Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090804i.jpg" align="right" border="0" height="265" width="353">
The official policy interest rates in both Australia and New
Zealand have been unchanged since May of this year--Australia at 3% and
New Zealand at 2.5%, as can be seen in the first chart. In recent news
releases, Glenn Stevens, the Governor of the Bank of Australia, hinted
that the next move might be an increase while Alan Bollard,<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090804j.jpg" align="right" border="0" height="265" width="353">
Governor of
the Bank of New Zealand would not rule out further reductions.
Typical of the cross currents affecting these economies are
today's updates of the Haver data bases for the two countries. In
Australia, retail sales were down slightly in June, but on a quarterly
basis, the second quarter was 2% above the first quarter and almost 8%
above the second quarter of 2008. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090804k.jpg" align="right" border="0" height="265" width="353">
An index of house prices of
established homes in eight capital cities increased 4.2% in the second
quarter from the first quarter of this year and was only 1.4% below the
value of the index in the second quarter of 2008. The quarter to
quarter changes in retail sales and house prices are shown in the
second chart.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090804l.jpg" align="right" border="0" height="265" width="353">
In New Zealand wages and salaries are still rising, both for
ordinary hours and for overtime, but the rate of increase has declined
in the past few quarters, as shown in the third chart. Employment
continues to decline and was 0.75% lower in the second quarter than in
the first quarter and more than 3% lower than the second quarter of
2008. Part Time and Full Time employment trends are shown in the fourth
chart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Q2 09</th>
<th scope="col">Q1&nbsp; 09</th>
<th scope="col">Q2 08</th>
<th scope="col">Q/Q %&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="even">
<td colspan="9" class="firstcol"> AUSTRALIA</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail Sales (Millions A$)</td>
<td>58,615</td>
<td>57,426</td>
<td>54,406</td>
<td>2.07</td>
<td>7.67</td>
<td>219,968</td>
<td>211,255</td>
<td>195.254</td>
</tr>
<tr class="odd">
<td class="firstcol">House Price Index
(Q2,2003-Q2,2004=100)</td>
<td>128.1</td>
<td>122.9</td>
<td>129.4</td>
<td>4.23</td>
<td>-1.39</td>
<td>128.0</td>
<td>122.7</td>
<td>110.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="even">
<td colspan="9" class="firstcol">NEW ZEALAND</td>
</tr>
<tr class="odd">
<td class="firstcol">Employment (000)</td>
<td>1355</td>
<td>1365</td>
<td>1400</td>
<td>-0.75</td>
<td>-3.19</td>
<td>1392</td>
<td>1370</td>
<td>1338</td>
</tr>
<tr class="odd">
<td class="firstcol">Wages Ordinary Time (Q2
2001=1000)</td>
<td>1244</td>
<td>1240</td>
<td>1209</td>
<td>0.32</td>
<td>2.89</td>
<td>1216</td>
<td>1174</td>
<td>1138</td>
</tr>
<tr class="odd">
<td class="firstcol">Wages Over Time (Q2 2001=1000)</td>
<td>1268</td>
<td>1262</td>
<td>1225</td>
<td>0.48</td>
<td>3.51</td>
<td>1233</td>
<td>1192</td>
<td>1150</td>
</tr>
</tbody>
</table>
</body></html>

The official policy interest rates in both Australia and New Zealand have been unchanged since May of this year--Australia at 3% and New Zealand at 2.5%, as can be seen in the first chart. In recent news releases, Glenn Stevens, the [...]

Mixed Signals From Down Under

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090804h.jpg" align="left" border="0" height="265" width="353">
EMU producer prices (x-construction) ticked up in June but are
still falling at an accelerating pace Year-over-year. Sector prices are
weak and falling across the board on all horizons but the rate of
descent is not gathering momentum overall or by sector. In the end that
is the really good news. 
 

Germany shows prices falling over three-months at about the
same pace they are falling over six months, both of which are at a
faster pace of decline than year-over-year. But core German prices,
Italian prices and UK prices, in particular, are not showing any
continuing deceleration: declines yes, but decelerations, no. In the UK
PPI prices have started to rise. In Italy the down turn has abated and
there is one month in which the PPI headline rate has risen (June).
German trends are marked by still declining headline and core rates
even monthly, but the move down is not accelerating. 
 

In short inflation appears to be contained and deflation does
not seem to be in the cards on a sampling of big picture EMU sector
news and smattering of country-level reports. Lingering economic
weakness is probably having this extended impact in depressing prices. 
 
