Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081223n.jpg" align="left" border="0" height="265" width="353">
The United Kingdom, the United States, Denmark, the
Netherlands and New Zealand released their, for the most part, final
estimates of Gross Domestic Product for the third quarter of 2008
today. The quarterly percent changes in GDP for New Zealand, Denmark,
the Netherlands and the U.K. are shown in the first chart.
All five countries appear to be in recession or heading
towards it although their paths are diverse. The data show that New
Zealand has now reported three successive quarters of decline and is
definitely in recession. After a rebound in the second quarter, Denmark
has once again reported a decline in GDP. GDP in the Netherlands has
hovered around zero growth in all three quarters of 2008. GDP in the U.
K. declined 0.65% in the third quarter, more than expected and the
biggest decline since 1990. GDP in Denmark declined 0.38% in the third
quarter after rising 0.43% in the second quarter. As can be seen in the
first chart, quarterly movements in Denmark's GDP are much more
volatile than those of the other countries shown.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081223o.jpg" align="right" border="0" height="265" width="353">
GDP in the United States, which had declined 0.04% in the
fourth quarter of 2007, increased by 0.22 % in the first quarter of
2008 and 0.70% in the second quarter, declined 0.13% in the third
quarter. (The U. S. typically shows quarterly changes in GDP at annual
rates, while most other countries use quarterly changes such as those
shown here. The comparable annual rate figures for the U. S. are
-0.17%, 0.87% , 2.83 % and -0.51% respectively.)
The National Bureau of Economic Research, the arbiter of
recession dating in the U. S., has declared the fourth quarter of 2007
to be the peak of the expansion and thus the first quarter of 2008, the
beginning of recession. Quarterly changes in the GDP of the U. S
together with recession shading are shown in the second chart. Other
countries have yet to make an official announcement, but when they do,
Haver will record the recession dating and shading in the Graph Menu in
DLXVG3.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">QUARTERLY
CHANGES IN GDP &nbsp;</th>
<th scope="col">Q3 08</th>
<th scope="col">Q2 08&nbsp;</th>
<th scope="col">Q1 08&nbsp;</th>
<th scope="col">Q4 07&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">New Zealand</td>
<td>-0.68</td>
<td>-0.52</td>
<td>-0.57</td>
<td>0.33</td>
</tr>
<tr>
<td class="firstcol">Denmark</td>
<td>-0.38</td>
<td>0.43</td>
<td>-1.16</td>
<td>-0.23</td>
</tr>
<tr class="odd">
<td class="firstcol">The Netherlands</td>
<td>-0.02</td>
<td>0.00</td>
<td>0.33</td>
<td>1.25</td>
</tr>
<tr>
<td class="firstcol">United Kingdom</td>
<td>-0.65</td>
<td>0.00</td>
<td>0.38</td>
<td>0.55</td>
</tr>
<tr class="odd">
<td class="firstcol">United States</td>
<td>-0.13</td>
<td>0.70</td>
<td>0.22</td>
<td>-0.04</td>
</tr>
</tbody>
</table>
</body></html>

The United Kingdom, the United States, Denmark, the Netherlands and New Zealand released their, for the most part, final estimates of Gross Domestic Product for the third quarter of 2008 today. The quarterly percent changes in GDP for [...]

GDP Data For Third Quarter Of 2008: Paths To Recession

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081223l.jpg" align="left" border="0" height="265" width="353">
With the release of the new detail, the IFO headline has not
changed but the report now reveals how impacted the whole of the survey
is from the ongoing weakness and gathering gloom. 
 

Germany&#8217;s IFO headline at 82.6 in Dec. from 96.3 in Nov. is
now the weakest since 1991. The current manufacturing situation is in
the bottom 19th percent of its range for that period. Business
expectations, activity and orders on hand all are the worst readings on
record for the period. The reading for &#8216;Foreign orders on hand&#8217; is now
the relative strongest category and it resides in the bottom 25% of its
range. 
 

