Tom Moeller

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The latest Manpower Inc. Survey suggested that recent improvement in the U.S.
labor market will pick up next quarter. For Q1 2011, the level of the seasonally
adjusted diffusion index rose to 9 following a reading of 5 in Q4. The latest
figure was the highest in two years. Since inception in 1976, there has been a
66% correlation between the level of the index and the q/q change in payroll
employment.&nbsp;
The Manpower Inc Employment Outlook Survey is a quarterly measurement of hiring intentions of more than 15,000 employers in 473 cities. Employers
declare their intentions to increase, decrease, or maintain the size of their present workforce
for the upcoming three-month period. The survey was designed with the assistance of the Survey Research Center of the
University of Michigan. The current seasonal adjustments are by 
Manpower, Inc. Haver calculated the historical seasonally adjusted series.
The overall not seasonally adjusted diffusion index remained steady with Q4
at a low level of 4. The detail of the survey indicates that Q1 hiring plans rema6ins
broadly positive across industries but was strongest in the wholesale &amp;
retail and the professional &amp; business services sectors.&nbsp; The indexes
for construction and durable manufacturing slipped Q/Q but elsewhere there was
improvement.
The Manpower Inc Employment Outlook Survey is a quarterly measurement of
hiring intentions of more than 15,000 employers in 473 cities. Employers declare
their intentions to increase, decrease, or maintain the size of their present
workforce for the upcoming three-month period.
The figures referenced above are available in Haver's USECON database.
<a href="/comment/101207b_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/101207b.png"></a>
<a href="/comment/101207c_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/101207c.png"></a>
 <table class="centered" border="0" cellSpacing="0" width="100%">
 <colgroup><col><col><col><col><col><col><col><col></colgroup>
 <thead>
 <tr>
 <th scope="col" class="firstcol">Manpower Inc. Employment 
 Outlook Survey (%)</th>
 <th scope="col">Q1'11</th>
 <th scope="col">Q4'10</th>
 <th scope="col">Q3'10</th>
 <th scope="col">Q2'10</th>
 <th scope="col">2010</th>
 <th scope="col">2009</th>
 <th scope="col">2008</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol">All Industries (SA)</td>
 <td>9</td>
 <td>5</td>
 <td>6</td>
 <td>5</td>
 <td>6</td>
 <td>1</td>
 <td>13</td>
 </tr>
 <tr class="odd">
 <td class="firstcol">All Industries (NSA)</td>
 <td>4</td>
 <td>4</td>
 <td>10</td>
 <td>8</td>
 <td>6</td>
 <td>1</td>
 <td>13</td>
 </tr>
 <tr>
 <td class="firstcol">&nbsp;&nbsp;Construction</td>
 <td>-9</td>
 <td>-8</td>
 <td>8</td>
 <td>4</td>
 <td>-2</td>
 <td>-6</td>
 <td>4</td>
 </tr>
 <tr class="odd">
 <td class="firstcol">&nbsp;&nbsp;Manufacturing - Durables</td>
 <td>6</td>
 <td>7</td>
 <td>9</td>
 <td>8</td>
 <td>5</td>
 <td>-6</td>
 <td>13</td>
 </tr>
 <tr>
 <td class="firstcol">&nbsp;&nbsp;Manufacturing - Nondurables</td>
 <td>6</td>
 <td>6</td>
 <td>12</td>
 <td>9</td>
 <td>7</td>
 <td>-2</td>
 <td>11</td>
 </tr>
 <tr class="odd">
 <td class="firstcol">&nbsp;&nbsp;Wholesale &amp; Retail Trade</td>
 <td>10</td>
 <td>13</td>
 <td>15</td>
 <td>7</td>
 <td>10</td>
 <td>7</td>
 <td>13</td>
 </tr>
 <tr>
 <td class="firstcol">&nbsp;&nbsp;Transportation &amp; Utilities</td>
 <td>2</td>
 <td>2</td>
 <td>9</td>
 <td>8</td>
 <td>3</td>
 <td>-4</td>
 <td>14</td>
 </tr>
 <tr class="odd">
 <td class="firstcol">&nbsp; Professional &amp; Business Services</td>
 <td>11</td>
 <td>10</td>
 <td>15</td>
 <td>15</td>
 <td>11</td>
 <td>8</td>
 <td>--</td>
 </tr>
 <tr>
 <td class="firstcol">&nbsp; Education &amp; Health Services</td>
 <td>6</td>
 <td>4</td>
 <td>-2</td>
 <td>3</td>
 <td>2</td>
 <td>1</td>
 <td>--</td>
 </tr>
 <tr class="odd">
 <td class="firstcol">&nbsp; Financial Activities&nbsp; </td>
 <td>4</td>
 <td>4</td>
 <td>11</td>
 <td>9</td>
 <td>7</td>
 <td>3</td>
 <td>--</td>
 </tr>
 <tr>
 <td class="firstcol">&nbsp;&nbsp;Government</td>
 <td>0</td>
 <td>-6</td>
 <td>-2</td>
 <td>-1</td>
 <td>-3</td>
 <td>-3</td>
 <td>10</td>
 </tr>
 </tbody>
</table>


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The latest Manpower Inc. Survey suggested that recent improvement in the U.S. labor market will pick up next quarter. For Q1 2011, the level of the seasonally adjusted diffusion index rose to 9 following a reading of 5 in Q4. The [...]

U.S. Hiring Improves Indicates Manpower Inc. Survey

Robert Brusca

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Spain’s economy is steadily losing ground. Industrial output made a recovery and began to show Yr/Yr increases but it is now backsliding. Real retail sales cut their recession losses and flirted with making Yr/Yr gains when backsliding occurred. 
Spain’s dealing with a collapsed property market in the wake of the financial crisis and global downturn was not bad enough. The problems in Greece shined a too-bright light on Spain’s other weaknesses. Long one of the lax fiscal policy Mediterranean countries Spain came to its time reckoning... and, it happened at the worst possible moment. Spain was forced to deal with its structural budget problems worsening its cyclical collapse. Actually Spain was in the process of climbing out of its cyclical downturn, getting a grip on the rim of recovery, when Greece’s problems led markets to stomp on Spain’s fragile grip on recovery. The German conditions for Spain to receive financial help preclude continued economic expansion. 
Spain is now in a period of fiscal austerity trying to control its budget deficit in a period of severe economic contraction. That is of course worsening the contraction and in turn making the deficit worse. It is not clear what kind of progress markets will require of Spain. But with unemployment over the 20% mark it is clear that Spain’s ability to post fiscal economic miracles will be very limited. 
Against that background, Spain’s industrial output rose by 0.4% in October. Output of consumer goods fell as did output of intermediate goods. Investment goods’ output alone increased. That rise helped to push the overall index higher. Still it is unreasonable given current trends to expect that Spain will be able soon to continue increases in industrial output. Spain continues to be severely challenged by economic times. This month’s rise in IP is aberrant. 