 
 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="7" scope="col">Euro Area and UK PPI Trends </th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="2">M/M</td>
<td colspan="4">Saar</td>
</tr>
<tr class="grey3">
<td class="firstcol">Euro Area</td>
<td>Jun-09</td>
<td>May-09</td>
<td>3-Mo</td>
<td>6-MO</td>
<td>Yr/Yr</td>
<td>Y/Y Yr Ago</td>
</tr>
<tr class="grey2">
<td class="firstcol">Total excl Constructions</td>
<td>0.2%</td>
<td>-0.2%</td>
<td>-4.5%</td>
<td>-7.8%</td>
<td>-6.7%</td>
<td>7.9%</td>
</tr>
<tr class="grey1">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol">Capital Goods</td>
<td>0.0%</td>
<td>-0.3%</td>
<td>-1.2%</td>
<td>-1.2%</td>
<td>0.3%</td>
<td>2.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Consumer Goods</td>
<td>-0.1%</td>
<td>0.0%</td>
<td>-0.7%</td>
<td>-3.6%</td>
<td>-2.3%</td>
<td>4.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Intermediate &amp; Capital
Goods</td>
<td>0.0%</td>
<td>-0.4%</td>
<td>-5.2%</td>
<td>-9.4%</td>
<td>-6.4%</td>
<td>4.3%</td>
</tr>
<tr class="grey1">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol">MFG</td>
<td>0.5%</td>
<td>-0.1%</td>
<td>-0.4%</td>
<td>-5.0%</td>
<td>-7.4%</td>
<td>7.2%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Germany</td>
<td>-0.1%</td>
<td>0.0%</td>
<td>-9.4%</td>
<td>-9.8%</td>
<td>-3.3%</td>
<td>5.1%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Germany excl Energy</td>
<td>-0.1%</td>
<td>-0.2%</td>
<td>-2.3%</td>
<td>-4.1%</td>
<td>-2.8%</td>
<td>2.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Italy</td>
<td>0.2%</td>
<td>-0.2%</td>
<td>-2.9%</td>
<td>-6.6%</td>
<td>-7.2%</td>
<td>8.1%</td>
</tr>
<tr class="grey2">
<td class="firstcol">UK</td>
<td>1.1%</td>
<td>0.5%</td>
<td>1.5%</td>
<td>2.1%</td>
<td>-8.6%</td>
<td>24.1%</td>
</tr>
<tr class="grey1">
<td colspan="7" class="firstcol">E-zone Harmonized PPI ex construction</td>
</tr>
<tr class="grey3">
<td colspan="7" class="firstcol">The EA 13 countries are Austria,
Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,
the Netherlands, Portugal, Slovenia</td>
</tr>
</tbody>
</table>
</body></html>

EMU producer prices (x-construction) ticked up in June but are still falling at an accelerating pace Year-over-year. Sector prices are weak and falling across the board on all horizons but the rate of descent is not gathering momentum [...]

All Producer Prices in EMU Still Under Downward Pressure

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090804f.jpg" width="353">
The economy must be improving if gasoline prices are rising. Or is it seasonal strength? The pump price for regular gasoline increased last week to an average $2.56 per gallon, though that still was down a nickel from last month&#39;s high. The increase added to the nearly one dollar (59%) rise from the December low. Yesterday, however, the pricing strength was even more evident with the twenty cent jump to $2.03 per gallon in the cash market price. Gasoline prices were up off the early-July low of $1.60. The figures are reported by the U.S. Department of Energy and can be found in Haver&#39;s WEEKLY &amp; DAILY databases.
Crude oil prices also have strengthened. Light sweet crude oil prices (WTI) increased to $67.23 per barrel and they&#39;ve roughly doubled this year. Yesterday the spot market price for light sweet crude oil rose further to $71.58 per barrel. Prices had reached a daily high of $72.68 earlier in July.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090804g.jpg" width="353">
The pickup in energy prices is against the backdrop of a firming demand picture. It probably is seasonal, but during the last four weeks the demand for gasoline is up sharply. Year-to year, demand still is down by 1.8%, but that compares to a nearly 5% rate of decline last fall. Demand for distillate also is off sharply though residual fuel oil demand has moved higher. Finally, oil remains plentiful as evidenced by a 13.0% y/y rise in inventories of crude oil &amp; petroleum products. Inventories of gasoline are flat y/y but crude oil inventories less the SPR are up by 17.8%. The figures on crude oil production and inventories are available in Haver&#39;s OILWKLY database.
Natural gas prices continued their move sideways last week. At an average of $3.44 per mmbtu (-62.8% y/y), the price was down by three-quarters from the high reached in early-July of last year of $13.19/mmbtu.

<table border="0" cellspacing="0" width="100%">
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<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">08/03/09</th>
<th scope="col">07/27/09</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>
<td class="firstcol">Retail Regular Gasoline ($ per Gallon, Regular)</td>
<td>2.56</td>
<td>2.50</td>
<td>-34.1%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; ($ per bbl.)</td>
<td>67.23</td>
<td>64.72</td>
<td>-45.0%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
</body>
</html>

The economy must be improving if gasoline prices are rising. Or is it seasonal strength? The pump price for regular gasoline increased last week to an average $2.56 per gallon, though that still was down a nickel from last month's [...]

