Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071120a.jpg" width="353">
Overall, good weather helped housing starts to post a surprising 3.0% m/m gain in October to 1.229M units. Consensus expectations had been for little change at 1.20M starts and the prior month&#39;s level was little revised.
The surprise was that starts of multi-family structures recovered virtually all the prior month&#39;s plunge with a 44.4% rebound. It was from the lowest level since 1994.
Single-family starts continued downward for the seventh consecutive month with a 7.3% m/m decline. At 884M units single family starts fell to their lowest since 1991, off by more than one-half from the peak early last year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071120b.jpg" width="353">
By region, single family starts in the South suffered the worst m/m drop in a year with a 19.5% fall, down 56% from the 2006 peak. In the West single family starts fell 8.1% m/m but starts are off nearly two-thirds from the 2005 peak level. In the Midwest starts rose 15.% to finish 48% below the 2006 peak and single family starts in the Northeast rose for the second consecutive month with a 29.5% rise, but they&#39;re still 42% below the recent peak.
Continuing with downward momentum, building permits fell 6.6% (-24.5% y/y) for the fifth straight m/m decline. Single-family permits fell 8.0% (-31.0% y/y) and multi-family permits fell as well.
Asset Price Bubbles from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>1,229</td>
<td>1,193</td>
<td>-16.4%</td>
<td>1,812</td>
<td>2,073</td>
<td>1,950</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-Family</td>
<td>884</td>
<td>954</td>
<td>-25.1%</td>
<td>1,474</td>
<td>1,719</td>
<td>1,604</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-Family</td>
<td>345</td>
<td>239</td>
<td>9.4%</td>
<td>338</td>
<td>354</td>
<td>345</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>1,178</td>
<td>1,261</td>
<td>-24.5%</td>
<td>1,842</td>
<td>2,159</td>
<td>2,058</td>
</tr>
</tbody>
</table>
</body>
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Overall, good weather helped housing starts to post a surprising 3.0% m/m gain in October to 1.229M units. Consensus expectations had been for little change at 1.20M starts and the prior month's level was little revised. The surprise [...]

