Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071116h.jpg" align="left" border="0" height="265" width="353">
Exports slow as imports rise. 
 

It is too soon to chalk up the dwindling trade surplus of
Europe to the high Euro, but this month&#8217;s report is another hint. The
surplus is sketching out a shrinking pattern beyond the simple drop of
this month's balance. And exports and imports are starting to assume
the position of trade flows in transition. Exports have shed their bump
up in the growth rate that may just have been a J-curve effect of the
euro&#8217;s rise. Imports are rising more rapidly and that could shift if
the strong euro weakens European growth. Still, the strong euro makes
imports cheaper and that would account for some import rise in the
aftermath of shoot up in the currency&#8217;s value even as import prices
fell in domestic currency terms (euro terms). 
 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="6" scope="col"> Euro area 13-Trade Trends for Goods</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="2">m/m%</td>
<td colspan="3">% SAAR</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Sep-07</td>
<td>Aug-07</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
</tr>
<tr class="grey4">
<td class="firstcol">Balance*</td>
<td>&#8364;&#8364; 3,905</td>
<td>&#8364;&#8364; 4,511</td>
<td>&#8364;&#8364; 2,957</td>
<td>&#8364;&#8364; 3,195</td>
<td>&#8364;&#8364; 3,080</td>
</tr>
<tr class="grey3">
<td class="firstcol">Exports</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol">All Exports</td>
<td>-0.4%</td>
<td>3.5%</td>
<td>7.3%</td>
<td>8.3%</td>
<td>6.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Food and Drinks</td>
<td>-2.0%</td>
<td>2.4%</td>
<td>11.7%</td>
<td>8.5%</td>
<td>9.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Raw Materials</td>
<td>3.0%</td>
<td>-1.6%</td>
<td>-0.2%</td>
<td>9.5%</td>
<td>4.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Manufacturing</td>
<td>-2.3%</td>
<td>3.0%</td>
<td>0.8%</td>
<td>4.0%</td>
<td>4.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Imports</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol">All Imports</td>
<td>0.1%</td>
<td>0.2%</td>
<td>12.2%</td>
<td>11.7%</td>
<td>5.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Food and Drinks</td>
<td>5.1%</td>
<td>0.7%</td>
<td>31.3%</td>
<td>22.4%</td>
<td>14.2%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Raw Materials</td>
<td>-6.8%</td>
<td>0.8%</td>
<td>-14.8%</td>
<td>-2.9%</td>
<td>0.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Manufacturing</td>
<td>-2.7%</td>
<td>1.1%</td>
<td>0.8%</td>
<td>2.7%</td>
<td>4.0%</td>
</tr>
<tr class="grey1">
<td colspan="6" class="firstcol">*Million Euros; mo or period average</td>
</tr>
</tbody>
</table>
</body></html>

Exports slow as imports rise. It is too soon to chalk up the dwindling trade surplus of Europe to the high Euro, but this month’s report is another hint. The surplus is sketching out a shrinking pattern beyond the simple drop of this [...]

The EMU Trade Surplus Shrinks

Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071116c.jpg" align="left" border="0" height="265" width="353">
Total business inventories rose a moderate 0.4% during September
following the prior month's 0.3% gain. The three month change in
inventories remained stable with the prior few months, up from earlier
this year but half the growth rates seen last year. That slowing
remained a function of the slower growth in sales 
Retail inventories ticked up just 0.1%. Inventories of motor
vehicles &amp; parts dealers actually fell a slight 0.1% (+2.1% y/y)
after the 1.5% spurt during August. Excluding autos, retail inventories
rose a modest 0.2% following a little revised, negligible August
decline. Furniture inventories spurted 1.3% (3.3% y/y) and the three
month change rose to an excessive (9.9%, AR). At clothing &amp;
accessory stores inventories rose 0.1% and offset a 0.1% August
downtick and it left the three month at a manageable 0.0%. Inventories
at General merchandise stores also seemed under control. a 0.4% gain
followed declines during the prior three months and three month growth
was a negative 2.8%.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071116d.jpg" align="right" border="0" height="265" width="353">
Wholesale inventories rose 0.8% following a very much upwardly
revised 0.7% August increase. Petroleum inventories fell for third
straight month (-1.3% y/y) and less petroleum, wholesale inventories
rose 0.9%, up 5.4% y/y which is a y/y growth rate which has halved
versus late last year. During the last ten years there has been a 59%
correlation between the annual change in wholesale inventories les
petroleum and the change in merchandise imports.
Factory inventories rose 0.6% (2.2% y/y) after two months of little
change. Three month growth in manufacturers' inventories was 2.3%
versus a 6.4% rate of growth during all of last year.
The Role of Money in Monetary Policy: Why Do the Fed and ECB See It So Differently? from the Federal Reserve Bank of Kansas City can be found <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/3q07kahn.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED06/@ED0601/@ED0601.HTM">Business Inventories</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.4%</td>
<td>0.3%</td>
<td>3.3%</td>
<td>5.9%</td>
<td>6.2%</td>
<td>7.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.1%</td>
<td>0.5%</td>
<td>2.8%</td>
<td>3.2%</td>
<td>2.8%</td>
<td>6.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Autos</td>
<td>0.2%</td>
<td>-0.0%</td>
<td>3.2%</td>
<td>4.5%</td>
<td>4.5%</td>
<td>7.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>0.8%</td>
<td>0.7%</td>
<td>5.2%</td>
<td>8.6%</td>
<td>7.4%</td>
<td>9.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.6%</td>
<td>-0.1%</td>
<td>2.2%</td>
<td>6.4%</td>
<td>8.9%</td>
<td>7.7%</td>
</tr>
</tbody>
</table>
</body></html>

Total business inventories rose a moderate 0.4% during September following the prior month's 0.3% gain. The three month change in inventories remained stable with the prior few months, up from earlier this year but half the growth [...]