Gasoline Prices Move Higher As Crude Prices Rise And Demand Stabilizes

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090804d.jpg" width="353">
The rebound in housing activity grew stronger last month as mortgage rates remained low. The National Association of Realtors reported that June pending sales of existing homes jumped 3.6% from May to their highest level since June of 2007. The gain easily outpaced Consensus expectations for a slight 0.6% increase in monthly sales.
Home sales rose last month in each of the country&#39;s regions, but they surged in the South and the West. In the South, sales jumped 7.1% m/m to lift them nearly nine percent from June of 2008. In the West, sales also were strong and posted a 7.1% gain. Though strong last month, sales have meandered sideways for the last year. In the Northeast, sales ticked up just 0.4% from May. That followed strong gains during three of the prior four months and left them at their highest in two years. Finally, sales in the Midwest also rose but by a slight 0.8% m/m; nevertheless, they were at their highest level since 2007.
These home sales figures are analogous to the new home sales data from the Commerce Department in that they measure existing home sales when the sales contract is signed, not at the time the sale is closed. The series dates back to 2001.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090804e.jpg" width="353">
The latest monthly gains in home sales have been accompanied by improvement in prices. The median sales price of an existing home increased 4.1% in June (-15.4% y/y) and prices have risen 7.1% since December. That latest increase reduced the affordability index of a home but it nevertheless remained up by 29.9% year-to-year and by three-quarters from the 2006 low. The median price of an existing home rose to $181,600 (-15.0% y/y) and the average mortgage rate was 5.2%, down from 6.3% one year ago.
The Realtors Association indicated in an earlier report that the number of homes on the market and available for sale slipped m/m and was down 14.9% versus one year earlier. At the current sales rate, there was a 9.4 months&#39; supply of homes on the market which was near the lowest since June 2007. However, it still was up from the 8.9 months supply during all of 2007 and 6.5 months during 2006. At the high, there was a 10.4 months supply during all of last year.
The pending home sales data are available in Haver&#39;s PREALTOR database. The number of homes on the market and prices are in the REALTOR 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/WEEKLY/@W5/@W507/@W507.HTM">Pending Home Sales (2001=100)&nbsp;</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>94.6</td>
<td>91.3</td>
<td>&nbsp;&nbsp; 6.7%</td>
<td>86.8</td>
<td>95.8</td>
<td>112.1&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>81.2</td>
<td>80.9</td>
<td>5.9</td>
<td>72.6</td>
<td>85.6</td>
<td>98.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Midwest</td>
<td>89.9</td>
<td>89.2</td>
<td>11.5</td>
<td>80.6</td>
<td>89.5</td>
<td>102.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>100.7</td>
<td>94.0</td>
<td>8.9</td>
<td>89.8</td>
<td>107.3</td>
<td>127.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; West</td>
<td>100.4</td>
<td>97.6</td>
<td>-0.2</td>
<td>99.3</td>
<td>92.1</td>
<td>109.5</td>
</tr>
</tbody>
</table>
</body>
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The rebound in housing activity grew stronger last month as mortgage rates remained low. The National Association of Realtors reported that June pending sales of existing homes jumped 3.6% from May to their highest level since June of [...]

U.S. Pending Home Sales Rise To The Highest Level In Two Years

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090804a.jpg" width="353">
As &quot;automatic stabilizers&quot; vanished, June personal income reversed all of the prior month&#39;s jump with a 1.3% decline. Government payments to individuals dropped 6.0% as &quot;other&quot; stimulus payments reversed the May gain with a 16.5% decline (-7.3% y/y). As might be expected, wages &amp; salaries, remained under pressure with the weak job market. The 0.4% decline from May was the ninth decline in the last ten months (-4.7% y/y). In the goods producing industries, wages have been particularly hard hit and are down 11.4% y/y. In addition, the decline in interest rates has taken its toll on interest income which in June was off 3.7% y/y while fewer dividends were paid by the corporate sector (-24.4% y/y). These latest figures reflect benchmark revisions which generally lowered income and the June decline roughly matched Consensus expectations for a 1.0% drop.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090804b.jpg" width="353">
With lower income came lower taxes. Tax payments fell 1.5% last month and they were down by nearly one-quarter since December. Nevertheless, disposable personal income fell 1.3% last month. So far this year disposable income has risen at a 1.7% annual rate which very much reflects sharp downward revisions to earlier figures. Adjusted for inflation, real disposable income also reversed the May gain and fell 1.8%. Revisions dropped growth in real take-home pay to a negative 0.4% since December whereas earlier figures showed firm growth.
Whatever it takes, consumers have attempted to rebuild their balance sheets. Though the personal savings rate backpedaled last month with the income drop, the 4.6% figure was near the highest since 1998 despite the downward income revisions.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090804c.jpg" width="353">
Restraint on spending has driven the rise in savings. June personal consumption expenditures about matched expectations and rose just 0.4%. They are up 2.5% at a annual rate so far this year. However, that growth largely reflects the rise in gasoline prices. Adjusted for inflation, June spending slipped 0.1% and so far this year it is up at just a 0.4% annual rate. (The details behind this restraint will be available later this week.)
Pricing power continues to held back by sluggish spending. The PCE chain price index rose 0.5% last month, largely due to the rise in energy prices. Less food and energy prices rose just 0.2%. Combined with weakness during prior months, the y/y gain in core prices dropped to 1.5% which was its lowest since 2003. The latest increase in prices matched Consensus expectations.
The personal income &amp; consumption figures are available in Haver&#39;s USECON and USNA databases.
Bank Supervision is today&#39;s Senate testimony by Fed Governor Daniel K. Tarullo and it can be found <a href="http://www.federalreserve.gov/newsevents/testimony/tarullo20090804a.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a> (%)&nbsp;</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>-1.3</td>
<td>1.3</td>
<td>-3.4</td>
<td>2.9</td>
<td>5.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Disposable Personal Income</td>
<td>-1.3</td>
<td>1.6</td>
<td>-1.3</td>
<td>3.9</td>
<td>4.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption Expenditures</td>
<td>0.4</td>
<td>0.1</td>
<td>-2.2</td>
<td>3.1</td>
<td>5.4</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>4.6</td>
<td>6.2</td>
<td>3.5 (June &#39;08)</td>
<td>2.6</td>
<td>1.7</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>0.5</td>
<td>0.1</td>
<td>-0.4</td>
<td>3.3</td>
<td>2.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.2</td>
<td>0.1</td>
<td>1.5</td>
<td>2.4</td>
<td>2.4</td>
</tr>
</tbody>
</table>
</body>
</html>

As "automatic stabilizers" vanished, June personal income reversed all of the prior month's jump with a 1.3% decline. Government payments to individuals dropped 6.0% as "other" stimulus payments reversed the May gain with a 16.5% [...]

