Tom Moeller

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
<br>
<span id="articletext">
<p></p>

<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100128e.jpg" style="width: 353px; height: 265px;" align="right">
The Labor
Department reported that initial claims for jobless insurance slipped
8,000 to 470,000 following strong increases during the prior two weeks.
Despite the earlier increases, claims remained near the lowest level
since late August, 2008 and were down from the recession peak of
674,000 hit last March. Consensus expectations had been for 450,000
claims. The weekly gains raised the four-week moving average of initial
claims to 456,250 .which remained near the cycle low.</p><p> Continuing
claims for unemployment insurance during the latest week fell sharply
to a new cycle low. The 57,000 drop reversed all of the prior week's
increase and claims were down by one-third since late-June. Continuing
claims were at the lowest level since mid-January of last year. The
overall decline is a function of the improved job market but also
reflects the exhaustion of 26 weeks of unemployment benefits.
Continuing claims provide an indication of workers' ability to find
employment. The four-week average of continuing claims fell to
4,669,250. This series dates back to 1966.</p><p> Extended
benefits for unemployment insurance slipped to another cycle low of
261,962 during the second week of January and were down by more than
one-half from a peak of 597,688 reached in November.</p><p> The
insured rate of unemployment also fell to a new low of 3.5%. The rate
reached a high of 5.2% during late-June. <img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100128f.jpg" style="width: 353px; height: 265px;" align="right">
During the last ten years,
there has been a 93% correlation between the level of the insured
unemployment rate and the overall rate of unemployment published by the
Bureau of Labor Statistics.&nbsp;· The highest insured unemployment
rates in the week ending January 2 were in Wisconsin (7.3 percent),
Alaska (7.1), Pennsylvania (6.9), Idaho (6.8), Michigan (6.2), North
Carolina (6.1), Montana (6.0), Washington (6.0) and Connecticut (5.8).
The lowest insured unemployment rates were in Virginia (2.5), Texas
(2.6), Florida (3.4), Wyoming (3.6),&nbsp;Maryland (3.8), Maine
(4.0), Ohio (4.1), New York (4.5) and Mississippi (4.4). These data are
not seasonally adjusted but the overall insured unemployment rate is.</p><p> The unemployment insurance claims data is available in Haver's <b>WEEKLY</b>
database and the state data is in the <b>REGIONW</b>
database.</p><p> <strong>Labor Market Globalization in the Recession
and Beyond </strong>from the Federal Reserve Bank of Dallas is
available <a href="http://dallasfed.org/research/eclett/2009/el0910.pdf">here</a>.</p>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b><a ;="" href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM" style="color: black;">Unemployment Insurance (000s)</a></b></th>
<th scope="col"><b>1/23/10</b></th>
<th scope="col"><b>1/16/10</b></th>
<th scope="col"><b>1/09/10</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Initial Claims</td>
<td>470</td>
<td>478</td>
<td>444</td>
<td>-20.3%</td>
<td>573</td>
<td>419</td>
<td>321</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>4,602</td>
<td>4,659</td>
<td>-1.5%</td>
<td>5,835</td>
<td>3,345</td>
<td>2,552</td>
</tr>
<tr class="odd">
<td class="firstcol">Insured Unemployment Rate (%)</td>
<td>--</td>
<td>3.5</td>
<td>3.6</td>
<td>3.5 (1/2009)</td>
<td>4.4</td>
<td>2.5</td>
<td>1.9</td>
</tr>
</tbody>
</table>
</span></body></html>

The Labor Department reported that initial claims for jobless insurance slipped 8,000 to 470,000 following strong increases during the prior two weeks. Despite the earlier increases, claims remained near the lowest level since late [...]

U.S. Initial Jobless Insurance Claims Slip

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
<br>

<span id="articletext">
<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100128a.jpg" style="width: 353px; height: 265px;" align="right">
The pace of improvement in factory sector activity eased after
material improvement early last year. Durable goods orders during
December provided another indication of a slower rate of gain with a
0.3% increase following two months of modest declines which were
revised lower. A 2.0% December increase had been the Consensus
expectation. The recently flat orders pattern nevertheless left orders
6.3% above the March low. For all of last year, orders fell 19.9%
following a 6.0% drop during 2008.</p>
<p>Transportation sector orders provided much of the shortfall
during the last two months with 2.0% and 8.1% declines. <img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100128b.jpg" style="width: 353px; height: 265px;" align="right">
These were led
by sharply lower orders for nondefense aircraft &amp; parts which
fell by one-half during all of last year after a one-third 2008
decline. New orders for motor vehicles &amp; parts improved
slightly during the second half of 2009 but were off by one-quarter for
the year.</p>
<p>Primary metals orders improved sharply during the second half
of last year but still were off by one-third for 2009. Machinery orders
also improved steadily during the second half but fell 25% for the year
as a whole. Electrical equipment orders were volatile m/m and fell
19.1% for the year. Orders for computers &amp; related equipment
also showed sketchy improvement late in the year but nevertheless fell
10.6% for 2009 overall.</p>
<p>Capital goods orders ended 2009 on a firm note. Nondefense
capital goods orders less aircraft rose 1.3% (-2.0% y/y) and rose 12.3%
from the April low.</p>
<p>Shipments of durable goods jumped 2.9% during December (-3.9%
y/y) and firmed by 7.2% during the second half of 2009. Shipments of
primary metals have been notably strong (2.0% y/y) logging a one-third
increase since mid-year. Machinery shipments also firmed late in the
year (-16.0% y/y) as did electrical equipment shipments (-8.4% y/y).</p>
<p>Perhaps the factory sector's inventory cycle is ending but
it's not over. Durable goods inventories slipped 0.2% during December
(-11.3% y/y) after similar declines during the prior two months. These
declines followed monthly drops between 1.0% and 1.7% during the first
nine months of the year. As a result of the decumulation the ratio of
inventories-to-shipments was at its lowest since October of 2008, off
sharply from the January high.. The pace of the decline in unfilled
orders accelerated at a yearend with a 1.2% drop (-10.4% y/y) after a
0.7% November decline. The transportation sector saw the largest
shortfall (-11.7% y/y). Less transportation, backlogs were roughly
unchanged during the last three months of 2009 (-8.7% y/y).</p>
</span>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100128c.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100128d.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a ;="" href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED0101.HTM" style="color: white;"><b>NAICS Classification</b>
</a>(%)</th>
<th scope="col"><b>December</b></th>
<th scope="col"><b><span>November</span></b></th>
<th scope="col"><b>October</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Durable Goods Orders</td>
<td>0.3</td>
<td>-0.4</td>
<td>-0.1</td>
<td>-3.1</td>
<td>-19.9</td>
<td>-6.0</td>
<td>1.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Excluding Transportation</td>
<td>0.9</td>
<td>2.1</td>
<td>-0.5</td>
<td>0.5</td>
<td>-17.4</td>
<td>-1.4</td>
<td>-0.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>-0.2</td>
<td>-3.0</td>
<td>2.0</td>
<td>-2.2</td>
<td>-24.0</td>
<td>-7.0</td>
<td>3.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>1.3</td>
<td>3.1</td>
<td>-1.8</td>
<td>-2.0</td>
<td>-18.3</td>
<td>-0.5</td>
<td>-2.7</td>
</tr>
</tbody>
</table>
</body></html>