The three-month outlook for expected MFG activity has slipped
to its weakest reading of the period since 1998. Orders, expectations
for Retailing and Wholesaling are around the bottom 20% of their
respective ranges. Despite foreign orders on hand having held up the
expectations for export business on the part of manufactures is the
worst of the survey period. Employment expectations in manufacturing
are also their worst of the period. The German IFO survey leaves little
cheer for Christmas. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col"> IFO
Survey: Germany</th>
</tr>
</thead>
<tbody>
<tr class="grey7">
<td class="firstcol">&nbsp;</td>
<td colspan="5">Percent: Yr/Yr</td>
<td colspan="3">INDEX NUMBERS</td>
</tr>
<tr class="grey6">
<td class="firstcol">&nbsp;</td>
<td>Dec-08</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>Current</td>
<td>Average</td>
<td>Percentile</td>
</tr>
<tr class="grey5">
<td class="firstcol">Biz Climate</td>
<td>-20.0%</td>
<td>-17.8%</td>
<td>-13.4%</td>
<td>-10.9%</td>
<td>-10.5%</td>
<td>82.6</td>
<td>96.3</td>
<td>0.0%</td>
</tr>
<tr class="grey5">
<td class="firstcol">Current Situation</td>
<td>-18.1%</td>
<td>-14.2%</td>
<td>-8.9%</td>
<td>-9.4%</td>
<td>-7.5%</td>
<td>88.8</td>
<td>96.3</td>
<td>18.0%</td>
</tr>
<tr class="grey5">
<td class="firstcol">Biz Expectations: Next 6-Mos</td>
<td>-22.0%</td>
<td>-21.3%</td>
<td>-17.6%</td>
<td>-12.6%</td>
<td>-13.4%</td>
<td>76.8</td>
<td>96.4</td>
<td>0.0%</td>
</tr>
<tr class="grey4">
<td class="firstcol" colspan="9">&nbsp;</td>
</tr>
<tr class="grey6">
<td class="firstcol">Manufacturing:</td>
<td>Dec-08</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>Current</td>
<td>Average</td>
<td>Percentile</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="9">Current
Situation</td>
</tr>
<tr class="grey5">
<td class="firstcol">MFG</td>
<td>-25.8%</td>
<td>-19.5%</td>
<td>-12.4%</td>
<td>-11.9%</td>
<td>-8.9%</td>
<td>81.1</td>
<td>93.5</td>
<td>19.6%</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="9">Biz
Expectations: Next
6-Mos</td>
</tr>
<tr class="grey5">
<td class="firstcol">MFG</td>
<td>-27.0%</td>
<td>-25.4%</td>
<td>-21.5%</td>
<td>-15.8%</td>
<td>-16.9%</td>
<td>70.8</td>
<td>95.8</td>
<td>0.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="9">Activity
(m/m)</td>
</tr>
<tr class="grey5">
<td class="firstcol">MFG</td>
<td>-25.1%</td>
<td>-17.8%</td>
<td>-7.7%</td>
<td>-10.1%</td>
<td>-8.5%</td>
<td>75.1</td>
<td>96.9</td>
<td>0.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="9">Demand
M/M</td>
</tr>
<tr class="grey5">
<td class="firstcol">MFG</td>
<td>-27.5%</td>
<td>-25.8%</td>
<td>-15.3%</td>
<td>-16.0%</td>
<td>-10.8%</td>
<td>70.1</td>
<td>96.5</td>
<td>0.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="9">Orders
on hand</td>
</tr>
<tr class="grey5">
<td class="firstcol">MFG</td>
<td>-26.7%</td>
<td>-22.5%</td>
<td>-13.2%</td>
<td>-14.7%</td>
<td>-11.2%</td>
<td>73.6</td>
<td>96.1</td>
<td>0.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="9">Foreign
orders on hand</td>
</tr>
<tr class="grey5">
<td class="firstcol">MFG</td>
<td>-23.3%</td>
<td>-17.6%</td>
<td>-14.0%</td>
<td>-9.7%</td>
<td>-7.7%</td>
<td>84.6</td>
<td>94.8</td>
<td>24.5%</td>
</tr>
<tr class="grey5">
<td colspan="9" class="firstcol">Yr/Yr
percentage changes in
underlying Indices</td>
</tr>
<tr class="grey2">
<td colspan="9" class="firstcol">IFO
outlook for 3-Months
ahead</td>
</tr>
<tr class="grey7">
<td class="firstcol">3-Mos ahead</td>
<td colspan="5">Percent: Yr/Yr</td>
<td colspan="3">INDEX NUMBERS</td>
</tr>
<tr class="grey6">
<td class="firstcol">Expected Activity</td>
<td>Dec-08</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>Current</td>
<td>Average</td>
<td>Percentile</td>
</tr>
<tr class="grey5">
<td class="firstcol">MFG</td>
<td>-24.8%</td>
<td>-22.2%</td>
<td>-13.9%</td>
<td>-9.2%</td>
<td>-10.8%</td>
<td>77.3</td>
<td>96.7</td>
<td>0.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Orders Expectations</td>
<td colspan="5">Changes over
12-months</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey5">
<td class="firstcol">Retail Orders&nbsp;</td>
<td>-22.0%</td>
<td>-24.0%</td>
<td>-5.0%</td>
<td>-4.0%</td>
<td>-10.0%</td>
<td>-32.0</td>
<td>-16.1</td>
<td>22.4%</td>
</tr>
<tr class="grey5">
<td class="firstcol">Wholesale</td>
<td>-32.0%</td>
<td>-30.0%</td>
<td>-16.0%</td>
<td>-12.0%</td>
<td>-15.0%</td>
<td>-26.0</td>
<td>-12.4</td>
<td>17.9%</td>
</tr>
<tr class="grey1">
<td class="firstcol" colspan="9">EXPORT
Biz Expectations</td>
</tr>
<tr class="grey5">
<td class="firstcol">MFG</td>
<td>-23.3%</td>
<td>-19.0%</td>
<td>-13.3%</td>
<td>-9.6%</td>
<td>-7.2%</td>
<td>80.7</td>
<td>98.1</td>
<td>0.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol" colspan="9">Employment
Expectations</td>
</tr>
<tr class="grey5">
<td class="firstcol">MFG (Since June 1997)</td>
<td>-20.6%</td>
<td>-15.5%</td>
<td>-9.8%</td>
<td>-8.7%</td>
<td>-8.3%</td>
<td>87.4</td>
<td>96.2</td>
<td>0.0%</td>
</tr>
</tbody>
</table>
</body></html>

With the release of the new detail, the IFO headline has not changed but the report now reveals how impacted the whole of the survey is from the ongoing weakness and gathering gloom. Germany’s IFO headline at 82.6 in Dec. from 96.3 in [...]

