope="col">Sept 2007</th>
<th scope="col">Aug 2007</th>
<th scope="col">Year Ago</th>
<th scope="col" colspan="3">Monthly
Averages</th>
</tr>
<tr>
<th scope="col" colspan="5"></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">Mortgage Loans,
Net Change, Bil.&#163;</td>
<td>4.95</td>
<td>5.88</td>
<td>5.75</td>
<td>5.84</td>
<td>5.50</td>
<td>4.59</td>
<td>5.05</td>
</tr>
<tr>
<td colspan="8" class="firstcol">Number
of Loan Approvals</td>
</tr>
<tr class="odd">
<td class="firstcol">Home Purchase</td>
<td>44,100</td>
<td>53,997</td>
<td>56,811</td>
<td>70,458</td>
<td>68,961</td>
<td>62,754</td>
<td>68,888</td>
</tr>
<tr class="odd">
<td class="firstcol">Remortgaging</td>
<td>54,881</td>
<td>66,519</td>
<td>62,559</td>
<td>66,238</td>
<td>64,149</td>
<td>65,014</td>
<td>67,989</td>
</tr>
<tr class="odd">
<td class="firstcol">Other (incl "Equity Withdrawal")</td>
<td>38,471</td>
<td>43,143</td>
<td>40,744</td>
<td>48,298</td>
<td>48,557</td>
<td>52,127</td>
<td>64,924</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Value, Loans
Approved for Home Purchase*, &#163;</td>
<td>153,500</td>
<td>152,300</td>
<td>153,800</td>
<td>144,600</td>
<td>139,167</td>
<td>128,250</td>
<td>112,100</td>
</tr>
</tbody>
</table>
Services Slip: E-zone PMIs are Weak 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 23, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071123a.jpg" align="left" border="0" height="265" width="353">
The NTC-Reuter Flash PMIs for November show an unexpected
bounce for Manufacturing and slip for Services. Both readings are weak,
however. Placed in the past 23-month range (the whole of the life of
the services index) services are the weakest ever at a reading of
53.72. The MFG index is in the 18.5 percentile of its range for this
period. Although taking MFG back to 1997, we find it resides in the
55th percentile of its much longer range experience. That experience
includes episodes of recession whereas for services and MFG the shorter
comparison does not. 

The graph, however, underscores that the peaking and dropping
of the indices dates from super-peaking in 2006 then to a dropping from
a lower plateau in mid 2007. Currently the indices are chopping around
at a much lower level that barely indicates continuing growth (above a
level of 50). 

We know that the strong euro is part of the problem, but
interestingly the outlook and slowing has spread though the services
industries just as fast even though MFG is sure to be affected first by
foreign exchange issues. With exports plus imports accounting for 40%
of GDP in some EMU nations it is no wonder that the impact of a strong
currency spreads faster that in the US where the sum is so much smaller. 

