Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091104a.jpg" width="353">
U.S. unit sales of light vehicles during October recovered from the &quot;payback&quot; month of September following the summer&#39;s &quot;cash-for-clunkers&quot; sales program. Sales rose 13.5% m/m to 10.46M units according to the Autodata Corporation. (Seasonal adjustment of the figures is provided by the U.S. Bureau of Economic Analysis). October sales were stronger than the expected 9.8M sales rate.
Sales of domestically made vehicles rose 17.2% to 7.75M units after their one-third m/m September drop. Despite the gain, sales remained 0.7% lower than October 2007. Sales of fuel efficient cars rose 11.9% following their more than one-third September decline. Light truck sales reversed most of the September drop and rose 22.2% m/m. Total sales of domestic vehicles during this year&#39;s first 10 months were down 27.5% from last year&#39;s first ten months.
Imported light vehicles rebounded after the end of the sales program, but the increase was less than for domestic makes. Overall sales rose just 4.1% to 2.71M after September&#39;s 36.5% m/m drop. Sales of imported autos rose 5.2% after the one-third September drop while the gain in imported light truck sales amounted to just 1.6% after the more than one-third September drop. Year-to-date, sales of imported vehicles remained 20.0% below last year&#39;s first ten month&#39;s average.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091104b.jpg" width="353">
Overall, import&#39;s share of the U.S. light vehicle market fell to 25.9% last month from 28.2% in September. It reached 26.5% during all of last year. (Imported vehicles are those produced outside the United States.) Imports&#39; share of the U.S. car market totaled 33.9%, versus 34.3% last year while the share of the light truck market was 16.9%, down from 18.3% last year.
The U.S. vehicle sales figures can be found in Haver&#39;s USECON database.

<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/@ED09/@ED0901/@ED0901.HTM&quot;" style="color: #000000">Light Vehicle Sales (SAAR, Mil. Units)</a></th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Oct. Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>10.46</td>
<td>9.22</td>
<td>14.09</td>
<td>-3.4%</td>
<td>13.17</td>
<td>16.16</td>
<td>16.54</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>5.50</td>
<td>5.02</td>
<td>8.05</td>
<td>-3.7</td>
<td>6.71</td>
<td>7.58</td>
<td>7.77</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Domestic</td>
<td>3.64</td>
<td>3.25</td>
<td>5.26</td>
<td>-1.1</td>
<td>4.42</td>
<td>5.07</td>
<td>5.31</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imported</td>
<td>1.87</td>
<td>1.77</td>
<td>2.78</td>
<td>-8.4</td>
<td>2.29</td>
<td>2.52</td>
<td>2.45</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Light Trucks</td>
<td>4.96</td>
<td>4.20</td>
<td>6.05</td>
<td>-3.0</td>
<td>6.47</td>
<td>8.60</td>
<td>8.78</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Domestic</td>
<td>4.12</td>
<td>3.37</td>
<td>4.75</td>
<td>-0.4</td>
<td>5.29</td>
<td>7.10</td>
<td>7.42</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imported</td>
<td>0.84</td>
<td>0.83</td>
<td>1.31</td>
<td>-13.9</td>
<td>1.18</td>
<td>1.47</td>
<td>1.37</td>
</tr>
</tbody>
</table>


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U.S. unit sales of light vehicles during October recovered from the "payback" month of September following the summer's "cash-for-clunkers" sales program. Sales rose 13.5% m/m to 10.46M units according to the Autodata Corporation. [...]