IFO Details Show Widespread Gloom in Germany

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081223f.jpg" width="353">
The full-month reading of consumer sentiment in December from the University of Michigan recovered slightly from the the dismal November level. At 60.1 the figure was improved slightly from the mid-month level and that was up 8.7% from November. It was the highest level since September. It still was down, however, by nearly one quarter from last year. The December reading beat Consensus expectations for 58.7.
During the last ten years there has been a 58% correlation between the level of sentiment and the three-month change in real consumer spending.
The same as in the mid-month report, weak prices most likely pushed up the index of buying conditions for large household goods by one-third from November. The view of current personal finances improved just slightly from November&#39;s record low level, and the figure remained off by nearly one half from last year&#39;s average.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081223g.jpg" width="353">
The expectations component of consumer sentiment remained roughly unchanged m/m. The series was near its lowest since 1990 and close to the low of 1980. Expectations for business conditions during the next year dropped to the lowest since 1980 and expectations for conditions during the next five years ticked up. The expected change in personal finances improved slightly for the second consecutive month.
The opinion of government policy, which apparently influences economic expectations, ticked up for the second month (-25.7% y/y). A higher 45% thought that a fair job was being done but a lesser 4% thought that a good job was being done. That was nearly the lowest percentage on record. Forty nine percent of survey participants thought that a poor job was being done by government.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081223m.jpg" width="353">
Recent economic weakness and lower oil prices caused inflation expectations to fall. The mean expected rate of inflation during the next year fell further to 1.7%. It was as high as 7.0% in May. The expected inflation rate during the next five years fell to 2.6%, a record low for the series which dates back to 1980.
The University of Michigan survey is not seasonally adjusted.The reading is based on telephone interviews with about 500 households at month-end; the mid-month results are based on about 300 interviews. The summary indexes are in Haver&#39;s USECON database, with details in the proprietary UMSCA database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">December</th>
<th scope="col">Mid-December</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">December y/y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>60.1</td>
<td>59.1</td>
<td>55.3</td>
<td>57.6</td>
<td>-20.4%</td>
<td>85.6</td>
<td>87.3</td>
<td>88.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>69.5</td>
<td>69.4</td>
<td>57.5</td>
<td>58.4</td>
<td>-23.6</td>
<td>101.2</td>
<td>105.1</td>
<td>105.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>54.0</td>
<td>52.4</td>
<td>53.9</td>
<td>57.0</td>
<td>-17.7</td>
<td>75.6</td>
<td>75.9</td>
<td>77.4</td>
</tr>
</tbody>
</table>
</body>
</html>

The full-month reading of consumer sentiment in December from the University of Michigan recovered slightly from the the dismal November level. At 60.1 the figure was improved slightly from the mid-month level and that was up 8.7% [...]

Michigan Consumer Sentiment Improved Slightly in December

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081223j.jpg" width="353">
New single-family homes fell 2.9% m/m during November to 407,000 after a downwardly revised 5.2% October decline. The level of sales in November was off by 71% from the July 2005 peak and sales fell short of Consensus expectations for 415,000.
The m/m change in sales continued mixed by region. Sales in the West rose 11.0% and reversed their October decline. Sales in the Northeast also were up by 14.3% for the second consecutive monthly increase. Working the other way were sales in the Midwest which fell 16.4% to a new low and sales in the South also fell 7.1%, also to a new low.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081223k.jpg" width="353">
The median price for a new single-family home gained back more than half of an October decline. The rise to $220,400, nevertheless, left them still off 11.5% y/y. For October, the decline in home prices about matched the 7.5% drop reported by the Office of Federal Housing Enterprise Oversight (FHFA). The FHFA figures, (formerly the Office of Federal Housing Enterprise Oversight (OFHEO), as well as the Census Dept. figures, are available in Haver&#39;s USECON database. 
The number of new homes for purchase again fell sharply, by 7.0% (-25.5% y/y). That reduced the inventory of unsold homes to the lowest level since early-2004. In each of the country&#39;s regions, the inventory is down 20% to 30% during the last year.
The month&#39;s supply of new homes for sale was about unchanged m/m at 11.5.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">US New Homes</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Y/Y (%)</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Sales (SAAR, 000s)</td>
<td>407</td>
<td>419</td>
<td>-35.3</td>
<td>768</td>
<td>1,049</td>
<td>1,279</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>40</td>
<td>35</td>
<td>&nbsp;-27.3</td>
<td>64</td>
<td>64</td>
<td>81</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>56</td>
<td>67</td>
<td>-34.9</td>
<td>118</td>
<td>161</td>
<td>203</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>210</td>
<td>226</td>
<td>-38.1</td>
<td>408</td>
<td>559</td>
<td>638</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>101</td>
<td>91</td>
<td>-32.2</td>
<td>178</td>
<td>266</td>
<td>356</td>
</tr>
<tr>
<td class="firstcol">Median Price (NSA, $)</td>
<td>220,400</td>
<td>214,600</td>
<td>-11.5</td>
<td>243,742</td>
<td>243,067</td>
<td>234,208</td>
</tr>
</tbody>
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New single-family homes fell 2.9% m/m during November to 407,000 after a downwardly revised 5.2% October decline. The level of sales in November was off by 71% from the July 2005 peak and sales fell short of Consensus expectations for [...]

U.S. New-Home Sales Fell During October; Lowest Since 1991

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081223h.jpg" width="353">
U.S. existing home sales fell 8.6% last month versus October to pull sales down to 4,490 million, according to the National Association of Realtors. The decline during the prior month was revised slightly and the latest was much greater than Consensus expectations for sales of 4.93M homes. Total sales include sales of condos and co-ops.
Median home prices fell 2.8% (NSA) last month, about as they did during October and it was the fifth consecutive monthly drop. That pulled the y/y comparison to -13.2%. Prices have fallen 21.0% since their peak in June 2007.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081223i.jpg" width="353">
Sales of existing single-family homes followed a similar pattern as the total and fell 8.0% after a revised 4.6% during October. Sales of existing homes are down by one-third from their peak in mid-2005.
The latest drop in single-family home sales was to the lowest since 1997, is from a trend line this year that had been roughly stable and moving sideways.
By region, home sales in the Northeast led last month&#39;s decline with a 12.0% drop and they were down nearly twenty percent from last year. In the South sales also were quite weak as they posted a 10.9% drop. In the West sales sales fell about they did during October, by 4.3%. Sales in the Midwest fell 7.4%, like they did during October.
The number of unsold homes (condos &amp; single-family) on the market ticked up 0.1%, about as they did year-to-year. At the current sales rate there as a 11.2 months&#39; supply on the market which was near the series&#39; high.. For single-family homes the inventory rose m/m to a 10.6 months supply at the current sales rate, also near the high.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Existing Home Sales (Thous)</th>
<th scope="col">November</th>
<th scope="col">y/y %</th>
<th scope="col">October</th>
<th scope="col">November &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>4,490</td>
<td>-10.6</td>
<td>4,910</td>
<td>5,020</td>
<td>5,672</td>
<td>6,508</td>
<td>7,076</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>730</td>
<td>-18.0</td>
<td>830</td>
<td>890</td>
<td>1,008</td>
<td>1,090</td>
<td>1,168</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,000</td>
<td>-16.0</td>
<td>1,080</td>
<td>1,190</td>
<td>1,331</td>
<td>1,491</td>
<td>1,589</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>1,640</td>
<td>-17.6</td>
<td>1,840</td>
<td>1,990</td>
<td>2,240</td>
<td>2,576</td>
<td>2,704</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,120</td>
<td>17.9</td>
<td>1,170</td>
<td>950</td>
<td>1,093</td>
<td>1,353</td>
<td>1,617</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>4,020</td>
<td>-8.8</td>
<td>4,370</td>
<td>4,410</td>
<td>4,958</td>
<td>5,703</td>
<td>6,181</td>
</tr>
<tr class="odd">
<td class="firstcol">Median Price, Total, $</td>
<td>181,300</td>
<td>-13.2</td>
<td>186,500</td>
<td>208,800</td>
<td>216,617</td>
<td>222,000</td>
<td>218,217</td>
</tr>
</tbody>
</table>
</body>
</html>

