Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071115e.jpg" width="353">
Initial claims for unemployment insurance jumped 20,000 last week to 339,000 from 319,000 during the week prior. The latest was the highest level in four weeks and the prior week&#39;s figure was upwardly revised. A claims level of 320,000 had been expected.
The four week moving average of initial claims was stable at 330,000 (4.3% y/y).There were no special factors indicated as having influenced the figures.
A claims level below 400,000 typically has been associated with growth in nonfarm payrolls. During the last six years there has been a (negative) 78% correlation between the level of initial claims and the m/m change in nonfarm payroll employment.
Continuing claims for unemployment insurance fell 7,000 after a slight decline during the prior week which was revised up slightly.
The continuing claims numbers lag the initial claims figures by one week.
The insured rate of unemployment was again stable at 1.9%.
By state and versus last week, large increases in claims were logged in California, New Jersey, South Carolina, Illinois, Georgia, North Carolina and Michigan. The construction industry and the manufacturing industry were two of the most sighted for layoffs.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">11/10/07 </th>
<th scope="col">11/03/07 </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>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;339</td>
<td>319</td>
<td>7.6%</td>
<td>313</td>
<td>331</td>
<td>343</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,568</td>
<td>5.2%</td>
<td>2,459</td>
<td>2,662</td>
<td>2,924</td>
</tr>
</tbody>
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Initial claims for unemployment insurance jumped 20,000 last week to 339,000 from 319,000 during the week prior. The latest was the highest level in four weeks and the prior week's figure was upwardly revised. A claims level of [...]

U.S. Initial Unemployment Insurance Claims Jump

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071115a.jpg" width="353">
The consumer price index (CPI-U) rose an expected 0.3% last month and matched the prior month&#39;s swift increase. Rising to 3.5%, the y/y rise also was the quickest in just over one year.
Core consumer price inflation held stable at an expected 0.2% for the sixth month in the last seven. The y/y increase of 2.1% also was stable although the change over the last three months dipped to 2.1% (AR) from 2.5% where it has been since July.
Core goods prices dipped just slightly for the third straight month as apparel prices showed no change (-1.2% y/y). New &amp; used motor vehicle prices also fell for the second straight month (-1.1% y/y) and prices of household furnishings &amp; operation fell for the sixth month in the last seven (-0.9% y/y).Tobacco prices provided lift to the core goods price measure with a 0.2% (7.6% y/y) rise.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071115b.jpg" width="353">
Core services prices rose 0.2% (3.2% y/y) but the gains have been decelerating since June, mostly because of slower gains in shelter prices. They rose 0.1% (3.3% y/y) but the three month change fell to 2.4%, half the rate of increase a year ago. The owners equivalent rent of primary residence, a measure not equivalent to other house price measures, rose 0.2% (2.8% y/y). Over the last three months, however, most of the deceleration in shelter prices has been due to prices for lodging away from home. Public transportation prices rose an accelerated 1.2% (2.6% y/y) while medical care services prices also rose an accelerated 0.6% (5.9% y/y). Education service prices rose 0.8% (5.3% y/y) but communication prices fell slightly (-0.4% y/y).
Food &amp; beverage prices again increased 0.3% (4.4% y/y). That y/y increase is double the rate of last December. Prices for fruits &amp; vegetable rose 0.7% (0.8% y/y) but prices for meats, poultry &amp; fish rose 0.2% (5.6% y/y). Prices of dairy products rose a diminished 0.2% (2.8% y/y) after four straight months of double digit gain.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071115c.jpg" width="353">
Energy prices were firm last month. The 1.4% gain was led by a 1.3% (5.0% y/y) rise in natural gas &amp; electricity prices. Gasoline prices also jumped 1.4% (2.4% y/y) but the weekly data indicates a 9.2% m/m gain for November.
The chained CPI, which adjusts for shifts in the mix of consumer purchases rose 0.2% (3.0% y/y) but the core measure rose 0.2%, 1.8% y/y.
What&#39;s Really Happening in Housing Markets from the Federal Reserve Bank of Cleveland is available <a href="http://www.clevelandfed.org/research/Commentary/2007/07.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a> </th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Aug</th>
<th scope="col">Y/Y&nbsp;</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&nbsp;</td>
<td>0.3%</td>
<td>0.3%</td>
<td>-0.1%</td>
<td>3.5%&nbsp;</td>
<td>3.2%</td>
<td>3.4%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Total less Food &amp; Energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.1%&nbsp;</td>
<td>2.5%</td>
<td>2.2%</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Goods less Food &amp; Energy</td>
<td>-0.0%</td>
<td>-0.0%</td>
<td>-0.0%</td>
<td>-0.6%&nbsp;</td>
<td>0.2%</td>
<td>0.5%</td>
<td>-0.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.2%</td>
<td>0.3%</td>
<td>0.2%</td>
<td>3.2%&nbsp;</td>
<td>3.4%</td>
<td>2.8%</td>
<td>2.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Energy</td>
<td>1.4%</td>
<td>0.3%</td>
<td>-3.2%</td>
<td>14.5%&nbsp;</td>
<td>11.1%</td>
<td>16.9%</td>
<td>10.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food &amp; Beverages</td>
<td>0.3%</td>
<td>0.5%</td>
<td>0.4%</td>
<td>4.4%&nbsp;</td>
<td>2.3%</td>
<td>2.4%</td>
<td>3.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td></td>
<td></td>
<td>&nbsp;</td>
<td>&nbsp;&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a>&nbsp;</td>
<td>0.2%</td>
<td>0.3%</td>
<td>-0.1%</td>
<td>3.0%</td>
<td>2.8%</td>
<td>2.9%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy&nbsp;</td>
<td>0.3%</td>
<td>0.3%</td>
<td>0.2%</td>
<td>1.8%</td>
<td>2.3%</td>
<td>1.9%</td>
<td>1.7%</td>
</tr>
</tbody>
</table>


