Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080829e.jpg" align="left" border="0" height="265" width="353">
This Month - The European Commission&#8217;s monthly indices show
that the area continued to lose ground as economic sentiment slipped
from 88.8 in July to 86.9 in August. All main sector gauges fell in the
month save consumer confidence which advanced one thin point but
remained negative overall and weak in its historic range. 
 

Assessing the levels of the various indicators - The EU
sentiment gauge stands in the 31st percentile of its range in August
2008. The gage for EMU is slightly stronger in its 35.8th percentile.
France did not report on time this month and that often seem to be the
case for France when things are deteriorating. Reporting later does not
make things better. Germany and Italy have overall sentiment gauges
that lie in about the 35th percentile of their respective historic
ranges. Spain is in the bottom 8 percentile of its range. The UK, an EU
member, drags down the average with a heavy weight as its gauge stands
in the bottom 19 percent of its historic range. 
 

Assessing the sectors this month: In August the retail index
fell especially hard, dropping by 4 points. This compares to a three
point drop for the industrial sector. Services backtracked by only one
point, but that sector is the relative weakest in the 13th percentile
of its historic range. Retailing is in the 22nd percentile of its
historic range and consumer confidence with its one-point rise stands
in the 27th percentile of its range. Construction at a deeply negative
-18 is still in the 51st percentile of its historic range while MFG at
a -10 is at the 50th percentile the dead middle of its range. 
 

EMU inflation, the EU Commission survey and more - There is a
lot of concern about inflation in EMU at the moment. The day also saw
the release of the EMU July HICP. That preliminary reading showed
inflation has notched down to 3.8% from 4% - a move in the right
direction but still distant from the 2% ECB ceiling for inflation. In
the EU Commission survey there was some evidence that inflation
expectations were adjusting in a positive direction. For industrial
selling prices, expectations fell by three months to a +17 level and
stand in the 75th percentile of their historic range- still high. For
consumers, expected price trends in the next 12-months broke sharply
lower dropping by 8 points on the month to stand at +22 in the 57th
percentile of their historic range. In construction prices expectations
stood at a +4 down in the month and down sharply from +111 in June but
still held in the 63rd percentile of their range. All in all actual
inflation did edge lower in the month of July and expectations are
moving in the right direction, lower, in August. The ECB can breathe
somewhat of a sigh of relief. The bad inflation news on the day came
form Germany where more first half wage agreements showed signs of
edging over 4%. So it was not a perfect day but it was a good day for
inflation-watchers. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="12" scope="col">EU
Sectors and Country level Overall Sentiment </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">EU</td>
<td>Aug 
08</td>
<td>Jul 
08</td>
<td>Jun 
08</td>
<td>May 
08</td>
<td>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
<td>R-SQ 
w/Overall</td>
</tr>
<tr>
<td class="firstcol">Overall</td>
<td>86.9</td>
<td>88.8</td>
<td>94.5</td>
<td>97.1</td>
<td>31.8</td>
<td>230</td>
<td>116</td>
<td>73</td>
<td>43</td>
<td>101</td>
<td>1.00</td>
</tr>
<tr>
<td class="firstcol">Industrial</td>
<td>-10</td>
<td>-7</td>
<td>-4</td>
<td>-3</td>
<td>50.0</td>
<td>156</td>
<td>7</td>
<td>-27</td>
<td>34</td>
<td>-6</td>
<td>0.86</td>
</tr>
<tr>
<td class="firstcol">Consumer Confidence</td>
<td>-19</td>
<td>-20</td>
<td>-17</td>
<td>-14</td>
<td>27.6</td>
<td>225</td>
<td>2</td>
<td>-27</td>
<td>29</td>
<td>-10</td>
<td>0.83</td>
</tr>
<tr>
<td class="firstcol">Retail</td>
<td>-15</td>
<td>-11</td>
<td>-5</td>
<td>-3</td>
<td>22.2</td>
<td>239</td>
<td>6</td>
<td>-21</td>
<td>27</td>
<td>-5</td>
<td>0.49</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>-18</td>
<td>-17</td>
<td>-14</td>
<td>-11</td>
<td>51.1</td>
<td>157</td>
<td>5</td>
<td>-42</td>
<td>47</td>
<td>-15</td>
<td>0.42</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>-1</td>
<td>0</td>
<td>7</td>
<td>6</td>
<td>13.2</td>
<td>130</td>
<td>32</td>
<td>-6</td>
<td>38</td>
<td>17</td>
<td>0.80</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>% m/m</td>
<td>&nbsp;</td>
<td>Aug 
08</td>
<td colspan="2">Based on Level</td>
<td colspan="4">Level</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">EMU</td>
<td>-0.8%</td>
<td>-5.6%</td>
<td>-2.9%</td>
<td>88.8</td>
<td>35.8</td>
<td>226</td>
<td>117</td>
<td>73</td>
<td>44</td>
<td>101</td>
<td>0.93</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>-2.7%</td>
<td>-4.1%</td>
<td>-1.5%</td>
<td>94.7</td>
<td>37.9</td>
<td>182</td>
<td>121</td>
<td>79</td>
<td>42</td>
<td>101</td>
<td>0.64</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>N/A</td>
<td>-4.6%</td>
<td>-3.0%</td>
<td>N/A</td>
<td>N/A</td>
<td>N/A</td>
<td>N/A</td>
<td>N/A</td>
<td>N/A</td>
<td>N/A</td>
<td>N/A</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>4.8%</td>
<td>-10.1%</td>
<td>-0.1%</td>
<td>89.5</td>
<td>35.7</td>
<td>224</td>
<td>122</td>
<td>71</td>
<td>51</td>
<td>101</td>
<td>0.80</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>-4.3%</td>
<td>1.6%</td>
<td>-7.8%</td>
<td>71.0</td>
<td>8.4</td>
<td>243</td>
<td>118</td>
<td>67</td>
<td>51</td>
<td>100</td>
<td>0.60</td>
</tr>
<tr>
<td class="firstcol">Memo:UK</td>
<td>-6.1%</td>
<td>-7.8%</td>
<td>2.3%</td>
<td>80.3</td>
<td>19.0</td>
<td>235</td>
<td>130</td>
<td>69</td>
<td>61</td>
<td>101</td>
<td>0.42</td>
</tr>
<tr>
<td colspan="5" class="firstcol">Since 1990
except Services (Oct
1996)
247</td>
<td>-Count</td>
<td>Services:</td>
<td>142</td>
<td>-Count</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td colspan="9" class="firstcol">Sentiment is
an index, sector
readings are net balance diffusion measures</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body></html>