U.S. existing home sales fell 8.6% last month versus October to pull sales down to 4,490 million, according to the National Association of Realtors. The decline during the prior month was revised slightly and the latest was much [...]

U.S. Existing Home Sales Fell; Single-Family Sales Lowest Since 1997

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081223e.jpg" width="353">
Regular gasoline prices were roughly unchanged last week at $1.65 per gallon, according to the U.S. Department of Energy survey. Yesterday, the spot market price for a gallon of regular gasoline fell sharply to $0.88 per gallon.
Weekly gasoline prices can be found in Haver&#39;s WEEKLY database. Daily prices are in the DAILY database.
Though gasoline prices are down, that has done little to drive up product demand. The U.S. Department of Energy reported that the demand for gasoline fell by 3.5% y/y, nearly the fastest rate of decline since late-1995 (the latest four weeks versus the same four weeks last year). The demand for all petroleum products also fell 4.9% y/y.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081223f.jpg" width="353">
These DOE figures are available in Haver&#39;s OILWKLY database.
The price for a barrel of West Texas Intermediate crude oil fell last week by five dollars from the prior week&#39;s average to $39.65 per barrel, down by two-thirds since the peak in July of $145.66. In futures trading yesterday, the one-month price for crude oil was $39.91.
Last week, prices for natural gas were unchanged w/w at $5.67 per mmbtu (-20.7% y/y). The latest average price was 50% below natural gas prices in early-July of $13.19/mmbtu.
The Yield Curve from the Federal Reserve Bank of Cleveland is available <a href="http://www.clevelandfed.org/research/trends/2009/0109/01monpol.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/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">12/22/08</th>
<th scope="col">12/15/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per Gallon)</td>
<td>1.65</td>
<td>1.66</td>
<td>-44.5%</td>
<td>2.80</td>
<td>2.57</td>
<td>2.27</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; ($ per bbl.)</td>
<td>39.65</td>
<td>44.71</td>
<td>-56.6%</td>
<td>72.25</td>
<td>66.12</td>
<td>56.60</td>
</tr>
</tbody>
</table>
</body>
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Regular gasoline prices were roughly unchanged last week at $1.65 per gallon, according to the U.S. Department of Energy survey. Yesterday, the spot market price for a gallon of regular gasoline fell sharply to $0.88 per gallon. [...]

U.S. Gasoline Prices Down Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081223a.jpg" width="353">
As roughly indicated in the prior two reports, 3Q08 U.S. real GDP growth slipped 0.5%. The latest figure matched Consensus expectations. The y/y rate of growth of 0.7% continued as the weakest since the end of the 2001 recession.
Corporate profits also were little revised and they posted a 1.2% drop and were down 9.2% y/y. Last quarter&#39;s decline was the seventh drop of the last eight quarters and the y/y change was the weakest since the 2001 recession. The financial sector&#39;s travails continued to lead profits lower. They were revised weaker and down by roughly one-third from the year ago level. Domestic nonfinancial corporations fell a little-revised 4.3% y/y. Finally, repatriated earnings from abroad rose 6.2% y/y which was slightly better than reported initially.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081223b.jpg" width="353">
Real U.S. final sales to domestic purchasers were little revised and they posted a 2.2% drop. That remained the largest quarterly decline since the end of the 1990-91 recession. The year-to-year dip of 0.2% was the first decline since 1991.
Personal consumption expenditures fell at a 3.8% annual rate (-0.2% y/y). Spending on autos &amp; light trucks collapsed at a 26.6% annual rate (-15.0% y/y). Real spending on furniture &amp; other household equipment fell at an 8.2% rate but they were still up 2.6% y/y. Real spending on apparel fell at a 13.3% clip (-1.1% y/y) and that more than reversed a 2Q jump. Spending on consumer services slipped 0.1% and the y/y gain of 1.1% was the weakest since 1981.
Residential construction fell a little revised 16.1% (-20.6% y/y) and subtracted 0.7% points from GDP growth. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081223c.jpg" width="353">
The 1.7% decline in business fixed investment was little revised (+1.6% y/y). Equipment investment fell at a 7.5% rate (-3.1% y/y), the third consecutive quarter of decline while structures investment was firm again and rose at an upwardly revised 9.6% annual rate (11.2% y/y).
Inventory accumulation was little revised and added 0.8 percentage points to GDP growth after three consecutive quarters of subtraction.
An improved foreign trade deficit added the same 1.1 percentage points to U.S. growth as estimated last month and it remained the main source of lift to GDP growth. The addition was, however, almost one third of that in 2Q. Exports grew at a slower 3.0% annual rate (6.1% y/y), half that in 2Q. Growth in imports weakened with the slowdown in overall economic growth and they fell at a 3.5% annual rate (-3.5% y/y). It was the fifth quarterly decline in the last six.
Spending by governments was strong again and rose 5.8% (3.1% y/y). That was little revised and the quickest since early 2003.
The estimate of the GDP chain price index was lowered to a still-strong 3.9% (AR) gain. The downward revision was due to a lowered jump in the PCE price index to 4.3%. Capital spending prices rose at an accelerated 4.2% rate (2.2% y/y) while the residential investment price deflator was revised downward and declined at a 2.4% rate; down for the fourth straight quarter (-2.4% y/y).
Agricultural Markets and Food Price Inflation - A conference summary from the Federal Reserve Bank of Chicago is available <a href="http://www.chicagofed.org/publications/fedletter/cfljanuary2009_258a.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained 2000$, % AR</a></th>
<th scope="col">3Q &#39;08 (Final)</th>
<th scope="col">3Q &#39;08 (Preliminary)</th>
<th scope="col">3Q &#39;08 (Advance)</th>
<th scope="col">2Q &#39;08</th>
<th scope="col">3Q Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>-0.5</td>
<td>-0.5</td>
<td>-0.3</td>
<td>2.8</td>
<td>0.7</td>
<td>2.0</td>
<td>2.8</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>0.8</td>
<td>0.9</td>
<td>0.6</td>
<td>-1.5</td>
<td>-0.4</td>
<td>-0.4</td>
<td>0.0</td>
<td>-0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>-1.3</td>
<td>-1.4</td>
<td>-0.8</td>
<td>4.4</td>
<td>1.2</td>
<td>2.4</td>
<td>2.8</td>
<td>3.1</td>
</tr>
<tr>
<td class="firstcol">Foreign Trade Effect</td>
<td>1.1</td>
<td>1.1</td>
<td>1.1</td>
<td>2.9</td>
<td>1.4</td>
<td>0.6</td>
<td>0.2</td>
<td>0.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>-2.2</td>
<td>-2.3</td>
<td>-1.8</td>
<td>1.3</td>
<td>-0.2</td>
<td>1.8</td>
<td>2.6</td>
<td>3.1</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>3.9</td>
<td>4.2</td>
<td>4.2</td>
<td>1.1</td>
<td>2.6</td>
<td>2.7</td>
<td>3.2</td>
<td>3.3</td>
</tr>
</tbody>
</table>