<table border="0" cellspacing="0" width="100%" class="centered">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr class="grey3">
 <th colspan="8" scope="col">Various looks at the UK, EU and EMU Services Sector</th>
 </tr>
 </thead>
 <tr class="even">
 <td>&nbsp;</td>
 <td>Nov-10</td>
 <td>Oct-10</td>
 <td>Sep-10</td>
 <td>3-Mo</td>
 <td>6-Mo</td>
 <td>12-Mo</td>
 <td>%</td>
 </tr>
 <tr class="odd">
 <td class="firstcol">Euro-Area</td>
 <td>55.42</td>
 <td>53.35</td>
 <td>54.09</td>
 <td>54.29</td>
 <td>55.01</td>
 <td>54.49</td>
 <td>72.6%</td>
 </tr>
 <tr>
 <td class="firstcol">Germany</td>
 <td>59.18</td>
 <td>56.04</td>
 <td>54.85</td>
 <td>56.69</td>
 <td>56.42</td>
 <td>55.01</td>
 <td>90.9%</td>
 </tr>
 <tr class="odd">
 <td class="firstcol">France</td>
 <td>54.96</td>
 <td>54.81</td>
 <td>58.17</td>
 <td>55.98</td>
 <td>58.38</td>
 <td>57.85</td>
 <td>58.2%</td>
 </tr>
 <tr>
 <td class="firstcol">Italy</td>
 <td>54.45</td>
 <td>51.00</td>
 <td>51.26</td>
 <td>52.24</td>
 <td>51.54</td>
 <td>52.36</td>
 <td>66.4%</td>
 </tr>
 <tr class="odd">
 <td class="firstcol">Spain</td>
 <td>48.26</td>
 <td>46.54</td>
 <td>47.86</td>
 <td>47.55</td>
 <td>49.15</td>
 <td>49.19</td>
 <td>61.4%</td>
 </tr>
 <tr>
 <td class="firstcol">Ireland</td>
 <td>50.76</td>
 <td>50.92</td>
 <td>48.78</td>
 <td>50.15</td>
 <td>52.41</td>
 <td>50.75</td>
 <td>51.6%</td>
 </tr>
 <tr class="even">
 <td class="firstcol" colspan="8">EU only</td>
 </tr>
 <tr class="odd" >
 <td class="firstcol">UK (CIPs)</td>
 <td>53.00</td>
 <td>53.19</td>
 <td>52.80</td>
 <td>53.00</td>
 <td>52.96</td>
 <td>54.55</td>
 <td>63.1%</td>
 </tr>
 <tr>
 <td class="firstcol">US NONFMG ISM</td>
 <td>55.00</td>
 <td>54.30</td>
 <td>53.20</td>
 <td>54.17</td>
 <td>53.68</td>
 <td>53.47</td>
 <td>73.9%</td>
 </tr>
 
 <tr class="grey3">
 <td colspan="8">EU Commission Indices for
 EU and EMU</td>
 </tr>
 <tr class="even">
 <td class="firstcol">EU Index</td>
 <td>Nov-10</td>
 <td>Oct-10</td>
 <td>Sep-10</td>
 <td>3Mo</td>
 <td>6Mo</td>
 <td>12Mo</td>
 <td>%</td>
 </tr>
 <tr class="odd">
 <td class="firstcol">EU Services</td>
 <td>8</td>
 <td>5</td>
 <td>5</td>
 <td>-10.33</td>
 <td>-12.17</td>
 <td>-14.33</td>
 <td>67.6%</td>
 </tr>
 <tr class="even">
 <td class="firstcol">EMU </td>
 <td>Nov-10</td>
 <td>Oct-10</td>
 <td>Sep-10</td>
 <td>3Mo</td>
 <td>6Mo</td>
 <td>12Mo</td>
 <td>%</td>
 </tr>
 <tr class="odd">
 <td class="firstcol">Services</td>
 <td>10</td>
 <td>8</td>
 <td>8</td>
 <td>8.67</td>
 <td>7.33</td>
 <td>3.71</td>
 <td>60.3%</td>
 </tr>
 <tr>
 <td class="firstcol">Cons Confidence</td>
 <td>-9</td>
 <td>-11</td>
 <td>-11</td>
 <td>-10.33</td>
 <td>-12.17</td>
 <td>-2.31</td>
 <td>67.6%</td>
 </tr>
 <tr class="grey3">
 <td colspan="8">Consumer Confidence by Country</td>
 </tr>
 <tr class="odd">
 <td class="firstcol">Germany</td>
 <td>11</td>
 <td>7</td>
 <td>5</td>
 <td>7.67</td>
 <td>2.67</td>
 <td>-5.33</td>
 <td>100.0%</td>
 </tr>
 <tr>
 <td class="firstcol">France</td>
 <td>-17</td>
 <td>-17</td>
 <td>-18</td>
 <td>-17.33</td>
 <td>-19.00</td>
 <td>-18.75</td>
 <td>50.0%</td>
 </tr>
 <tr class="odd">
 <td class="firstcol">Italy</td>
 <td>-22</td>
 <td>-22</td>
 <td>-22</td>
 <td>-22.00</td>
 <td>-21.50</td>
 <td>-21.00</td>
 <td>28.6%</td>
 </tr>
 <tr>
 <td class="firstcol">Spain</td>
 <td>-21</td>
 <td>-20</td>
 <td>-19</td>
 <td>-20.00</td>
 <td>-21.83</td>
 <td>-20.67</td>
 <td>50.9%</td>
 </tr>
 <tr class="odd">
 <td class="firstcol">Ireland</td>
 <td>#N/A</td>
 <td>#N/A</td>
 <td>#N/A</td>
 <td>#N/A</td>
 <td>#N/A</td>
 <td>#N/A</td>
 <td>#N/A</td>
 </tr>
 <tr>
 <td class="firstcol">UK</td>
 <td>-18</td>
 <td>-16</td>
 <td>-17</td>
 <td>-17.00</td>
 <td>-15.33</td>
 <td>-10.83</td>
 <td>44.7%</td>
 </tr>
<tr>
 <td class="firstcol" colspan="8">percentile
 is over range since May 2000</td>
 </tr>

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Spain’s economy is steadily losing ground. Industrial output made a recovery and began to show Yr/Yr increases but it is now backsliding. Real retail sales cut their recession losses and flirted with making Yr/Yr gains when [...]