In Germany the export association says firms can still export
at an exchanger rate to the dollar of 1.50 but Merkel is registering
worry already and orders of all sorts across the Euro Area members are
slowing if not weakening. The NTC indices memorialize and underscore
that Europe is slowing and is well off peak. They tell us more
topically what other indices will hold for us in the months ahead.
While certain groups of exports may be more resilient than others some
line seems to have been crossed that says that a the euro has risen
above a critical level that is taking business prospects down a notch
for some critical mass of companies. In part this means that US-based
firms should benefit form the exact factor that is hurting European
business (FX competitiveness), but due to the weakness in Europe that
the euro strength also engenders, that the amount of benefit will be
limited. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col">FLASH
Readings </th>
</tr>
<tr>
<th colspan="3" scope="col">NTC PMIs
for the Euro Area
13</th>
</tr>
</thead>
<tbody>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Manufacturing</td>
<td>Services</td>
</tr>
<tr class="grey2">
<td class="firstcol">Nov-07</td>
<td>52.60</td>
<td>53.72</td>
</tr>
<tr class="grey2">
<td class="firstcol">Oct-07</td>
<td>51.46</td>
<td>55.56</td>
</tr>
<tr class="grey2">
<td class="firstcol">Sep-07</td>
<td>53.21</td>
<td>54.04</td>
</tr>
<tr class="grey2">
<td class="firstcol">Aug-07</td>
<td>54.16</td>
<td>57.91</td>
</tr>
<tr class="grey1">
<td colspan="3" class="firstcol">Averages</td>
</tr>
<tr class="grey2">
<td class="firstcol">3-Mo</td>
<td>52.42</td>
<td>54.44</td>
</tr>
<tr class="grey2">
<td class="firstcol">6-Mo</td>
<td>53.61</td>
<td>56.28</td>
</tr>
<tr class="grey2">
<td class="firstcol">12-Mo</td>
<td>54.56</td>
<td>56.74</td>
</tr>
<tr class="grey1">
<td colspan="3" class="firstcol">23-Mo
Range</td>
</tr>
<tr class="grey2">
<td class="firstcol">High</td>
<td>57.61</td>
<td>61.21</td>
</tr>
<tr class="grey2">
<td class="firstcol">Low</td>
<td>51.46</td>
<td>53.72</td>
</tr>
<tr class="grey2">
<td class="firstcol">% Range</td>
<td>18.5%</td>
<td>0.0%</td>
</tr>
</tbody>
</table>
</body></html>

UK Banks Sharply Restrain MortgageLending in October

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071124a.jpg" width="353">
The Conference Board reported that the composite index of leading economic indicators for October fell by 0.5% after a 0.1% decline during September which was revised from the slight rise reported initially. The latest was the fourth decline in the last five months. 
During the last ten years there has been a 59% correlation between the y/y change in the leading indicators index and the lagged change in real GDP.
The breadth of one month gain amongst the 10 components of the leading index again collapsed to 30.0% from the revised 60% during September. Over a six month period, the breadth of gain amongst the leaders components was 50% for the second month in a row.
Last month, virtually all of the leader&#39;s components fell significantly except new orders for consumer goods, M2 and stock prices which made very modest positive contributions.
The method of calculating the contribution to the leading index from the spread between 10 year Treasury securities and the Fed funds rate has been revised. A negative contribution will now occur only when the spread inverts rather than when declining as in the past. More details can be found <a href="http://www.conference-board.org/pdf_free/economics/bci/lei0705.pdf">here</a>.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071124b.jpg" width="353">
The leading index is based on eight previously reported economic data series. Two series, orders for consumer goods and orders for capital goods, are estimated.
The coincident indicators was unchanged for the first month since a slight decline in January. Over the last ten years there has been a 86% correlation between the y/y change in the coincident indicators and real GDP growth.
The lagging index rose firmly for the third consecutive month mostly due to higher C&amp;I loans. The ratio of coincident to lagging indicators (a measure of economic excess) fell for the fifth month in the last six to the lowest level since 1991. 
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<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/BCI/BCI.HTM">Business Cycle Indicators</a></th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>-0.5%</td>
<td>-0.1%</td>
<td>-0.5%</td>
<td>1.2%</td>
<td>2.5%</td>
<td>7.1%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.0%</td>
<td>0.2%</td>
<td>1.7%</td>
<td>2.5%</td>
<td>2.1%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.3%</td>
<td>0.4%</td>
<td>3.3%</td>
<td>3.0%</td>
<td>3.5%</td>
<td>0.6%</td>
</tr>
</tbody>
</table>


</html>

The Conference Board reported that the composite index of leading economic indicators for October fell by 0.5% after a 0.1% decline during September which was revised from the slight rise reported initially. The latest was the fourth [...]

U.S. Leading Economic Indicators Fell Again

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

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

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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The **PCE chain price index** increased 0.2% (2.6% y/y) after rising an unrevised 0.3% in June and an unrevised 0.2% in May. The y/y gain steadied at 2.6%. It was increased from 2.2% y/y in April. Energy prices fell 1.1% (-2.7% y/y) after rising 0.9%, while food & beverage prices eased 0.1% (+1.9% y/y) following a 0.3% rise. The price index excluding food & energy rose a steady 0.3%, after two straight 0.2% increases. The y/y gain edged up to 2.9% last month from 2.8% in June. It was increased from a low of 2.6% in April.