The pace of improvement in factory sector activity eased after material improvement early last year. Durable goods orders during December provided another indication of a slower rate of gain with a 0.3% increase following two months [...]

U.S. Durable Goods Orders' Improvement Abates

U.S. Durable Goods Orders'Improvement Abates

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
<br>

<span id="articletext">
<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100127h.jpg" style="width: 312px; height: 265px;" align="right"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100127i.jpg" style="width: 312px; height: 265px;" align="right">
</p>
The Federal
Open Market Committee today left the Federal funds rate in a "range
from 0 to 1/4 percent." The Fed funds rate remained unchanged from
late-2008 at its lowest level ever. The discount rate also was left
unchanged at 0.5%. The action was as expected.<p></p>
<p>
The FOMC statement
regarding the economy was upgraded slightly. "Information received
since the Federal Open Market Committee met in December suggests that
economic activity has continued to strengthen and that the
deterioration in the labor market is abating."
</p>
<p>Regarding inflation the
statement was succinct. "With substantial resource slack continuing to
restrain cost pressures and with longer-term inflation expectations
stable, inflation is likely to be subdued for some time."</p>
<p> Finally, the
Fed left little-changed its prior comments on the improved functioning
of financial markets. Moreover, one board member indicated "that
economic and financial conditions had changed sufficiently that the
expectation of exceptionally low levels of the federal funds rate for
an extended period was no longer warranted."</p>
<p>A complete text of the
Fed's latest press release can be found <a href="http://www.federalreserve.gov/newsevents/press/monetary/20100127a.htm">here</a>
.</p>
<p> The Haver databases <b>USECON, WEEKLY </b>and <b>DAILY</b>
contain the figures from the Federal Reserve Board.</p>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col"><b>Current</b></th>
<th scope="col"><b>Last</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Federal Funds Rate, % (Target)</td>
<td>0.00 - 0.25</td>
<td>0.00 - 0.25</td>
<td>0.16</td>
<td>1.93</td>
<td>5.02</td>
</tr>
<tr>
<td class="firstcol">Discount Rate, %</td>
<td>0.50</td>
<td>0.50</td>
<td>0.50</td>
<td>2.39</td>
<td>5.86</td>
</tr>
</tbody>
</table>
</span>
</body></html>

The Federal Open Market Committee today left the Federal funds rate in a "range from 0 to 1/4 percent." The Fed funds rate remained unchanged from late-2008 at its lowest level ever. The discount rate also was left unchanged at 0.5%. [...]

FOMC Leaves Interest Rates Unchanged

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
<br>

<span id="articletext">
<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100127e.jpg" style="width: 353px; height: 265px;" align="right">The
latest estimates of the federal government's budget deficit were
released yesterday by the Congressional Budget Office. Though this
fiscal year's deficit estimate of $1.3 trillion was down slightly from
2009 due to the end of the latest recession, it remained near a record.
As a percentage of GDP, the 9.2% deficit was near its peak and triple
the 2008 figure. </p>
<p>With the end of the recession revenues are
expected to rise 3.3% after the huge decline last year. Thereafter, as
the economic recovery matures revenue growth is expected in the
double-digits for both 2011 and 2012. Subpar growth in employment is
expected, however, to hold revenue growth below recoveries. A subpar
recovery in corporate profits also would contribute to low federal
revenue growth. </p>
<p>This year the projected deficit would lift
the national debt to $13.3 trillion. At 91% of GDP that is the highest
level since 1950. </p>
<p>The CBO's latest budget projections are
available in Haver's <b>USECON</b> database. </p>
<p><b>Budget
Outlook 2010</b> from the Congressional Budget Office can be
found <a href="http://www.cbo.gov/ftpdocs/108xx/doc10871/BudgetOutlook2010_Jan.cfm">here</a>.</p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100127f.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100127g.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b>Ongressional
Budget Office Projections</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2010</b></th>
<th scope="col"><b>2011</b></th>
<th scope="col"><b>2012</b></th>
<th scope="col"><b>2013</b></th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol"><b>Federal Budget Deficit
</b>($ Billion)</td>
<td>1,414</td>
<td>1,349</td>
<td>980</td>
<td>650</td>
<td>539</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
% of GDP</td>
<td>10.0</td>
<td>9.2</td>
<td>6.5</td>
<td>4.1</td>
<td>3.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Revenues</td>
<td>-16.6</td>
<td>3.3</td>
<td>22.8</td>
<td>11.0</td>
<td>8.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Outlays</td>
<td>17.9</td>
<td>0.2</td>
<td>3.6</td>
<td>-1.0</td>
<td>4.0</td>
</tr>
<tr>
<td colspan="6"><b>Underlying Assumptions</b></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Nominal GDP</td>
<td>-1.4</td>
<td>2.5</td>
<td>2.7</td>
<td>4.9</td>
<td>6.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Real GDP</td>
<td>-2.9</td>
<td>1.6</td>
<td>1.8</td>
<td>3.9</td>
<td>4.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Consumer
Price Index</td>
<td>-0.3</td>
<td>2.4</td>
<td>1.4</td>
<td>1.2</td>
<td>1.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;
Unemployment Rate</td>
<td>9.3</td>
<td>10.1</td>
<td>9.5</td>
<td>8.0</td>
<td>6.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; 10-Year
Treasury Note Rate</td>
<td>3.2</td>
<td>3.6</td>
<td>3.9</td>
<td>4.2</td>
<td>4.5</td>
</tr>
</tbody>
</table>
</span>
</body></html>