</html>

As roughly indicated in the prior two reports, 3Q08 U.S. real GDP growth slipped 0.5%. The latest figure matched Consensus expectations. The y/y rate of growth of 0.7% continued as the weakest since the end of the 2001 recession. [...]

U.S. 3Q'08 GDP Growth Unrevised; Profit's Fall Little Changed

Surging orders for computers and electronics propelling durable goods orders

Next year's inflation forecasts are on the rise and above target

Disrupted global supply chains placing upward pressure on US goods prices

Construction of data centers has overtaken transportation construction in US

Elevated energy prices putting intense upward pressure on input prices around the globe

US is big leader in global surge in private AI investment

Larger-than-usual income tax refunds this year are supporting consumer spending

Sharply rising share of AI-related jobs

Inflationary impact of surge in oil prices larger in Europe than in the US

Futures market thinks the price of oil will recede significantly over the next six months

Recent pickup in US defense orders could help support overall growth ahead

Cost of transporting crude oil has soared to series high

Market-based inflation expectations have not yet reflected recent surge in oil prices

Global equity markets are fearing a major economic disruption from soaring oil prices

Is recent drop in sentiment signaling softer growth ahead?

With the Iran conflict, geopolitical risk has soared to alarming levels

Soaring AI-related investment in US underpinning strong contribution of business spending to overall growth

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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Winnie Tapasanun

260625H9.jpg

260625I9.jpg

The U.S. international trade deficit in goods ballooned to a larger-than-expected $105.75 billion in May after narrowing to $83.01 billion in April, according to the advance estimate from the U.S. Census Bureau. The May reading marked the third widening in the goods trade deficit in four months, exceeding a $91.55 billion shortfall in May 2025. A deficit of $84.0 billion for May had been expected by the Action Economics Forecast Survey. The deficit reached a low of $61.44 billion in October 2025 (the smallest since February 2020) and a record high of $158.73 billion in March 2025. On a quarterly basis, the deficit averaged $94.38 billion so far in Q2'26 versus $81.96 billion in Q1'26.

Total goods exports fell 5.4% m/m (+14.7% y/y) to $207.67 billion in May, the first monthly fall since December and a three-month low, following a 3.8% rise to a record-high $219.52 billion in April. Exports were up 27.7% from a June 2023 low. The m/m fall in exports in May reflected declines of 9.2% (-5.0% y/y) in nonfood consumer goods excluding autos, 7.0% (+23.2% y/y) in industrial supplies & materials, 6.8% (+19.5% y/y) in other goods, and 5.0% (+14.8% y/y) in capital goods excluding autos. To the upside, exports of foods, feeds & beverages (+3.9%; +19.1% y/y) and automotive vehicles & parts (+0.5%; -3.6% y/y) rebounded m/m in May.

Total goods imports, up for the fourth consecutive month, rose 3.6% m/m (15.0% y/y) to $313.43 billion in May, after a 2.0% increase to $302.53 billion in April, marking the highest level since the March 2025 record high of $340.11 billion. Imports were up 25.0% from a March 2023 low. The m/m rise in imports in May was broad-based across all end-use categories, led by an 11.5% gain (22.0% y/y) in other goods, followed by increases of 6.3% (1.4% y/y) in automotive vehicles & parts, 5.7% (-9.1% y/y) in nonfood consumer goods excluding autos, 4.8% (11.7% y/y) in industrial supplies & materials, 4.3% (-0.2% y/y) in foods, feeds & beverages, and 0.4% (41.9% y/y) in capital goods excluding autos. 

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: $105.75 bil. in May, up $22.75 bil. (+27.4%) from April’s $83.01 bil.
- Exports -5.4%, first m/m decline since Dec., led by a 9.2% drop in nonauto consumer goods exports.
- Imports +3.6%, fourth straight m/m rise to highest level since Mar. ’25, driven by an 11.5% gain in imports of other goods.