U.S. Business Inventories' Increase Moderate

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<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071116a.jpg" width="353">
Industrial production declined during October versus a Consensus expectation for a 0.1% uptick. The decline was the first since January and it was the largest m/m in two years. Because of modest 0.2% gains during the prior two months the three month growth in industrial output fell to -0.7% (AR), its first time negative since early this year.
Factory output also was down and posted a 0.4% drop, its second 0.4% decline in the last three months. Those declines felled the three month growth rate to -2.7%, its first time negative since late lat year.
Easier output was broad based. Production in the motor vehicle &amp; parts industries dropped 0.9% (+0.9% y/y). Output of furniture &amp; related products suffered the weakness in the housing industry with a 0.2% (-2.6% y/y) decline while output of construction supplies fell 0.4% (+0.1% y/y), the forth consecutive monthly decline.
Returning to the consumer goods sector, production of computers &amp; electronics fell 0.9% (+14.6% y/y), down for the third straight month. Apparel output also fell for the third consecutive month (-4.6% y/y). Chemical products output fell as well by 0.5% (-1.3% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071116b.jpg" width="353">
Output of business equipment held up with just a 0.1% decline (+4.6% y/y). Output of information &amp; processing equipment, however, fell 0.3% and the three month growth fell to 2.9% versus double digit rates of growth earlier this year. Production of industrial equipment also has eased and it posted its second decline in the last three months. Three month growth rate fell to a negative 2.6% (AR).
In the materials category output fell 0.4%. Production of durable consumer parts fell 0.5%, unchanged over the last year and down for the second consecutive month. Production of durable equipment parts rose 0.3% (6.3% y/y) but other durable goods materials output fell 0.3% (+2.9% y/y).
Capacity utilization fell to 80.1%. Utilization in the factory sector fell m/m to 79.9% versus an average 80.2% last year. Capacity rose 0.1% (1.9% y/y).
Risk Management and the Economic Outlook is today&#39;s speech by Fed GovernorRandall S. Kroszner and it is available <a href="http://www.federalreserve.gov/newsevents/speech/kroszner2007116a.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">INDUSTRIAL PRODUCTION (SA)</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-0.5%</td>
<td>0.2%</td>
<td>1.8%</td>
<td>4.0%</td>
<td>3.2%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">Manufacturing</td>
<td>-0.4%</td>
<td>0.2%</td>
<td>2.1%</td>
<td>5.0%</td>
<td>4.0%</td>
<td>3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Mining</td>
<td>-0.6%</td>
<td>0.6%</td>
<td>0.4%</td>
<td>2.7%</td>
<td>-1.6%</td>
<td>-0.6%</td>
</tr>
<tr>
<td class="firstcol">Utilities</td>
<td>-1.6%</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>0.2%</td>
<td>2.0%</td>
<td>1.4%</td>
</tr>
</tbody>
</table>
</body>
</html>

Industrial production declined during October versus a Consensus expectation for a 0.1% uptick. The decline was the first since January and it was the largest m/m in two years. Because of modest 0.2% gains during the prior two months [...]

U.S. Industrial Production Decline Broad and Unexpected

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071116a.jpg" align="left" border="0" height="265" width="353">
Industrial production declined during October versus a
Consensus expectation for a 0.1% uptick. The decline was the first
since January and it was the largest m/m in two years. Because of
modest 0.2% gains during the prior two months the three month growth in
industrial output fell to -0.7% (AR), its first time negative since
early this year.
Factory output also was down and posted a 0.4% drop, its
second 0.4% decline in the last three months. Those declines felled the
three month growth rate to -2.7%, its first time negative since late
lat year.
Easier output was broad based. Production in the motor vehicle
&amp; parts industries dropped 0.9% (+0.9% y/y). Output of
furniture &amp; related products suffered the weakness in the
housing industry with a 0.2% (-2.6% y/y) decline while output of
construction supplies fell 0.4% (+0.1% y/y), the forth consecutive
monthly decline.
Returning to the consumer goods sector, production of
computers &amp; electronics fell 0.9% (+14.6% y/y), down for the
third straight month. Apparel output also fell for the third
consecutive month (-4.6% y/y). Chemical products output fell as well by
0.5% (-1.3% y/y).<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071116b.jpg" align="right" border="0" height="265" width="353">
Output of business equipment held up with just a 0.1% decline
(+4.6% y/y). Output of information &amp; processing equipment,
however, fell 0.3% and the three month growth fell to 2.9% versus
double digit rates of growth earlier this year. Production of
industrial equipment also has eased and it posted its second decline in
the last three months. Three month growth rate fell to a negative 2.6%
(AR).
In the materials category output fell 0.4%. Production of
durable consumer parts fell 0.5%, unchanged over the last year and down
for the second consecutive month. Production of durable equipment parts
rose 0.3% (6.3% y/y) but other durable goods materials output fell 0.3%
(+2.9% y/y).
Capacity utilization fell to 80.1%. Utilization in the factory
sector fell m/m to 79.9% versus an average 80.2% last year. Capacity
rose 0.1% (1.9% y/y).
Risk Management and the Economic Outlook is
today's speech by Fed GovernorRandall S. Kroszner and it is available <a href="http://www.federalreserve.gov/newsevents/speech/kroszner2007116a.htm">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">INDUSTRIAL
PRODUCTION (SA)</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-0.5%</td>
<td>0.2%</td>
<td>1.8%</td>
<td>4.0%</td>
<td>3.2%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">Manufacturing</td>
<td>-0.4%</td>
<td>0.2%</td>
<td>2.1%</td>
<td>5.0%</td>
<td>4.0%</td>
<td>3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Mining</td>
<td>-0.6%</td>
<td>0.6%</td>
<td>0.4%</td>
<td>2.7%</td>
<td>-1.6%</td>
<td>-0.6%</td>
</tr>
<tr>
<td class="firstcol">Utilities</td>
<td>-1.6%</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>0.2%</td>
<td>2.0%</td>
<td>1.4%</td>
</tr>
</tbody>
</table>
U.S. Business Inventories'
Increase&nbsp; Moderate 
by <a href="/comment/Moeller.html">Tom
Moeller</a> November 16, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071116c.jpg" align="left" border="0" height="265" width="353">
Total business inventories rose a moderate 0.4% during
September following the prior month's 0.3% gain. The three month change
in inventories remained stable with the prior few months, up from
earlier this year but half the growth rates seen last year. That
slowing remained a function of the slower growth in sales 
 