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The consumer price index (CPI-U) rose an expected 0.3% last month and matched the prior month's swift increase. Rising to 3.5%, the y/y rise also was the quickest in just over one year. Core consumer price inflation held stable at an [...]

U.S. CPI Rise of 0.3% As-expected, 0.2% Core Also In Line

Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071114h.jpg" width="353">
This past spring, as disruptions in the residential mortgage market became more severe, the Federal Reserve&#39;s Division of Monetary Affairs revised some of the relevant questions on its quarterly Senior Loan Officer Opinion Survey. Rather than inquiring about mortgage demand and lending policies in general, they broke the category down into three, &quot;prime&quot;, &quot;subprime&quot; and &quot;nontraditional&quot;. While this modification is more descriptive of banks&#39; current situations, it gave no basis for comparison of current practice with previous periods.
So last week, following the release of the Q4 survey data, a number of Haver clients called the Client Hotline, asking if there wasn&#39;t something we could do with the information. Carol Stone here at Haver devised a method for re-combining the three new questions into an overall mortgage item.
On the lending policy aspect, banks report whether they have &quot;tightened&quot; lending standards &quot;considerably&quot; or &quot;somewhat&quot; or &quot;eased considerably&quot; or &quot;somewhat&quot; or left their lending policy &quot;basically unchanged&quot;. We simply added the responses together for each loan type and took that total as a percentage of the total responses. This ignores the response &quot;do not offer&quot; for each one, so the answers we&#39;ve used cover only banks that are active lenders in each category.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071114i.jpg" width="353">
The results show a dramatic policy shift. Through nearly all of 2006, banks were easing their lending approval criteria, at least in a modest way. They switched toward tightening in Q4 and then moved much more aggressively in the new year. The old &quot;total&quot; mortgage series shows a net tightening of 16.4% in the January survey; the Haver calculations show that doubling by April to 32.7% and reaching 50% in the latest poll. The actual measure here is a &quot;net&quot;, that is, those tightening less those easing, but in the last three quarters, no one has eased lending standards. So the latest responses show 50% tightening and 50% &quot;basically unchanged&quot;. In the table below, we show the original Federal Reserve series in regular typeface, and the Haver figures in italics.
Demand for home mortgages -- at least as reported by the responding banks -- is weakening, although the recent performance here is no worse than last year. In fact, Q3 and Q4 of 2006 show the biggest negatives, -58.5% and -60.4%, respectively. During 2007, the weighted total of the new series moderated during the spring and early summer, but the latest survey shows renewed erosion to -48.5%. These demand figures reflect not only overall consumer demand for home purchase and/or other mortgage credit, but also the competitive mix of lending institutions. The moderation of banks&#39; demand experience during part of this year could indicate a relative turn toward banks as mortgage companies and others pulled back more severely from the market.
We were cautioned by Federal Reserve analysts about making these combination series, and we, in turn, need to pass that caution to you as you use them. These are rough guides to the direction and degree of changes in bank mortgage lending standards and loan demand. But they cannot be numerically precise. The reason is that the three types of loans, prime, subprime and nontraditional, are not completely separate from each other. Prime loans include some nontraditional loans, as do subprime loans. Other nontraditional loans are classified by the lenders as a distinct category, neither prime nor subprime. So there is an indeterminate amount of double-counting in our simple summation of the total survey responses. Nonetheless, the resulting series look like what we&#39;d expect: greatly tightening lending policies and weakening loan demand. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Senior Loan Officers Survey</th>
<th scope="col">Oct 2007</th>
<th scope="col">July 2007</th>
<th scope="col">Apr 2007</th>
<th scope="col">Jan 2007</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 Mortgages: Haver Series: Net Tightening</td>
<td>50.0</td>
<td>30.8</td>
<td>32.7</td>
<td>16.4</td>
<td>-4.2</td>
<td>-3.4</td>
<td>-3.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Prime</td>
<td>40.8</td>
<td>14.3</td>
<td>15.1</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nontraditional</td>
<td>60.0</td>
<td>40.5</td>
<td>45.5</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Subprime</td>
<td>55.5</td>
<td>56.3</td>
<td>56.3</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Haver Mortgage Series: &nbsp; Net Demand</td>
<td>-48.5</td>
<td>-19.4</td>
<td>-17.7</td>
<td>-37.0</td>
<td>-46.5</td>
<td>-11.9</td>
<td>-19.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Prime</td>
<td>-51.0</td>
<td>-10.0</td>
<td>-18.9</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nontraditional</td>
<td>-45.0</td>
<td>-21.3</td>
<td>-15.9</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Subprime</td>
<td>-50.0</td>
<td>-43.8</td>
<td>-18.8</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
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This past spring, as disruptions in the residential mortgage market became more severe, the Federal Reserve's Division of Monetary Affairs revised some of the relevant questions on its quarterly Senior Loan Officer Opinion Survey. [...]