Spain’s Recovery Is Short Cut

Louise Curley

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<a href="/comment/101206g_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/101206g.png"></a>
The price of copper has more than tripled from its low point of $1.2474 per
 pound on December 24, 2008 to $3.9950 on December 3rd of this year, as
 can be seen in the first chart which shows the price of copper found in
 the Haver data base, INTDAILY.&nbsp; 
 
 Copper consumption has not only been rising fast but it has also been exceeding production since
 2009.&nbsp; As a result, stocks are declining and prices are soaring. The
 Economist Intelligence Unit's (EIU) annual data and forecasts for copper
 consumption, production and stocks illustrate this point and are shown in
 the second chart.&nbsp; The data are found in the EIUDREGS&nbsp; database.
 
 The rise in consumption is due largely to demand from China.&nbsp; By comparing Chinese imports of
 copper ore and concentrates in the EMERGEPR data base with the
 production of refined copper in the EIUDREGS data base it appears
 that China's imports of copper have risen from about 12% of worth
 production in 2000 to almost one third of world production
 currently.&nbsp; However, new products, such as hybrid and electric cars,
 are also responsible for the increased demand for copper.&nbsp; The high
 prices might encourage the use of substitutes and thus limit the extent
 to which the price of copper could rise.&nbsp;&nbsp; In addition, further
 official attempts to cool the Chinese economy with higher interest rates
 would also discourage additional price rises.
 
 Nevertheless, the long
 term supply situation is likely to play the more important role in
 determining the price of copper.&nbsp; Mining companies have been unable
 to keep pace with the demand, partly because it is getting harder to find
 the metal and the quality of what is found has deteriorated.&nbsp;&nbsp;

<colgroup><col><col><col><col><col><col><col><col></colgroup>
 

 <tr class="grey3">
 <td>Cooper&nbsp; (Thousand Tons)</td>
 <td >2012F</td>
 <td >2011F</td>
 <td >2010E</td>
 <td >2009&nbsp;</td>
 <td >2008</td>
 <td>2007</td>
 <td >2006</td>
 </tr>
 <tr class="odd" >
 <td class="firstcol">Stocks</td>
 <td >559</td>
 <td >742</td>
 <td >946</td>
 <td >1105</td>
 <td >810</td>
 <td>666</td>
 <td >672</td>
 </tr>
 <tr>
 <td class="firstcol" >Consumption</td>
 <td >20788</td>
 <td >20181</td>
 <td >19460</td>
 <td >18554</td>
 <td >18010</td>
 <td>18021</td>
 <td >17210</td>
 </tr>
 <tr class="odd">
 <td class="firstcol">Production</td>
 <td >20606</td>
 <td >19978</td>
 <td >19303</td>
 <td >18432</td>
 <td >18517</td>
 <td>18055</td>
 <td >17434</td>
 </tr>

 



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The price of copper has more than tripled from its low point of $1.2474 per pound on December 24, 2008 to $3.9950 on December 3rd of this year, as can be seen in the first chart which shows the price of copper found in the Haver data [...]

Copper Consumption, Production, Stocks and Prices in Haver Databases

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<a href="/comment/101206b_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/101206b.png" align="left"></a>
<a href="/comment/101206c_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/101206c.png"></a>
Tentative indications of improvement in U.S. economic
activity began recently to lift interest rates. Short-term rates have risen
slightly as investors' fear near-term action by the Federal Reserve. Amongst the
economic indications are lower initial claims for jobless insurance, higher
vehicle and home sales as well as improved ISM readings on factory and service
sector activity. Last week's report of weakness in nonfarm payrolls is expected
to improve with this month's figures. Investor fears
generally are not shared, however, by economists. Through year-end 2011 the
National Association for Business Economics (NABE) survey has left short-term
rates unchanged from current levels.&nbsp;
 The prospect of the Fed keeping short-term rates low, along
with economic improvement, has lifted long-term rates. Investors fear the
ultimate inflationary consequences and the need for greater Fed tightening,
later. Economists generally share this concern and see the 10-Yr. Treasury rate
at 3.25% in twelve months. In a recent television interview, Fed Chairman Ben S.
Bernanke downplayed these inflationary fears. Mortgage rates
rates also have moved up modestly to date. The rate on 15-year fixed rate
mortgages has inched up to 3.81% from its low one month ago of 3.57%. As might
be expected rates on adjustable rate mortgages have not risen from the 3.25%
low.
Interest rate data are available in Haver's USECON, WEEKLY and
DAILY databases. The NABE figures can be found in the SURVEYS
database.&nbsp;
<a href="/comment/101206d_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/101206d.png" align="left"></a>
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<table class="centered" border="0" cellSpacing="0" width="100%">
 <colgroup><col><col><col><col><col><col><col><col></colgroup> 
 <thead>
 <tr>
 <th class="firstcol" scope="col" ><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM" ;>U.S.
 Interest Rates</a></th>
 <th scope="col" >Latest</th>
 <th scope="col" >Nov.</th>
 <th scope="col" >Oct.</th>
 <th scope="col" >Dec. '09</th>
 <th scope="col" >2009</th>
 <th scope="col" >2008</th>
 <th scope="col" >2007</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Fed Funds</td>
 <td >0.20</td>
 <td >0.19</td>
 <td >0.19</td>
 <td >0.12</td>
 <td >0.16</td>
 <td >1.93</td>
 <td >5.02</td>
 </tr>
 <tr>
 <td class="firstcol" >1 Month Treasury</td>
 <td >0.16</td>
 <td >0.13</td>
 <td >0.14</td>
 <td >0.03</td>
 <td >0.10</td>
 <td >1.29</td>
 <td >4.40</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >1 Year Treasury</td>
 <td >0.29</td>
 <td >0.25</td>
 <td >0.23</td>
 <td >0.37</td>
 <td >0.47</td>
 <td >1.82</td>
 <td >4.52</td>
 </tr>
 <tr>
 <td class="firstcol" >5 Year Treasury</td>
 <td >1.68</td>
 <td >1.35</td>
 <td >1.18</td>
 <td >2.34</td>
 <td >2.19</td>
 <td >2.80</td>
 <td >4.43</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >10 Year Treasury</td>
 <td >3.01</td>
 <td >2.76</td>
 <td >2.54</td>
 <td >3.59</td>
 <td >3.26</td>
 <td >3.67</td>
 <td >4.63</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Corporate Bond&nbsp; Aaa </td>
 <td >4.95</td>
 <td >4.87</td>
 <td >4.68</td>
 <td >5.26</td>
 <td >5.31</td>
 <td >5.64</td>
 <td >5.56</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >15-Year Fixed Rate Mortgage (FHLMC)</td>
 <td >3.81</td>
 <td >3.68</td>
 <td >3.68</td>
 <td >4.35</td>
 <td >4.58</td>
 <td >5.63</td>
 <td >6.03</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >One-Year ARM</td>
 <td >3.25</td>
 <td >3.25</td>
 <td >3.38</td>
 <td >4.30</td>
 <td >4.71</td>
 <td >5.18</td>
 <td >5.56</td>
 </tr>
 </tbody>
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Tentative indications of improvement in U.S. economic activity began recently to lift interest rates. Short-term rates have risen slightly as investors' fear near-term action by the Federal Reserve. Amongst the economic indications [...]