Retail inventories ticked up just 0.1%. Inventories of motor
vehicles &amp; parts dealers actually fell a slight 0.1% (+2.1%
y/y) after the 1.5% spurt during August. Excluding autos, retail
inventories rose a modest 0.2% following a little revised, negligible
August decline. Furniture inventories spurted 1.3% (3.3% y/y) and the
three month change rose to an excessive (9.9%, AR). At clothing
&amp; accessory stores inventories rose 0.1% and offset a 0.1%
August downtick and it left the three month at a manageable 0.0%.
Inventories at General merchandise stores also seemed under control. a
0.4% gain followed declines during the prior three months and three
month growth was a negative 2.8%.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071116d.jpg" align="right" border="0" height="265" width="353">
Wholesale inventories rose 0.8% following a very much upwardly
revised 0.7% August increase. Petroleum inventories fell for third
straight month (-1.3% y/y) and less petroleum, wholesale inventories
rose 0.9%, up 5.4% y/y which is a y/y growth rate which has halved
versus late last year. During the last ten years there has been a 59%
correlation between the annual change in wholesale inventories les
petroleum and the change in merchandise imports.
Factory inventories rose 0.6% (2.2% y/y) after two months of
little change. Three month growth in manufacturers' inventories was
2.3% versus a 6.4% rate of growth during all of last year.
The Role of Money in Monetary Policy: Why Do the Fed
and ECB See It So Differently? from t he Federal Reserve Bank
of Kansas City can be found <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/3q07kahn.pdf">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED06/@ED0601/@ED0601.HTM">Business
Inventories</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.4%</td>
<td>0.3%</td>
<td>3.3%</td>
<td>5.9%</td>
<td>6.2%</td>
<td>7.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.1%</td>
<td>0.5%</td>
<td>2.8%</td>
<td>3.2%</td>
<td>2.8%</td>
<td>6.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Retail excl. Autos</td>
<td>0.2%</td>
<td>-0.0%</td>
<td>3.2%</td>
<td>4.5%</td>
<td>4.5%</td>
<td>7.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>0.8%</td>
<td>0.7%</td>
<td>5.2%</td>
<td>8.6%</td>
<td>7.4%</td>
<td>9.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.6%</td>
<td>-0.1%</td>
<td>2.2%</td>
<td>6.4%</td>
<td>8.9%</td>
<td>7.7%</td>
</tr>
</tbody>
</table>
Foreign Investors Renew
Commitmentto US Markets, Albeit Limited, According to New TIC Data 
by <a href="/comment/Stone.html">Carol
Stone</a> November 16, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071116e.jpg" align="left" border="0" height="265" width="353">
After their exodus from US financial markets in August,
foreign investors returned in September with moderate net purchases of
US long-term securities. These totaled $26.4 billion, compared with
August's $70.6 billion liquidation (revised from the original $85.5
billion reported).
Even as foreign investors returned, they did so in a much more
limited way than earlier this year, and with a more conservative asset
mix. Net purchases of domestic securities were $55.4 billion, almost
half of which, $26.3 billion, were Treasuries. Both private and
official foreign institutions were net buyers both of Treasuries and in
total. Back in August, private foreigners had been net purchasers of
Treasuries as well, but official institutions were net sellers then.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071116f.jpg" align="right" border="0" height="265" width="353">
There were net purchases of all three of the other securities
categories, $11.5 billion in Agencies, $15.1 billion in corporate bonds
and $2.5 billion in equities. The resumption of corporate bond
purchases is impressive after August's small net sales, although the
amount is modest compared with a $43 billion monthly average during
2006 and $47 billion in the first half of this year. Regarding
equities, it looks that the most we can say, with just $2.5 billion in
purchases, is that the net selling stopped. The figures here don't show
much conviction about increasing US equity positions. So foreign
investors highlighted Treasury securities in their September
acquisitions, but were restrained toward other, riskier securities.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071116g.jpg" align="left" border="0" height="265" width="353">
Last month here, we emphasized the erratic nature of other
types of foreigners' participation in the US financial system. They can
buy short-term securities, including Treasury bills, or other paper,
and they had done so in size in July and August, $56.2 billion and
$33.9 billion, respectively. In September, however, this practice was
far less extensive, as only $3.8 billion went into these assets. By
then, rates on T-bills were quite low and the market for commercial
paper was shrinking rapidly, making those both less attractive outlets.
And as we pointed out in our summary of August data, these items are by
definition transitory holdings anyway. Also, bank deposits from foreign
account holders and other bank liabilities to foreigners had decreased
sharply in August, and these actually continued to do so in September.
Possibly the unpopular dollar is a main factor here, as traders reduce
their cash in US banks when they sell dollars. Again, though,
substantive explanations are hard to come by for these assets, since
they too are largely short-term holdings.
So it is encouraging to see a return to net inflows to US
markets from foreign investors, but the September performance still
shows significant hesitation. As we also mentioned last month, this is
no different from the attitudes of US investors, is it?

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Net
Foreign Purchases from US Residents,
Bil $</th>
<th scope="col">Sept 2007</th>
<th scope="col">August 2007</th>
<th scope="col">July 2007</th>
<th scope="col">June 2007</th>
<th scope="col" colspan="3">Monthly
Averages</th>
</tr>
<tr class="even">
<th scope="col" colspan="5"></th>
<th scope="col">Last 12 Months</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">"Headline": Net
Foreign Purchases 
= 1 + 2 + Other*</td>
<td>26.4</td>
<td>-70.6</td>
<td>19.5</td>
<td>99.9</td>
<td>60.8</td>
<td>76.2</td>
<td>69.9</td>
</tr>
<tr>
<td class="firstcol">1. Domestic
Securities</td>
<td>55.4</td>
<td>-36.1</td>
<td>25.0</td>
<td>121.7</td>
<td>87.8</td>
<td>97.2</td>
<td>84.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;
Treasuries</td>
<td>26.3</td>
<td>-2.8</td>
<td>-9.4</td>
<td>24.7</td>
<td>17.3</td>
<td>17.3</td>
<td>28.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;
Agencies</td>
<td>11.5</td>
<td>8.4</td>
<td>8.7</td>
<td>39.6</td>
<td>21.0</td>
<td>24.5</td>
<td>18.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;
Corporate Bonds</td>
<td>15.1</td>
<td>-0.9</td>
<td>4.5</td>
<td>28.5</td>
<td>41.0</td>
<td>42.8</td>
<td>31.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;
Equities</td>
<td>2.5</td>
<td>-40.6</td>
<td>21.2</td>
<td>28.8</td>
<td>13.4</td>
<td>12.6</td>
<td>6.8</td>
</tr>
<tr>
<td class="firstcol">2. Foreign
Securities&nbsp;</td>
<td>-29.0</td>
<td>-34.5</td>
<td>-5.5</td>
<td>-21.8</td>
<td>-27.0</td>
<td>-21.0</td>
<td>-14.4</td>
</tr>
<tr>
<td class="firstcol">3. Short-Term
Sec's &amp; Custody Holdings</td>
<td>3.8</td>
<td>33.9</td>
<td>56.2</td>
<td>-16.0</td>
<td>11.7</td>
<td>12.2</td>
<td>-4.0</td>
</tr>
<tr>
<td class="firstcol">4. Banks'
Liabilities</td>
<td>-24.3</td>
<td>-97.8</td>
<td>30.3</td>
<td>-15.4</td>
<td>-8.5</td>
<td>15.3</td>
<td>1.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Total TIC
Flows**&nbsp;</td>
<td>-14.7</td>
<td>-150.7</td>
<td>83.5</td>
<td>43.6</td>
<td>47.4</td>
<td>89.5</td>
<td>55.4</td>
</tr>
<tr>
<td class="firstcol">China</td>
<td>8.5</td>
<td>-10.1</td>
<td>4.5</td>
<td>21.2</td>
<td>10.0</td>
<td>9.7</td>
<td>7.4</td>
</tr>
<tr>
<td class="firstcol">United Kingdom</td>
<td>-4.4</td>
<td>31.7</td>
<td>25.1</td>
<td>55.4</td>
<td>35.7</td>
<td>26.5</td>
<td>26.4</td>
</tr>
<tr>
<td class="firstcol">Cayman Islands</td>
<td>14.8</td>
<td>-14.7</td>
<td>-16.4</td>
<td>9.6</td>
<td>7.3</td>
<td>12.1</td>
<td>4.1</td>
</tr>
<tr class="grey1">
<td colspan="8" class="firstcol">*"Other"
includes stock swaps and repayments of capital
on asset-backed securities.
</td>
</tr>
<tr class="grey1">
<td colspan="8" class="firstcol">**Sum of
Lines 1. through 4 (plus "other" noted above. Line 1 is the sum of the
security types listed immediately below it.)</td>
</tr>
</tbody>
</table>
The EMU Trade Surplus
Shrinks&nbsp; 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 16, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071116h.jpg" align="left" border="0" height="265" width="353">
Exports slow as imports rise. 
 