Durable goods prices eased 0.1% (+1.1% y/y) in July, after rising 0.5% in June. Home furnishings & appliance prices edged 0.1% higher (2.5% y/y), after increasing 1.3%. Recreational goods & vehicle costs declined 0.9% (-0.3% y/y) and reversed the 0.9% June strengthening. Motor vehicle & parts prices rose 0.2% (1.6% y/y), after a 0.4% June decline.

Prices of nondurable goods eased 0.1% (+0.2% y/y) last month after rising 0.4% in June. Clothing prices held steady both m/m and y/y after rising 0.3% in June. Food & beverage prices eased 0.1% (+1.9% y/y), following a 0.4% June increase. Gasoline & other energy prices fell 1.7% (-9.6% y/y), after rising 0.9% in June.

Services prices in July rose 0.3% (3.6% y/y), after four straight 0.2% increases. Housing & utility prices rose 0.2% (4.3% y/y), after two consecutive 0.3% increases, and services prices excluding energy & healthcare gained 0.4% (3.7% y/y) after two 0.2% gains. Healthcare prices rose 0.2% (2.7% y/y), after rising 0.4%. The cost of financial services & insurance jumped 1.2% (5.5% y/y) after rising 0.4% in June. Recreation services costs rose 0.3% (3.2% y/y) after rising 0.1%. Transportation prices gained 0.2% (4.4% y/y), following a 0.1% rise, while hotel & restaurant prices improved 0.1% (2.8% y/y) after a slight June decline.

**Personal consumption expenditures (PCE)** rose 0.5% (4.7% y/y) last month after increasing 0.4% in June, revised from 0.3%, after holding steady in May. The July rise matched expectations in the Action Economics Forecast Survey. When adjusted for price changes, PCE improved 0.3% in July (2.1% y/y) after rising 0.1% in June.

Real spending on durable goods increased 2.0% (3.2% y/y) in July, after falling for three straight months. Real spending on motor vehicles jumped 4.5% (3.5% y/y), after falling sharply in both June and May. Real outlays on furnishings & appliances improved 0.2% (0.9% y/y), after falling in each of the prior month. Real spending on recreational goods & vehicles increased 1.5% (4.9% y/y) last month, after falling 0.4% in June. Spending on “other” durable goods improved 0.4% (2.6% y/y) after rising 0.2% in June.

Nondurable goods spending in real terms rose 0.3% (2.7% y/y) in July after gaining 0.6% in June. Real clothing & footwear purchases rose 0.6% (4.9% y/y) last month, following a 0.5% rise during June. Real food & beverage purchases strengthened 0.7% (1.7% y/y) after rising 0.4%. Real outlays on gasoline & other energy products fell 1.3% (-1.5% y/y), after rising 1.5%. Real spending on “other” nondurable goods edged 0.1% higher (4.1% y/y) last month, following a 0.6% rise in June.

Real spending on services improved 0.1% (1.7% y/y) in July for the second straight month. Real spending on housing & utilities rose 0.1% (1.1% y/y) in July, for a second consecutive month, while real health care spending also rose 0.1% (3.9% y/y) after rising 0.2%. Real spending on food services & accommodations eased 0.2% (+1.7% y/y), after rising 0.4% in June. Real spending on financial services & insurance rose 0.2% (2.4% y/y) after increasing 0.4% in June. Real spending on transportation services rose 0.3% (-0.0% y/y) in July, after falling 0.6% in June. Recreation spending slipped 0.1% (+1.0% y/y), the same as in June. Spending on “other” services rose 0.3% (2.7% y/y) for the second straight month.

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**Personal income** rose 0.4% last month (5.0% y/y) after increasing 0.3% in June. A 0.5% gain was expected. Wages & salaries moved 0.6% higher (5.3% y/y), following a 0.1% increase during June. Rental income increased 0.5% (4.0% y/y) in July, after falling for three straight months. Proprietors’ income improved 0.7% (2.3% y/y), after a minimal 0.1% increase. Income from assets rose 0.1% (1.4% y/y), after holding steady in June, and current transfer receipts were unchanged (8.3% y/y) following a 1.1% June increase.