U.S. Housing Starts Total Up Unexpectedly; Single Family & Permits Down

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071120a.jpg" align="left" border="0" height="265" width="353">
Overall, good weather helped housing starts to post a
surprising 3.0% m/m gain in October to 1.229M units. Consensus
expectations had been for little change at 1.20M starts and the prior
month's level was little revised.
The surprise was that starts of multi-family structures
recovered virtually all the prior month's plunge with a 44.4% rebound.
It was from the lowest level since 1994.
Single-family starts continued downward for the seventh
consecutive month with a 7.3% m/m decline. At 884M units single family
starts fell to their lowest since 1991, off by more than one-half from
the peak early last year.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071120b.jpg" align="right" border="0" height="265" width="353">
By region, single family starts in the South suffered the
worst m/m drop in a year with a 19.5% fall, down 56% from the 2006
peak. In the West single family starts fell 8.1% m/m but starts are off
nearly two-thirds from the 2005 peak level. In the Midwest starts rose
15.% to finish 48% below the 2006 peak and single family starts in the
Northeast rose for the second consecutive month with a 29.5% rise, but
they're still 42% below the recent peak.
Continuing with downward momentum, building permits fell 6.6%
(-24.5% y/y) for the fifth straight m/m decline. Single-family permits
fell 8.0% (-31.0% y/y) and multi-family permits fell as well.
Asset Price Bubbles from the Federal
Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing
Starts (000s, AR)</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>1,229</td>
<td>1,193</td>
<td>-16.4%</td>
<td>1,812</td>
<td>2,073</td>
<td>1,950</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-Family</td>
<td>884</td>
<td>954</td>
<td>-25.1%</td>
<td>1,474</td>
<td>1,719</td>
<td>1,604</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-Family</td>
<td>345</td>
<td>239</td>
<td>9.4%</td>
<td>338</td>
<td>354</td>
<td>345</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>1,178</td>
<td>1,261</td>
<td>-24.5%</td>
<td>1,842</td>
<td>2,159</td>
<td>2,058</td>
</tr>
</tbody>
</table>
German PPI Drifts Lower but
noClear Deceleration is in Sight 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 20, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071120c.jpg" align="left" border="0" height="265" width="353">
We are hearing more concerns about inflation not just
inflation risk from Euro area officials. Germany has its core PPI
heading lower and the headline as well but not in a clear cut way. Also
the declines are slow and energy prices are still threatening. Germany
has not had its year/year PPI core rate below 2% since April of 2006
when it rose by 1.8%. The Bundesbank has been issuing such warnings
especially Weber. Today Austrian CB president Liebscher says that the
harmonized CPI is &#8216;striking me with concern.&#8217; At the same time groups
like the German engineering Association warn of the impact of a too
strong euro on the economy. These very clear, well founded, and
completely opposite concerns put the ECB in a tough spot.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">Germany PPI
</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">%m/m</td>
<td colspan="4">%-SAAR</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Oct-07</td>
<td>Sep-07</td>
<td>Aug-07</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-moY-Ago</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>0.4%</td>
<td>0.1%</td>
<td>0.2%</td>
<td>2.7%</td>
<td>2.4%</td>
<td>1.7%</td>
<td>4.6%</td>
</tr>
<tr>
<td class="firstcol">Ex Energy</td>
<td>0.3%</td>
<td>0.0%</td>
<td>0.4%</td>
<td>2.5%</td>
<td>2.6%</td>
<td>2.4%</td>
<td>3.0%</td>
</tr>
<tr class="grey1">
<td colspan="8" class="firstcol">Core: ex
food beverages, tobacco
&amp; Petroleum</td>
</tr>
</tbody>
</table>
UK Orders Bounce Higher in Survey
Unexpectedly 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 20, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071120d.jpg" align="left" border="0" height="265" width="353">
UK orders jumped to a net balance reading of +8 from -6 in
October. The series has been somewhat see-saw as the chart on the left
shows. Export orders, also
showing some see-saw movement, are nonetheless rather better behaved
and showing a clearer trend move lower. Output
volume has been moving to lower readings but that net balance response
continues to be at a firm, positive, +9. The price reading shows an
unwelcome +21, its strongest reading in a while.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col">UK
Industrial Volume Data CBI Survey </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Reported:</td>
<td>Nov 
07</td>
<td>Oct 
07</td>
<td>Sep 
07</td>
<td>Aug 
07</td>
<td>12MO Avg</td>
<td>Pctile</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>8</td>
<td>-6</td>
<td>6</td>
<td>9</td>
<td>2</td>
<td>98%</td>
<td>9</td>
<td>-40</td>
<td>49</td>
</tr>
<tr class="grey1">
<td class="firstcol">Export Orders</td>
<td>-4</td>
<td>-9</td>
<td>-2</td>
<td>-3</td>
<td>-4</td>
<td>87%</td>
<td>3</td>
<td>-50</td>
<td>53</td>
</tr>
<tr>
<td class="firstcol">Stocks:Finished Goods</td>
<td>14</td>
<td>14</td>
<td>7</td>
<td>9</td>
<td>10</td>
<td>57%</td>
<td>26</td>
<td>-2</td>
<td>28</td>
</tr>
<tr class="grey1">
<td class="firstcol">Output Volume: Next 3M</td>
<td>9</td>
<td>10</td>
<td>17</td>
<td>13</td>
<td>16</td>
<td>66%</td>
<td>28</td>
<td>-28</td>
<td>56</td>
</tr>
<tr>
<td class="firstcol">Avg Prices 4Nxt 3m</td>
<td>21</td>
<td>14</td>
<td>16</td>
<td>16</td>
<td>17</td>
<td>93%</td>
<td>25</td>
<td>-30</td>
<td>55</td>
</tr>
</tbody>
</table>
French Orders Weaken 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 20, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071120e.jpg" align="left" border="0" height="265" width="353">
We continue to monitor order trends. Trends for France are
still higher over 12 months at +6.4%. Foreign orders are a half step
behind at +5.5%. But over six months the growth rate is lower and over
three months the growth rate is negative for both overall and foreign
orders. Total and foreign orders are lower in two of the most recent
three months.
The French economy has been losing momentum and now it is
beset with strikes. These are in sharp contrast with the post election
enthusiasm that kept sentiment strong well after the elections. The
prospect of change was invigorating; the reality of what it will really
mean appears to be disappointing. That swing from euphoria to worker
strikes could do damage to the economy. The
strong Euro has played a role in the slowing of the economy as well as
throughout the Euro area. Sarkozy has his work cut out for him. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col"> French
Orders</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar exept m/m</td>
<td>Sep-07</td>
<td> Aug-07</td>
<td> Jul-07</td>
<td> 3-mo</td>
<td> 6-mo</td>
<td> 12-mo</td>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>-2.3%</td>
<td>-1.0%</td>
<td>0.5%</td>
<td>-10.7%</td>
<td>4.2%</td>
<td>6.4%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>-3.1%</td>
<td>0.5%</td>
<td>-1.2%</td>
<td>-14.5%</td>
<td>2.1%</td>
<td>5.5%</td>
</tr>
</tbody>
</table>
Italy's Orders Growth Slows as
Foreign Orders Hold Erratically Higher 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 20, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071120f.jpg" align="left" border="0" height="265" width="353">
Italy&#8217;s order trends are not as
clear as the slowing in some other Euro area countries. True, the
3-month growth rates are lower and sharply lower especially for foreign
orders. But the chart on the left shows how erratic foreign orders have
been. Domestic orders that have slowed by less are negative and in a
clearer slowdown mode. On balance Italy&#8217;s pattern looks as though its
showdown is of domestic, not of foreign, origin. Domestic orders have
been weak and are now in negative territory. Sales, which have been
relatively firmer and even accelerated in the recent three months, fell
sharply in September after a strong rise in August. Orders give us a
clearer picture of slowing growth in Italy. The foreign sector is
unclear. But domestic orders are sending a pretty clear message of
slowdown in progress.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col">Italy
Orders </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar exept m/m</td>
<td>Sep-07</td>
<td>Aug-07</td>
<td>Jul-07</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>0.3%</td>
<td>-0.8%</td>
<td>-0.6%</td>
<td>-4.1%</td>
<td>6.3%</td>
<td>5.9%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>5.7%</td>
<td>-4.0%</td>
<td>-3.5%</td>
<td>-8.1%</td>
<td>15.7%</td>
<td>17.8%</td>
</tr>
<tr>
<td class="firstcol">Domestic</td>
<td>-2.7%</td>
<td>1.1%</td>
<td>1.1%</td>
<td>-2.1%</td>
<td>1.3%</td>
<td>0.0%</td>
</tr>
<tr class="even">
<td class="firstcol">Memo:</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Sales</td>
<td>-3.6%</td>
<td>4.0%</td>
<td>1.3%</td>
<td>6.7%</td>
<td>3.8%</td>
<td>5.9%</td>
</tr>
</tbody>
</table>
</body></html>