U.S. Interest Rates Begin To Nudge Higher

Recent labor market improvement backpedaled last month. Nonfarm payrolls rose just 39,000 after an upwardly revised 172,000 October increase. The rise disappointed Consensus forecasts for a 142,000 gain. Also disappointing was the [...]

U.S. Payroll Increase Is Disappointing While Jobless Rate Increases

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 Recent labor market improvement backpedaled last month. Nonfarm
 payrolls rose just 39,000 after an upwardly revised 172,000 October
 increase. The rise disappointed Consensus forecasts for a 142,000 gain.
 Also disappointing was the rise in the unemployment rate to 9.8%, its
 highest since April.
 
 
 Accompanying the weak headline figures were discouraging details. The
 breadth of gain in payrolls fell to just 52% of industries, the lowest of
 the current expansion. Average hourly earnings were unchanged m/m and the
 annual gain of 2.1% matched its weakest since 2004.&nbsp;
 
 
 Within the establishment survey, indications of
 weaker hiring were broad-based. The weakest was the slight 65,000 worker
 increase in private service sector hiring. The gain was the smallest since
 June. It reflected broadly weaker increases across industries as well as
 monthly declines in finance (-1.2% y/y) and retail trade (+0.4% y/y).
 Showing the disinterest in hiring full-timers, temporary help jobs rose by
 39,500 (19.2% y/y). Continuing to the downside were factory and
 construction sector payrolls, though the rates of decline have slowed
 significantly from their worst. In the public sector, payrolls fell 11,000
 led by a decline (-1.8% y/y) in local gov't jobs which continue to fall
 with lower tax revenues. Federal gov't employment rose just 2,000 (0.1%
 y/y) as the government continues to face large budget deficits.&nbsp;
 Accompanying the weak payroll figures was the
 rise to 9.8% in the unemployment rate, as calculated in the household
 survey. A 9.6% rate had been expected. The increase reflected a 173,000
 drop (+0.4% y/y) in employment following a 330,000 October decline.
 Moreover, a 103,000 increase (0.2%) in the labor force failed to recoup
 October's drop. The more comprehensive unemployment rate, which includes
 marginally attached workers and those who work part time but would prefer
 a full-time job, remained at 17.0%. Forty-two percent of individuals have
 been unemployed for 27 weeks or longer, down just slightly from the May
 high.
 The household survey also showed that those
 unemployed were jobless for a near-record 33.8 weeks, on average.
 Forty-two percent of individuals had been unemployed for 27 weeks or more.
 That resulted in a 2.2% rise in the number of individuals not in the labor
 force, with those &quot;not looking because of discouragement over job
 prospects&quot; up by nearly one-half y/y.
 
 The figures referenced above are available in Haver's USECON
 database. Additional detail can be found in the LABOR and in the EMPL
 databases.
 How Do Sudden Large Losses In Wealth Affect Labor Force
 Participation? from the Federal Reserve Bank of Chicago can be found
 here <a href="http://www.chicagofed.org/digital_assets/publications/chicago_fed_letter/2011/cfljanuary2011_282.pdf">http://www.chicagofed.org/digital_assets/publications/chicago_fed_letter/2011/cfljanuary2011_282.pdf</a>
 <table class="centered" width="888" border="0" cellspacing="0">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="290">Employment: 000s</th>
 <th scope="col" width="84">Nov.</th>
 <th scope="col" width="85">Oct.</th>
 <th scope="col" width="85">Sept.</th>
 <th scope="col" width="85">Y/Y</th>
 <th scope="col" width="85">2009</th>
 <th scope="col" width="85">2008</th>
 <th scope="col" width="85">2007</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="290">Payroll Employment</td>
 <td align="center" width="84">39</td>
 <td align="center" width="85">172</td>
 <td align="center" width="85">-24</td>
 <td align="center" width="85">0.6%</td>
 <td align="center" width="85">-4.3%</td>
 <td align="center" width="85">-0.6%</td>
 <td align="center" width="85">1.1%</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="290">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Previous</td>
 <td align="center" width="84"></td>
 <td align="center" width="85">151</td>
 <td align="center" width="85">-41</td>
 <td align="center" width="85">--</td>
 <td align="center" width="85">--</td>
 <td align="center" width="85">--</td>
 <td align="center" width="85">--</td>
 </tr>
 <tr>
 <td class="firstcol" width="290">&nbsp;&nbsp;Manufacturing</td>
 <td align="center" width="84">-13</td>
 <td align="center" width="85">-11</td>
 <td align="center" width="85">-6</td>
 <td align="center" width="85">0.8%</td>
 <td align="center" width="85">-11.3%</td>
 <td align="center" width="85">-3.4%</td>
 <td align="center" width="85">-2.0%</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="290">&nbsp;&nbsp;Construction</td>
 <td align="center" width="84">-5</td>
 <td align="center" width="85">3</td>
 <td align="center" width="85">-11</td>
 <td align="center" width="85">-2.0%</td>
 <td align="center" width="85">-15.7%</td>
 <td align="center" width="85">-6.1%</td>
 <td align="center" width="85">-0.8%</td>
 </tr>
 <tr>
 <td class="firstcol" width="290">&nbsp;&nbsp;Private Service
 Producing</td>
 <td align="center" width="84">65</td>
 <td align="center" width="85">157</td>
 <td align="center" width="85">122</td>
 <td align="center" width="85">1.1%</td>
 <td align="center" width="85">-3.4%</td>
 <td align="center" width="85">-0.2%</td>
 <td align="center" width="85">1.7%</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="290">&nbsp;&nbsp;Government</td>
 <td align="center" width="84">-11</td>
 <td align="center" width="85">12</td>
 <td align="center" width="85">-136</td>
 <td align="center" width="85">-1.1%</td>
 <td align="center" width="85">0.2%</td>
 <td align="center" width="85">1.3%</td>
 <td align="center" width="85">1.1%</td>
 </tr>
 <tr>
 <td class="firstcol" width="290">Average Weekly Hours</td>
 <td align="center" width="84">34.3</td>
 <td align="center" width="85">34.3</td>
 <td align="center" width="85">34.2</td>
 <td align="center" width="85">33.9 
 (Nov.'09)</td>
 <td align="center" width="85">33.1</td>
 <td align="center" width="85">33.6</td>
 <td align="center" width="85">33.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="290">Average Hourly Earnings</td>
 <td align="center" width="84">0.0%</td>
 <td align="center" width="85">0.4%</td>
 <td align="center" width="85">0.1%</td>
 <td align="center" width="85">2.1%</td>
 <td align="center" width="85">3.0%</td>
 <td align="center" width="85">3.8%</td>
 <td align="center" width="85">4.0%</td>
 </tr>
 <tr>
 <td class="firstcol" width="290">Unemployment Rate (%)</td>
 <td align="center" width="84">9.8</td>
 <td align="center" width="85">9.6</td>
 <td align="center" width="85">9.6</td>
 <td align="center" width="85">10.0 (Nov.'09)</td>
 <td align="center" width="85">9.3</td>
 <td align="center" width="85">5.8</td>
 <td align="center" width="85">4.6</td>
 </tr>
 </tbody>
 </table>
 