U.S. Personal Income Reverses Large May Gain While Savings Rate Tumbles

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090803h.jpg" align="right" border="0" height="265" width="353">
The U.S. government's "Cash for Clunkers" program was given
credit for supporting sales of light vehicles last month. The program
gives car buyers up to $4,500 for trading in older, gas-guzzling
vehicles if they're buying more fuel efficient cars. The Treasury Dept.
was authorized to spend $1 billion and an additional $2 billion
currently is under consideration by the Senate. The House passed its
approval of the plan on Friday. One estimate is that, just last week,
the program helped spike vehicle sales to a 15-to-16 million annual
rate. Regardless of the program's impact, U.S. light vehicle
sales last month jumped 15.8% <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090803i.jpg" align="right" border="0" height="265" width="353">
from June to 11.24 million
units (AR) which was the highest sales rate since last September. It
followed a 1.6% decline during June. While sales were firm last month,
they remained down by nearly one-third, year-to-date, from the first
seven months of 2008. (Benchmark revisions altered sales levels
slightly back to 2002.)
Unit sales of U.S. made light vehicles
jumped 15.8% m/m to 8.17M units during July which was their highest
since last September, according to the Autodata Corporation. (Seasonal
adjustment of the figures is provided by the U.S. Bureau of Economic
Analysis). Sales of domestically made cars jumped 25.4% m/m to 4.11M
units while light truck sales rose 7.4% m/m to 4.06M units. YTD, sales
of domestic vehicles overall are down 33.6% following last year's 35.8%
drop from December-to-December.
In similar fashion, sales of imported light vehicles<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090803j.jpg" align="right" border="0" height="265" width="353">
were strong and rose 16.0% m/m during July from June. Sales of imported
autos rose 18.3% from June and were at their highest level since last
August. Sales of imported light trucks were nearly as strong m/m, up
11.3% from June, but they've really been strong all year rising to
their highest just since March. Sales of imported vehicles YTD have
increased 12.5%.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090803k.jpg" align="right" border="0" height="265" width="353">
Overall, import's share of the U.S. light
vehicle market held steady at 27.3% last month after reaching 26.5%
during all of last year. (Imported vehicles are those produced outside
the United States.) Imports' share of the U.S. car market totaled 33.7%
while the share of the light truck market was 19.5%, up slightly from
last year.
The U.S. vehicle sales figures can be found in Haver'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">Light
Vehicle Sales (SAAR, Mil. Units)</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">July 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>11.24</td>
<td>9.70</td>
<td>9.86</td>
<td>-11.4%</td>
<td>13.17</td>
<td>16.16</td>
<td>16.54</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>6.20</td>
<td>5.04</td>
<td>4.89</td>
<td>-10.7</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>4.11</td>
<td>3.28</td>
<td>3.19</td>
<td>-7.0</td>
<td>4.42</td>
<td>5.07</td>
<td>5.31</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Imported</td>
<td>2.09</td>
<td>1.76</td>
<td>1.71</td>
<td>-17.3</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>5.04</td>
<td>4.66</td>
<td>4.37</td>
<td>-12.2</td>
<td>6.47</td>
<td>8.60</td>
<td>8.78</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Domestic</td>
<td>4.06</td>
<td>3.78</td>
<td>4.05</td>
<td>-12.6</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>0.98</td>
<td>0.88</td>
<td>0.92</td>
<td>-10.4</td>
<td>1.18</td>
<td>1.47</td>
<td>1.37</td>
</tr>
</tbody>
</table>
</body></html>

The U.S. government's "Cash for Clunkers" program was given credit for supporting sales of light vehicles last month. The program gives car buyers up to $4,500 for trading in older, gas-guzzling vehicles if they're buying more fuel [...]