The latest estimates of the federal government's budget deficit were released yesterday by the Congressional Budget Office. Though this fiscal year's deficit estimate of $1.3 trillion was down slightly from 2009 due to the end of the [...]

U.S. Federal Budget Deficit Projections Falling From Lofty Heights

Robert Brusca

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
<br>

<span id="articletext">
<p></p>
<p><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100127d.jpg" align="left" border="0" height="265" width="353"></p>
<p>Despite great strides made in the improvement in business and
household confidence since the pit of the recession, levels of
confidence for business and households remain at levels that are below
par. Both series, while still climbing, are showing signs of slowing
the pace of that advance.</p>
<p>The industry climate reading stands in the 43rd percentile of
its range well below the mid point and at an index of 92 it stands well
below the mean value of 100 as well. The only reading that stands above
its mean is the RECENT trend for production. Unfortunately the likely
trend is at the 47th percentile of its range, below the midpoint and at
a reading of -7 it is below its mean reading of +5. The orders trends
are improving but they have a very long way to go just to get back to
neutral.</p>
<p>The story for the household sector is much the same as for
business, except weaker. At -29 the confidence reading for households
is below neutral and in fact is much weaker than that standing short of
the one-third mark of its range. The mean reading stands at -19 but
confidence reads -29 in January.</p>
<p>While the strongest reading from the consumer is a positive
reading on the household&#8217;s current financial standing (a reading in the
81st percentile of its range) the next highest reading is a 77th
percentile reading on the prospect for unemployment. These two readings
are diametrically opposed. French consumers fear unemployment yet see
that they are in a relatively strong current financial situation, even
as the economy is putting its worst days behind it. This is surely a
prescription for the consumer to keep his wallet locked up tightly.</p>
<p>Responses show that living standards are thought to have
improved and to be improving. Yet these readings are low in their
respective ranges and well short of historic median values.</p>
<p>Savings is one of the bright spots. While standing in the 59th
and 65th percentiles both the responses for &#8216;favorable to save&#8217; and
&#8216;ability to save&#8217; are near or above historic median values.</p>
<p>Spending, a key parameter for getting recovery in gear is
still rated as subpar. Households&#8217; response to the question &#8216;is it a
favorable time to spend?&#8217; resides just short of the 40th range
percentile and at a raw reading of -19 that is short of its median
value of -14.</p>
<p>In short the business sector and the consumer sector see
ongoing progress</p>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th scope="col" colspan="11"> INSEE Industry
Survey</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="4">&nbsp;</td>
<td colspan="2">Since Jan 1990</td>
<td colspan="4">Since Jan 1990</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jan<br>
10</td>
<td>Dec<br>
09</td>
<td>Nov<br>
09</td>
<td>Oct<br>
09</td>
<td>Percentile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
</tr>
<tr>
<td class="firstcol">Climate</td>
<td>92</td>
<td>88</td>
<td>90</td>
<td>89</td>
<td>43.4</td>
<td>186</td>
<td>122</td>
<td>69</td>
<td>53</td>
<td>100</td>
</tr>
<tr class="odd">
<td colspan="11" class="firstcol">Production</td>
</tr>
<tr>
<td class="firstcol">Recent
Trend</td>
<td>-4</td>
<td>-10</td>
<td>-8</td>
<td>-8</td>
<td>59.3</td>
<td>111</td>
<td>44</td>
<td>-74</td>
<td>118</td>
<td>-8</td>
</tr>
<tr>
<td class="firstcol">Likely
trend</td>
<td>-7</td>
<td>-5</td>
<td>-1</td>
<td>-1</td>
<td>47.1</td>
<td>211</td>
<td>30</td>
<td>-40</td>
<td>70</td>
<td>5</td>
</tr>
<tr class="odd">
<td colspan="11" class="firstcol">Orders/Demand</td>
</tr>
<tr>
<td class="firstcol">Orders&amp;Demand</td>
<td>-45</td>
<td>-52</td>
<td>-52</td>
<td>-52</td>
<td>22.2</td>
<td>215</td>
<td>25</td>
<td>-65</td>
<td>90</td>
<td>-17</td>
</tr>
<tr>
<td class="firstcol">Fgn Orders&amp;Demand</td>
<td>-45</td>
<td>-54</td>
<td>-46</td>
<td>-49</td>
<td>25.5</td>
<td>215</td>
<td>31</td>
<td>-71</td>
<td>102</td>
<td>-13</td>
</tr>
<tr class="odd">
<td colspan="11" class="firstcol">Prices</td>
</tr>
<tr>
<td class="firstcol">Likely Sales Price
Trend</td>
<td>-11</td>
<td>-18</td>
<td>-13</td>
<td>-9</td>
<td>25.5</td>
<td>205</td>
<td>24</td>
<td>-23</td>
<td>47</td>
<td>0</td>
</tr>
</tbody>
</table>
<br>
<p>The consumer is still not solidly underpinned by the notion
that government has stabilized the economic environment. Even though
consumers are feeling relatively financially settled they are fearful