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071119d.jpg" align="left" border="0" height="265" width="353">
Singapore's current account continues to climb. In the third
quarter, it was S$20,773 mil. on a seasonally unadjusted basis compared
with S$18,263 million in the second quarter and S$14,289 million in the
third quarter of 2006. The current account balance was 34% of Gross
Domestic Product in the third quarter. The first chart shows the rise
in the current account and in its percentage of GDP.
The combined capital and financial account continues to be
much smaller than the current account with the result that Singapore'
foreign reserves continue to pile up. In the third quarter after
allowing for -S$2,634 million of errors and omissions, reserves were
increased by S$6,031 million. At the end of the quarter foreign
reserves amounted to S$226 billion. Since mid 2003, reserves have been
close in amount to the annual rate of Singapore's Gross Domestic
Product in nominal terms, as shown in the second chart.
Singapore in contrast to some of the other Pacific Rim
countries who are accumulating reserves, has been more relaxed about
letting its currency appreciate relative to the dollar. The dollar
exchange rates of China, Japan and Singapore are shown in the third
chart. The data are plotted on a log scale where the slope of data
represents equal percentage changes. Thus the steep decline in the
number of Singapore dollars to the U. S. dollar shows a greater
appreciation to the dollar than the Japanese yen or the Chinese yuan.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071119e.jpg" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071119f.jpg" height="265" width="312">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">SINGAPORE
BALANCE OF PAYMENTS (NSA, Mil of S$)</th>
<th scope="col">Q3 07</th>
<th scope="col">Q2 07&nbsp;</th>
<th scope="col">Q1 07&nbsp;</th>
<th scope="col">Q4 06</th>
<th scope="col">Q3 06&nbsp;&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">Current Account&nbsp;</td>
<td>20773</td>
<td>18263</td>
<td>16603</td>
<td>15317</td>
<td>14289</td>
<td>57661</td>
<td>47616</td>
<td>36414</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Capital and Financial
Account&nbsp;</td>
<td>-12108</td>
<td>-7744</td>
<td>-13496</td>
<td>-8518</td>
<td>-9078</td>
<td>-33262</td>
<td>-31923</td>
<td>-12868</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Net Errors and
Omissions</td>
<td>-2634</td>
<td>-1383</td>
<td>-1592</td>
<td>2688</td>
<td>-1205</td>
<td>2597</td>
<td>4703</td>
<td>-3077</td>
</tr>
<tr>
<td class="firstcol"> &nbsp;Change in Reserves*</td>
<td>-6031</td>
<td>-9136</td>
<td>-1515</td>
<td>-9487</td>
<td>-4006</td>
<td>-26996</td>
<td>-20397</td>
<td>-20468.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Reserves</td>
<td>226290</td>
<td>220503</td>
<td>208876</td>
<td>208992</td>
<td>205096</td>
<td>208992</td>
<td>182813</td>
<td>183467</td>
</tr>
</tbody>
</table>
</body></html>