Disposable personal income increased 0.4% (4.6% y/y) during July following a 0.3% June rise. After adjusting for price changes, disposable income improved 0.2% (2.0% y/y) after holding steady in June.

The personal saving rate held steady in July at 4.4%, after falling from 5.0% in April. It still stands well above low of 3.5% in December of last year. Personal saving fell 1.7% (+5.8% y/y) in July, after declining 0.9% in June.

The personal income and consumption figures are available in Haver’s **USECON** database with detail in the **USNA** database. The Action Economics forecasts are in **AS1REPNA**.

**Let’s Get On with It** from Fed Governor Christopher J. Waller is available [here](https://www.federalreserve.gov/newsevents/speech/waller20250828a.htm).

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- Core price increase y/y matches highest since February.
- Real spending moderation centers on services.
- Real disposable income improves; personal savings rate steadies.

U.S. Core PCE Price Inflation Up in July; Real Spending Slows Y/Y 

Winnie Tapasanun

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The advance estimate of the U.S. international trade deficit in goods widened to a larger-than-expected $103.57 billion in July after narrowing to $84.85 billion in June, data from the U.S. Census Bureau showed. The July reading, the second widening in the goods trade deficit in three months, was slightly smaller than a $103.92 billion shortfall in July 2024. A deficit of $90.2 billion for July had been expected by the Action Economics Forecast Survey. The deficit reached a record $161.95 billion in March. In Q2'25, the goods trade deficit narrowed to $266.96 billion, the smallest since Q4'23, after ballooning to a record $465.035 billion in Q1'25; the monthly deficit averaged $88.99 billion in Q2'25, down from a record $155.01 billion in Q1'25.

Total goods exports dipped 0.1% m/m (+3.0% y/y), the third consecutive monthly decline, to $177.97 billion in July, the lowest level since January, after a 0.7% decrease to $178.08 billion in June. April registered a record high of $190.08 billion. Exports were up 9.6% from a June 2023 low but down 2.1% from a July 2022 high. The m/m decline in exports in July reflected exports m/m drops of 2.4% (+16.3% y/y) in other goods, 0.9% (+5.1% y/y) in nonfood consumer goods excluding autos, and 0.8% (-1.2% y/y) in industrial supplies & materials. To the upside, exports for the following end-use categories rose m/m in July: automotive vehicles & parts (2.2%; -4.0% y/y), capital goods excluding autos (0.7%; 7.0% y/y), and foods, feeds & beverages (0.5%; 1.4% y/y).

Total goods imports rebounded 7.1% m/m (1.7% y/y), the first monthly increase since March, to a four-month-high $281.54 billion in July following a 4.6% drop to $262.94 billion in June. March registered a record high of $344.59 billion. Imports were up 11.9% from a June 2023 low but down 2.6% from a March 2022 high. The m/m rebound in imports in July reflected m/m rises in most imports end-use categories. These included a 25.4% surge (the first m/m increase and the largest since January; 4.9% y/y) in industrial supplies & materials as well as rises of 11.5% (23.5% y/y) in other goods, 4.8% (14.7% y/y) in capital goods excluding autos, 2.4% (4.9% y/y) in foods, feeds & beverages, and 2.1% (-12.2% y/y) in nonfood consumer goods excluding autos. In contrast, imports of automotive vehicles & parts, the only end-use category with a monthly decline in July, fell 3.2% (-14.1% y/y), the third m/m fall in four months, on top of a 3.6% June decrease.

The advance international trade data can be found in Haver's **USECON** database. The expectation figure is from the Action Economics Forecast Survey, which is in **AS1REPNA**.

- Deficit: $103.57 bil. in July, jumping 22.1% from June’s $84.85 bil.
- Exports -0.1%, down for the third straight month, led by a 2.4% decline in exports of other goods.
- Imports +7.1%, up for the first time since March, led by a 25.4% surge in imports of industrial supplies & materials.