U.S. Vehicle Sales Recover During October

U.S. Vehicle Sales Recover DuringOctober

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103g.jpg" align="left" border="0" height="265" width="353">
Brazilian industrial production increased 0.75% to 119.2
(2002=100) in September from 118.3 in August, a little short of
expectations, but still on the upward trend that began in January. The
three major marketing groups--capital goods, intermediate goods and
consumer goods--have all recovered from their falls in December as can
be seen in the first chart. The decline in capital goods was especially
severe and the recovery equally sharp.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103h.jpg" align="right" border="0" height="265" width="353">
Industrial production is a good proxy for Brazilian GDP.
Brazil reports real GDP on an index basis with 1995=100. We rebased the
Industrial production index to 1995=100 and aggregated the monthly
figures to quarterly. The second chart compares this index with the
index of real GDP. The correlation between the two series is strong at
.97. In the third quarter, industrial production increased 4.1%. A 3.9%
increase in industrial production was associated with a 1.9% increase
in real GDP. If the relationship between industrial production and real
GDP holds, Brazil's real GDP should show another roughly 2% rise in GDP
in the third quarter.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">BRAZIL</th>
<th scope="col">Sep 09</th>
<th scope="col">Aug&nbsp;09</th>
<th scope="col">Sep 08</th>
<th scope="col">M/M %&nbsp;</th>
<th scope="col">Y/Y %</th>
<th scope="col">2008&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Industrial Production&nbsp;
(2002=100) as reported</td>
<td>109.2</td>
<td>118.3</td>
<td>129.7</td>
<td>0.75</td>
<td>-8.1</td>
<td>125.3</td>
<td>121.8</td>
<td>115.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Industrial Production (1995=100)</td>
<td>136.2</td>
<td>135.2</td>
<td>148.3</td>
<td>0.75</td>
<td>-8.1</td>
<td>143.2</td>
<td>139.2</td>
<td>131.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Q3 09</td>
<td>Q2 09</td>
<td>Q1 09</td>
<td>Q4 08</td>
<td>Q3 08</td>
<td>Q2 08</td>
<td>Q1 08</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Real GDP (1995=100)</td>
<td>&nbsp;</td>
<td>145.3</td>
<td>142.7</td>
<td>146.0</td>
<td>149.0</td>
<td>147.1</td>
<td>144.9</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Industrial Production (1995=100)</td>
<td>135.1</td>
<td>129.8</td>
<td>124.9</td>
<td>133.8</td>
<td>148.2</td>
<td>146.3</td>
<td>144.7</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body></html>

Brazilian industrial production increased 0.75% to 119.2 (2002=100) in September from 118.3 in August, a little short of expectations, but still on the upward trend that began in January. The three major marketing groups--capital [...]

Brazil's Industrial Production Points To Good Third Quarter Growth In GDP

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103e.jpg" width="353">
Factory inventories continued lower during September as the stage continued to be set for a firm rebound in manufacturing activity. Of course that rebound is dependant on whether demand improves, and there are tentative indications that it is. Factory inventories fell 1.0% during September, about as they did during the prior four months. Despite the strength of these declines, the 4.6% decline during the period is a clear moderation from the 6.5% rate during the five months through April.
The moderation in inventory decumulation rates continues spotty amongst various industries. Inventories of electrical equipment &amp; appliances have fallen at a reduced 6.6% rate during the period but decumulation of machinery inventories continued firm at a 7.3% rate. Furniture inventories fell at a reduced 8.8% rate. The rate of decumulation of primary metals inventories also slowed as did cuts of motor vehicle &amp; parts inventories. Inventory reductions of computers &amp; electronic products continued firm but it may have bottomed.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103f.jpg" width="353">
Factory shipments have started to rise moderately. On a three-month basis they&#39;re up at a 3.5% rate after the 40% plus rates of decline last Winter. Shipments of primary metals have firmed to a 52.5% growth rate over the last three months and computers &amp; electronics shipments rose at a 4.7% rate. Shipments of transportation equipment rose at a 25.1% rate led by a surge in shipments of nondefense aircraft &amp; parts. Shipments of basic chemicals also turned up as did shipments from textile mills. The shipments improvement has caused unfilled orders to fall at a much-reduced 3.9% rate through September.
Overall, the reduction of inventories in the factory sector has succeeded in lowering the inventory-to-sales ratio. The decline to 1.36 was to its lowest level since October of last year and down from the recent peak of 1.46.
Finally, new orders have improved. The 0.9% increase during September raised orders at a 6.0% rate during the last three months. It reflected improvement in orders for transportation equipment, machinery, primary metals and electrical equipment.
The Manufacturers&#39; Shipments, Inventories and Orders (MSIO) data is available in Haver&#39;s USECON database.