U.S. Light Vehicle Sales Benefit From "Cash For Clunkers" Program

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090803g.jpg" align="left" border="0" height="265" width="353">
Cash earnings, including bonuses, for Japanese workers in all
establishments of 5 or more persons were 430,620 Yen (approximately
$4,500) in June, 8% below a year ago. The sharp decline was due to
lower bonuses and less overtime pay. The average bonus in June of this
year was 167,044 yen compared with 197,226 yen last June, a decline of
more than 15%. Overtime pay was 15,725 yen compared with 19,275 yen a
year ago, a decline of 18.42% and, although the decline was small, even
base pay declined 1.4% to 247,851 yen from 251,437 yen a year ago.
Cash earnings in the manufacturing industry in establishments
of 5 or more persons were down over 13% in June. Again, bonuses were
the major cause of the decline. Bonuses in Manufacturing were 155,298
yen in June 2009, compared with 209,309 yen in June 2008, a drop of
almost 40%. In contrast to industry as a whole, manufacturing saw an
increase in base pay of 1.5% and an increase of 5.7% in overtime from
May to June.
Total cash wages for all surveyed industries and for
manufacturing are shown in the attached chart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Japan
Wages (Average monthly data in yen)</th>
<th scope="col">Jun 09</th>
<th scope="col">May&nbsp; 09</th>
<th scope="col">Jun 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="even">
<td class="firstcol" colspan="9">All
Industries</td>
</tr>
<tr class="odd">
<td class="firstcol">Schedule wages</td>
<td>247851</td>
<td>242451</td>
<td>251437</td>
<td>1.39</td>
<td>-1.43</td>
<td>251069</td>
<td>249749</td>
<td>252809</td>
</tr>
<tr class="odd">
<td class="firstcol">Overtime</td>
<td>15725</td>
<td>15940</td>
<td>19275</td>
<td>-1.35</td>
<td>-18.42</td>
<td>19147</td>
<td>19753</td>
<td>19805</td>
</tr>
<tr class="odd">
<td class="firstcol">Total=Contractual
Wages&nbsp;</td>
<td>263576</td>
<td>260391</td>
<td>270712</td>
<td>1.22</td>
<td>-2.64</td>
<td>270515</td>
<td>2695B02</td>
<td>272614</td>
</tr>
<tr class="odd">
<td class="firstcol">Bonuses</td>
<td>167044</td>
<td>7928</td>
<td>197226</td>
<td>n.m.</td>
<td>-15.30</td>
<td>60538</td>
<td>60396</td>
<td>62844</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Cash Wages</td>
<td>430620</td>
<td>268319</td>
<td>467938</td>
<td>n.m</td>
<td>-7.97</td>
<td>331053</td>
<td>329898</td>
<td>335438</td>
</tr>
<tr class="even">
<td class="firstcol" colspan="9">Manufacturing</td>
</tr>
<tr class="odd">
<td class="firstcol">Schedule wages</td>
<td>267443</td>
<td>263356</td>
<td>269229</td>
<td>1.55</td>
<td>-0.66</td>
<td>267625</td>
<td>265482</td>
<td>271803</td>
</tr>
<tr class="odd">
<td class="firstcol">Overtime</td>
<td>19424</td>
<td>18351</td>
<td>31988</td>
<td>5.69</td>
<td>-39.28</td>
<td>30963</td>
<td>33025</td>
<td>34168</td>
</tr>
<tr class="odd">
<td class="firstcol">Total=Contractual
Wages&nbsp;</td>
<td>286867</td>
<td>281737</td>
<td>301217</td>
<td>1.82</td>
<td>-4.76</td>
<td>298588</td>
<td>298507</td>
<td>305972</td>
</tr>
<tr class="odd">
<td class="firstcol">Bonuses</td>
<td>155298</td>
<td>5836</td>
<td>209309</td>
<td>n.m.</td>
<td>-25.80</td>
<td>75644</td>
<td>75664</td>
<td>59515</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Cash Wages</td>
<td>442165</td>
<td>287573</td>
<td>510526</td>
<td>n.m.</td>
<td>-13.39</td>
<td>374231</td>
<td>374171</td>
<td>385487</td>
</tr>
<tr>
<td colspan="9" class="firstcol">N.M.
presented in the table
is&nbsp; because of the distortions in the monthly data due to the
distribution of Bonuses in mid and end years, the month to month data
for bonuses and total cash wages are not meaningful</td>
</tr>
</tbody>
</table>
</body></html>

Cash earnings, including bonuses, for Japanese workers in all establishments of 5 or more persons were 430,620 Yen (approximately $4,500) in June, 8% below a year ago. The sharp decline was due to lower bonuses and less overtime pay. [...]

Japanese Wages Continue To Decline In June

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

Global freight costs are on the rise while supply chain pressures are contained

Accelerating positive economic surprises in the G10 are boosting the global economy

Considerably more monetary ease expected from US and UK as Japan tightens

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

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Winnie Tapasanun

260501A9.jpg

260501B9.jpg

The ISM U.S. manufacturing PMI held at a lower-than-expected 52.7 in April and March following a 0.2-point easing to 52.4 in February, data from the Institute for Supply Management showed. The April reading, above the 50 expansion-contraction dividing line, indicated the U.S. manufacturing sector expanded for the fourth successive month. A reading of 53.0 for April had been expected in the Action Economics Forecast Survey. The April manufacturing PMI, while above a contraction-level 48.8 in April 2025 and a low of 47.0 in October 2024, remained below a peak of 63.8 in March 2021.

The production index slipped to 53.4 in April from 55.1 in March, indicating production expanded for the sixth consecutive month but at the slowest pace since December. The index was above its recent low of 44.8 in April 2025 but below a peak of 66.5 in March 2021. In April, 28.3% (NSA) of respondents reported higher production while 13.0% reported lower production. The new orders index rebounded to 54.1 in April from 53.5 in March, signaling new orders grew for the fourth straight month following four successive months of contraction. The index remained well above a low of 41.8 in January 2023. In April, an increased 31.6% (NSA) of respondents reported higher new orders while 15.2% reported declines. The inventories index increased to 49.0 in April from 47.1 in March, marking the 12th straight month of contraction. The index was below its recent high of 52.7 in March 2025 but above a low of 43.8 in October 2024. Meanwhile, the supplier deliveries index rose to 60.6 in April from 58.9 in March, indicating slower delivery performance for the fifth consecutive month after faster deliveries in November. In April, 22.6% (NSA) of respondents reported slower delivery speeds while only 1.5% reported faster speeds.