Singapore's current account continues to climb. In the third quarter, it was S$20,773 mil. on a seasonally unadjusted basis compared with S$18,263 million in the second quarter and S$14,289 million in the third quarter of 2006. The [...]

Singapore's Balance of Payments Continues Strong

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071119g.jpg" width="353">
The Composite Housing Market Index from the National Association of Home Builders&#39; (NAHB) at 19 in November remained stable, near record lows, m/m versus the downwardly revised level of the prior month.
The index rose very slightly m/m in most areas of the country but fell sharply (-52.5% y/y) in the South. 
During the last twenty years there has been a 76% correlation between the y/y change in the Composite Index and the change in single family housing starts. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071119h.jpg" width="353">
The sub-index from the NAHB for current sales (-45.5% y/y) and prospective sales in the next six months (-44.4% y/y) were both roughly stable m/m.
Similarly, traffic of prospective home buyers was up very slightly m/m bu remained down 41% from this past February&#39;s high.
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions good than poor. 
Visit the <a href="http://www.nahb.org">National Association of Home Builders</a>.
The Decline in the U.S. Personal Saving Rate: Is It Real and Is It a Puzzle? from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/review/07/11/Guidolin.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a>&nbsp;</th>
<th scope="col">November</th>
<th scope="col">October &nbsp;</th>
<th scope="col">Nov. &#39;06&nbsp;</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Housing Market Index</td>
<td>19</td>
<td>19</td>
<td>33</td>
<td>42</td>
<td>67</td>
<td>68</td>
</tr>
</tbody>
</table>
</body>
</html>

The Composite Housing Market Index from the National Association of Home Builders' (NAHB) at 19 in November remained stable, near record lows, m/m versus the downwardly revised level of the prior month. The index rose very slightly [...]

U.S. NAHB Housing Market Index Stable At Record Low

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071019b.jpg" width="353">
The index of manufacturing activity in New York State for November fell modestly to 27.37 from 28.75 last month which was its highest level in three years. The figures are reported by the Federal Reserve Bank of New York.
Since the series&#39; inception in 2001 there has been a 55% correlation between the index level and the three month change in U.S. factory sector industrial production.
All of the overall indexes component fell at least slightly, including new orders and employment, but shipment improves slightly.
In the (perhaps too) short six year history of the NY employment index, there has been an 85% correlation between it level and the three month growth in overall factory sector employment.
Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question; it is not a weighted combination of the components. Last week, the Federal Reserve Bank of Philadelphia reported slight improvement in its November General Business Conditions index of activity in the factory sector.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071119c.jpg" width="353">
Pricing pressure again improved, for November to nearly its highest level since the Summer of last year. Since 2001 there has been an 81% correlation between the index of prices paid and the three month change in the core intermediate materials PPI.
The Empire State index of expected business conditions in six months plummeted and fell to its lowest level since the recession of 2001. Expectations for new orders and shipments fell most precipitously, but expectations for employment, capital spending and technology spending also fell sharply.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001.
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html">here</a>.
Monetary Policy under Uncertainty is today&#39;s speech by Federal Reserve Board Chairman Ben S. Bernanke and it is available <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20071019a.htm">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/@S511/@S511.HTM">Empire State Manufacturing Survey</a></th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Nov. &#39;06&nbsp;</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions (diffusion index)&nbsp;&nbsp;</td>
<td>27.37</td>
<td>28.75&nbsp;</td>
<td>25.00</td>
<td>20.33</td>
<td>15.62</td>
<td>28.70</td>
</tr>
<tr>
<td class="firstcol">Prices Paid</td>
<td>42.86</td>
<td>36.05</td>
<td>34.90</td>
<td>41.88</td>
<td>44.74</td>
<td>50.50</td>
</tr>
</tbody>
</table>


</html>

The index of manufacturing activity in New York State for November fell modestly to 27.37 from 28.75 last month which was its highest level in three years. The figures are reported by the Federal Reserve Bank of New York. Since the [...]