<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/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM" style="color:#FFFFFF">Factory Survey</a> (NAICS, %)</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>-1.0</td>
<td>-0.9</td>
<td>-11.8</td>
<td>2.1</td>
<td>3.7</td>
<td>8.2&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>-0.7</td>
<td>-0.4</td>
<td>-14.1</td>
<td>-0.6</td>
<td>2.7</td>
<td>7.9</td>
</tr>
<tr class="odd">
<td class="firstcol">New Orders</td>
<td>0.9</td>
<td>-0.8</td>
<td>-17.1</td>
<td>0.1</td>
<td>1.9</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>0.8</td>
<td>0.3</td>
<td>-15.7</td>
<td>3.1</td>
<td>1.2</td>
<td>7.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>0.8</td>
<td>-0.2</td>
<td>-15.9</td>
<td>1.7</td>
<td>1.2</td>
<td>5.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>0.1</td>
<td>-0.1</td>
<td>-16.5</td>
<td>3.7</td>
<td>1.5</td>
<td>6.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Unfilled Orders</td>
<td>-0.4</td>
<td>-0.4</td>
<td>-11.5</td>
<td>3.5</td>
<td>17.1</td>
<td>15.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Transportation</td>
<td>0.5</td>
<td>-0.1</td>
<td>-14.2</td>
<td>-1.0</td>
<td>8.2</td>
<td>16.0</td>
</tr>
</tbody>
</table>
</body>
</html>

Factory inventories continued lower during September as the stage continued to be set for a firm rebound in manufacturing activity. Of course that rebound is dependant on whether demand improves, and there are tentative indications [...]

U.S. Factory Inventory Decumulation Rate Still Strong

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103d.jpg" align="left" border="0" height="265" width="353">
The auto sector is giving Europe a boost as incentive programs
are still helping to stimulate sales. Only Italy and Spain have
reported registrations for October but despite poor growth in both
regions auto sales are growing in strongly. Spain&#8217;s sales are up by
1.7% m/m in October and up at a 99% annual rate over three months even
as unemployment has hit a 10Year high there. Italy backed off in
October after a strong September.
Troubles in the financial sector have banks as less than
wiling lenders. Tough economic times have put consumers on the
sidelines. But government programs to stimulate demand with outright
subsidies linked to the scrappage of old poor-mileage vehicles has been
a way to stimulate demand and to vest theses programs with some sense
of a public purpose.
EMU Italy and Spain all saw sales crater at about the same
time. Despite different auto incentive programs in different countries
we see that Spain and Italy, two of the more challenged EMU economies,
with auto sectors that are very much in sync with the rest of Europe.
Evidence is that the recession in EMU is ending.
The EU Commission today issued a new outlook for the Zone and
confirmed that it sees recovery taking hold. It sees a contraction of
4.1% for the EU area this year followed by growth of 0.7% in 2010 and
of 1.6% in 2011 and roughly similar growth metrics for the Zone. This
outlook is a hike in its forecast from its previous stance than growth
in 2010 would contract by 0.1% in EMU.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col">E zone
Car Registrations</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo %</td>
<td colspan="2">3Mo Trend From</td>
<td colspan="2">6Mo Trend From</td>
<td colspan="2">12Mo Trend From</td>
</tr>
<tr>
<td class="firstcol">All Seas Adj</td>
<td>Oct 09</td>
<td>Sep 09</td>
<td>Aug 09</td>
<td>Oct 09</td>
<td>Sep 09</td>
<td>Oct 09</td>
<td>Sep 09</td>
<td>Oct 09</td>
<td>Sep 09</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>-1.6%</td>
<td>19.3%</td>
<td>-13.6%</td>
<td>5.8%</td>
<td>13.4%</td>
<td>16.1%</td>
<td>44.9%</td>
<td>14.5%</td>
<td>6.2%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>1.7%</td>
<td>28.8%</td>
<td>-9.3%</td>
<td>99.0%</td>
<td>158.6%</td>
<td>117.0%</td>
<td>181.5%</td>
<td>25.8%</td>
<td>17.7%</td>
</tr>
<tr>
<td class="firstcol">base Month of Calc</td>
<td>Sep-09</td>
<td>Aug-09</td>
<td>Jul-09</td>
<td>Jul-09</td>
<td>Jun-09</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>Oct-08</td>
<td>Sep-08</td>
</tr>
</tbody>
</table>
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The auto sector is giving Europe a boost as incentive programs are still helping to stimulate sales. Only Italy and Spain have reported registrations for October but despite poor growth in both regions auto sales are growing in [...]