Fed's Loan Officer Survey Shows Drastic Tightening of Mortgage Lending, Weakening of Banks' Mortgage Demand

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071115d.jpg" align="left" border="0" height="265" width="353">
European car registrations jumped by 11.6% Y/Y following a
drop of 8.2% in September. Despite gains in two of the past three
months, sales are still lower year to date in 2007, by 0.4% compared to
sales last year. Germany lags the most as its year-to-date (YTD) sales
are lower by 7.7% through October. Spain is also lagging but with sales
off by 1.6% YTD. Italy is up strongly, by 6.9%, on a year-to-date
basis- surprising for a country where growth has been so weak. The UK
and France have stronger year-to-date numbers of 1.4% and 0.9%
respectively. Auto sales are mostly weak on the back of the German VAT
tax hike that shoved sales into late 2006 to avoid the tax. Apart from
that, European sales are doing ok. Excluding Germany European auto
sales are up by 2.6% over last year on a YTD basis. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="10" scope="col">Ezone Car Registrations </th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo %</td>
<td colspan="2">3-Mo Trend From</td>
<td colspan="2">6-Mo Trend From</td>
<td colspan="2">12-Mo Trend From</td>
</tr>
<tr class="grey3">
<td class="firstcol">All Seas Adj</td>
<td>Oct 07</td>
<td>Sep 07</td>
<td>Aug 07</td>
<td>Oct 07</td>
<td>Sep 07</td>
<td>Oct 07</td>
<td>Sep 07</td>
<td>Oct 07</td>
<td>Sep 07</td>
</tr>
<tr class="grey2">
<td class="firstcol">Ezone Registrations</td>
<td>11.6%</td>
<td>-8.2%</td>
<td>3.8%</td>
<td>28.0%</td>
<td>-17.5%</td>
<td>32.2%</td>
<td>-10.9%</td>
<td>4.2%</td>
<td>-4.1%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Germany:</td>
<td>6.2%</td>
<td>-7.4%</td>
<td>6.3%</td>
<td>19.5%</td>
<td>5.4%</td>
<td>31.6%</td>
<td>-5.5%</td>
<td>-4.1%</td>
<td>-11.1%</td>
</tr>
<tr class="grey2">
<td class="firstcol">France (WDA)</td>
<td>-0.2%</td>
<td>3.7%</td>
<td>-4.1%</td>
<td>-2.9%</td>
<td>12.0%</td>
<td>11.7%</td>
<td>7.5%</td>
<td>4.6%</td>
<td>7.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Italy</td>
<td>11.5%</td>
<td>-10.6%</td>
<td>10.5%</td>
<td>47.2%</td>
<td>-39.0%</td>
<td>10.8%</td>
<td>-12.4%</td>
<td>8.5%</td>
<td>-0.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Spain</td>
<td>11.4%</td>
<td>-9.5%</td>
<td>5.3%</td>
<td>27.3%</td>
<td>-25.0%</td>
<td>28.1%</td>
<td>-25.8%</td>
<td>3.8%</td>
<td>-7.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">UK</td>
<td>7.1%</td>
<td>22.0%</td>
<td>-20.0%</td>
<td>19.6%</td>
<td>-0.3%</td>
<td>11.6%</td>
<td>-8.2%</td>
<td>7.2%</td>
<td>-0.6%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Base Month of Calc</td>
<td>Sep-07</td>
<td>Aug-07</td>
<td>Jul-07</td>
<td>Jul-07</td>
<td>Jun-07</td>
<td>Apr-07</td>
<td>Mar-07</td>
<td>Oct-06</td>
<td>Sep-06</td>
</tr>
</tbody>
</table>
</body></html>