It is too soon to chalk up the dwindling trade surplus of
Europe to the high Euro, but this month&#8217;s report is another hint. The
surplus is sketching out a shrinking pattern beyond the simple drop of
this month's balance. And exports and imports are starting to assume
the position of trade flows in transition. Exports have shed their bump
up in the growth rate that may just have been a J-curve effect of the
euro&#8217;s rise. Imports are rising more rapidly and that could shift if
the strong euro weakens European growth. Still, the strong euro makes
imports cheaper and that would account for some import rise in the
aftermath of shoot up in the currency&#8217;s value even as import prices
fell in domestic currency terms (euro terms). 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="6" scope="col"> Euro
area 13-Trade Trends for Goods</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="2">m/m%</td>
<td colspan="3">% SAAR</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Sep-07</td>
<td>Aug-07</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
</tr>
<tr class="grey4">
<td class="firstcol">Balance*</td>
<td>&#8364;&#8364; 3,905</td>
<td>&#8364;&#8364; 4,511</td>
<td>&#8364;&#8364; 2,957</td>
<td>&#8364;&#8364; 3,195</td>
<td>&#8364;&#8364; 3,080</td>
</tr>
<tr class="grey3">
<td class="firstcol">Exports</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol">All Exports</td>
<td>-0.4%</td>
<td>3.5%</td>
<td>7.3%</td>
<td>8.3%</td>
<td>6.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Food and Drinks</td>
<td>-2.0%</td>
<td>2.4%</td>
<td>11.7%</td>
<td>8.5%</td>
<td>9.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Raw Materials</td>
<td>3.0%</td>
<td>-1.6%</td>
<td>-0.2%</td>
<td>9.5%</td>
<td>4.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Manufacturing</td>
<td>-2.3%</td>
<td>3.0%</td>
<td>0.8%</td>
<td>4.0%</td>
<td>4.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Imports</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol">All Imports</td>
<td>0.1%</td>
<td>0.2%</td>
<td>12.2%</td>
<td>11.7%</td>
<td>5.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Food and Drinks</td>
<td>5.1%</td>
<td>0.7%</td>
<td>31.3%</td>
<td>22.4%</td>
<td>14.2%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Raw Materials</td>
<td>-6.8%</td>
<td>0.8%</td>
<td>-14.8%</td>
<td>-2.9%</td>
<td>0.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Manufacturing</td>
<td>-2.7%</td>
<td>1.1%</td>
<td>0.8%</td>
<td>2.7%</td>
<td>4.0%</td>
</tr>
<tr class="grey1">
<td colspan="6" class="firstcol">*Million
Euros; mo or period average</td>
</tr>
</tbody>
</table>
</body></html>

Carol Stone, CBE

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071115h.jpg" align="left" border="0" height="265" width="353">
The Kazakhstani economy is growing rapidly, benefiting from
strong oil revenues. New data on trade through September indicate a
sizable surplus, owing much to oil and gas exports. Further, separate
data on fixed capital investment show continuing strong growth in
infrastructure spending and other capital projects.
The summary trade balance was reported about 10 days ago, with
a surplus in September of $1.6 billion, up from $1.1 billion in August,
but smaller than the $2.4 billion a year ago. The factor in the smaller
surplus this year than last is a reduction in the value of oil exports
from $3.1 billion in September 2006 to $2.6 billion this September,
according to the detail data published today. Even so, other exports
gained noticeably, and total exports were only very little different,
$4.41 billion this September compared with $4.50 billion last year.
The slack was taken up by sizable gains in various metals and
metal products. What the Kazakhs refer to as ferro-alloys and flat
ferrous metals, along with lead and precious metals, all contributed.
Rising world prices for steel scrap and lead, among others, are no
doubt responsible. And while oil exports were down in the latest month,
they remain generally quite large, bringing sizable quantities of
dollars into the country. Note in the table below and the second graph,
the uncanny match between the value of oil exports and total imports:
oil revenue is very nearly covering Kazakhstan's demand for outside
products.
This favorable natural resource trade situation is fueling (if
you will) a prolonged building boom. Monthly data on "fixed capital
investment" show sustained growth, running through October at 19%
year-on-year. This is "slower" than in 2004-2006, but it remains
vigorous. Of KZT245 million per month so far this year, about 30% has
been in the oil and gas industry, a quarter in "real estate, renting
and business activity" and about an eighth in transportation and
communication infrastructure. By type of investment, just over half is
in construction projects and just under a third is in machinery and
tools.
Data on Kazakhstan are contained in Haver's EMERGECW
database.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071115i.jpg" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071115j.jpg" height="265" width="312">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Kazakhstan</th>
<th scope="col">Oct 2007</th>
<th scope="col">Sept 2007</th>
<th scope="col">Aug 2007</th>
<th scope="col">Year Ago</th>
<th scope="col" colspan="3">Monthly Averages</th>
</tr>
<tr class="odd">
<th scope="col" colspan="5"></th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Trade Balance, Mil.$</td>
<td>--</td>
<td>1,597</td>
<td>1,096</td>
<td>2,361</td>
<td>1,214</td>
<td>852</td>
<td>609</td>
</tr>
<tr>
<td class="firstcol">Exports</td>
<td>--</td>
<td>4,412</td>
<td>3,864</td>
<td>4,495</td>
<td>3,188</td>
<td>2,311</td>
<td>1,674</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Oil
&amp; Gas</td>
<td>--</td>
<td>2,563</td>
<td>2,401</td>
<td>3,094</td>
<td>1,968</td>
<td>1,450</td>
<td>951</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Other</td>
<td>--</td>
<td>1,849</td>
<td>1,463</td>
<td>1,401</td>
<td>1,220</td>
<td>861</td>
<td>723</td>
</tr>
<tr>
<td class="firstcol">Imports</td>
<td>--</td>
<td>2,815</td>
<td>2,769</td>
<td>2,134</td>
<td>1,973</td>
<td>1,460</td>
<td>1,065</td>
</tr>
<tr class="odd">
<td class="firstcol">Fixed Investment, 
Mo Avg YTD, Mil.KZT</td>
<td>245.3</td>
<td>237.3</td>
<td>223.0</td>
<td>206.8</td>
<td>234.2</td>
<td>183.7</td>
<td>127.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>18.8%</td>
<td>18.5%</td>
<td>16.9%</td>
<td>27.9%</td>
<td>27.4%</td>
<td>44.1%</td>
<td>21.6%</td>
</tr>
</tbody>
</table>
</body></html>

The Kazakhstani economy is growing rapidly, benefiting from strong oil revenues. New data on trade through September indicate a sizable surplus, owing much to oil and gas exports. Further, separate data on fixed capital investment [...]