On the labor front, the employment index slid to 46.4 in April from 48.7 in March, showing employment contracted for the 31st straight month and at the lowest level since December following a brief expansion in September 2023. The index was above its recent low of 44.1 in November 2025 but below a high of 49.7 in January 2025 and a high of 56.5 in March 2022. In April, 17.5% (NSA) of respondents reported higher employment while 20.2% reported less hiring.

On the pricing front, the prices paid index jumped to 84.6 (NSA) in April from 78.3 in March, indicating raw materials prices rose for the 19th consecutive month and at the fastest pace since April 2022. 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 April, an increased 70.3% (NSA) of respondents reported higher prices while only 1.2% reported price declines.

In other ISM series not included in the composite index, the new export orders index fell to 47.9 in April from 49.9 in March, indicating new export orders contracted for the second successive month after expanding in February and January. The index was up from a low of 40.1 in May 2025 but down from its recent high of 52.4 in January 2025 and a high of 57.1 in February 2022. The imports index decreased to 50.3 in April from 52.6 in March, suggesting imports expanded at the weakest pace in three months. 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 declined to 51.4 (NSA) in April from 54.4 in March, showing backlog levels grew at the slowest pace in four months. The index was well above a low of 37.5 in May 2023 but far below a peak of 70.6 in May 2021.

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.

260501C9.jpg

260501D9.jpg

- ISM Mfg. PMI at 52.7 in Apr. and Mar.; fourth consecutive month of expansion.
- Production (53.4) expands for the sixth straight mth.; new orders (54.1) for the fourth successive mth.
- Employment (46.4) contracts for the 31st straight mth.; at a four-month low.
- Prices Index (84.6) highest since Apr. ’22; prices rising for the 19th consecutive mth.
- Exports (47.9) contract; imports (50.3) still grow but at a three-month low.

U.S. ISM Manufacturing PMI Steady in April; New Orders and Production Growing; Employment Contracting

260501E.jpg

GDP growth in Europe in the first quarter of 2026 continued to be weak. First-quarter annualized growth at 0.6% followed a fourth-quarter annualized growth rate at 0.8%. Year-over-year growth in the monetary union logged a 0.8% annual rate; that represents a slowdown from earlier quarters where the growth rates were generally above 1% and more on the order of 1.5% at an annual rate.

**Early GDP reporters in EMU**
Among the 8 early reporters of GDP in the first quarter, in the table, only three posted growth pickups compared to the previous quarter. Those were Belgium, with a growth rate in the first quarter annualized at 0.8%, up from 0.2% in Q4 2025; Germany, where the growth rate picked up to 1.3% in the first quarter from 1.0% in Q4; and Ireland, with a dubious acceleration of growth to a -7.8% annualized rate, improving from -14.5% annualized in Q4.

**Big country, small country**
The table also looks at growth divided into the four largest economies in the monetary union versus the rest of the monetary union. There we see a growth rate of 1% for the four largest economies, a slowdown from 1.3% in the fourth quarter. For the rest of the monetary union, the growth rate held at 0.5% in the first quarter, the same rate logged in the fourth quarter.

**Median growth**
The median growth rate among these reporters was 0.6%, the same as for the weighted growth rate in the EMU, while the median in the fourth quarter was 1.5% compared to a weighted growth rate for the monetary union at 0.8%.

**Ranking the growth rates vs. their own histories**
The ranking data on the far-right column rank growth in the first quarter on its year-over-year growth pace. On a historic profile, we see only three monetary union reporters with growth in the first quarter at a rate that exceeds median on data back to the 1990s. Those economies are Italy with a 52.2 percentile ranking, Spain with a 53.3 percentile ranking, and Portugal with a 65.2 percentile ranking. For the monetary union as a whole, the growth rate rank is 28.3%, placing it at a ranking between its lower 1/4 and lower 1/3. The median for the monetary union among these early reporting countries is a 32.6 percentile growth rate, and these compared to the United States where the growth rate has a 60.2 percentile standing.

Other data sources report that growth in the services sector has been extremely weak, while there actually has been some resilience in manufacturing. That is somewhat surprising given the Middle East War that affects the world trade and global supply chains. New disruptions because of war in the Middle East are a new fact of life. However, war itself sometimes is a stimulant to some forms of growth. These sector trends will be for us to watch, but for right now growth rates are not impressive and they're certainly not gaining momentum.

260501.jpg

Europe

GDP Remains Weak in EMU

Andrew Cates

**Front-End Yields Reflect Policy Reassessment**
Against a backdrop of key central bank meetings either having just taken place or imminent, short-dated government bond yields have moved decisively higher across most major economies since the escalation of the Middle East conflict, with the sharpest increase seen in the UK. The rise in 2-year yields reflects a repricing of near-term monetary policy expectations, as markets respond to the inflationary implications of higher energy prices and the growing likelihood that central banks will delay easing cycles. Moves have been most pronounced in economies where inflation is expected to be more persistent—most notably the UK—while increases have been more modest in the US and particularly Japan, where policy normalisation remains gradual. In effect, the front end of the curve is signalling a shift away from the “rate cuts soon” narrative that prevailed earlier in the year toward a more cautious, higher-for-longer policy outlook.