U.S. Goods Trade Deficit Balloons in May, Largest Since March ’25

260626E.jpg

In June, there's a slight divergence in the performance of industry climate and service sector climate, although broadly the two sectors have seen their composite indexes moving in more or less the same direction. Since 2024, the industry survey has moved up slightly after falling faster than the services gauge. The services survey has been locked in a slow trend of deterioration, largely since it reached a peak in 2021 in the wake of COVID.

The industry climate gauge has a 30.8 percentile standing, but the recent production trend, while declining, logs a more substantial 42.8 percentile standing. Contributing survey members find their own industry ‘likely trend’ much weaker, at a 21.2 percentile standing. Demand overall, however, has standings above the 50th percentile, putting overall and foreign orders & demand each above their respective medians for this period of ranking back to 2001. Inventories have a strong 81-percentile ranking. Prices are extremely strong, with 87-percentile and 86-percentile standings for respondents for their personal industry trend for prices as well as for the overarching manufacturing sector estimate of prices. Higher prices seem to be the one thing that everyone can agree on by a large margin.

260626.jpg

As for services, the service climate index improved slightly to 93.4 in June from 92.6 in May. The three-month moving average was weaker in June than in May as well; the 12-month moving average has been stuck at its current level for a number of months. The outlook in June improved slightly to a reading of -12 from -15 in May, but the outlook ranking is still a weak 26.8 percentile standing. The three-month expectations and observations of past sales trends haven't changed much in the last two months, but there has been a slight improvement for sales expectations. However, both sales metrics have low 20th percentile standings. Sales prices have deteriorated slightly in June compared to May for both the observed and the expected trends, but prices have standings above their 50th percentiles, logging above-median performance. Employment over the last three months has weakened noticeably, and expected employment is weaker by a small amount.

In terms of rankings, all of the sector rankings are below the 50th percentile on all of these observations, including the climate headline except for sales prices where both the past three-month observed trend and the expected trend have readings above their respective 50th percentiles, indicating past and expected price pressures in excess of normal.

260626 2.jpg

**Assessment**
On balance, the readings for the French industry, manufacturing sector and services are not encouraging. In addition, concerns about prices linger. The services sector, those concerns seem moderate compared to the concerns in manufacturing.

The hot war continues between Ukraine and Russia, while in the Middle East there was talk of some improvement and a potential peace deal between the United States and Iran, but every time there is some talk of a breakthrough, there appears to be a breakdown. In the most recent development, Iran has asserted its right to control traffic through the Strait of Hormuz, and it's not clear how that demand would ever be consistent with the U.S. allowing a ceasefire. It appears that Iran may have traded its irreconcilable demand for nuclear weapons for a more pragmatic and real-world argument—that it will control the traffic through the Strait of Hormuz simply because it can—and it still is doing exactly that, even after all the destruction it suffered.

Stopping Iran from controlling the Strait would take a commitment to restart the war. All this makes me personally more pessimistic. I think Iran sees the need for Trump to cut a deal and stop the war before the U.S. mid-term elections, and it is pressing that need to its advantage. Trading its nuclear ambitions for real world control of the Strait would elevate Iran’s power from being dangerous but ethereal to a real world event with constant consequences.

France

French Industry and Services Confidence Diverge in June

Andrew Cates

**Equity Momentum and Global Surprises — Still Moving Together**
One of the more telling features of global equity markets in 2026 has been the persistence of the correlation between non-US equity momentum and global growth and inflation surprise indices. Equity markets outside the United States have generally prospered when economic data have beaten consensus expectations and when inflation surprises have been negative  — a combination that has historically been associated with stronger corporate earnings and a more benign policy backdrop in economies other than the US. That correlation has held reasonably well through the turbulence of the past few months, even as the Middle East conflict introduced significant noise into both the economic data and the financial market signal. What the chart reveals this week is a picture of moderate but not alarming deterioration: global growth surprises have softened at the margin, consistent with the energy cost headwinds that have weighed on European and Asian activity, but the relationship between equity momentum and the broader data pulse remains intact. It is a signal that market participants continue to track economic fundamentals rather than purely geopolitical newsflow — a modestly reassuring sign that the underlying framework for assessing the global cycle has not broken down.

260625Z1.jpg

**The Fed Decouples: Why Oil and US Two-Year Yields Have Parted Ways**
For much of 2026, oil prices and US two-year Treasury yields moved in close alignment. The logic was straightforward: higher oil prices raised inflation expectations, which in turn pushed market participants to anticipate a more hawkish Federal Reserve, lifting short-dated yields in the process. That relationship held with notable consistency through the March escalation and the months that followed, as energy market shocks and monetary policy expectations fed off each other. What this week’s chart captures is a striking breakdown in that correlation. As oil prices have fallen on the back of the US-Iran memorandum of understanding and the associated unwinding of the geopolitical risk premium, US two-year yields have not followed them lower. The reason is last week’s Federal Reserve meeting. Under new chair Kevin Warsh, the Fed delivered a hawkish dot plot that shifted the median year-end projection to a hike, making clear that the easing cycle previously priced by some market participants is no longer the central scenario. The message is important: the deflationary impulse from lower oil prices is being offset — at least in the Fed’s framing — by persistent underlying inflation pressures and a commitment to keeping policy tight.

260625Z2.jpg

**Flash PMIs Signal Easing Supply Chain Stress and Softer Price Pressures**
June’s flash PMI surveys, released this week across the major advanced economies, provide a timely read on how the global manufacturing and services sectors are absorbing the shifting macro backdrop. Two findings stand out. First, supplier delivery times have improved (or not lengthened as much as they had in the prior two months). This finding coheres naturally with the broader narrative: lower oil prices reduce transport and energy input costs, while the resumption of Strait of Hormuz shipping flows — examined in more detail in chart 4 — is beginning to reduce the freight disruption and re-routing costs that had been building since the conflict escalated. Second, output price inflation in manufacturing has softened, suggesting that some of the pipeline pressure from earlier energy cost spikes is beginning to fade.