 
 

&nbsp;




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Carol Stone, CBE

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<a href="/comment/101203j_big.png" name="modal"><img class="large" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/101203j.png" align="left"></a>
As indicated by the advance report on durable goods industries last week, the
total manufacturing sector appears to have lost some momentum in the last few
months through October.&nbsp; Shipments of manufactured goods rose just 0.3% in
October (+6.8% y/y) and new orders fell 0.9% (+8.9% y/y).&nbsp; Revisions to
durable goods previously reported were mild; shipments are still seen with a
0.9% decline in the month and orders were shaved to a 3.4% decrease from 3.3% in
the advance release.&nbsp; Nondurable goods shipments rose 1.5% in October and
were 7.7% above year-ago amounts; while this looks good, it compares to gains
back during the spring at about twice that year-to-year rate.&nbsp; 
Factory inventories are growing, with October's up 0.9% (+5.8% from a year
ago).&nbsp; The inventory/shipments ratio ticked up in October to 1.28 from 1.27
in September; it is about the same as a year ago, but higher than last winter
when shipments seemed stronger.&nbsp; Inventories at all three stages of
fabrication are rising; the increases in materials &amp; supplies, +4.8% y/y,
and work-in-process, +7.7% y/y, suggest that factory managers may believe their
demand is moving ahead, so they should rebuild stocks.&nbsp; But the increase in
finished goods, +5.1% y/y, could be associated with the recent moderation in
shipments, a less desirable development.
Thus, while there are some signs of improving activity, these continue to
look quite uneven and tenuous.
The Manufacturers' Shipments, Inventories and Orders (MSIO) data are
available in Haver's USECON database. 
 <a href="/comment/101203k_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/101203k.png"></a>
<a href="/comment/101203l_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/101203l.png"></a>
 <table class="centered" border="0" cellSpacing="0" width="100%">
 <colgroup><col><col><col><col><col><col><col><col></colgroup>
 <thead>
 <tr>
 <th class="firstcol" scope="col" ><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">U.S.
 Manufacturing Sector</a> (NAICS, %)</th>
 <th scope="col" >Oct</th>
 <th scope="col" >Sept</th>
 <th scope="col" >Aug</th>
 <th scope="col" >Y/Y</th>
 <th scope="col" >2009</th>
 <th scope="col" >2008</th>
 <th scope="col" >2007</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Inventories</td>
 <td>0.9</td>
 <td>1.1</td>
 <td>0.4</td>
 <td>5.8</td>
 <td>-8.8</td>
 <td>-0.8</td>
 <td>7.6</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >New Orders</td>
 <td>-0.9</td>
 <td>3.0</td>
 <td>0.0</td>
 <td>8.9</td>
 <td>-17.8</td>
 <td>-1.0</td>
 <td>8.7</td>
 </tr>
 <tr>
 <td class="firstcol" >Shipments</td>
 <td>0.3</td>
 <td>0.7</td>
 <td>-0.2</td>
 <td>6.8</td>
 <td>-15.6</td>
 <td>2.3</td>
 <td>6.4</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Unfilled Orders</td>
 <td>0.6</td>
 <td>1.3</td>
 <td>0.2</td>
 <td>1.8</td>
 <td>-11.1</td>
 <td>2.8</td>
 <td>31.2</td>
 </tr>
 </tbody>
</table>




</html>

As indicated by the advance report on durable goods industries last week, the total manufacturing sector appears to have lost some momentum in the last few months through October. Shipments of manufactured goods rose just 0.3% in [...]

U.S. Factory Shipments & Inventories Continue To Throw Off Mixed Signals

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</head>
<body>

 