Selected Car Registrations In Europe

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103a.jpg" width="353">
Divergent trends within the construction sector haven&#39;t yet added up to any meaningful improvement in the total but it could be on the way. Reported yesterday, September construction spending rose 0.8% following steady monthly declines during the last two years. Consensus estimates had been for yet another decline. Nevertheless, improvement in activity in the residential sector has picked up to a degree which may foreshadow improvement elsewhere.
Residential building activity increased firmly for the second consecutive month. The 3.9% m/m rise followed a similar gain in August and lifted the level of building activity to its highest since February. Single-family construction rose 2.4% (-35.0% y/y) for the fourth consecutive strong monthly increase. Spending on improvements also firmed by 7.2% (-12.5% y/y) in September after a 5.7% August increase. Offsetting the strength here has been a steady decline in multifamily building (-41.2% y/y). <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103b.jpg" width="353">
Poor corporate profitability and reduced economic activity generally continued to negatively affect nonresidential building activity. It fell 1.8% during September following similar declines during the prior three months. Over the four months combined, nonresidential outlays overall dropped 10.2%. Spending by the food &amp; beverage industries declined 26.2% during those four months as it did in the automotive sector. Hotel &amp; motel spending fell 19.0%; commercial &amp; amusements also fell 19.3% and office building dropped 11.6%. Relatively firm was the four-month spending decline in the education sector which totaled 6.2%. Spending on health care structures was down 3.5% but building activity in the religious sector actually rose 1.3% during the four months.
Public construction overall has been firm, up 6.1% y/y. Spending recouped the August decline with a 1.3% increase. Building activity by state &amp; local governments on power facilities rose 8.6% (32.0% y/y). The transportation area increased 2.7% (23.1% y/y). Public spending on health care facilities 3.4% (4.0% y/y and spending on highways &amp; streets rose 1.0% (2.8% y/y).<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103c.jpg" width="353">
The construction put-in-place figures are available in Haver&#39;s USECON database.
Incentive Compensation, Risk Management, and Safety and Soundness is yesterday&#39;s speech by Federal Reserve Board Governor Daniel K. Tarullo an it can be found here <a href="http://www.federalreserve.gov/newsevents/speech/tarullo20091102a.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Construction (%)</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.8</td>
<td>-0.1</td>
<td>-1.2</td>
<td>-13.0</td>
<td>-6.9</td>
<td>-1.6</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>0.5</td>
<td>0.4</td>
<td>-1.8</td>
<td>-20.6</td>
<td>-11.1</td>
<td>-5.7</td>
<td>5.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>3.9</td>
<td>3.8</td>
<td>0.1</td>
<td>-27.0</td>
<td>-29.1</td>
<td>-19.7</td>
<td>1.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-1.8</td>
<td>-1.8</td>
<td>-3.0</td>
<td>-15.4</td>
<td>13.2</td>
<td>23.1</td>
<td>16.2</td>
</tr>
<tr>
<td class="firstcol">Public</td>
<td>1.3</td>
<td>-1.1</td>
<td>0.1</td>
<td>6.1</td>
<td>5.6</td>
<td>13.1</td>
<td>9.3</td>
</tr>
</tbody>
</table>
</body>
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Divergent trends within the construction sector haven't yet added up to any meaningful improvement in the total but it could be on the way. Reported yesterday, September construction spending rose 0.8% following steady monthly [...]