of the future and therefore are not very prone to spend. Spending
proclivity is lagging behind improvements in financial well being. This
is an issue for policymakers. It is not necessarily a call out for any
new program but for leadership to take steps to reassure an
economically frightened public that is better off than it suspects and
whose fear could become a catalyst for backsliding.</p>
<p>As for business its progress is steady and there is no concern
about inflation. But even as current conditions have improved, here
again we see reluctance to extrapolate ongoing improvement into the
future. The orders data manifest this result with still weak (although
improving) readings for orders and demand that seem to get a greater
weight than their improving trend. What is lacking in France is
confidence and more certainty about the future.</p>
<p>That predicament may also be a statement about the e-Zone in
which France is firmly embedded. The whole of the e-zone is still
struggling with several states still battling horrific issues. In this
environment the euro, the strap that binds Europe together may be more
of a corset that restrains optimism since the healthy countries are
more afraid of being pulled down by or made to assist those that are
struggling. Europe seems to have been able to cobble together an
economic structure that has doe it more harm than good. The area is
bound together by a common currency that protects the imprudent from
the consequences of their own actions. Fiscal transgression is not
easily exported since fiscal accounts are kept separate. There is no
sharing of the public expenditure pot in Europe except for certain
consolidated government funding. Still there is a stigma. And you may
recall how the Latin American Debt crisis brought down all of Latin
America despite there being no common currency and no shared fiscal
responsibility of any type &#8211; just proximity and shared culture. Europe
is walking a very shaking tightrope and has not figured out yet how to
remedy its problems. France is but an example.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th scope="col" colspan="8"> INSEE Household
Monthly Survey</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="4">&nbsp;</td>
<td colspan="3">Since Jan 1990</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jan<br>
10</td>
<td>Dec<br>
09</td>
<td>Nov<br>
09</td>
<td>Oct<br>
09</td>
<td>Percentile</td>
<td>Rank %</td>
<td>Mean</td>
</tr>
<tr>
<td class="firstcol">Household
Confidence</td>
<td>-29</td>
<td>-30</td>
<td>-30</td>
<td>-34</td>
<td>31.6</td>
<td>21.6</td>
<td>-19</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">Living
Standards&nbsp;</td>
</tr>
<tr>
<td class="firstcol">past 12
Mos</td>
<td>-62</td>
<td>-65</td>
<td>-65</td>
<td>-70</td>
<td>18.4</td>
<td>16.2</td>
<td>-40</td>
</tr>
<tr>
<td class="firstcol">Next
12-Mos</td>
<td>-34</td>
<td>-36</td>
<td>-35</td>
<td>-39</td>
<td>33.3</td>
<td>24.9</td>
<td>-21</td>
</tr>
<tr>
<td class="firstcol">Unemployment: Next
12</td>
<td>64</td>
<td>62</td>
<td>63</td>
<td>65</td>
<td>77.7</td>
<td>88.4</td>
<td>33</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">Price
Developments</td>
</tr>
<tr>
<td class="firstcol">Past
12Mo</td>
<td>-22</td>
<td>-25</td>
<td>-27</td>
<td>-28</td>
<td>28.9</td>
<td>55.2</td>
<td>-16</td>
</tr>
<tr>
<td class="firstcol">Next
12-Mos</td>
<td>-37</td>
<td>-42</td>
<td>-46</td>
<td>-45</td>
<td>24.7</td>
<td>53.1</td>
<td>-35</td>
</tr>
<tr class="odd">
<td colspan="8">Savings</td>
</tr>
<tr>
<td class="firstcol">
Favorable to save</td>
<td>21</td>
<td>12</td>
<td>13</td>
<td>8</td>
<td>59.1</td>
<td>46.1</td>
<td>22</td>
</tr>
<tr>
<td class="firstcol">Ability
to save Next 12</td>
<td>-4</td>
<td>-6</td>
<td>-7</td>
<td>-11</td>
<td>65.5</td>
<td>83.8</td>
<td>-9</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">Spending</td>
</tr>
<tr>
<td class="firstcol">Favorable
for major purchase</td>
<td>-19</td>
<td>-20</td>
<td>-19</td>
<td>-24</td>
<td>39.7</td>
<td>40.2</td>
<td>-14</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">Financial
Situation</td>
</tr>
<tr>
<td class="firstcol"> Current</td>
<td>20</td>
<td>18</td>
<td>17</td>
<td>13</td>
<td>81.0</td>
<td>97.5</td>
<td>12</td>
</tr>
<tr>
<td class="firstcol">Past 12
MOs</td>
<td>-21</td>
<td>-21</td>
<td>-22</td>
<td>-25</td>
<td>48.4</td>
<td>29.0</td>
<td>-17</td>
</tr>
<tr>
<td class="firstcol"> Next
12-Mos</td>
<td>-10</td>
<td>-10</td>
<td>-8</td>
<td>-12</td>
<td>40.0</td>
<td>15.8</td>
<td>-2</td>
</tr>
<tr class="even">
<td colspan="8" class="firstcol">Number of
observations
in the period = 241</td>
</tr>
</tbody>
</table>
</body></html>

Despite great strides made in the improvement in business and household confidence since the pit of the recession, levels of confidence for business and households remain at levels that are below par. Both series, while still [...]