<a href="/comment/101203f_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/101203f.png"></a>
<a href="/comment/101203g_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/101203g.png"></a>
For the third consecutive month the U.S. service sector improved. The
November Composite Index for the service and construction sectors from the
Institute for Supply Management (ISM) rose to 55.0 from 54.3 in October. The
latest beat Consensus expectations for a reading of 54.7 and it remained up from
a low of 37.2 late in 2008. Since the series' inception in 1997 there has been a
65% correlation between the level of the composite index in the nonmanufacturing
sector and the q/q change in real GDP for the services and the construction
sectors.
The performance of the components of the ISM Index was mostly positive last
month. Only the business activity slipped to 57.0 from its highest level since
June. The new orders series rose to its highest since April. Finally, the
employment figure increased to the highest level since 2007. Sixteen percent
(NSA) of respondents increased hiring while a lessened 11% reported fewer jobs.
Since the series' inception in 1997 there has been an 80% correlation between
the level of the ISM nonmanufacturing employment index and the m/m change in
payroll employment in the service-producing plus the construction industries.
The supplier deliveries index increased as delivery speeds slowed a bit.
The pricing power index fell back and reversed half of its October increase.
A lessened twenty-eight percent of respondents reported higher prices while 5%
reported them lower. At the worst, late in 2008, 41% reported lower prices.
Since its inception ten years ago, there has been a 71% correlation between the
price index and the q/q change in the GDP services chain price index.
Beginning with the January 2008 Nonmanufacturing <cite>Report On Business ®,
</cite>the composite index is calculated as an indication of overall economic
conditions for the non-manufacturing sector. It is a composite index based on
the diffusion indices of four of the indicators (business activity, new orders,
employment and supplier deliveries) with equal weights.
The ISM data are available in Haver's USECON database.
<a href="/comment/101203h_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/101203h.png"></a>
<a href="/comment/101203i_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/101203i.png"></a>
<table class="centered" border="0" cellSpacing="0" width="100%">
 <colgroup><col><col><col><col><col><col><col><col></colgroup> 
 <thead>
 <tr>
 <th class="firstcol" scope="col" ><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM" ;>ISM
 Nonmanufacturing Survey</a></th>
 <th scope="col" >Nov.</th>
 <th scope="col" >Oct.</th>
 <th scope="col" >Sept.</th>
 <th scope="col" >Nov. '09</th>
 <th scope="col" >2009</th>
 <th scope="col" >2008</th>
 <th scope="col" >2007</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Composite Index</td>
 <td>55.0</td>
 <td>54.3</td>
 <td>53.2</td>
 <td>48.4</td>
 <td>46.2</td>
 <td>47.3</td>
 <td>53.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;&nbsp;&nbsp;Business Activity</td>
 <td>57.0</td>
 <td>58.4</td>
 <td>52.8</td>
 <td>49.6</td>
 <td>48.0</td>
 <td>47.4</td>
 <td>56.0</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;&nbsp;&nbsp;New Orders</td>
 <td>57.7</td>
 <td>56.7</td>
 <td>54.9</td>
 <td>53.7</td>
 <td>47.9</td>
 <td>47.0</td>
 <td>54.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;&nbsp;&nbsp;Employment</td>
 <td>52.7</td>
 <td>50.9</td>
 <td>50.2</td>
 <td>41.7</td>
 <td>39.9</td>
 <td>43.8</td>
 <td>52.0</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;&nbsp;&nbsp;Supplier
 Deliveries (NSA)</td>
 <td>52.5</td>
 <td>51.0</td>
 <td>55.0</td>
 <td>48.5</td>
 <td>49.0</td>
 <td>51.1</td>
 <td>51.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Prices Index</td>
 <td>63.2</td>
 <td>68.3</td>
 <td>60.1</td>
 <td>57.1</td>
 <td>49.4</td>
 <td>66.0</td>
 <td>63.8</td>
 </tr>
 </tbody>
</table>


</body>

</html>

For the third consecutive month the U.S. service sector improved. The November Composite Index for the service and construction sectors from the Institute for Supply Management (ISM) rose to 55.0 from 54.3 in October. The latest beat [...]

U.S. ISM Nonmanufacturing Index Improves Further

PMIs showing widespread revival of global economy

Crude oil price has returned to pre-conflict level but traffic through Hormuz still subpar

Surging orders for computers and electronics propelling durable goods orders

Next year's inflation forecasts are on the rise and above target

Disrupted global supply chains placing upward pressure on US goods prices

Construction of data centers has overtaken transportation construction in US

Elevated energy prices putting intense upward pressure on input prices around the globe

US is big leader in global surge in private AI investment

Larger-than-usual income tax refunds this year are supporting consumer spending

Sharply rising share of AI-related jobs

Inflationary impact of surge in oil prices larger in Europe than in the US

Futures market thinks the price of oil will recede significantly over the next six months

Recent pickup in US defense orders could help support overall growth ahead

Cost of transporting crude oil has soared to series high

Market-based inflation expectations have not yet reflected recent surge in oil prices

Global equity markets are fearing a major economic disruption from soaring oil prices

Is recent drop in sentiment signaling softer growth ahead?

With the Iran conflict, geopolitical risk has soared to alarming levels

Soaring AI-related investment in US underpinning strong contribution of business spending to overall growth

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

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Kathleen Stephansen, CBE

260709A1.jpg

260709B1.jpg

Initial claims for unemployment insurance declined 2,000 to 215,000 in the week ending July 4, from 217,000 in the week ending June 27, revised from 215,000. The four-week average was 218,750 in the July 4 week, down from 222,500 in the week ending June 27. The Action Economics/Haver Analytics Survey looked for 218,000 claims to have been filed. 

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—rose by 8,000 to 1.814 million in the week ending June 27, from 1.806 million in the week ending June 20, revised from 1.814 million. The four-week moving average rose to 1.808 million in the June 27 week from 1.801 million in the June 20 week. The insured unemployment rate was unchanged at 1.2% in the week of June 27. Except for a one-week dip to 1.1% in the week of April 25, the insured unemployment rate has been at 1.2% since the week of November 29, 2025.

The insured unemployment rate varied greatly across individual states and territories. In the week ending June 20, the highest unemployment rates were in Washington (2.03%), New Jersey (2.11%), Minnesota (2.15%), and Puerto Rico (2.45%). The lowest rates were in South Dakota (0.28%), Florida (0.35%), Alabama and North Carolina (both 0.41%), Louisiana (0.42%), and Arkansas (0.49%). Rates in other notable states include California (1.88%), Pennsylvania (1.63%), Illinois (1.58%), New York (1.52%), and Texas (1.12%). These state data are not seasonally adjusted.

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

260709C1.jpg

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- New claims declined by 2,000 to 215,000 in the week ending July 4.
- Continuing claims rose by 8,000 to 1.814 million in the week ending June 27.
- The insured unemployment rate was unchanged at 1.2% in the week of June 27.

U.S. Initial Unemployment Claims Declined in the Week of July 4

Andrew Cates

**Growth Surprises Continue to Underpin Equity Resilience**
Global equity markets have proved remarkably resilient in recent weeks, shrugging off intermittent bouts of geopolitical and policy uncertainty to grind higher. Chart 1 below helps explain why: it tracks the relationship between global growth-versus-inflation surprises and world equity markets, and on that measure the recent run of global growth data has continued to surprise on the upside relative to inflation outturns — a combination that has historically been supportive for risk assets. Whether that resilience persists will depend on whether the growth-surprise advantage evident in the chart below can be sustained in the face of the inflationary pressures explored below.

260709Z1.jpg

**PMIs Confirm a Broadly Solid Global Expansion**
This week's final composite PMI readings for June reinforced the broader impression of resilient global growth. As chart 2 below shows, most major economies posted readings comfortably in expansionary territory, with India continuing to lead the pack and the US not far behind. Even the laggards in the sample are hovering close to the expansion threshold rather than falling decisively below it, suggesting stabilisation rather than outright contraction (and with the UK a notable exception).