U.S. Construction Spending Increases Moderately But Residential Recovery Firms

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103a.jpg" align="left" border="0" height="265" width="353">
Divergent trends within the construction sector haven't yet
added up to any meaningful improvement in the total but it could be on
the way. Reported yesterday, September construction spending rose 0.8%
following steady monthly declines during the last two years. Consensus
estimates had been for yet another decline. Nevertheless, improvement
in activity in the residential sector has picked up to a degree which
may foreshadow improvement elsewhere.
Residential building activity increased firmly for the second
consecutive month. The 3.9% m/m rise followed a similar gain in August
and lifted the level of building activity to its highest since
February. Single-family construction rose 2.4% (-35.0% y/y) for the
fourth consecutive strong monthly increase. Spending on improvements
also firmed by 7.2% (-12.5% y/y) in September after a 5.7% August
increase. Offsetting the strength here has been a steady decline in
multifamily building (-41.2% y/y). <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103b.jpg" align="right" border="0" height="265" width="353">
Poor corporate profitability and reduced economic activity
generally continued to negatively affect nonresidential building
activity. It fell 1.8% during September following similar declines
during the prior three months. Over the four months combined,
nonresidential outlays overall dropped 10.2%. Spending by the food
&amp; beverage industries declined 26.2% during those four months
as it did in the automotive sector. Hotel &amp; motel spending fell
19.0%; commercial &amp; amusements also fell 19.3% and office
building dropped 11.6%. Relatively firm was the four-month spending
decline in the education sector which totaled 6.2%. Spending on health
care structures was down 3.5% but building activity in the religious
sector actually rose 1.3% during the four months.
Public construction overall has been firm, up 6.1% y/y.
Spending recouped the August decline with a 1.3% increase. Building
activity by state &amp; local governments on power facilities rose
8.6% (32.0% y/y). The transportation area increased 2.7% (23.1% y/y).
Public spending on health care facilities 3.4% (4.0% y/y and spending
on highways &amp; streets rose 1.0% (2.8% y/y).<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103c.jpg" align="left" border="0" height="265" width="353">
The construction put-in-place figures are available in Haver's
USECON database.
Incentive Compensation, Risk Management, and Safety
and Soundness is yesterday's speech by Federal Reserve Board
Governor Daniel K. Tarullo an it can be found here <a href="http://www.federalreserve.gov/newsevents/speech/tarullo20091102a.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Construction
(%)</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.8</td>
<td>-0.1</td>
<td>-1.2</td>
<td>-13.0</td>
<td>-6.9</td>
<td>-1.6</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>0.5</td>
<td>0.4</td>
<td>-1.8</td>
<td>-20.6</td>
<td>-11.1</td>
<td>-5.7</td>
<td>5.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>3.9</td>
<td>3.8</td>
<td>0.1</td>
<td>-27.0</td>
<td>-29.1</td>
<td>-19.7</td>
<td>1.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-1.8</td>
<td>-1.8</td>
<td>-3.0</td>
<td>-15.4</td>
<td>13.2</td>
<td>23.1</td>
<td>16.2</td>
</tr>
<tr>
<td class="firstcol">Public</td>
<td>1.3</td>
<td>-1.1</td>
<td>0.1</td>
<td>6.1</td>
<td>5.6</td>
<td>13.1</td>
<td>9.3</td>
</tr>
</tbody>
</table>
 Selected Car Registrations In
Europe 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 03, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103d.jpg" align="left" border="0" height="265" width="353">
The auto sector is giving Europe a boost as incentive programs
are still helping to stimulate sales. Only Italy and Spain have
reported registrations for October but despite poor growth in both
regions auto sales are growing in strongly. Spain&#8217;s sales are up by
1.7% m/m in October and up at a 99% annual rate over three months even
as unemployment has hit a 10Year high there. Italy backed off in
October after a strong September.
Troubles in the financial sector have banks as less than
wiling lenders. Tough economic times have put consumers on the
sidelines. But government programs to stimulate demand with outright