French Biz And Household Sectors Continue Process Of Repair

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
<br>

<span id="articletext">
<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100127a.jpg" style="width: 353px; height: 265px;" align="right">For
new or existing home sales, December was a bleak month. Following
Monday's report that existing home sales dropped sharply, the Commerce
Department reported today that new home sales fell 7.6% m/m to 342,000
from an upwardly revised November level. The latest was the fourth
decline in the last five months. December sales were the lowest since
last March and off 75.4% from the 2005 peak. Near term home sales
should be helped by the recent extension of the Federal government's
tax credit which now it is for all home buyers and not just first-time
purchases. The December sales figure fell well short of Consensus
expectations for 370,000 sales.</p>
<p><b>The
December results capped a dismal year.</b> <b>For 2009 as
a whole new home sales totaled 372,000 which was the lowest level since
the numbers were first tallied in 1963. </b></p>
<p>Home
prices firmed during December though the November figure was revised
down. The median price of a new single-family home rose to $221,300
which was the highest level since May. The increase pared the y/y
decline to 3.6% from its worst of -14.5% this past February. For all of
2009 median home prices fell 7.3% after a 5.5% decline during
2008.</p>
<p>Price discounts and lower housing starts drove down the
inventory of unsold homes by more than one-third y/y to its lowest
since early-1971. The months' supply of unsold homes rose modestly to
8.1 months but remained down from the high of 12.4 months in January
'09. Despite the shrinkage of inventory, it still took a record median
13.9 months to sell a new home. </p>
<p><b>Inflation: Mind the
Gap</b> from the Federal Reserve Bank of San Francisco is
available <a href="http://www.frbsf.org/publications/economics/letter/2010/el2010-02.html">here</a>.</p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100127b.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100127c.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b>US
New Homes</b></th>
<th scope="col"><b>December</b></th>
<th scope="col"><b>November</b></th>
<th scope="col"><b>October</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"><b>Total Sales</b>
(SAAR, 000s)</td>
<td>342</td>
<td>370</td>
<td>408</td>
<td>-8.6%</td>
<td>372</td>
<td>481</td>
<td>769</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>40</td>
<td>28</td>
<td>33</td>
<td>33.3</td>
<td>31</td>
<td>35</td>
<td>64</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>43</td>
<td>73</td>
<td>56</td>
<td>-27.1</td>
<td>54</td>
<td>69</td>
<td>118</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>178</td>
<td>192</td>
<td>224</td>
<td>-7.8</td>
<td>201</td>
<td>264</td>
<td>409</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>81</td>
<td>77</td>
<td>95</td>
<td>-12.0</td>
<td>87</td>
<td>113</td>
<td>178</td>
</tr>
<tr>
<td class="firstcol"><b>Median Price</b>
(NSA, $)</td>
<td>221,300</td>
<td>210,300</td>
<td>213,700</td>
<td>&nbsp;-3.6</td>
<td>213,567</td>
<td>230,408</td>
<td>243,742</td>
</tr>
</tbody>
</table>
</span>
</body></html>

For new or existing home sales, December was a bleak month. Following Monday's report that existing home sales dropped sharply, the Commerce Department reported today that new home sales fell 7.6% m/m to 342,000 from an upwardly [...]

U.S. New Home Sales Drop Again & Remain 75% Below Peak

U.S. New Home Sales Drop Again& Remain 75% Below Peak

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

Stable job openings and hiring rates point to cautious hiring

Our global data offering is unparalleled in terms of coverage, quality, and organization. We offer 290+ databases from 2500 government and private sources, a wealth of key survey and forecast data covering the world’s economies, and a robust offering of archive databases that drive machine learning for big data applications.

Optimized for precision analytics, our data is seamlessly integrated with Microsoft Office and all leading statistical packages through our DLX® software and platform independent HaverView™ website. We further offer direct database feeds, client server or cloud-based delivery, and RESTful API.


Privacy Policy

Disclaimer

Contact us

Service Health

A premier time series data platform for the global strategy, research, and quant communities. 

New York

London

Singapore

Tokyo

Economy in Brief

Viewpoints

Contact Us

Our Data

Our Products

What We Do

Our Authors

About Us

Data News

Featured Data Additions

Resources

Release Calendars

Training Center

Webinars

Newsletters

Download Software

For Clients

Live Updates

Sandy Batten

260702A4.jpg

260702B4.jpg

The luster fell a bit off the employment rose in June with nonfarm payrolls rising 57,000 against expectations of a 115,000 increase, according to today’s report from the Bureau of Labor Statistics. Moreover, the increases previously reported for April and May were revised down by a total of 74,000. Upon revision, payrolls increased 148,000 in April versus 179,000 previously reported and rose 129,000 in May versus 172,000 previously reported. The average increase over the past three months fell to 111,000 from 164,000 in May while the average increase over the past six months rose to 92,000 in June, its highest reading since February 2025, from 80,000 in May. Both remain on a modest uptrend and much stronger than payroll gains last year. In 2025, monthly payroll gains averaged only 10,000.

The weaker-than-expected payroll report was reinforced by a weak report from the **household survey**. While the number of unemployed fell 213,000 and the unemployment rate edged down to 4.2% from 4.3% in May, the number of employed slumped 507,000 in June, the largest monthly decline since May 2025 (with population adjustment to January 2026). The labor force plunged 720,000 with the labor force participation rate falling to 61.5%, its lowest level since March 2021.

Growth of average hourly earnings (AHE), a key variable for the Federal Reserve, was relatively well behaved in June. AHE increased 0.3% m/m, the same monthly gain as in May, in line with expectations. The y/y rate of advance edged up to 3.5% in June from 3.4% in May. Wage growth in private services-producing firms picked up in June, rising 0.4% m/m (3.4% y/y) versus 0.2% m/m (3.2% y/y) in May. Goods-producing wages increased 0.2% m/m in June after 0.3% monthly gains in both April and May with the y/y rate holding at 4.1%.

260702C4.jpg

260702D4.jpg

In the **establishment survey**, private-sector employment was also weaker than expected in June, increasing only 49,000 against an expected 115,000 increase. Moreover, April and May figures were also revised down by a total of 50,000. Government employment rose 8,000 following a 32,000 increase in May. Private goods-producing employment increased 10,000, its largest monthly gain in three months with an 11,000 gain in construction and a 3,000 rise in manufacturing jobs, the first increase in three months. In contrast, services-producing employment increased only 39,000 in June, its weakest monthly performance in four months. Private education and health services jobs posted another solid gain of 69,000, up from 45,000 in May. However, retail jobs fell 7,500, their first monthly decline in four months, and leisure and hospitality jobs slumped 61,000, their largest monthly decline since December 2020, after increasing 40,000 in May. There had been speculation in the market that the World Cup would generate additional leisure and hospitality jobs, but this obviously failed to pan out. On a brighter note, although the one-month payroll diffusion index, a measure of the breadth of job gains, slipped to 54.4 in June from 56.0 in May, it remained well above the key 50 level that indicates that more industries were adding jobs than losing them.