Kazakhstan's Oil and Metals Exports Bring Revenue for Investment Spending

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071115l.jpg" align="left" border="0" height="265" width="353">
The EMU region shows accelerations in overall inflation as
well as in core inflation (see table below). The goods sector (a sector
that includes energy) shows inflation is steadily accelerating and
services show the opposite, steady price deceleration. From the stand
point of inflation this offset is good news. From the stand point of
growth it may not be&#8230;
The weakness in services prices is suggestive of a domestic
population besieged by rising goods prices (&#8230;some of them of inelastic
demand such as food and energy) robbing spending from the services
component of expenditures where relatively more of the discretionary
funds may be spent. We will want to watch to see if the EMU service
sectors reflect a growing weakness that would confirm that such an
effect is in train.
The bottom of the table includes core inflation readings
across main EMU countries and all of them show that their inflation
acceleration is in train or above the ECB ceiling rate of 2%... or both.
With this report a more detailed look behind the &#8216;seemingly
benign&#8217; core rate of inflation of 2.1% looks a lot grimmer. With the
euro rising, and the ECB warning of spreading price pressures, it puts
the EMU region and the ECB in a tough spot. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col">Trends in HICP </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% mo/mo</td>
<td colspan="4">% saar</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Oct-07</td>
<td>Sep-07</td>
<td>Aug-07</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
</tr>
<tr>
<td class="firstcol">EMU-13</td>
<td>0.4%</td>
<td>0.4%</td>
<td>0.0%</td>
<td> 3.4%</td>
<td> 2.7%</td>
<td> 2.6%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">Core</td>
<td>0.3%</td>
<td>0.2%</td>
<td>0.2%</td>
<td> 3.0%</td>
<td> 2.2%</td>
<td> 2.1%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">Goods</td>
<td>0.8%</td>
<td>1.0%</td>
<td>0.0%</td>
<td> 7.6%</td>
<td>2.2%</td>
<td> 2.6%</td>
<td>1.3%</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>0.0%</td>
<td>-0.5%</td>
<td>0.2%</td>
<td>-1.5%</td>
<td>1.8%</td>
<td> 2.5%</td>
<td>2.1%</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan="8"> HICP</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>0.2%</td>
<td>0.7%</td>
<td>-0.1%</td>
<td> 3.1%</td>
<td>2.7%</td>
<td> 2.7%</td>
<td>1.1%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>0.2%</td>
<td>0.1%</td>
<td>0.3%</td>
<td> 2.6%</td>
<td> 2.3%</td>
<td> 2.1%</td>
<td>1.2%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>0.7%</td>
<td>0.3%</td>
<td>0.2%</td>
<td> 4.7%</td>
<td> 3.3%</td>
<td> 2.3%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>0.7%</td>
<td>0.4%</td>
<td>0.0%</td>
<td> 4.3%</td>
<td> 3.7%</td>
<td> 3.7%</td>
<td>2.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan="8"> Core: xFE&amp;A</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>0.2%</td>
<td>0.3%</td>
<td>0.1%</td>
<td>2.4%</td>
<td> 2.4%</td>
<td> 2.2%</td>
<td>0.9%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>0.2%</td>
<td>0.1%</td>
<td>0.3%</td>
<td> 2.7%</td>
<td> 1.9%</td>
<td> 1.7%</td>
<td>1.3%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>0.5%</td>
<td>0.4%</td>
<td>0.2%</td>
<td> 4.3%</td>
<td> 2.7%</td>
<td> 2.1%</td>
<td>2.0%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>0.7%</td>
<td>0.2%</td>
<td>0.3%</td>
<td> 4.8%</td>
<td> 3.5%</td>
<td> 3.1%</td>
<td>2.8%</td>
</tr>
</tbody>
</table>
</body></html>

The EMU region shows accelerations in overall inflation as well as in core inflation (see table below). The goods sector (a sector that includes energy) shows inflation is steadily accelerating and services show the opposite, steady [...]

EMU ‘Core’ Inflation Trends Are Mixed…But Still Poor

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071115k.jpg" align="left" border="0" height="265" width="353">
The percentile readings for Japan&#8217;s tertiary and
manufacturing/mining indexes remain elevated in the top 10% of their
respective ranges. In the case of the services industries their index
seems to show them still on trend with a bump lower in October. In
short, in September the drop does not seem to be anything to worry
about, especially on the heels of a solid gain in August. The MFG
series shows a slump that was probably aggravated by Japan&#8217;s
earthquake. The acceleration out of that slump pushes the index up
sharply and so the current setback comes at a time that the strength in
the short term trend is probably overstated. Even so the pull back in
September is a minor one. The moving averages show the Mining/MFG index
still going higher while the service sector shows the trend for 3-Month
and 6-Months has gone flat. That sector will be the one to watch. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="10" scope="col">Japan Industry Surveys </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol"></td>
<td colspan="3">Recent Months</td>
<td colspan="3">Moving Averages</td>
<td colspan="3">Extremes; Range</td>
</tr>
<tr class="grey3">
<td class="firstcol"></td>
<td>Sep-2007</td>
<td>Aug-2007</td>
<td>Jul-2007</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Max</td>
<td>Min</td>
<td>%-Tile</td>
</tr>
<tr>
<td class="firstcol">Mining and MFG</td>
<td>110.3</td>
<td>111.9</td>
<td>108.1</td>
<td>110.1</td>
<td>108.9</td>
<td>108.5</td>
<td>111.9</td>
<td>87.7</td>
<td>93.4%</td>
</tr>
<tr>
<td class="firstcol">Tertiary</td>
<td>109.4</td>
<td>111.2</td>
<td>109.9</td>
<td>110.2</td>
<td>110.2</td>
<td>109.9</td>
<td>111.2</td>
<td>91.0</td>
<td>91.1%</td>
</tr>
<tr class="grey1">
<td colspan="10" class="firstcol">Ranges, Max, Min since 1993</td>
</tr>
</tbody>
</table>
</body></html>

The percentile readings for Japan’s tertiary and manufacturing/mining indexes remain elevated in the top 10% of their respective ranges. In the case of the services industries their index seems to show them still on trend with a bump [...]

Japan’s Tertiary Sector Echoes Weakness in MFG and Mining

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071115f.jpg" width="353">
The November Philadelphia Federal Reserve Bank&#39;s Index of General Business Conditions in the manufacturing sector recovered just a piece of its October decline. The rise to 8.2 followed a sharp October decline to 6.8 from 10.9 in September.
The index is a diffusion index for each component or series. It reflects the increase in activity reported less the decrease.
During the last ten years there has been a 59% correlation between the level of the Philadelphia Fed Business Conditions Index and the three-month growth in factory sector industrial production. There has been a 42% correlation with q/q growth in real GDP.
The new orders index improved very slightly as a meaningful gain in new orders was offset by a sharp rise in orders which had decreased. The employment index fell sharply as the number of firms reporting an increase fell sharply and the number of firms showing a decrease rose. During the last ten years there has been a 75% correlation between the employment index and the three-month growth in factory payrolls.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071115g.jpg" width="353">
The business conditions index reflects a separate survey question, not the sub indexes.
The prices paid index slipped as the number of firms reporting an increase fell and the number reporting a decrease rose. During the last ten years there has been a 76% correlation between the prices paid index and the three-month growth in the intermediate goods PPI. There has been an 85% correlation with the change in core intermediate goods prices.
The separate index of expected business conditions in six months fell sharply to its lowest level since December of last year. Expectations for new orders plummeted as did expectations for the number of employees.
The latest Survey of Professional Forecasters from the Federal Reserve Bank of Philadelphia is available <a href="http://www.philadelphiafed.org/econ/spf/index.cfm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S504/@S504.HTM">Philadelphia Fed Business Outlook</a></th>
<th scope="col">November</th>
<th scope="col">October &nbsp;</th>
<th scope="col">Nov. &#145;06</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>8.2</td>
<td>6.8</td>
<td>5.4&nbsp;</td>
<td>8.1</td>
<td>11.5</td>
<td>28.1</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>37.7&nbsp;</td>
<td>&nbsp;40.3</td>
<td>&nbsp;25.2</td>
<td>36.6</td>
<td>40.1</td>
<td>51.2</td>
</tr>
</tbody>
</table>
</body>
</html>

The November Philadelphia Federal Reserve Bank's Index of General Business Conditions in the manufacturing sector recovered just a piece of its October decline. The rise to 8.2 followed a sharp October decline to 6.8 from 10.9 in [...]