European car registrations jumped by 11.6% Y/Y following a drop of 8.2% in September. Despite gains in two of the past three months, sales are still lower year to date in 2007, by 0.4% compared to sales last year. Germany lags the [...]

European Car Registrations Put in Another Good Month

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071114f.jpg" width="353">
The National Association of Realtors reported that for September, level of pending home sales held steady at the August level. That level was, however, still down 20.4% from one year earlier and 24.4% year to date.
The latest monthly figure is about one third below the peak average level during 2005. The data date back only to 2001.
These figures are analogous to the new home sales data from the Commerce Dept. in that they measure home sales when the sales contract is signed, not at the time the sale is closed.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071114g.jpg" width="353">
In further confirmation of the slow rate of home sales, the Realtors indicated in an earlier report that the number of homes on the market and available for sale rose September to a level 16.3% above the year earlier level.
In the Western part of the nation, sales were about unchanged m/m but remained down 25.6% from one year earlier.
In the Northeast, pending home sales are down 23.1% y/y. In the Midwest sales are down 14.4% and in the South sales are down 19.7%.
The pending home sales data are available in Haver&#39;s PREALTOR database and the number of homes on the market are in the REALTOR database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Pending Home Sales (2001=100)&nbsp;</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total</td>
<td>85.7</td>
<td>85.5</td>
<td>-20.4%&nbsp;</td>
<td>112.1&nbsp;</td>
<td>124.2</td>
<td>120.5&nbsp;</td>
</tr>
</tbody>
</table>
</body>
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The National Association of Realtors reported that for September, level of pending home sales held steady at the August level. That level was, however, still down 20.4% from one year earlier and 24.4% year to date. The latest monthly [...]

U.S. Pending Home Sales Stabilize

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071114d.jpg" width="353">
U.S. retail sales last month rose 0.2% after the 0.7% September increase which revised up slightly. The gain matched expectations and the prior month&#39;s 0.7% was revised up slightly.
Excluding autos, sales rose 0.2% and the prior month&#39;s gain of 0.4% was revised down slightly to 0.3%. A 0.3% October increase had been expected.
Nonauto retail sales less gasoline ticked up just 0.1% (3.9% y/y) after an unrevised 0.2% rise in September. The 0.1% decline during August was revised down to a 0.5% drop.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071114e.jpg" width="353">
Sales of discretionary items were generally weak last month. Furniture, home furnishings &amp; appliance stores sales fell 0.4% (0.8% y/y) and the prior month&#39;s gain was revised down to a 0.8% decline. Sales have declined in four of the last five months. Sales at general merchandise stores fell 0.1% (+3.6 y/y). Apparel store sales rose 0.1% (4.4% y/y) but the prior month&#39;s decline was revised up to a 0.1% increase.
Building material sales rose a firm 0.6% (1.3% y/y) though the prior month&#39;s gain of 0.8% was revised down to a 0.4% decline.
Sales of nonstore retailers (internet &amp; catalogue) fell 1.0% (5.9% y/y) after a little revised 0.9% September increase.
Motor vehicle &amp; parts purchases rose 0.2% (5.0% y/y) but unit sales of light vehicles fell 1.1% m/m in October.
Gasoline service station sales rose 0.8% after the 1.8% September gain. Higher gas prices should lift this month&#39;s increase.
The recent Treasury Dept. study of Income Mobility is available <a href="http://www.treasury.gov/press/releases/hp673.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">&nbsp;</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>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM">Retail Sales &amp; Food Services</a></td>
<td>0.2%</td>
<td>0.7%</td>
<td>5.2%</td>
<td>6.2%</td>
<td>6.6%</td>
<td>6.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>0.2%</td>
<td>0.3%</td>
<td>5.2%</td>
<td>7.3%</td>
<td>7.6%</td>
<td>7.1%</td>
</tr>
</tbody>
</table>


</html>

U.S. retail sales last month rose 0.2% after the 0.7% September increase which revised up slightly. The gain matched expectations and the prior month's 0.7% was revised up slightly. Excluding autos, sales rose 0.2% and the prior [...]