The length of the workweek was unchanged at 34.3 hours in June with the aggregate weekly hours index edging up 0.1% m/m, the same monthly gain as in May. The aggregate hours index rose 1.3% q/q saar in Q2, the fastest quarterly gain in four quarters, providing a solid base for Q2 real GDP growth. The goods-producing workweek was unchanged at 40.1 hours, the highest since January 2023, while the private service-producing workweek edged down to 33.2 hours from 33.3 hours in May.

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

260702X4.jpg

260702F4.jpg

- U.S. nonfarm payrolls increased 57,000 in June with meaningful downward revisions to both April and May.
- The market consensus looked for a 115,000 increase.
- The unemployment rate edged down to 4.2% from 4.3%, due mostly to a large decrease in the labor force.
- Average hourly earnings rose 0.3% m/m (3.5% y/y), in line with expectations.

U.S. Payroll Employment Gains Smaller than Expected in June

260702E.jpg

Unemployment rates in the European Monetary Union (EMU) were steady in May at 6.2%, the same level as in April, after April had fallen to 6.2% from 6.3%. The 6.2% reading is the lowest for the community since it was formed. Meanwhile, for the larger community, the EU, the unemployment rate has stabilized at 5.9%, the same as in April, again, a tick lower than it was in March. This 5.9% reading is a tick above the historic low for the European Union (EU). In both cases, the performance of these two economic conglomerations is quite excellent.

**Monthly**
The table looks at 12 of the most senior members of the monetary union, including an observation for the United Kingdom based on its claimant-count unemployment rate, presented at the bottom of the table. In May, the monetary union saw 4 of 12 members in the table with lower unemployment rates than they had in April. In April, five members had lower unemployment rates than in March. In March, seven members had lower unemployment rates than they posted in February. The progression to lower unemployment rates has slowed based on monthly data.

**Sequentially**
Looking at changes in the unemployment rates over broader sequential periods—three months, six months, and 12 months—6 out of 12 reporters have lower unemployment rates over three months; 7 have lower unemployment rates over six months; only 4 report unemployment rates that are lower over 12 months. The broader periods for comparison show changes in the unemployment rates that report more declines over the shorter and more recent periods compared to the longer/older periods. This is not the same trend leaning that we get from the last three months of data. It'll be good to watch these developments in the coming months to see if the tendency to lower unemployment rates is slowing or whether dropping unemployment is continuing in force.

**Rankings**
The ranking of unemployment rates since 1990 finds only three of these 12 monetary union members with unemployment rates above their medians. Those are Luxembourg, with a 98.2 percentile standing, Finland with an 81.9 percentile standing, and Austria with a 76.6 percentile standing. Italy, on the other hand, is reporting the lowest unemployment rate that it has seen during this period. The Greek unemployment rate has been this low or lower only about 3% of the time, while in Spain the unemployment rate has been this low or lower 11% of the time. For Portugal, the unemployment ranking figure has been weaker 13% of the time. The monetary union continues to report excellent labor market results even though economic growth has been relatively disappointing.

260702.jpg

**Summing up and central bankers**
In the wake of the monetary conference in the Sintra this past week, central banks featuring contributions from the European Central Bank, the Bank of England, the Federal Reserve, and the Bank of Canada, saw central bank heads talking about getting back to basics and stopping the use of some of the newer tools that had been pressed into service after the great financial crisis and during COVID. Bankers are getting back to basics to focus on short-term interest rates and say they will stop fiddling with the size of the balance sheet and to largely set aside the use of forward guidance. It will take time to determine what these changes are going to mean in terms of how policy performs and how markets will react. While there was a lot of discussion, and in some places concerns about the loss of forward guidance, what is clear is that, with forward guidance gone, there will be more volatility; however, the markets will be freer to price economic events themselves and will not be so stuck to the outlook of the central bank.  That could turn out to be a gigantic win for both markets and central bankers.

Europe

Unemployment Remains Quite Low in Europe

Andrew Cates

**Tightening Bias Intact, but Unevenly Distributed**
The July Blue Chip Financial Forecasts survey's expectations for policy rate changes over the next twelve months reveal a striking divergence across the major advanced economies, as chart 1 below makes clear. Across the board, the rate outlook is higher than it was in late February, before the US-Iran conflict escalated: the energy price shock and its inflationary consequences have left an imprint on the panel's thinking, even as oil prices have since retreated. Japan tops the list with an expected increase of around 40 basis points, reflecting the building pressure on the Bank of Japan to respond to yen weakness and still-elevated domestic inflation. Canada and the euro area also sit firmly in positive territory, with expected increases of around 30 and 20 basis points respectively. The US and the UK, by contrast, are in negative territory — the US barely so, the UK more distinctly, with the panel pencilling in modest rate reductions over the coming year. This pattern is not simply a reflection of where each economy sits in the inflation cycle. It also encodes a judgement about the current stance of monetary policy: in Japan, the euro area and Canada, policy is likely seen as insufficiently tight relative to the inflation challenge, and the conflict has reinforced that view. In the US and UK, by contrast, policy is judged to be closer to or already beyond neutral, meaning the next move is more likely to be an easing than a further tightening — even if, in the US case, that easing has been pushed well into 2027.

260702Z1.jpg

**When Will the Next Move Come?**
Chart 2 below adds a timing dimension to the rate outlook, showing where the BCFF panel currently places the next policy move for the Fed, ECB, Bank of England and Bank of Japan. For the BoJ, the distribution is concentrated around the near term, with a significant share of respondents expecting action in September or October — consistent with the building pressure illustrated in chart 1 and with the BoJ’s next scheduled decision on 31 July. For the ECB, September or later than November emerge as the most likely timing for the next step. The Bank of England panel is more spread, with a meaningful share expecting action to come later. For the Fed, the dominant view places the next move firmly in the ‘later’ category, consistent with the BCFF consensus that the Fed funds rate will hold through the rest of 2026, with a first cut not expected until Q2 2027. Under chair Kevin Warsh, the June FOMC meeting delivered a hawkish dot plot that shifted some participants toward a hike before year-end, but the panel as a whole has not moved that far.