subsidies linked to the scrappage of old poor-mileage vehicles has been
a way to stimulate demand and to vest theses programs with some sense
of a public purpose.
EMU Italy and Spain all saw sales crater at about the same
time. Despite different auto incentive programs in different countries
we see that Spain and Italy, two of the more challenged EMU economies,
with auto sectors that are very much in sync with the rest of Europe.
Evidence is that the recession in EMU is ending.
The EU Commission today issued a new outlook for the Zone and
confirmed that it sees recovery taking hold. It sees a contraction of
4.1% for the EU area this year followed by growth of 0.7% in 2010 and
of 1.6% in 2011 and roughly similar growth metrics for the Zone. This
outlook is a hike in its forecast from its previous stance than growth
in 2010 would contract by 0.1% in EMU.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col">E zone
Car Registrations</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo %</td>
<td colspan="2">3Mo Trend From</td>
<td colspan="2">6Mo Trend From</td>
<td colspan="2">12Mo Trend From</td>
</tr>
<tr>
<td class="firstcol">All Seas Adj</td>
<td>Oct 09</td>
<td>Sep 09</td>
<td>Aug 09</td>
<td>Oct 09</td>
<td>Sep 09</td>
<td>Oct 09</td>
<td>Sep 09</td>
<td>Oct 09</td>
<td>Sep 09</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>-1.6%</td>
<td>19.3%</td>
<td>-13.6%</td>
<td>5.8%</td>
<td>13.4%</td>
<td>16.1%</td>
<td>44.9%</td>
<td>14.5%</td>
<td>6.2%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>1.7%</td>
<td>28.8%</td>
<td>-9.3%</td>
<td>99.0%</td>
<td>158.6%</td>
<td>117.0%</td>
<td>181.5%</td>
<td>25.8%</td>
<td>17.7%</td>
</tr>
<tr>
<td class="firstcol">base Month of Calc</td>
<td>Sep-09</td>
<td>Aug-09</td>
<td>Jul-09</td>
<td>Jul-09</td>
<td>Jun-09</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>Oct-08</td>
<td>Sep-08</td>
</tr>
</tbody>
</table>
 U.S. Factory Inventory
Decumulation Rate Still Strong 
by <a href="/comment/Moeller.html">Tom
Moeller</a> November 03, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103e.jpg" align="left" border="0" height="265" width="353">
Factory inventories continued lower during September as the
stage continued to be set for a firm rebound in manufacturing activity.
Of course that rebound is dependant on whether demand improves, and
there are tentative indications that it is. Factory inventories fell
1.0% during September, about as they did during the prior four months.
Despite the strength of these declines, the 4.6% decline during the
period is a clear moderation from the 6.5% rate during the five months
through April.
The moderation in inventory decumulation rates continues
spotty amongst various industries. Inventories of electrical equipment
&amp; appliances have fallen at a reduced 6.6% rate during the
period but decumulation of machinery inventories continued firm at a
7.3% rate. Furniture inventories fell at a reduced 8.8% rate. The rate
of decumulation of primary metals inventories also slowed as did cuts
of motor vehicle &amp; parts inventories. Inventory reductions of
computers &amp; electronic products continued firm but it may have
bottomed.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103f.jpg" align="right" border="0" height="265" width="353">
Factory shipments have started to rise moderately. On a
three-month basis they're up at a 3.5% rate after the 40% plus rates of
decline last Winter. Shipments of primary metals have firmed to a 52.5%
growth rate over the last three months and computers &amp;
electronics shipments rose at a 4.7% rate. Shipments of transportation
equipment rose at a 25.1% rate led by a surge in shipments of
nondefense aircraft &amp; parts. Shipments of basic chemicals also
turned up as did shipments from textile mills. The shipments
improvement has caused unfilled orders to fall at a much-reduced 3.9%
rate through September.
Overall, the reduction of inventories in the factory sector
has succeeded in lowering the inventory-to-sales ratio. The decline to
1.36 was to its lowest level since October of last year and down from
the recent peak of 1.46.
Finally, new orders have improved. The 0.9% increase during
September raised orders at a 6.0% rate during the last three months. It
reflected improvement in orders for transportation equipment,
machinery, primary metals and electrical equipment.
The Manufacturers' Shipments, Inventories and Orders (MSIO)
data is available in Haver's USECON database.