U.S. Empire State Index Off Modestly, Expectations Plummet

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071119a.jpg" align="left" border="0" height="265" width="353">
German wages and salaries are losing momentum. In
inflation-adjusted terms the slow down is substantial and has turned
real trends negative over the past year. The downward pressure is not
abating. In September nominal wages and salaries per hour (including
construction) fell by 0.7%. In that same month the HICP rose by 0.7%.
The real wage dropped by 1.4% a bit slower than their 2% drop in August
but more severe than in July - all are m/m calculations. Yr/Yr nominal
wages and salaries per hour are lower by 1.3%; in real terms they are
lower by a stunning 4%. Over three months the annualized rate of
decline is greater still.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col">German
Wage and Salary Trends </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Sep-07</td>
<td>Aug-07</td>
<td>Jul-07</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
</tr>
<tr>
<td class="firstcol">Wages &amp; Salaries</td>
<td>-0.7%</td>
<td>-2.1%</td>
<td>1.0%</td>
<td>-6.8%</td>
<td>-1.6%</td>
<td>-1.3%</td>
</tr>
<tr>
<td class="firstcol">Real Wages &amp;
Salaries&nbsp;</td>
<td>-1.4%</td>
<td>-2.0%</td>
<td>0.9%</td>
<td>-9.9%</td>
<td>-4.7%</td>
<td>-4.0%</td>
</tr>
<tr class="grey1">
<td colspan="5" class="firstcol">Wages
&amp; Salaries less HICP
on same tenor</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body></html>

German wages and salaries are losing momentum. In inflation-adjusted terms the slow down is substantial and has turned real trends negative over the past year. The downward pressure is not abating. In September nominal wages and [...]

German Wage and Salary Trends Turn Lower…

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071019b.jpg" align="left" border="0" height="265" width="353">
The index of manufacturing activity in New York State for
November fell modestly to 27.37 from 28.75 last month which was its
highest level in three years. The figures are reported by the Federal
Reserve Bank of New York.
Since the series' inception in 2001 there has been a 55%
correlation between the index level and the three month change in U.S.
factory sector industrial production.
All of the overall indexes component fell at least slightly,
including new orders and employment, but shipment improves slightly.
In the (perhaps too) short six year history of the NY
employment index, there has been an 85% correlation between it level
and the three month growth in overall factory sector employment.
Like the Philadelphia Fed Index of General Business
Conditions, the Empire State Business Conditions Index reflects answers
to an independent survey question; it is not a weighted combination of
the components. Last week, the Federal Reserve Bank of Philadelphia
reported slight improvement in its November General Business Conditions
index of activity in the factory sector.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071119c.jpg" align="right" border="0" height="265" width="353">
Pricing pressure again improved, for November to nearly its
highest level since the Summer of last year. Since 2001 there has been
an 81% correlation between the index of prices paid and the three month
change in the core intermediate materials PPI.
The Empire State index of expected business
conditions in six months plummeted and fell to its lowest
level since the recession of 2001. Expectations for new orders and
shipments fell most precipitously, but expectations for employment,
capital spending and technology spending also fell sharply.
The Empire State Manufacturing Survey is a monthly survey of
manufacturers in New York State conducted by the Federal Reserve Bank
of New York. Participants from across the state in a variety of
industries respond to a questionnaire and report the change in a
variety of indicators from the previous month. Respondents also state
the likely direction of these same indicators six months ahead. April
2002 is the first report, although survey data date back to July 2001.
For more on the Empire State Manufacturing Survey, including
methodologies and the latest report, click <a href="http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html">here</a>.


Monetary Policy under Uncertainty is
today's speech by Federal Reserve Board Chairman Ben S. Bernanke and it
is available <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20071019a.htm">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/@S511/@S511.HTM">Empire
State Manufacturing Survey</a></th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Nov. '06&nbsp;</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions
(diffusion index)&nbsp;&nbsp;</td>
<td>27.37</td>
<td>28.75&nbsp;</td>
<td>25.00</td>
<td>20.33</td>
<td>15.62</td>
<td>28.70</td>
</tr>
<tr>
<td class="firstcol">Prices Paid</td>
<td>42.86</td>
<td>36.05</td>
<td>34.90</td>
<td>41.88</td>
<td>44.74</td>
<td>50.50</td>
</tr>
</tbody>
</table>
U.S. NAHB Housing Market Index
Stable At Record Low 
by <a href="/comment/Moeller.html">Tom
Moeller</a> November 19, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071119g.jpg" align="left" border="0" height="265" width="353">
The Composite Housing Market Index from the National
Association of Home Builders' (NAHB) at 19 in November remained stable,
near record lows, m/m versus the downwardly revised level of the prior
month.
The index rose very slightly m/m in most areas of the country
but fell sharply (-52.5% y/y) in the South. 
 