260709Z2.jpg

**Inflation Surprises Are Creeping Back, and Bond Yields Are Taking Notice**
The US growth picture painted by Haver's surprise indices broadly echoes the message from the global PMI data. Chart 3 below shows the combined growth-and-inflation surprise index drifting higher this week, and closer inspection suggests growth is doing most of that work, with activity data continuing to outperform expectations. That is, on the face of it, good news. But it has not stopped bond markets from taking notice: short-dated Treasury yields have remained elevated in recent weeks, as stronger growth keeps alive the possibility that the Federal Reserve holds rates higher for longer or even lifts them in coming weeks.

260709Z3.jpg

**Supply Chains Are Tightening** 
Latest data show that global supply chain pressures tightened by less in June than they had the month before, likely reflecting the easing of Middle East tensions through much of the period. Chart 4 below shows that pressures troughed in the middle of last year and have been building gradually since, though June's slower pace of tightening suggests that easing had started to feed through. Still, today's flare-up threatens to undo that improvement, particularly if it affects shipping routes or energy flows through the region once again.

260709Z4.jpg

**Extreme Weather: An Old Supply-Side Risk Returns**
Geopolitics is not the only source of supply-side risk currently in play. Large parts of Europe have been gripped this week by another intense and prolonged heatwave, with temperatures in several major cities running well above seasonal norms. Extreme heat of this kind carries real economic costs: it depresses labour productivity, particularly in outdoor and manufacturing-adjacent sectors, strains electricity grids as air-conditioning demand spikes, and can disrupt agricultural output and river-based transport when water levels fall. Episodes like this have become more frequent in recent years, and while any single heatwave rarely shifts the macro picture on its own, the cumulative effect of more frequent and more severe weather events could start showing up in productivity and inflation data across the advanced economies. It is a reminder that the supply side of the global economy faces structural as well as cyclical challenges, and that climate-related disruption deserves a permanent place alongside geopolitics and demographics in any assessment of medium-term inflation risk.

260709Z5.jpg

**AI Investment: The Other Side of the Supply Equation**
Set against these supply-side headwinds is a genuinely positive structural development: the extraordinary scale of private investment now flowing into artificial intelligence. Chart 6 below shows just how sharply that investment has grown in recent years, reaching a fresh high last year. If even a fraction of that investment translates into genuine productivity gains, it could provide a meaningful long-run offset to the energy, climate and geopolitical constraints highlighted elsewhere in this week's charts. The scale of the bet now being placed on AI is large enough that it is beginning to show up in aggregate investment and capital expenditure data across the advanced economies, and it is likely to remain one of the defining structural themes shaping the global growth outlook over the remainder of this decade.

260709Z6.jpg

Global markets head into this week’s closing stages digesting a mixed set of signals. Last week's US non-farm payrolls report undershot expectations, adding to questions about the durability of the US labour market even as broader activity data have continued to hold up well. Compounding that picture, news broke today of renewed instability in the Middle East, reintroducing a geopolitical risk premium into markets just as investors had begun to look past it. Global equity markets have nonetheless remained resilient, continuing to track the broadly encouraging tone of incoming activity data (chart 1). That resilience was reinforced by a solid set of global PMIs across most major economies over the past few days (chart 2). Haver's surprise indices tell a similar story of positive growth momentum in the US, but with an important caveat: incoming inflation data have also been surprising to the upside, driven largely by higher oil prices (chart 3). These inflation risks could persist moreover, as global supply chain pressures have picked up in recent months and today's flare-up in the Middle East threatens to add further strain (chart 4). The world economy remains vulnerable to other supply-side shocks too, such as the extreme heat gripping much of Europe this week (chart 5). Still, on the other side of the ledger the enormous scale of investment now flowing into artificial intelligence could be a genuine source of supply-side potential (chart 6).

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/0dl4LKZaL1oTC5UPIaqrA9?utm_source=generator&si=7aa69345dbfd4ac4" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: Growth Holds Firm

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Mortgage applications dropped 2.2% w/w (-5.4% y/y) in the week ending July 3, following no change in the week ending June 26, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications for loans to purchase a house edged down 0.6% w/w (-6.3% y/y) in the latest week, after rising 0.5% w/w (3.2% y/y) in the June 26 week.  Applications for loan refinancing dropped 4.1% w/w (-4.2% y/y) in the week ending July 3, after declining 0.7% w/w (+9.1% y/y) in the June 26 week.

The effective interest rate on a 30-year fixed-rate loan rose 1bp to 6.77% in the week ending July 3 from 6.76% in the week ending June 26. The rate on 15-year fixed-rate mortgages edged down 2bps to 6.17% in the July 3 week from 6.19% in the June 26 week. The 30-year Jumbo rate edged down 1bp to 6.62% in the latest week from 6.63% in the June 26 week. The rate on a 5-year ARM rose 5bps to 6.19% in the July 3 week from 6.14% in the June 26 week.

The share of applications for refinancing an existing loan declined to 40.6% of total applications in the week of July 3 from 41.4% in the June 26 week. The adjustable-rate mortgage (ARM) share of activity edged up to 7.8% in the July 3 week from 7.6% in the June 26 week.

The average size of a mortgage declined 0.4% w/w (+1.3% y/y) to $391,500 in the week ending July 3, after rising 1.1% w/w (0.4% y/y) to $393,200 in the week ending June 26. The average size of a purchase loan declined 1.0% w/w (+4.3% y/y) to $451,000 in the latest week, after rising 1.2% w/w (2.7% y/y) to $455,600 in the June 26 week. The average size of a loan to refinance a mortgage edged down 0.1% w/w (-3.9% y/y) to $304,600 in the week ending July 3, after rising 0.5% w/w (-2.8% y/y) to $304,900 in the June 26 week.

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.

- Both applications for loans to purchase and applications for loan refinancing declined in the latest week.
- Interest rate on 30-year fixed-rate loans rose 1bp to 6.77%. 
- Average loan size edged down.

U.S. Mortgage Applications Retrenched in the July 3 Week

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**The Clash!**
The U.S.-Iranian clash in the Middle East resulted in a closure of the Strait of Hormuz that collapsed the economy watchers index in Japan earlier this year. However, as the war-like conditions settled down and the two sides have moved toward some kind of cease fire or a more permanent arrangement, in the wake of that comparative tranquility, the economy watchers index improved, and its future index improved more sharply. These comments applied to the data in the table and conditions up to the end of June.

**New day dawning...**
However, the data in the table are unrelated to what has happened in the past two days, when Iran took potshots at a couple of ships in the Strait, causing the U.S. to retaliate and President Trump to declare that the ceasefire has now ended. The door remains open for some kind of talks; however, the president’s recent remarks carried in the newspapers has clearly stated that the ceasefire has ended, and the U.S. intends to hit Iran and has suggested that it intends to hit it ‘hard.’ At the same time, Mr. Trump has said the door remains open to continuing talk and negotiations if both sides still want to get together; however, he admits he is not optimistic.