260702Z2.jpg

**Headline Up, Core Contained: The Inflation Picture Across Advanced Economies**
One of the more reassuring features of the current inflation episode has been the limited pass-through from energy prices to underlying price dynamics. Across the advanced economies, headline CPI inflation has risen materially since the conflict escalated in March, driven overwhelmingly by consumer energy costs. Core inflation — stripping out food and energy — has edged higher, but only modestly, suggesting that second-round effects remain contained for now. In the United States, the pressures are arguably more alarming, with core PCE rising sharply between February and May to its highest level since October 2023. In the euro area, the focus this week has been firmly on Eurostat's June flash CPI estimate, published yesterday. Headline inflation fell back to 2.8% from a peak of 3.2% in May, as energy costs — the main driver of the surge since the conflict began — eased meaningfully. Crucially, core inflation also ticked down, and services inflation retreated as well. The June data therefore tell a broadly reassuring story: the energy shock is unwinding without leaving a lasting imprint on underlying price dynamics — precisely what the ECB will have been hoping for.

260702Z3.jpg

**Consumer Price Expectations: Are Households Convinced?**
The aggregate inflation picture looks relatively contained at the macro level, but whether households are similarly reassured is a separate question. Chart 4 below draws on the European Commission's consumer survey data on price expectations — one of the more timely and widely watched indicators of inflation psychology in the euro area. The survey captures whether consumers expect prices to rise, stay the same or fall over the coming twelve months, and its relationship with actual inflation outturns has historically been close. A sustained elevation in consumer price expectations risks becoming self-fulfilling, feeding into wage demands and pricing behaviour in ways that complicate the ECB's task considerably. The June survey, however, brought an encouraging development: expectations fell steeply, suggesting that households have begun to register the reversal in energy prices and the broader easing of the inflationary impulse. That said, the absolute level of expectations remains elevated relative to the pre-conflict period, and one month's decline does not constitute a trend. Whether the June reading marks the beginning of a sustained normalisation — or proves a temporary dip before expectations re-anchor at a higher level — will be one of the key variables shaping the ECB's decision calculus in the months ahead.

260702Z4.jpg

**Japan: A Weak Yen at the Worst Possible Time**
Japan occupies a particularly uncomfortable position in the current global conjuncture. The yen has depreciated to levels not seen since December 1986, with USD/JPY touching 162 this week. The move reflects the persistence of a large interest rate differential: even as the Bank of Japan has continued its gradual tightening, the Fed’s hawkish pivot under chair Kevin Warsh — with the mid-June FOMC dot plot signalling a possible hike before year-end — has reinforced the carry trade dynamics weighing on the currency. For Japan, which imports virtually all of its energy, yen weakness at a time of still-elevated global oil prices is a double burden, amplifying domestic inflation and squeezing real incomes. Verbal warnings from Japan’s Finance Ministry have had only a modest and short-lived effect on the exchange rate. The Bank of Japan’s next policy decision is on 31 July, and the pressure to act more decisively is building. The BCFF panel’s July survey revised upward its expectation for a stronger US dollar against the yen over the coming year — consistent with the fundamental picture that chart 5 below describes.

260702Z5.jpg

**AI: Optimism on the Technology, Scepticism on the Price**
Returning to the BCFF survey, its special questions reveal a panel that continues to look beyond the current cyclical turbulence toward a longer-horizon structural narrative. On artificial intelligence, respondents are broadly optimistic: 45% expect a noticeable impact on US productivity and growth within one to three years, with a further 45% believing those effects are already becoming evident. That is a striking degree of conviction about a technology whose macro-level productivity impact remains, by most empirical measures, still to fully materialise. Yet the same panellists are considerably more cautious about financial markets than about the technology itself. Nearly all respondents believe that expected AI gains are already fully reflected — or even over-reflected — in current asset prices. Chart 6 below captures this tension. It is a combination — high conviction on transformative potential, high scepticism on current valuations — that has historically been associated with stretched risk premia and vulnerability to disappointment, even where the underlying technology story ultimately proves correct.

260702Z6.jpg

Global financial markets have had a more settled feel this week, reflecting the continued unwinding of the geopolitical risk premium that had built up during the worst of the US-Iran conflict. Oil prices have fallen further, equity markets have been broadly supported, and incoming inflation data — notably the euro area’s June flash CPI estimate — have come in below expectations. The US holiday-shortened week ahead, with Independence Day on Friday, is likely to keep volumes thin and activity subdued. The bigger picture, however, remains one of tension between a more benign near-term inflation trajectory and central banks that may not yet be ready to stand down. In the charts below we look first at what the latest Blue Chip Financial Forecasts (BCFF) survey reveals about the expected change in and timing of policy rates across the major economies (charts 1 and 2), then at the divergence between headline and core inflation across the advanced economies (chart 3), and at what euro area consumers are more specifically expecting about inflation in the period ahead (chart 4). We turn next to Japan and the yen’s slide this week to 40-year lows (chart 5), and finally to the BCFF survey’s special questions on artificial intelligence and asset valuations (chart 6).

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/6WAWvuhdCIiVMfa7lArFBI?utm_source=generator&si=a00a7c7e625c4035" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: Forecasters Hold Firm

Winnie Tapasanun

260701A23.jpg

260701B23.jpg

The ISM U.S. manufacturing PMI fell to a lower-than-expected 53.3 in June, the first m/m fall since February, following a 1.3-point increase to 54.0 in May, according to data from the Institute for Supply Management. The June reading, above the 50 expansion-contraction threshold, indicated the U.S. manufacturing sector expanded for the sixth straight month, albeit at a slightly slower pace. A reading of 53.8 for June had been expected in the Action Economics Forecast Survey. The June manufacturing PMI, while above a contraction-level 49.0 in June 2025 and a low of 47.0 in October 2024, remained below a peak of 63.8 in March 2021.