During the last twenty years there has been a 76% correlation
between the y/y change in the Composite Index and the change in single
family housing starts. 
 
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071119h.jpg" align="right" border="0" height="265" width="353">
The sub-index from the NAHB for current sales (-45.5% y/y) and
prospective sales in the next six months (-44.4% y/y) were both roughly
stable m/m.
Similarly, traffic of prospective home buyers was up very
slightly m/m bu remained down 41% from this past February's high.
The NAHB index is a diffusion index based on a survey of
builders. Readings above 50 signal that more builders view conditions
good than poor. 
 

Visit the <a href="http://www.nahb.org">National
Association of Home Builders</a>.
The Decline in the U.S. Personal Saving Rate: Is It
Real and Is It a Puzzle? from the Federal Reserve Bank of St.
Louis is available <a href="http://research.stlouisfed.org/publications/review/07/11/Guidolin.pdf">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat'l
Association of Home Builders</a>&nbsp;</th>
<th scope="col">November</th>
<th scope="col">October
&nbsp;</th>
<th scope="col">Nov. '06&nbsp;</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Housing Market Index</td>
<td>19</td>
<td>19</td>
<td>33</td>
<td>42</td>
<td>67</td>
<td>68</td>
</tr>
</tbody>
</table>
German Wage and Salary Trends
TurnLower&#8230; 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 19, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071119a.jpg" align="left" border="0" height="265" width="353">
German wages and salaries are losing momentum. In
inflation-adjusted terms the slow down is substantial and has turned
real trends negative over the past year. The downward pressure is not
abating. In September nominal wages and salaries per hour (including
construction) fell by 0.7%. In that same month the HICP rose by 0.7%.
The real wage dropped by 1.4% a bit slower than their 2% drop in August
but more severe than in July - all are m/m calculations. Yr/Yr nominal
wages and salaries per hour are lower by 1.3%; in real terms they are
lower by a stunning 4%. Over three months the annualized rate of
decline is greater still.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col">German
Wage and Salary Trends </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Sep-07</td>
<td>Aug-07</td>
<td>Jul-07</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
</tr>
<tr>
<td class="firstcol">Wages &amp; Salaries</td>
<td>-0.7%</td>
<td>-2.1%</td>
<td>1.0%</td>
<td>-6.8%</td>
<td>-1.6%</td>
<td>-1.3%</td>
</tr>
<tr>
<td class="firstcol">Real Wages &amp;
Salaries&nbsp;</td>
<td>-1.4%</td>
<td>-2.0%</td>
<td>0.9%</td>
<td>-9.9%</td>
<td>-4.7%</td>
<td>-4.0%</td>
</tr>
<tr class="grey1">
<td colspan="5" class="firstcol">Wages
&amp; Salaries less HICP
on same tenor</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
Singapore's Balance of
Payments Continues Strong 
by <a href="/comment/Curley.html">Louise
Curley</a> November 19, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071119d.jpg" align="left" border="0" height="265" width="353">
Singapore's current account continues to climb. In the third
quarter, it was S$20,773 mil. on a seasonally unadjusted basis compared
with S$18,263 million in the second quarter and S$14,289 million in the
third quarter of 2006. The current account balance was 34% of Gross
Domestic Product in the third quarter. The first chart shows the rise
in the current account and in its percentage of GDP.
The combined capital and financial account continues to be
much smaller than the current account with the result that Singapore'
foreign reserves continue to pile up. In the third quarter after
allowing for -S$2,634 million of errors and omissions, reserves were
increased by S$6,031 million. At the end of the quarter foreign
reserves amounted to S$226 billion. Since mid 2003, reserves have been
close in amount to the annual rate of Singapore's Gross Domestic
Product in nominal terms, as shown in the second chart.
Singapore in contrast to some of the other Pacific Rim
countries who are accumulating reserves, has been more relaxed about
letting its currency appreciate relative to the dollar. The dollar
exchange rates of China, Japan and Singapore are shown in the third
chart. The data are plotted on a log scale where the slope of data
represents equal percentage changes. Thus the steep decline in the
number of Singapore dollars to the U. S. dollar shows a greater
appreciation to the dollar than the Japanese yen or the Chinese yuan.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071119e.jpg" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071119f.jpg" height="265" width="312">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">SINGAPORE
BALANCE OF PAYMENTS (NSA, Mil of S$)</th>
<th scope="col">Q3 07</th>
<th scope="col">Q2 07&nbsp;</th>
<th scope="col">Q1 07&nbsp;</th>
<th scope="col">Q4 06</th>
<th scope="col">Q3 06&nbsp;&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">Current Account&nbsp;</td>
<td>20773</td>
<td>18263</td>
<td>16603</td>
<td>15317</td>
<td>14289</td>
<td>57661</td>
<td>47616</td>
<td>36414</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Capital and Financial
Account&nbsp;</td>
<td>-12108</td>
<td>-7744</td>
<td>-13496</td>
<td>-8518</td>
<td>-9078</td>
<td>-33262</td>
<td>-31923</td>
<td>-12868</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Net Errors and
Omissions</td>
<td>-2634</td>
<td>-1383</td>
<td>-1592</td>
<td>2688</td>
<td>-1205</td>
<td>2597</td>
<td>4703</td>
<td>-3077</td>
</tr>
<tr>
<td class="firstcol"> &nbsp;Change in Reserves*</td>
<td>-6031</td>
<td>-9136</td>
<td>-1515</td>
<td>-9487</td>
<td>-4006</td>
<td>-26996</td>
<td>-20397</td>
<td>-20468.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Reserves</td>
<td>226290</td>
<td>220503</td>
<td>208876</td>
<td>208992</td>
<td>205096</td>
<td>208992</td>
<td>182813</td>
<td>183467</td>
</tr>
</tbody>
</table>
</body></html>