**Precarious times and conditions**
So, these are precarious conditions. Oil prices have already responded and moved higher. We have Japan’s economic data for June showing some revival in the current index and some sharply higher revivals over the last few months in the future index. However, when the dust clears the queue standings of the current and future indexes are revealed, they are pretty similar, with the current index at a standing of 29.6% and the future index of 31.6%. Both the current and future readings coalesce around a 30-percentile standing, marking the two segments of the survey as usually stronger about 70% of the time which marks the latest readings as relatively weak. And that is before we take the new realities of July into account.

**The current IS the future...**
There isn't too much point in talking about the two parts of the survey separately. The current and future surveys are simply not that different. This month, the lowest percentile standing in the current subindexes is housing, at an 11.5 percentile standing, followed by employment at a 17.8 percentile standing. In the future index, housing has an 11.1 percentile standing and employment has an 18.6 percentile standing; these readings are also the two lowest rankings in the future survey.

**Sequential improvement is only point-to-point**
Over three months, we can see the point-to-point changes in the current index and some improvements in all of the components except housing. In the future index, the three-month changes show point-to-point improvements in all of the components. However, both surveys show point-to-point declines over six months and broad point-to-point declines over 12 months as well. Looking at the changes based on smooth data (shown at the bottom of the table), for the three-month averages compared to six-month averages and six-month averages compared to 12-month averages, conditions show no improvement. We see no improvements in the current or future indexes over three months or six months, and no improvement in the future index in the 12-month average compared to 12-month average of 12 months ago—although 40% of the components in the current index are improved over 12 months compared to 12 months ago.

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**Summing up**
The bottom line here seems to be that the opening of the armed conflict in Iran that led to the closure of the Strait of Hormuz was a terrible blow according to the economy watchers. However, once conditions settled down, the willingness to believe that conditions were going to get better and eventually open the Strait led to improved perceptions as things appeared to be headed back toward normal. Now, war-like conditions are back into effect for a period that's more recent than the tabular data can address. It seems likely that we are going to see the indexes decline once again if this current rupture in the normalization process is unable to be repaired soon. The responses and changes in the economy watchers index illustrate a couple of things: one, being that the Strait of Hormuz is very important; two, being that the survey participants were willing to believe that the former war participants could act in a civilized manner and reopen the Strait. The question now is whether the survey participants can believe that after one normalization agreement fell apart, the next agreement is one that they can believe in. That's what we will be waiting to see.

Japan

Economy Watchers Poll Marks Revival—Still Weak; What’s Next Now with a New Rift?

Sandy Batten

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The U.S. trade deficit in goods and services (BOP basis) widened markedly to $77.6 billion in May from a downwardly revised $54.6 billion in April (previously -$55.9 billion), according to the U.S. Census Bureau. The Action Economics Forecast Survey looked for a deficit of $78.6 billion. The goods deficit widened to $106.5 billion in May, the largest monthly shortfall since March 2025 when imports flooded in ahead of expected tariff increases, from a downwardly revised $82.9 billion in April (previously -$83.7 billion) while the services surplus widened to $28.9 billion in May from an upwardly revised $28.3 billion in April (previously +$27.8 billion).

The real (inflation-adjusted) trade deficit in goods widened to $100.0 billion (2017$) in May from an unrevised $84.3 billion in April. The April/May average is considerably higher than the Q1 average although some of this reflects a decline in exports of nonmonetary gold and other precious metals that are not included in the calculation of GDP. Still, the May report implies that net exports will once again subtract from overall GDP growth in Q2. They subtracted 0.37%-point in Q1.

Exports of goods and services fell 3.2% m/m (+12.6% y/y) in May following an upwardly revised 3.0% monthly increase in April (previously +2.6% m/m). This was the first monthly decline in exports since last December. Goods exports (Census basis) slumped 5.3% m/m (+15.1% y/y) led by outsized declines in exports of nonmonetary gold and other precious metals. In dollar terms, goods exports declined $11.6 billion in May. A $7.5 billion decline in exports of nonmonetary gold and other precious metals accounted for 65% of that decline. However, exports of capital goods ex autos (-4.9% m/m) and nonfood consumer goods ex autos exports (-9.1% m/m) were also very weak. Service exports edged up 0.7% m/m (6.6% y/y) in May following a 0.1% monthly rise in April. Travel service exports rebounded 2.4% m/m in May after having declined in both March and April. Transport exports rose 1.1% m/m in May, their third consecutive monthly gain. Over the past three months, transport exports have increased 6.7%.

Imports of goods and services increased 3.3% m/m (13.3% y/y) in May for their fourth consecutive monthly gain. Over the four months to May, imports rose 11.7%. Goods imports (Census basis) jumped 4.0% m/m (15.3% y/y) in May after a 1.9% monthly gain in April. Imports rose in every major end-use category in May, led by a 10.3% m/m jump in “other” imports, a 6.3% m/m rise in auto imports, a 6.2% m/m increase in nonfood consumer goods imports ex autos, and a 5.8% m/m rise in industrial supplies imports. Service imports increased 0.3% m/m (5.1% y/y) in May, slowing from a 1.6% monthly gain in April. Performance varied meaningfully across end-use categories. Imports of insurance services rose 1.4% m/m, their sixth consecutive monthly rise. Imports of personal and recreational services increased 1.1% m/m in May. Imports of financial services rose 0.6% m/m. By contrast, imported maintenance and repairs services slumped 3.9% m/m, their second monthly decline in the past three months. Imported intellectual property fell 0.3% m/m, their fourth monthly decline in the past five months. Imports of transport services declined 0.4% m/m, their fourth monthly decrease in the past five months.

By country, the goods trade deficit with China widened to $14.5 billion in May from $12.0 billion in April. The trade deficit with the European Union widened to $9.3 billion in May from $7.2 billion in April. The trade deficit with Japan declined to $2.0 billion in May from $2.8 billion in April.

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

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- The deficit in goods and services widened to $77.6 billion in May from $54.6 billion in April.
- Exports slumped 3.2% m/m, led by an outsized fall in exports of nonmonetary gold and other precious metals.
- Imports increased by 3.3% m/m with increases in each major end-use category.
- The goods deficit widened to $106.5 billion, while the services surplus widened to $28.9 billion.

Economy in Brief

Jump to:

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U.S. Interest Rates Begin To Nudge Higher

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