U.S. Retail Sales About As Expected

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071114a.jpg" align="left" border="0" height="265" width="353">
Finished producer prices ticked up just 0.1% during October
following the firm 1.1% rise during September. The gain was the
smallest since June and was slightly less than Consensus expectations
for a 0.3% rise. Nevertheless, it lifted the y/y increase to 6.0% its
strongest in two years.
Core finished goods producer prices were
unchanged last month. It was the first month without an increase in
prices since a slight decline this past March and it was less than the
expected 0.2% increase. Again, it left the y/y gain at 2.5% which was
its strongest in two years. The recent momentum in core producer prices
did, however, fall to its lowest of 1.0% since May.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071114b.jpg" align="right" border="0" height="265" width="353">
Energy prices fell 0.8% (16.1% y/y) as prices for gasoline
fell 0.8% (+32.4% y/y) after the 4.7% September jump. Natural gas
prices also fell 0.5% (+7.7% y/y) but home heating oil prices increased
3.2% (16.2% y/y.
Food prices were again strong and rose 0.8% (7.1% y/y) on the
heels of a 1.5% jump during September. Vegetable prices soared 29.1%
(27.0% y/y) but beef prices fell 2.1% (+1.5% y/y). 
Household appliance prices were firm and rose 0.4% (1.2% y/y)
after two months of 0.2% decline while passenger car
prices jumped 5.7% (0.4% y/y).
Capital equipment prices jumped 1.0% (2.0% y/y) reflecting
strength in most categories. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071114c.jpg" align="left" border="0" height="265" width="353">
Intermediate goods prices ticked up 0.1% and the index
excluding food &amp; energy prices again rose a small 0.1%. Prices
for steel mill products fell 1.8%, the fourth month of sharp decline. 
 

The crude materials PPI rose 2.4% led higher by a 3.7% (4.1%
y/y) gain in crude petroleum and a 9.7% (37.6% y/y) rise in natural gas
prices. The core crude materials PPI also was strong and rose 1.4%.
Iron &amp; steel scrap prices again rose 1.4% (29.8% y/y).
Today's speech by Federal Reserve Chairman Ben S.
Bernanke on Federal Reserve Communications can be found <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20071114a.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"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer
Price Index</a></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">Finished Goods</td>
<td>0.1%</td>
<td>1.1%&nbsp;</td>
<td>&nbsp; 6.0%&nbsp;</td>
<td>2.9%</td>
<td>&nbsp;4.9%&nbsp;</td>
<td>3.6%&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.0%</td>
<td>0.1%</td>
<td>&nbsp;2.5%</td>
<td>1.4%</td>
<td>2.4%</td>
<td>1.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>0.1%</td>
<td>0.4%</td>
<td>5.4%</td>
<td>6.4%</td>
<td>&nbsp;8.0%</td>
<td>6.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.1%</td>
<td>0.1%</td>
<td>1.9%</td>
<td>6.0%</td>
<td>&nbsp;5.5%</td>
<td>5.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>2.4%</td>
<td>&nbsp;0.1%&nbsp;</td>
<td>&nbsp;25.6%</td>
<td>1.4%</td>
<td>14.6%</td>
<td>&nbsp;17.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>1.4%</td>
<td>1.6%</td>
<td>&nbsp;18.8%</td>
<td>20.9%</td>
<td>4.9%</td>
<td>&nbsp;26.5%</td>
</tr>
</tbody>
</table>
</body></html>

Finished producer prices ticked up just 0.1% during October following the firm 1.1% rise during September. The gain was the smallest since June and was slightly less than Consensus expectations for a 0.3% rise. Nevertheless, it lifted [...]

U.S. PPI Total & Core Weak

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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250829A1.jpg

250829B1.jpg

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.

250829F1.jpg

250829G1.jpg

**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).

250829C1.jpg

250829D1.jpg

- 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

250829H.jpg

250829I.jpg

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

250829E.jpg

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.

250829.jpg

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.

250828Z1.jpg

**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.

250828Z3.jpg

**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.

250828Z4.jpg

**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.

250828Z5.jpg

**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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U.S. Initial Unemployment Insurance Claims Jump

U.S. CPI Rise of 0.3% As-expected, 0.2% Core Also In Line

U.S. CPI Rise of 0.3% As-expected, 0.2% Core Also In Line

Fed's Loan Officer Survey Shows Drastic Tightening of Mortgage Lending, Weakening of Banks' Mortgage Demand

European Car Registrations Put in Another Good Month

U.S. Pending Home Sales Stabilize

U.S. Retail Sales About As Expected

U.S. PPI Total & Core Weak