Carol Stone, CBE

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071116e.jpg" align="left" border="0" height="265" width="353">
After their exodus from US financial markets in August,
foreign investors returned in September with moderate net purchases of
US long-term securities. These totaled $26.4 billion, compared with
August's $70.6 billion liquidation (revised from the original $85.5
billion reported).
Even as foreign investors returned, they did so in a much more
limited way than earlier this year, and with a more conservative asset
mix. Net purchases of domestic securities were $55.4 billion, almost
half of which, $26.3 billion, were Treasuries. Both private and
official foreign institutions were net buyers both of Treasuries and in
total. Back in August, private foreigners had been net purchasers of
Treasuries as well, but official institutions were net sellers then.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071116f.jpg" align="right" border="0" height="265" width="353">
There were net purchases of all three of the other securities
categories, $11.5 billion in Agencies, $15.1 billion in corporate bonds
and $2.5 billion in equities. The resumption of corporate bond
purchases is impressive after August's small net sales, although the
amount is modest compared with a $43 billion monthly average during
2006 and $47 billion in the first half of this year. Regarding
equities, it looks that the most we can say, with just $2.5 billion in
purchases, is that the net selling stopped. The figures here don't show
much conviction about increasing US equity positions. So foreign
investors highlighted Treasury securities in their September
acquisitions, but were restrained toward other, riskier securities.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071116g.jpg" align="left" border="0" height="265" width="353">
Last month here, we emphasized the erratic nature of other
types of foreigners' participation in the US financial system. They can
buy short-term securities, including Treasury bills, or other paper,
and they had done so in size in July and August, $56.2 billion and
$33.9 billion, respectively. In September, however, this practice was
far less extensive, as only $3.8 billion went into these assets. By
then, rates on T-bills were quite low and the market for commercial
paper was shrinking rapidly, making those both less attractive outlets.
And as we pointed out in our summary of August data, these items are by
definition transitory holdings anyway. Also, bank deposits from foreign
account holders and other bank liabilities to foreigners had decreased
sharply in August, and these actually continued to do so in September.
Possibly the unpopular dollar is a main factor here, as traders reduce
their cash in US banks when they sell dollars. Again, though,
substantive explanations are hard to come by for these assets, since
they too are largely short-term holdings.
So it is encouraging to see a return to net inflows to US
markets from foreign investors, but the September performance still
shows significant hesitation. As we also mentioned last month, this is
no different from the attitudes of US investors, is it?