Philadelphia Fed Index Recovered Slightly

Reaccelerating goods price inflation along with sticky services inflation clouds the outlook

Falling oil prices aren't pulling down inflation expectations, pointing to a boost from increased tariffs

Equity market exuberance outpacing macroeconomic data

Apart from Japan, Blue Chip forecasters expect further sizable monetary easing

US production rebounded in Q2, but demand continued to slow

US leader, Germany trailer for real GDP growth over past 3 years

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

With escalation of Israel/Iran conflict, geopolitical risk has recently surged while US trade policy uncertainty has ebbed

Renewed supply chain pressures point to a rebound in global inflation ahead

Apart from Japan, Blue Chip forecasters look for further significant monetary policy easing

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

Even with expected tariff-induced increases in inflation, BCFF forecasters look for a more aggressive round of monetary easing

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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The **PCE chain price index** increased 0.2% (2.6% y/y) after rising an unrevised 0.3% in June and an unrevised 0.2% in May. The y/y gain steadied at 2.6%. It was increased from 2.2% y/y in April. Energy prices fell 1.1% (-2.7% y/y) after rising 0.9%, while food & beverage prices eased 0.1% (+1.9% y/y) following a 0.3% rise. The price index excluding food & energy rose a steady 0.3%, after two straight 0.2% increases. The y/y gain edged up to 2.9% last month from 2.8% in June. It was increased from a low of 2.6% in April.

Durable goods prices eased 0.1% (+1.1% y/y) in July, after rising 0.5% in June. Home furnishings & appliance prices edged 0.1% higher (2.5% y/y), after increasing 1.3%. Recreational goods & vehicle costs declined 0.9% (-0.3% y/y) and reversed the 0.9% June strengthening. Motor vehicle & parts prices rose 0.2% (1.6% y/y), after a 0.4% June decline.

Prices of nondurable goods eased 0.1% (+0.2% y/y) last month after rising 0.4% in June. Clothing prices held steady both m/m and y/y after rising 0.3% in June. Food & beverage prices eased 0.1% (+1.9% y/y), following a 0.4% June increase. Gasoline & other energy prices fell 1.7% (-9.6% y/y), after rising 0.9% in June.

Services prices in July rose 0.3% (3.6% y/y), after four straight 0.2% increases. Housing & utility prices rose 0.2% (4.3% y/y), after two consecutive 0.3% increases, and services prices excluding energy & healthcare gained 0.4% (3.7% y/y) after two 0.2% gains. Healthcare prices rose 0.2% (2.7% y/y), after rising 0.4%. The cost of financial services & insurance jumped 1.2% (5.5% y/y) after rising 0.4% in June. Recreation services costs rose 0.3% (3.2% y/y) after rising 0.1%. Transportation prices gained 0.2% (4.4% y/y), following a 0.1% rise, while hotel & restaurant prices improved 0.1% (2.8% y/y) after a slight June decline.

**Personal consumption expenditures (PCE)** rose 0.5% (4.7% y/y) last month after increasing 0.4% in June, revised from 0.3%, after holding steady in May. The July rise matched expectations in the Action Economics Forecast Survey. When adjusted for price changes, PCE improved 0.3% in July (2.1% y/y) after rising 0.1% in June.

Real spending on durable goods increased 2.0% (3.2% y/y) in July, after falling for three straight months. Real spending on motor vehicles jumped 4.5% (3.5% y/y), after falling sharply in both June and May. Real outlays on furnishings & appliances improved 0.2% (0.9% y/y), after falling in each of the prior month. Real spending on recreational goods & vehicles increased 1.5% (4.9% y/y) last month, after falling 0.4% in June. Spending on “other” durable goods improved 0.4% (2.6% y/y) after rising 0.2% in June.

Nondurable goods spending in real terms rose 0.3% (2.7% y/y) in July after gaining 0.6% in June. Real clothing & footwear purchases rose 0.6% (4.9% y/y) last month, following a 0.5% rise during June. Real food & beverage purchases strengthened 0.7% (1.7% y/y) after rising 0.4%. Real outlays on gasoline & other energy products fell 1.3% (-1.5% y/y), after rising 1.5%. Real spending on “other” nondurable goods edged 0.1% higher (4.1% y/y) last month, following a 0.6% rise in June.

Real spending on services improved 0.1% (1.7% y/y) in July for the second straight month. Real spending on housing & utilities rose 0.1% (1.1% y/y) in July, for a second consecutive month, while real health care spending also rose 0.1% (3.9% y/y) after rising 0.2%. Real spending on food services & accommodations eased 0.2% (+1.7% y/y), after rising 0.4% in June. Real spending on financial services & insurance rose 0.2% (2.4% y/y) after increasing 0.4% in June. Real spending on transportation services rose 0.3% (-0.0% y/y) in July, after falling 0.6% in June. Recreation spending slipped 0.1% (+1.0% y/y), the same as in June. Spending on “other” services rose 0.3% (2.7% y/y) for the second straight month.

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**Personal income** rose 0.4% last month (5.0% y/y) after increasing 0.3% in June. A 0.5% gain was expected. Wages & salaries moved 0.6% higher (5.3% y/y), following a 0.1% increase during June. Rental income increased 0.5% (4.0% y/y) in July, after falling for three straight months. Proprietors’ income improved 0.7% (2.3% y/y), after a minimal 0.1% increase. Income from assets rose 0.1% (1.4% y/y), after holding steady in June, and current transfer receipts were unchanged (8.3% y/y) following a 1.1% June increase.

Disposable personal income increased 0.4% (4.6% y/y) during July following a 0.3% June rise. After adjusting for price changes, disposable income improved 0.2% (2.0% y/y) after holding steady in June.

The personal saving rate held steady in July at 4.4%, after falling from 5.0% in April. It still stands well above low of 3.5% in December of last year. Personal saving fell 1.7% (+5.8% y/y) in July, after declining 0.9% in June.

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

**Let’s Get On with It** from Fed Governor Christopher J. Waller is available [here](https://www.federalreserve.gov/newsevents/speech/waller20250828a.htm).

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- Core price increase y/y matches highest since February.
- Real spending moderation centers on services.
- Real disposable income improves; personal savings rate steadies.

U.S. Core PCE Price Inflation Up in July; Real Spending Slows Y/Y 

Winnie Tapasanun

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The advance estimate of the U.S. international trade deficit in goods widened to a larger-than-expected $103.57 billion in July after narrowing to $84.85 billion in June, data from the U.S. Census Bureau showed. The July reading, the second widening in the goods trade deficit in three months, was slightly smaller than a $103.92 billion shortfall in July 2024. A deficit of $90.2 billion for July had been expected by the Action Economics Forecast Survey. The deficit reached a record $161.95 billion in March. In Q2'25, the goods trade deficit narrowed to $266.96 billion, the smallest since Q4'23, after ballooning to a record $465.035 billion in Q1'25; the monthly deficit averaged $88.99 billion in Q2'25, down from a record $155.01 billion in Q1'25.