U.S. Goods Trade Deficit Balloons in July; Largest Since March’s Record High

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Inflation in the monetary union was tepid across the large, early-reporting, economies in August. In Germany, the HICP rose by 0.2% on the month, the gauge rose by 0.1% in France, and was flat in both Italy and in Spain. However, these outstanding readings follow several months of stronger inflation in particular in July German prices rose by 0.2%, in Italy the gauge rose by 0.3%, in France by 0.4%, and in Spain by 0.5%.

As a result, over 3-months, inflation is running hot on the headline gauge, over 2% in France, Italy, and Spain, and just below it, at a 1.8% annual rate in Germany. Over 12-months inflation is well behaved but that headline up 0.8% in France rises by 1.7% over 12-months in Italy, by 2.1% in Germany, and at a 2.6% pace in Spain. That is a bit more mixed but still quite solid set of results. The EMU-wide HICP for July – on a one-month lag- rises by 2.1% over 12-months with a core at 2.3%.

Core inflation is not well reported on an early basis, the Italian core rate rose 0.2% in August with Spain at 0.3%, both Italy and Spain logged increases of 0.3% in July and in June and as a result the 3-month inflation rate on the core for Italy and Spain runs at 2.7% in Italy and at 3.8% for Spain. These, of course, are much higher and more disturbing numbers for inflation. The 6-month inflation rate for core Italy and Spain runs at 2.9% and 3.1%, respectively, while over 12-months the Italian core is up by only 2.1% and the Spanish core is up by only 2.4%. The kick up and inflation for the core is a relatively recent phenomenon.

These statistics give the ECB some room and some time to maneuver, since headline inflation is in pretty good shape and the inflation issues are scattered and have emerged more recently from the core and with growth still weak and with rising unemployment in Germany where it juts topped 3-million for the first time in a decade. There may not be any impetus to have to raise rates to cool inflation. The ECB, like the Federal Reserve, is likely playing a watch and wait game with the economic statistics and, of course, this month the watch and wait game turned pretty much in its favor with very good headline figures although, still some difficult core figures. It will take a little time before we get the core numbers for the rest of the monetary union members to fill in to understand exactly where those trends sit.

However, based on the early returns, the ECB is probably relatively happy with how inflation is sitting even with the core rates slightly excessive and varied. There doesn't appear to be any burgeoning inflation problem; there's some kind of a modest core inflation issue building in Italy and Spain and we'll have to watch that in the coming months. For now, the ECB should be relatively content.

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Europe

EMU Large Country Inflation Runs Cold – Over Tepid Cores

Andrew Cates

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

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

250828Z2.jpg

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

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

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

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

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

Charts of the Week: Riskbusters

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

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

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

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

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

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

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

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

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Government spending eased 0.2%, revised from up 0.5% in Q2 (+1.8% y/y) after a 0.6% decline. Federal government expenditures declined 4.7% (+0.7% y/y) after falling 4.6% in Q1. National defense expenditures increased 1.4% (3.0% y/y) after declining 7.1% in Q1. State & local government spending rose 2.6% (2.5% y/y) following a 2.0% rise.

The GDP chain price index rose an unrevised and expected 2.0% last quarter (2.5% y/y) after increasing 3.8% in Q1. The PCE chain price index increased 2.0% (2.4% y/y) following a 3.7% rise. The PCE price index excluding food and energy rose 2.5% (2.7% y/y) after increasing 3.5% in Q1. The business fixed investment price index edged 0.5% lower (+1.1% y/y) after a 0.4% rise. The residential price index rose 1.1% (2.6% y/y) after a 4.1% rise while the government price index increased 3.3% (3.1% y/y) following a 4.6% rise.

The GDP data can be found in Haver’s **USECON** and **USNA** databases. **USNA** contains virtually all of the Bureau of Economic Analysis detail in the national accounts. The Action Economics consensus estimates can be found in **AS1REPNA**.

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- Business investment strengthens & consumer spending firms.
- U.S. business earnings reverse Q1 decline.
- Increase in price index is unrevised, remaining roughly half of Q1’s gain.

Economy in Brief: 2007

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UK GDP Grows 3%

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