<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/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM" style="color: rgb(255, 255, 255);">Factory Survey</a>
(NAICS, %)</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>-1.0</td>
<td>-0.9</td>
<td>-11.8</td>
<td>2.1</td>
<td>3.7</td>
<td>8.2&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding
Transportation</td>
<td>-0.7</td>
<td>-0.4</td>
<td>-14.1</td>
<td>-0.6</td>
<td>2.7</td>
<td>7.9</td>
</tr>
<tr class="odd">
<td class="firstcol">New Orders</td>
<td>0.9</td>
<td>-0.8</td>
<td>-17.1</td>
<td>0.1</td>
<td>1.9</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding
Transportation</td>
<td>0.8</td>
<td>0.3</td>
<td>-15.7</td>
<td>3.1</td>
<td>1.2</td>
<td>7.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>0.8</td>
<td>-0.2</td>
<td>-15.9</td>
<td>1.7</td>
<td>1.2</td>
<td>5.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding
Transportation</td>
<td>0.1</td>
<td>-0.1</td>
<td>-16.5</td>
<td>3.7</td>
<td>1.5</td>
<td>6.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Unfilled Orders</td>
<td>-0.4</td>
<td>-0.4</td>
<td>-11.5</td>
<td>3.5</td>
<td>17.1</td>
<td>15.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding
Transportation</td>
<td>0.5</td>
<td>-0.1</td>
<td>-14.2</td>
<td>-1.0</td>
<td>8.2</td>
<td>16.0</td>
</tr>
</tbody>
</table>
 Brazil's Industrial Production
Points To Good Third Quarter Growth In GDP 
by <a href="/comment/Curley.html">Louise
Curley</a> November 3, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103g.jpg" align="left" border="0" height="265" width="353">
Brazilian industrial production increased 0.75% to 119.2
(2002=100) in September from 118.3 in August, a little short of
expectations, but still on the upward trend that began in January. The
three major marketing groups--capital goods, intermediate goods and
consumer goods--have all recovered from their falls in December as can
be seen in the first chart. The decline in capital goods was especially
severe and the recovery equally sharp.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091103h.jpg" align="right" border="0" height="265" width="353">
Industrial production is a good proxy for Brazilian GDP.
Brazil reports real GDP on an index basis with 1995=100. We rebased the
Industrial production index to 1995=100 and aggregated the monthly
figures to quarterly. The second chart compares this index with the
index of real GDP. The correlation between the two series is strong at
.97. In the third quarter, industrial production increased 4.1%. A 3.9%
increase in industrial production was associated with a 1.9% increase
in real GDP. If the relationship between industrial production and real
GDP holds, Brazil's real GDP should show another roughly 2% rise in GDP
in the third quarter.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">BRAZIL</th>
<th scope="col">Sep 09</th>
<th scope="col">Aug&nbsp;09</th>
<th scope="col">Sep 08</th>
<th scope="col">M/M %&nbsp;</th>
<th scope="col">Y/Y %</th>
<th scope="col">2008&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Industrial Production&nbsp;
(2002=100) as reported</td>
<td>109.2</td>
<td>118.3</td>
<td>129.7</td>
<td>0.75</td>
<td>-8.1</td>
<td>125.3</td>
<td>121.8</td>
<td>115.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Industrial Production (1995=100)</td>
<td>136.2</td>
<td>135.2</td>
<td>148.3</td>
<td>0.75</td>
<td>-8.1</td>
<td>143.2</td>
<td>139.2</td>
<td>131.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Q3 09</td>
<td>Q2 09</td>
<td>Q1 09</td>
<td>Q4 08</td>
<td>Q3 08</td>
<td>Q2 08</td>
<td>Q1 08</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Real GDP (1995=100)</td>
<td>&nbsp;</td>
<td>145.3</td>
<td>142.7</td>
<td>146.0</td>
<td>149.0</td>
<td>147.1</td>
<td>144.9</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Industrial Production (1995=100)</td>
<td>135.1</td>
<td>129.8</td>
<td>124.9</td>
<td>133.8</td>
<td>148.2</td>
<td>146.3</td>
<td>144.7</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
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U.S. Construction SpendingIncreases Moderately But Residential Recovery Firms