Total goods exports dipped 0.1% m/m (+3.0% y/y), the third consecutive monthly decline, to $177.97 billion in July, the lowest level since January, after a 0.7% decrease to $178.08 billion in June. April registered a record high of $190.08 billion. Exports were up 9.6% from a June 2023 low but down 2.1% from a July 2022 high. The m/m decline in exports in July reflected exports m/m drops of 2.4% (+16.3% y/y) in other goods, 0.9% (+5.1% y/y) in nonfood consumer goods excluding autos, and 0.8% (-1.2% y/y) in industrial supplies & materials. To the upside, exports for the following end-use categories rose m/m in July: automotive vehicles & parts (2.2%; -4.0% y/y), capital goods excluding autos (0.7%; 7.0% y/y), and foods, feeds & beverages (0.5%; 1.4% y/y).

Total goods imports rebounded 7.1% m/m (1.7% y/y), the first monthly increase since March, to a four-month-high $281.54 billion in July following a 4.6% drop to $262.94 billion in June. March registered a record high of $344.59 billion. Imports were up 11.9% from a June 2023 low but down 2.6% from a March 2022 high. The m/m rebound in imports in July reflected m/m rises in most imports end-use categories. These included a 25.4% surge (the first m/m increase and the largest since January; 4.9% y/y) in industrial supplies & materials as well as rises of 11.5% (23.5% y/y) in other goods, 4.8% (14.7% y/y) in capital goods excluding autos, 2.4% (4.9% y/y) in foods, feeds & beverages, and 2.1% (-12.2% y/y) in nonfood consumer goods excluding autos. In contrast, imports of automotive vehicles & parts, the only end-use category with a monthly decline in July, fell 3.2% (-14.1% y/y), the third m/m fall in four months, on top of a 3.6% June decrease.

The advance international trade data can be found in Haver's **USECON** database. The expectation figure is from the Action Economics Forecast Survey, which is in **AS1REPNA**.

- Deficit: $103.57 bil. in July, jumping 22.1% from June’s $84.85 bil.
- Exports -0.1%, down for the third straight month, led by a 2.4% decline in exports of other goods.
- Imports +7.1%, up for the first time since March, led by a 25.4% surge in imports of industrial supplies & materials.

U.S. Goods Trade Deficit Balloons in July; Largest Since March’s Record High

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Inflation in the monetary union was tepid across the large, early-reporting, economies in August. The HICP rose by 0.2% on the month in Germany, rose by 0.1% in France, while it was flat in both Italy and Spain. However, these outstanding readings followed several months of stronger inflation; in particular in July German prices rose by 0.2%, in Italy the gauge rose by 0.3%, in France by 0.4%, and in Spain by 0.5%.

As a result, over three months, inflation is running hot on the headline gauge, over 2% in France, Italy, and Spain, and just below it, at a 1.8% annual rate in Germany. Over 12 months, inflation is well behaved, but that headline is up 0.8% in France, rises by 1.7% over 12 months in Italy, by 2.1% in Germany, and at a 2.6% pace in Spain. That is a bit more mixed but still quite solid set of results. The EMU-wide HICP for July – on a one-month lag- rises by 2.1% over 12 months with a core at 2.3%.

Core inflation is not well reported on an early basis. The Italian core rate rose 0.2% in August with Spain at 0.3%; both Italy and Spain logged increases of 0.3% in July and in June and as a result the 3-month inflation rate on the core for Italy and Spain runs at 2.7% in Italy and at 3.8% for Spain. These, of course, are much higher and more disturbing numbers for inflation. The 6-month inflation rate for core Italy and Spain runs at 2.9% and 3.1%, respectively, while over 12 months the Italian core is up by only 2.1% and the Spanish core is up by only 2.4%. The kick up and inflation for the core is a relatively recent phenomenon.

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These statistics give the ECB some room and some time to maneuver, since headline inflation is in pretty good shape and the inflation issues are scattered and have emerged more recently from the core and with growth still weak and with rising unemployment in Germany where it just topped 3 million for the first time in a decade. There may not be any impetus to have to raise rates to cool inflation. The European Central Bank, like the Federal Reserve, is likely playing a watch and wait game with the economic statistics, and this month the watch and wait game turned pretty much in its favor with very good headline figures although still having some difficult core figures. It will take a little time before we get the core numbers for the rest of the monetary union members to fill in to understand exactly where those trends sit.

However, based on the early returns, the ECB is probably relatively happy with how inflation is sitting even with the core rates slightly excessive and varied. There doesn't appear to be any burgeoning inflation problem; there's some kind of a modest core inflation issue building in Italy and Spain and we'll have to watch that in the coming months. For now, the ECB should be relatively content.

Europe

EMU Large Country Inflation Runs Cold – Over Tepid Cores

Andrew Cates

**The US labour market**
The latest data highlight a growing sense of fragility in the US labour market. The unemployment rate, while still relatively low by historical standards, has been edging higher through the course of this year. More telling, however, is the signal from this week’s consumer confidence survey from Conference Board and specifically the labour market differential — the gap between the share of consumers saying jobs are plentiful versus those saying jobs are hard to get. That balance has narrowed sharply, moving back toward levels historically associated with softer labour demand and rising unemployment.

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**Goods and services inflation** 
Haver’s breakdown of goods and services CPI inflation in the advanced economies highlights where fresh risks are emerging. Goods inflation, which had been receding sharply after the pandemic supply shocks, has recently shown signs of firming again. Some of this probably reflects the impact of US tariff policies, which are raising import costs and putting renewed upward pressure on traded goods prices. While services inflation remains the more stubborn component in most advanced economies, the risk is that tariffs could reintroduce stickiness into goods prices, slowing the overall disinflation process.

250828Z2.jpg

**China, Europe and US trade policy**
A consequence of US tariff policies has been a sharp contraction in Chinese exports to the US market, with much of the surplus redirected elsewhere. Europe in particular has recorded near double-digit import growth in recent months, raising concerns that Beijing is deflecting its industrial overcapacity problem rather than resolving it, effectively transferring the pressure onto trading partners. China’s authorities, however, have begun to push back, introducing measures to curb excess supply and rein in so-called “involution,” including clampdowns on price wars across several industries.

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**China’s excess capacity and Europe**
A closer look at Europe–China trade shows that electric vehicles remain a key flashpoint. Import volumes from China have continued to rise even as per-unit prices fall sharply from a year ago —evidence suggesting that industrial overcapacity persists, with low-cost Chinese EVs increasingly challenging European automakers. The surge has carried on despite EU tariffs of up to 45% on battery EVs, as Chinese producers have adapted by pushing plug-in hybrids and expanding onshore production in Europe to bypass duties and defend market share.

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**Wage growth in the US and Europe** 
Turning back to inflation dynamics, the UK stands out for its persistent wage pressures. While posted wage growth has cooled across the US and euro area, the UK measure has remained elevated at around 6% year-on-year, well above pre-pandemic norms. This stickiness reflects a still-tight labour market in key service sectors, even as broader activity has slowed and unemployment has edged higher. For the Bank of England, it underscores the dilemma: headline inflation is easing, but underlying pay growth risks keeping services inflation uncomfortably high, complicating the timing and scale of policy easing.