260625Z3.jpg

**Hormuz Traffic and Oil: A Coherent Story of Tentative Normalisation**
The recent US-Iran memorandum of understanding to work towards a final deal, though not without subsequent flare-ups, has already brought relief to markets, most visibly in crude oil prices. This should go a long way towards unwinding the inflation-related concerns that previously elevated oil prices had stoked. While the pullback has owed much to anticipation of the glut of pent-up supply expected to follow, certain trackers of shipping volume through the Strait of Hormuz, such as the IMF’s, already point to a marked pickup in traffic, even if it remains well below pre-conflict levels. Should this normalisation of shipping flows persist, it would lend continued justification to a corresponding easing in oil prices, energy-related inflation and, by extension, headline inflation — a welcome development for central banks grappling with the delicate balancing act of reining in price pressures without dampening growth too sharply.

260625Z4.jpg

**South Korea’s Trade Data Flag a Modest Softening in Global Demand**
South Korea’s trade data serve as one of the global economy’s most useful early warning systems. As one of the world’s most open economies, with exports spanning semiconductors, petrochemicals, steel, automobiles and consumer electronics, South Korea’s monthly trade figures provide a timely and broad-based read on the state of global demand. This week’s data show a slightly softer picture than the strong prints that characterised much of the first quarter. Headline export growth has moderated at the margin, and crucially, semiconductor exports — which had been the most dynamic component of the trade data, propelled by AI-related chip demand — have also come in a touch below the exceptional run rates seen earlier in the year. This is not, in itself, alarming: some moderation from peak rates was always to be expected, and the semiconductor cycle remains structurally supported by the scale of AI infrastructure investment globally.

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**A Super El Niño on the Horizon — The Next Inflation Risk**
With that said, while one driver of price pressures seems to be ebbing for now — albeit not without the risk of future flare-ups — another potential inflationary risk looms on the horizon. The chart illustrates the transmission mechanism. It plots Thailand’s milled rice production (left axis) against Australia’s Southern Oscillation Index (right axis), a well-established barometer of El Niño and La Niña conditions. The convention is straightforward: SOI readings persistently above +8 indicate La Niña, associated with above-average rainfall across Southeast Asia and broadly supportive crop conditions; readings persistently below -8 signal El Niño, which brings drought stress and reduced water availability across the region. The historical relationship is striking. The sharp negative SOI troughs around 2002–03, 2009–10 and most dramatically around 2015 all coincide with visible falls in Thai milled rice output. The severe El Niño of 2014–16 produced both the deepest SOI trough in the series and the sharpest single drop in rice production, to below 24,000 thousand tonnes. As meteorological authorities have been warning for some time, the world appears to be facing an imminent Super El Niño event, with the SOI already drifting back towards negative territory in recent months. Were a significant El Niño to materialise in the second half of this year, the implications for Thai rice output — and by extension for Asian food price inflation — could be substantial. Central bankers, in other words, may find themselves having to wrestle with a new inflationary impulse just as they had begun to hope the worst was behind them.

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The mood in global financial markets this week is more settled, though “settled” should not be confused with resolved. The US-Iran memorandum of understanding, signed last week, has continued to do its work: oil prices have fallen further, Strait of Hormuz shipping traffic has picked up measurably, and the risk premium that had been embedded in energy markets since the conflict escalated in March is now visibly unwinding. That is a material development for the inflation outlook, and central bankers will be watching carefully. Yet the picture is not without its complications. Technology stocks — the most conspicuous beneficiary of the prevailing low-rate, high-growth narrative — have been subject to renewed jitters this week, as investors grow more attentive to stretched valuations and the implications of a Federal Reserve that, under new chair Kevin Warsh, is no longer signalling the easing cycle previously priced into markets. Against this backdrop, this week’s charts draw on the latest data to assess where the global economic cycle stands. Equity momentum outside the United States has tracked closely with global growth and inflation surprises, a correlation that tells us something important about how activity is being perceived (chart 1). Meanwhile, the breakdown of the previously tight relationship between oil prices and US two-year yields is arguably one of the more telling market signals of recent weeks (chart 2). June’s flash PMI surveys point to easing supply chain stress and softer output price inflation in manufacturing — a finding that chimes naturally with lower crude prices and the resumption of Hormuz flows (chart 3). The Strait of Hormuz itself deserves a closer look: traffic data and the mechanics of the oil price pullback are telling a coherent story that supports the PMI picture (chart 4). South Korea’s trade data, including semiconductors, offer a slightly softer read on global demand momentum at the margin (chart 5). And looming on the horizon, one new risk is drawing the attention of meteorological authorities: a Super El Niño event whose probability has been rising, with potentially significant implications for food commodity prices and Asian agriculture (chart 6).

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Charts of the Week: Calmer Waters, New Currents

Michael J. Moran

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The price index for personal consumption expenditures rose 0.4% in May, although the measure almost rounded up to 0.5% (0.4498%). May marked the sixth consecutive month with headline prices increasing 0.3% or more. This series of changes has pulled the year-over-year inflation rate to 4.1%, up from 2.3% just over one year ago (April 2025). Energy prices, of course, have been the most important factor behind the acceleration in inflation, and they remained an issue in May, increasing 4.0% after advances of 3.9% and 11.6% in the prior two months. Food prices have moved erratically in the past year, with jumps and lulls leaving an average monthly increase of 0.2%. The noise was evident in recent months, with food prices increasing only 0.1% in May after a jump of 0.5% in April.

Core prices also have contributed to the pickup in inflation. After averaging monthly increases of 0.24% during 2025, core prices have increased at an average rate of 0.34% so far this year. The year-over-year increase in core inflation totaled 3.4% in May, up from a recent low of 2.6% in April of last year. Both the headline and core inflation rates are uncomfortably above the Federal Reserve’s target of 2.0%.

Total personal income rose briskly in May (0.7%). A surge in farm income played an important role (up 125% month-to-month, most likely reflecting government support payments), but nominal results also were firm elsewhere (up 0.5% ex farm income). Inflation reduced the purchasing power of this income gain, but aggregate income still advanced slightly in real terms (0.2%).