260430Z1.jpg

**US Recession Risks Remain Contained—For Now**
Despite the recent deterioration in the macro backdrop, real-time recession risk indicators for the US remain relatively subdued. This is notable given the combination of softer growth momentum, higher bond yields and heightened geopolitical risk. The nowcast—derived from a blend of high-frequency activity data and financial stress measures—has historically tended to move sharply when conditions turn, rather than drift higher gradually. That asymmetry is important in the current environment. While recession risks are not yet flashing red, past cycles suggest they can reprice abruptly, and arguably at present if energy-driven inflation were to feed much more forcefully into financial conditions or begin to weigh more materially on demand.

260430Z2.jpg

**Consumer Confidence Diverges: Europe and UK Slide, US Stabilises**
Consumer confidence has weakened across the major economies, but the deterioration has been more pronounced in the euro area and the UK than in the US. While sentiment in the US has recently edged up, it remains at relatively subdued levels. By contrast, confidence in Europe and the UK has fallen more sharply, reflecting greater exposure to higher energy costs and a more direct squeeze on real household incomes. This divergence is consistent with broader macro trends, suggesting that demand in Europe may prove more sensitive to the current shock, with weaker sentiment feeding more quickly into consumption.

260430Z3.jpg

**Euro area Credit Conditions Turn More Restrictive**
The latest ECB lending survey points to a clear tightening in credit conditions across the euro area, with banks raising lending standards for both firms and households while loan demand weakens. This combination—more restrictive supply alongside softer demand—is typically associated with a cooling in activity, particularly in interest-sensitive sectors. Recent evidence suggests that higher perceived risks, rising funding costs and geopolitical uncertainty are all weighing on banks’ willingness to lend, while weaker confidence and reduced investment appetite are dampening borrowing needs. The result is a tightening in financial conditions that is likely to amplify the broader slowdown already evident in survey data, reinforcing the more fragile growth dynamics now emerging across the region.

260430Z4.jpg

**An Intensifying AI Boom with Supply-Side Undercurrents**
Against the backdrop of surging AI-related investment, semiconductor prices are not just high—they are rising at an increasingly rapid pace. This chart shows a clear acceleration in both prices and export values, pointing to an intensifying boom in global chip demand. While this is in part a reflection of strong, structural demand, supply-side factors may also be playing a growing role. Although the Middle East is not a direct source of key chip-making minerals, it is central to the energy and petrochemical inputs that underpin semiconductor production. Ongoing geopolitical tensions are therefore likely feeding into higher costs and renewed frictions across supply chains. The combination of accelerating demand and tightening supply conditions suggests that semiconductor inflation could prove more persistent—and more globally consequential—than currently assumed.

260430Z5.jpg

**Labour Markets Reflect the AI Acceleration**
Our final chart this week highlights the extent to which the current AI boom is now feeding through into labour markets. This high-frequency indicator—based on the share of job listings containing AI-related keywords—shows a sharp and sustained increase since the widespread adoption of generative AI tools in late 2022. What began as a more traditional build-out in machine learning roles has evolved into a broader and more intense wave of hiring tied to generative AI capabilities, with demand accelerating markedly across multiple economies. The scale and persistence of this trend point to a structural shift rather than a cyclical upswing, reinforcing the view that AI is becoming an increasingly important driver of investment, productivity expectations and, potentially, broader macroeconomic dynamics.

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Against a backdrop of persistent geopolitical tensions, firmer energy prices and a busy week of central bank meetings—including the Fed, ECB, BoE and BoJ—financial markets have remained notably resilient, even as the macro narrative has softened at the margin. The message from this week’s charts is one of growing tension beneath that surface calm. Front-end bond yields have moved higher, signalling a shift toward a more cautious, “higher-for-longer” policy outlook (chart 1). At the same time, real-time recession indicators for the United States suggest risks remain contained for now (chart 2). Consumer confidence data paint a more uneven picture, with sharper declines in the euro area and UK than in the US, highlighting regional vulnerabilities to the current energy shock (chart 3). The ECB’s latest bank lending survey reinforces this, pointing to tighter credit conditions and weaker demand—factors that are likely to weigh further on European growth (chart 4). By contrast, developments in the semiconductor sector underline a different dynamic: an intensifying global boom, with accelerating price pressures reflecting both strong AI-driven demand and emerging supply-side constraints linked indirectly to energy and logistics disruptions (chart 5). Finally, labour market data confirm that the AI surge is not merely a market narrative but a tangible structural shift, with hiring for AI-related roles accelerating across economies (chart 6). Taken together, these signals point to a more complex macro environment—one in which resilient markets coexist with softening growth, more persistent inflation risks and increasingly delicate policy trade-offs.

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Charts of the Week: Tension Beneath the Surface

Michael J. Moran

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Real GDP grew at an annual rate of 2.0% in the first quarter of 2026, almost identical to the expected advance of 2.1%. The latest change was comfortably within the range of recent observations and close to the economy’s potential rate of growth. The year-over-year change totaled 2.7%, but that shift reflected what might be viewed as a special factor (robust growth in the second and third quarters that offset a trade-tariff-induced drop in 2025-Q1 GDP).

Business fixed investment was the star of the show in the first quarter, registering growth of 10.4%. Outlays for information processing equipment and software were especially strong, while outlays for industrial equipment and Research & Development contributed positively as well. Outlays for structures remained decidedly soft, dropping for the ninth consecutive quarter. Building of data centers have been vigorous, but softness in offices and manufacturing facilities has dwarfed the strength in this new area.