The production index declined to 52.2 in June from 54.3 in May, indicating production expanded for the eighth consecutive month but at the slowest pace since December. The index was above a low of 44.8 in April 2025 but below a peak of 66.5 in March 2021. In June, 19.0% (NSA) of respondents reported higher production while 13.0% reported lower production. The new orders index slipped to 56.0 in June from 56.8 in May, signaling new orders grew for the sixth straight month following four successive months of contraction. The index remained well above a low of 41.8 in January 2023 but below a high of 67.0 in May 2021. In June, 22.3% (NSA) of respondents reported higher new orders while 13.4% reported declines. The inventories index climbed to 51.4 in June from 49.9 in May, marking the first expansion since April 2025. The index was slightly below a high of 52.7 in March 2025 but above a low of 43.8 in October 2024. Meanwhile, the supplier deliveries index fell to 57.4 in June from 60.6 in May and April, indicating slowing delivery performance for the seventh consecutive month after faster deliveries in November. In June, 18.1% (NSA) of respondents reported slower delivery speeds while 3.4% reported faster speeds.

On the labor front, the employment index improved to 49.7 in June from 48.6 in May, showing employment contracted for the 33rd straight month but at the slowest contraction pace since January 2025. The index was above a low of 44.1 in November 2025 but below a high of 56.5 in March 2022. In June, 16.2% (NSA) of respondents reported higher employment while 13.8% reported lower hiring.

On the pricing front, the prices paid index fell to a still-high 73.0 (NSA) in June, a 9.1-point drop—the largest decline since July 2022—from 82.1 in May, indicating raw materials prices rose for the 21st straight month but at the slowest rising pace since February. The index remained well above a low of 39.4 in December 2022 but below a high of 87.1 in March 2022 and a peak of 92.1 in June 2021. In June, 55.1% (NSA) of respondents reported higher prices while 9.2% reported price declines.

In other ISM series not included in the composite index, the new export orders index fell to 48.5 in June from 50.6 in May, indicating new export orders contracted for the third time in four months. The index was up from a low of 40.1 in May 2025 but down from a high of 52.4 in January 2025 and a peak of 57.1 in February 2022. The imports index edged down to 52.9 in June from 53.0 in May, suggesting imports expanded for the fifth successive month. The index was below its recent high of 54.9 in February but above a low of 39.9 in May 2025. The order backlog index decreased to 50.5 (NSA) in June from 52.2 in May, showing backlog levels grew at the slowest pace in six months. The index was below a high of 56.6 in February and a peak of 70.6 in May 2021 but well above a low of 37.5 in May 2023.

The ISM figures are based on responses from over 400 purchasing and supply executives from 18 industries, which are weighted according to each industry’s contribution to GDP. These data are diffusion indexes where a reading above 50 indicates expansion; below 50 indicates contraction. The ISM Manufacturing PMI is a composite index based on the diffusion indexes of five of the indexes (seasonally adjusted) with equal weights: New Orders, Production, Employment, Supplier Deliveries, and Inventories. The figures from the Institute for Supply Management can be found in Haver’s **USECON** database; further detail is found in the **SURVEYS** database. The expectations number is available in Haver’s **AS1REPNA** database.

260701C23.jpg

260701D23.jpg

- ISM Mfg. PMI down slightly to 53.3 in June; sixth straight month above 50.
- Production (52.2) expands for the eighth consecutive mth.; new orders (56.0) for the sixth successive mth.
- Employment (49.7) contracts for the 33rd straight mth.; at the slowest contraction pace since Jan. ’25.
- Prices Index (73.0) at a four-month low, still indicating prices rising for the 21st consecutive mth.
- Exports (48.5) contract for the third time in four mths.; imports (52.9) continue to grow.

U.S. ISM Manufacturing PMI Still Expansionary in June; New Orders and Production Growing at a Slower Pace; Employment Contracting

Michael J. Moran

260701A.jpg

260701B.jpg

The monthly report on construction activity receives scant attention in the financial press, and investors and traders in financial markets typically pay little heed. However, it is a valuable report for economists, as it provides a broad-based view of building activity, covering private residential and business construction, as well as government-related activity. The figures feed into the calculation of GDP. Unfortunately, results have been soft since early 2025.

Total construction activity rose 0.1 percent in May, marking the third consecutive increase. However, the gains have not been especially large, averaging 0.3%, and they have barely dented the string of weak readings in the preceding 17 months. The year-over-year change in May totaled -1.5%.

Private residential construction, the largest component of the total (41% share), rose 0.3% in May, adding to an average gain of 1.1% in the prior two months and leaving a year-over-year increase of 1.8% (chart, upper left). Most of the advance in the past year was the result of improvements to existing homes (up 8.1%). Construction of new multi-family units has shown little net change in the past year or so, while new single-family building has traced a mild downward trend (off 4.0% in the past year). Public construction has been flat in the past year, with both the federal government and state and local governments showing little net change (chart, upper right).

Private nonresidential construction (34% of the total) has received considerable press attention in the past few years because of explosive growth in the building of data centers. Growth has indeed been vigorous. Building started in 2020 and grew moderately at first, but this sector took off in 2022, about the time when artificial intelligence models became publicly available (chart, lower left, in levels to show the strong trend more clearly). Average annual growth for the three years ended 2025 totaled 48%.

Interestingly, despite the rapid growth in the building of data centers, the private nonresidential sector has been the weakest area of the construction report, with activity trending lower since early 2025 (chart, lower right). Some components of private nonresidential construction have held steady or improved (e.g. amusement & recreation, electric power), but three areas stand out on the soft side: general office, commercial, and manufacturing.

The construction figures can be found in Haver's **USECON** database. The expectations figure is from the Action Economics Forecast Survey in **AS1REPNA**.

260701C.jpg

260701D.jpg

- Building activity in the US was firm in 2023 and 2024, but it has lost ground since then.
- Government-related construction and private residential building have been little changed in the past year or so.
- Private nonresidential construction has been notably weak, despite robust activity in the building of data centers.