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**The UK economy**
The UK’s net international investment position has deteriorated noticeably in recent years, with both direct investment and portfolio flows showing persistent weakness. The latest data underline how net FDI has turned increasingly negative, while the portfolio investment balance has also eroded, leaving the UK more reliant on volatile short-term funding sources. This deterioration comes against a backdrop of heightened investor unease about the riskiness of UK debt markets, where elevated gilt yields and rising debt-servicing costs have amplified concerns over fiscal sustainability. Taken together, these trends underscore the vulnerability of the UK’s external position at a time when global capital is arguably proving more selective and risk sensitive.

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Global markets have continued to rally into late summer, buoyed by AI optimism, dovish signals from central bankers at Jackson Hole, and expectations of easier policy ahead. Yet beneath the surface, risks to the world economy are accumulating. In the US, labour market indicators point to softening conditions (chart 1), while tariff-driven pressures are beginning to push goods prices higher (chart 2). Global trade flows are being reshaped by US policy, with China’s excess capacity increasingly diverted toward Europe, most visibly through surging exports of electric vehicles (EVs) (charts 3 and 4). At the same time, wage growth remains stubbornly elevated in the UK, complicating disinflation (chart 5), while concerns are mounting over the country’s external vulnerabilities as net FDI and portfolio positions weaken against the backdrop of jittery debt markets (chart 6). Together, these dynamics highlight the tension between buoyant market performance and a global economy still grappling with structural fragilities.

Charts of the Week: Riskbusters

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Real GDP grew 3.3% (SAAR) during the second quarter of 2025, revised from a 3.0% gain reported initially. The increase followed an unrevised 0.5% decline in Q1. A 3.1% rise had been expected in the Action Economics Forecast Survey. Growth during the last four quarters of 2.1% compared to 2.0% y/y in Q1, and remained below its most recent high of 3.2% in Q4 2023.

After-tax corporate profits without IVA & CCA adjustment increased 1.4% (7.0% y/y) last quarter after easing 0.8% in Q1. Before-tax earnings with IVA & CCA rose 1.7% (4.3% y/y) after falling 2.3% in Q1. Financial sector earnings rose 1.4% (15.3% y/y) after rising 2.3% in Q1. Nonfinancial corporate profits rose 2.2% (2.5% y/y) after falling 2.5% in Q1. Earnings from abroad eased 0.7% (-0.4% y/y) following a 7.3% Q1 decline.

Foreign trade balance improvement added 4.95 percentage points to growth last quarter after subtracting 4.61 percentage points in Q1. Imports fell 29.8% (+1.3% y/y) after surging 38.0% in Q1. Exports declined 1.3% (+2.0% y/y) after improving 0.4% in Q1. Inventories subtracted 3.29 percentage points from growth after adding 2.59 percentage point to Q1 growth.

Real final sales to domestic purchasers grew 1.6% (2.4% y/y), revised from 1.1%, in Q2 after rising 1.5% in Q1. Personal consumption expenditures rose 1.6% (2.4% y/y), revised from 1.4%, following a 0.5% gain. Durable goods spending rose 2.6% (4.6% y/y) after falling 3.7% in Q1. Motor vehicle purchases strengthened 11.7% (6.7% y/y) after declining 11.2% in Q1. Spending on home furnishings & appliances weakened 2.1% (+3.5% y/y) following a 1.5% rise. Recreational goods & vehicle outlays fell 3.5% (+4.3% y/y) last quarter after a 0.4% Q1 gain.

Nondurable goods outlays in constant dollars rose 2.3% (3.0% y/y) following 2.1% growth in Q1. Apparel spending increased 5.4% (4.8% y/y) following a 7.0% rise. Food & beverage buying gained 0.3% (1.5% y/y) after a 1.0% increase. Gasoline & fuel oil purchases weakened 1.4% (+0.9% y/y) after gaining 3.6% in Q1.

Real spending on services increased 1.2% (1.9% y/y) after a 0.6% gain. Outlays on housing & utilities eased 0.4% (+1.1% y/y) after rising 2.9% in Q1. Health care expenditures rose 4.2% (4.8% y/y) after a 3.1% increase. Transportation outlays declined 2.9% (-0.6% y/y) after a 1.4% rise, while recreation spending rose 3.6% (0.7% y/y) following a 5.1% decline. Restaurant & hotel expenditures increased 5.1% (1.9% y/y) after falling 1.8%. Financial services expenditures rose 1.9% (2.3% y/y) following a 0.1% Q1 increase.

Business fixed investment in constant dollars increased 5.7% last quarter (4.2% y/y), revised from 1.9%, following a 10.3% surge in Q1. Expenditures on structures declined 8.9% (-3.4% y/y), after falling 2.4% in Q1. Expenditures on producers’ durable equipment increased 7.4% (7.7% y/y), revised from 4.8%, after surging 23.7% in Q1. Outlays on information processing equipment rose 10.1% (20.1% y/y), revised from 5.5%, after soaring 72.8% during Q1. Industrial equipment investment rose 6.7% (4.0% y/y) after a 4.7% rise. Transportation equipment investment surged 20.4% (6.8% y/y) after a 6.9% gain. Intellectual property product spending rose 12.8% last quarter (5.2% y/y) following a 6.0% rise.

Residential structures investment in real terms declined a little-revised 4.7% (-1.3% y/y), the fourth decline in the last five quarters.

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Government spending eased 0.2%, revised from up 0.5% in Q2 (+1.8% y/y) after a 0.6% decline. Federal government expenditures declined 4.7% (+0.7% y/y) after falling 4.6% in Q1. National defense expenditures increased 1.4% (3.0% y/y) after declining 7.1% in Q1. State & local government spending rose 2.6% (2.5% y/y) following a 2.0% rise.

The GDP chain price index rose an unrevised and expected 2.0% last quarter (2.5% y/y) after increasing 3.8% in Q1. The PCE chain price index increased 2.0% (2.4% y/y) following a 3.7% rise. The PCE price index excluding food and energy rose 2.5% (2.7% y/y) after increasing 3.5% in Q1. The business fixed investment price index edged 0.5% lower (+1.1% y/y) after a 0.4% rise. The residential price index rose 1.1% (2.6% y/y) after a 4.1% rise while the government price index increased 3.3% (3.1% y/y) following a 4.6% rise.

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

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- Business investment strengthens & consumer spending firms.
- U.S. business earnings reverse Q1 decline.
- Increase in price index is unrevised, remaining roughly half of Q1’s gain.

Economy in Brief: 2007

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The EMU Trade Surplus Shrinks

U.S. Business Inventories' Increase Moderate

U.S. Industrial Production Decline Broad and Unexpected

U.S. Industrial Production Decline Broad and Unexpected

Kazakhstan's Oil and Metals Exports Bring Revenue for Investment Spending

EMU ‘Core’ Inflation Trends Are Mixed…But Still Poor

Japan’s Tertiary Sector Echoes Weakness in MFG and Mining

Philadelphia Fed Index Recovered Slightly