Given the recent surge in energy-driven inflation, May marked only the second monthly increase in real income so far this year. Tight budgets have dampened consumer spending, but individuals have not pulled to the sidelines. Real consumption expenditures rose 0.5% (annual rate) in the first quarter, and results for April and May suggest that real PCE is on track to increase 1.5% to 2.0% in the second quarter.

Households have managed to remain moderately active in their spending by limiting their saving. The saving rate has drifted lower since early 2024 moving to 3.0% in May (chart, below right). The erosion in saving perhaps seems reckless, but some of the reduction could be a response to the strength in the equity market, where wealth gains have possibly limited the incentive to save. Also, larger-than-normal tax refunds this year because of tax cuts in the One Big Beautiful Budget Act have allowed many households to spend actively despite modest increases in real income.

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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- Energy prices rose sharply for the third consecutive month; core prices were unsettling as well.
- A jump in nominal income translated to a modest advance in real terms, allowing consumers to remain reasonably active.

Personal Income, Consumption, and Prices in May

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New orders for durable goods fell 4.5% m/m in May, the first monthly fall in three months, following an upwardly revised 8.5% gain in April (+7.9% initially reported on May 28) and a 1.3% increase in March (unrevised), according to today’s advance report by the U.S. Census Bureau. The Action Economics Forecast Survey had expected a 4.4% m/m May decrease. The year-on-year rate decelerated to -3.5% in May from +17.7% in April (+20.0% in May 2025), marking the first negative reading since December 2024 (-4.5%). Excluding transportation, durable goods orders rose 1.3% (10.2% y/y) in May, the 13th consecutive m/m rise, after a 1.4% increase in April. Meanwhile, durable goods orders excluding defense dropped 4.6% (-5.0% y/y), down for the third time in four months, following an 8.4% April rebound.

The m/m fall in May durable goods orders was driven by a 51.8% m/m plunge in orders for nondefense aircraft & parts, following a 167.4% surge in April and a 23.0% slump in March. Orders for defense aircraft & parts rose 7.9% (63.5% y/y), the fourth successive m/m increase, after gains of 2.5% in April and 23.7% in March. Orders excluding aircraft climbed 1.0% (9.8% y/y), the six straight m/m rise and the 10th in 11 months, after a 1.3% April increase.

Durable goods orders for transportation dropped 14.0% (-22.1% y/y) in May, the first m/m decline since February, following a 22.4% gain in April. In addition to May’s m/m plunge in nondefense aircraft orders and increase in defense aircraft orders, motor vehicles & parts orders rose 1.1% (12.4% y/y), the sixth straight m/m rise, after a 0.7% April increase. Orders for primary metals advanced 3.0% (15.9% y/y), the largest of six successive m/m gains, after a 2.6% April rise. Machinery orders climbed 1.9% (14.0% y/y), up for the 13th straight month, on top of a 1.3% April rise. Orders for fabricated metal products grew 1.5% (11.2% y/y), the third m/m increase in four months, following a 4.1% April gain. Orders for all other durable goods rose 0.8% (3.2% y/y), the strongest of nine consecutive m/m increases, after a 0.1% April uptick. Orders for computers & electronic products rebounded 0.3% (13.3% y/y), the eighth m/m gain in nine months, following a 0.4% April decrease. Orders for electrical equipment, appliances & components recovered 0.3% (5.8% y/y), the second increase in three months, after a 0.2% April decline.

Capital goods orders fell 13.6% (-21.1% y/y) in May, the first m/m fall in three months and the deepest since June 2025, following a 22.2% jump in April. Nondefense capital goods orders dropped 15.7% (-26.4% y/y), the fifth m/m decrease in six months, after a 24.9% April rebound. Core capital goods orders (i.e., nondefense capital goods orders excluding aircraft) rose 1.6% (10.5% y/y), the third m/m gain in four months, reversing a 0.7% April decline. Defense capital goods orders slid 3.4% (+14.4% y/y), the first m/m slide since January, after a 10.4% April gain. Notably, core capital goods shipments (core capex shipments)—a reliable coincident indicator of business spending on equipment in the national accounts—rose 0.3% (7.6% y/y), the eighth m/m rise in nine months, after a 0.5% April increase.

Shipments of all manufactured goods climbed 1.6% (8.9% y/y) in May following a 1.3% gain in April. Durable goods shipments rose 1.0% (8.9% y/y) after a 0.7% April increase. Nondurable goods shipments advanced 2.2% (9.0% y/y), building on a 1.9% April gain. All three series posted the sixth consecutive m/m increase.

Unfilled orders of durable goods rose 0.6% (8.5% y/y) in May, the 10th straight m/m rise, after a 1.8% gain in April. Excluding transportation, unfilled orders increased 0.9% (4.3% y/y), also up for the 10th consecutive month, following a 0.7% April rise.

Manufacturing inventories edged up 0.2% (1.9% y/y) in May, the seventh successive m/m gain, after a 0.3% rise in April. Durable goods inventories grew 0.2% (2.1% y/y), the eighth straight m/m increase, after rising 0.3% in April and March. Nondurable goods inventories, up for the fourth consecutive month, rose 0.3% (1.6% y/y), matching April's pace.

Manufacturers’ orders and shipments of durable and nondurable goods, along with unfilled orders and inventories, are compiled by the U.S. Census Bureau. They are available in Haver’s **USECON** database. The Action Economics forecast data are in the **AS1REPNA** database.

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- May headline orders -4.5% m/m, first fall in three mths.; -3.5% y/y, first negative reading since Dec. ’24.
- Nondefense aircraft & parts -51.8% m/m vs. April’s +167.4%.
- Transportation orders -14.0%, first m/m drop since Feb.; orders ex transp. +1.3%, 13th straight m/m rise.
- Core capital goods shipments +0.3%, eighth gain in nine mths., pointing to a moderate contribution to Q2’26 GDP from business equipt. spending.
- Durable goods shipments +1.0%; unfilled orders +0.6%; inventories +0.2%.

Economy in Brief

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