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Net
Foreign Purchases from US Residents,
Bil $</th>
<th scope="col">Sept 2007</th>
<th scope="col">August 2007</th>
<th scope="col">July 2007</th>
<th scope="col">June 2007</th>
<th scope="col" colspan="3">Monthly
Averages</th>
</tr>
<tr class="even">
<th scope="col" colspan="5"></th>
<th scope="col">Last 12 Months</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">"Headline": Net
Foreign Purchases 
= 1 + 2 + Other*</td>
<td>26.4</td>
<td>-70.6</td>
<td>19.5</td>
<td>99.9</td>
<td>60.8</td>
<td>76.2</td>
<td>69.9</td>
</tr>
<tr>
<td class="firstcol">1. Domestic
Securities</td>
<td>55.4</td>
<td>-36.1</td>
<td>25.0</td>
<td>121.7</td>
<td>87.8</td>
<td>97.2</td>
<td>84.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;
Treasuries</td>
<td>26.3</td>
<td>-2.8</td>
<td>-9.4</td>
<td>24.7</td>
<td>17.3</td>
<td>17.3</td>
<td>28.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;
Agencies</td>
<td>11.5</td>
<td>8.4</td>
<td>8.7</td>
<td>39.6</td>
<td>21.0</td>
<td>24.5</td>
<td>18.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;
Corporate Bonds</td>
<td>15.1</td>
<td>-0.9</td>
<td>4.5</td>
<td>28.5</td>
<td>41.0</td>
<td>42.8</td>
<td>31.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;
Equities</td>
<td>2.5</td>
<td>-40.6</td>
<td>21.2</td>
<td>28.8</td>
<td>13.4</td>
<td>12.6</td>
<td>6.8</td>
</tr>
<tr>
<td class="firstcol">2. Foreign
Securities&nbsp;</td>
<td>-29.0</td>
<td>-34.5</td>
<td>-5.5</td>
<td>-21.8</td>
<td>-27.0</td>
<td>-21.0</td>
<td>-14.4</td>
</tr>
<tr>
<td class="firstcol">3. Short-Term
Sec's &amp; Custody Holdings</td>
<td>3.8</td>
<td>33.9</td>
<td>56.2</td>
<td>-16.0</td>
<td>11.7</td>
<td>12.2</td>
<td>-4.0</td>
</tr>
<tr>
<td class="firstcol">4. Banks'
Liabilities</td>
<td>-24.3</td>
<td>-97.8</td>
<td>30.3</td>
<td>-15.4</td>
<td>-8.5</td>
<td>15.3</td>
<td>1.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Total TIC
Flows**&nbsp;</td>
<td>-14.7</td>
<td>-150.7</td>
<td>83.5</td>
<td>43.6</td>
<td>47.4</td>
<td>89.5</td>
<td>55.4</td>
</tr>
<tr>
<td class="firstcol">China</td>
<td>8.5</td>
<td>-10.1</td>
<td>4.5</td>
<td>21.2</td>
<td>10.0</td>
<td>9.7</td>
<td>7.4</td>
</tr>
<tr>
<td class="firstcol">United Kingdom</td>
<td>-4.4</td>
<td>31.7</td>
<td>25.1</td>
<td>55.4</td>
<td>35.7</td>
<td>26.5</td>
<td>26.4</td>
</tr>
<tr>
<td class="firstcol">Cayman Islands</td>
<td>14.8</td>
<td>-14.7</td>
<td>-16.4</td>
<td>9.6</td>
<td>7.3</td>
<td>12.1</td>
<td>4.1</td>
</tr>
<tr class="grey1">
<td colspan="8" class="firstcol">*"Other" includes stock swaps and repayments of capital
on asset-backed securities.
</td>
</tr>
<tr class="grey1">
<td colspan="8" class="firstcol">**Sum of
Lines 1. through 4 (plus "other" noted above. Line 1 is the sum of the
security types listed immediately below it.)</td>
</tr>
</tbody>
</table>
</body></html>

After their exodus from US financial markets in August, foreign investors returned in September with moderate net purchases of US long-term securities. These totaled $26.4 billion, compared with August's $70.6 billion liquidation [...]

Foreign Investors Renew Commitment to US Markets, Albeit Limited, According to New TIC Data

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. The HICP rose by 0.2% on the month in Germany, rose by 0.1% in France, while it was flat in both Italy and Spain. However, these outstanding readings followed 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 three 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 is 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.

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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 just 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 European Central Bank, like the Federal Reserve, is likely playing a watch and wait game with the economic statistics, and this month the watch and wait game turned pretty much in its favor with very good headline figures although still having 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.

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.

250828Z3.jpg

**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.

250828Z5.jpg

**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.

250828Z6.jpg

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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250828P8.jpg

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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German Wage and Salary Trends Turn Lower…

U.S. Empire State Index Off Modestly, Expectations Plummet

Foreign Investors Renew Commitment to US Markets, Albeit Limited, According to New TIC Data