Federal spending surged 9.4% in Q1, but the rise reflected the reopening of most federal agencies after their closure during much of the fourth quarter. Excluding this noise, support from the federal government has been softening. Nondefense outlays peaked in the fourth quarter of 2024, and they were 6.9% shy of that total in the first quarter. Defense spending also peaked in 2024-Q4 and has eased 2.4% since then. Defense spending most likely will grow in coming quarters because of the efforts in the Middle East. Orders for defense goods have already started to rise.

Consumer spending rose 1.5% in the first quarter, a bit shy of the 2.1% pace over the four quarters of last year and less than half the rates in 2023 and 2024. Consumer spending showed signs of softening in late 2025 and January of this year, but activity picked up in February and March. Firm tax refunds might have provided a boost to household spending in the latest months. Some of the tax cuts from the One Big Beautiful Bill were applied retroactively to 2025, but withholding schedules were not adjusted last year. Thus, many households are receiving larger-than-normal tax refunds.

International trade acted as a drag on economic growth in Q1, with net exports subtracting 1.3 percentage points from the GDP increase. Exports did well in the first quarter with growth of 12.9%, but imports were even stronger with a jump of 21.4%. The real trade deficit of $1.1 trillion was noticeably smaller than the shortfall of $1.4 trillion in 2025-Q1 when importers were rushing to get goods into the US before the imposition of tariffs. Still, the trade shortfall was sizeable and its effect on growth noticeable.

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

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- Robust business investment led the advance; moderate support from consumers.
- Government spending jumped with the reopening of most federal agencies.
- The trade sector remained volatile, making a sizeable negative contribution in Q1.

Q1 GDP: Weathering the Challenges; Trend-Like Growth

Sandy Batten

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This monthly report contains a wealth of information concerning the state of the consumer. The anticipation ahead of today’s report centered on how much the surge in energy prices since the escalation of the US-Iran conflict in early March would push up overall PCE inflation. Prices of energy goods and services jumped 11.6% m/m not annualized in March. This was the largest monthly increase since September 2005. As a result, the headline PCE price index increased 0.7% m/m (3.5% y/y versus 2.8% y/y in February), the largest monthly gain since July 2022 but in line with expectations of the Action Economics Forecast Survey.

The core index (that is, excluding food and energy prices) rose by a more modest 0.3% m/m in March, down from a 0.4% monthly increase in February and in line with expectations. However, the yearly rate rose further to 3.2% y/y in March from 3.0% in February, well above and moving away from the Fed’s 2% target. The FOMC left its fed funds rate target unchanged at yesterday’s meeting, but some committee members dissented, opposing the implied easing bias contained in the statement. Chair Powell, in his press conference, noted that a number of members have become more concerned over the inflation outlook and the possible need for a Fed response.

Nominal personal income posted a solid 0.6% m/m (3.7% y/y) increase in March following an upwardly revised unchanged reading in February (previously -0.1% m/m). The March increase was twice the 0.3% monthly gain expected by the Action Economics Forecast Survey. However, after adjusting for inflation, real personal income slipped 0.1% m/m in March on top of a 0.4% m/m decline in February.

Employee compensation continued to be a major driver of personal income in March. It rose 0.4% m/m (4.1% y/y) in March after a 0.2% monthly increase in February. In March, proprietors’ income jumped 2.8%. This outsized increase reflected payments to farmers from the federal government’s Farmer Bridge Assistance Program. Rental income rose a solid 0.7% m/m, the same gain as in February. Income from financial assets increased 0.4% m/m following a 0.9% m/m decline in February. Personal current transfer payments edged up 0.1% m/m versus a 0.3% m/m decline in February.

Nominal consumption expenditures jumped 0.9% m/m (5.7% y/y) in March following an upwardly revised 0.6% monthly gain in February (previously +0.5% m/m). Spending on goods rose 2.0% m/m (4.5% y/y) while spending on services increased 0.4% m/m (6.3% y/y). As for overall inflation, the surge in energy prices also accounted for a large portion of the March gain in nominal spending. After adjusting for overall inflation, real PCE rose a more modest 0.2% m/m following an upwardly revised 0.3% m/m increase in February (previously +0.1% m/m). Still, the solid gains in February and March provide a strong starting point for Q2. The March level is 1.5% at an annual rate above the Q1 average. For all of Q1, real PCE rose 1.6% q/q saar.

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

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- The PCE price index jumped 0.7%, reflecting an 11.6% m/m surge in energy prices.
- The core index was up 0.3%, in line with expectations but still well above the Fed’s target.
- Personal income increased 0.6% m/m, led by a 0.4% m/m rise in compensation.
- Personal consumption jumped 0.9% m/m with a slight upward revision to February.
- However, much of the March gain in nominal consumption also reflected the jump in energy prices.
- Real consumption rose by a more modest 0.2% m/m.

Economy in Brief

Jump to:

Mixed Signals From Down Under

All Producer Prices in EMU Still Under Downward Pressure

Gasoline Prices Move Higher As Crude Prices Rise And Demand Stabilizes

U.S. Pending Home Sales Rise To The Highest Level In Two Years

U.S. Personal Income Reverses Large May Gain While Savings Rate Tumbles

U.S. Personal Income Reverses Large May Gain While Savings Rate Tumbles

U.S. Light Vehicle Sales Benefit From "Cash For Clunkers" Program

Japanese Wages Continue To Decline In June