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091102k.jpg" align="right" border="0" height="265" width="353">Japanese
household consumption expenditures in the third quarter will not be
known until the "First Preliminary Release" of GDP for the third
quarter due November 16 is released.&nbsp; Some indication of what
the consumers is doing can be gleaned from recent monthly data from the
Family Income and Expenditure Survey and the data on wages and
employment.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091102l.jpg" align="right" border="0" height="265" width="353">Results of
Japan's Family Income and Expenditure Survey
for September were released over the week end.&nbsp; In nominal
terms, the index of living expenditures declined in July to 95.0 (2005
= 100) from 97.0 in June, but rose in August and September to 96.9 and
97.3, respectively.&nbsp; Nevertheless, for the quarter, living
expenditures in nominal terms were 2.4% below the year ago
figure.&nbsp; As a result of continued deflation in the Japanese
economy, real living expenditures increased in August and September and
for the quarter were up 0.4% from the third quarter of 2008 as can be
seen in the first chart.
On the whole, the Family Income and
Expenditure Surveys for the last three months suggest that real
consumer spending may show a small increase in the third quarter.The
outlook for consumer incomes and hence their ability to spend is
mixed.&nbsp; Seasonally unadjusted wages in nominal terms have
continued to decline on a year to year basis--5.6% in July, 2.7% in
August and 1.59% in September.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091102m.jpg" align="right" border="0" height="265" width="353">
But again adjusted for
deflation, real wages were up 0.9% in September over September, 2008
one of the few year over year increases in real wages that has occurred
over the past three years as can be seem in the second Chart.&nbsp;
Employment&nbsp; increased&nbsp; and unemployment decreased
marginally&nbsp; in August and September&nbsp; as can be seen
in the third chart.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Sep 09</th>
<th scope="col">Aug&nbsp; 09</th>
<th scope="col">Jul 09</th>
<th scope="col">Jun 09</th>
<th scope="col">May 09</th>
<th scope="col">Apr 08&nbsp;</th>
<th scope="col">Mar 09</th>
<th scope="col">Feb 09</th>
<th scope="col">Jan 09</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Real Living Expenditures (Y/Y %
Chg)</td>
<td>1.25</td>
<td>1.68</td>
<td>-1.75</td>
<td>0.84</td>
<td>-0.82</td>
<td>-1.16</td>
<td>-0.93</td>
<td>-18.4</td>
<td>-5.54</td>
</tr>
<tr>
<td class="firstcol">Nominal Living Expenditures
(Y/Y % Chg)</td>
<td>-1.22</td>
<td>-1.22</td>
<td>-4.62</td>
<td>-1.02</td>
<td>-1.81</td>
<td>-1.94</td>
<td>-0.92</td>
<td>-1.82</td>
<td>-5.76</td>
</tr>
<tr class="odd">
<td class="firstcol">Real Wages (Y/Y % Chg)&nbsp;</td>
<td>0.88</td>
<td>-0.12</td>
<td>-3.02</td>
<td>-5.2</td>
<td>-1.35</td>
<td>-2.64</td>
<td>-3.66</td>
<td>-2.44</td>
<td>-2.63</td>
</tr>
<tr>
<td class="firstcol">Nominal Wages (Y/Y % Chg)</td>
<td>-1.59</td>
<td>-2.71</td>
<td>-5.60</td>
<td>-7.01</td>
<td>-2.53</td>
<td>-2.73</td>
<td>-3.85</td>
<td>-2.43</td>
<td>-2.72</td>
</tr>
<tr class="odd">
<td class="firstcol">Employment&nbsp; (10,000
Persons)</td>
<td>6264</td>
<td>6260</td>
<td>6231</td>
<td>6233</td>
<td>6201</td>
<td>6305</td>
<td>6311</td>
<td>6373</td>
<td>6395</td>
</tr>
<tr>
<td class="firstcol">Unemployment&nbsp;</td>
<td>352</td>
<td>362</td>
<td>376</td>
<td>336</td>
<td>343</td>
<td>334</td>
<td>320</td>
<td>295</td>
<td>276</td>
</tr>
</tbody>
</table>

</body></html>

Japanese household consumption expenditures in the third quarter will not be known until the "First Preliminary Release" of GDP for the third quarter due November 16 is released. Some indication of what the consumers is doing can be [...]

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Sandy Batten

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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%.

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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.

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- 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

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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.

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**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.

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**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.

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**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.

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**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.

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**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.

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**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.

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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).

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Charts of the Week: Forecasters Hold Firm

Winnie Tapasanun

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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.

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- 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

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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**.

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- 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.