This Month - The European Commission’s monthly indices show that the area continued to lose ground as economic sentiment slipped from 88.8 in July to 86.9 in August. All main sector gauges fell in the month save consumer confidence [...]

EMU Indices Continue to Lose Ground

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080829c.jpg" width="353">
The University of Michigan&#39;s reading of consumer sentiment for this month rose 2.9% from July to an index level of 63.0. That was firmer than a 0.8% uptick reported in the mid-month survey. The gain followed a 8.5% increase in July and the level was higher than Consensus expectations for a reading of 62.0. The latest level of sentiment was the highest since March.
During the last ten years there has been a 47% correlation between the level of sentiment and the three-month change in real consumer spending.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080829d.jpg" width="353">
The expectations component of overall sentiment continued firm and rose 8.2% after the 8.7% increase during July. Expectations for business conditions during the next year jumped and expectations for conditions during the next five years rose firmly as well.The expected change in personal finances were unchanged after a strong July increase.
The current conditions index fell 2.9% for the month and reversed much of the improvement during July. The decline was due to a sharp decline in the index of whether now is a good time to buy large household goods. It reversed half of the July gain. The view of current personal finances also fell slightly.
The opinion of government policy, which apparently influences economic expectations, stabilized after a sharp decline in July. Only six percent of respondents thought that a good job was being done by government.
The mean expected rate of inflation during the next twelve months fell further to 5.3%. During the next five years, however, the expected inflation rate rose to 3.9% .
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></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">August</th>
<th scope="col">August&nbsp; (Prelim.)</th>
<th scope="col">July</th>
<th scope="col">Aug. 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>63.0</td>
<td>61.7</td>
<td>61.2</td>
<td>-24.5% </td>
<td>85.6</td>
<td>87.3</td>
<td>88.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>71.0</td>
<td>69.3</td>
<td>73.1</td>
<td>-27.8%</td>
<td>101.2</td>
<td>105.1</td>
<td>105.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>57.9</td>
<td>56.8</td>
<td>53.5</td>
<td>-21.4%</td>
<td>75.6</td>
<td>75.9</td>
<td>77.4</td>
</tr>
</tbody>
</table>
</body>
</html>

The University of Michigan's reading of consumer sentiment for this month rose 2.9% from July to an index level of 63.0. That was firmer than a 0.8% uptick reported in the mid-month survey. The gain followed a 8.5% increase in July [...]

Michigan Consumer Sentiment Improved Further in August

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080829a.jpg" width="353">
Nominal personal income fell 0.7% in July after gains of 0.1% and 1.8% during the prior two months. Those increases were lifted by $90B from the government&#39;s tax rebate checks. The June drop in personal income exceeded Consensus expectations for a 0.2% decline.
Disposable personal income fell 1.1% last month following a 1.9% decline during June and a 5.7% jump during May. Net taxes increased 1.8% last month, due to the absence of rebates, after an 18.7% June jump.
Wage &amp; salary income increased a modest 0.3% (4.1% y/y) after a 0.2% rise during June. These increases left the annualized three-month growth in wages low at 3.2% versus a 5.6% increase during 2007 and a 6.3% 2006 gain. Factory sector wages ticked up 0.1% (1.1% y/y) and three-month growth totaled 2.1%. Wages &amp; salaries in the private service-providing industries increased 0.2% (4.3% y/y) while three-month growth amounted to 2.6% after last year&#39;s gain of 6.4%. Wages in the government sector were firm again and rose 0.4% (5.5% y/y) rise and three-month growth rose to 5.8%.
Interest income jumped 1.1% (-1.7% y/y) and made up the prior month&#39;s decline. Interest income rose 7.9% during all of 2007. Dividend income rose 0.6% (8.2% y/y) for the third consecutive month. That followed a 12.4% rise last year and a 21.7% gain during 2006.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080829b.jpg" width="353">
The PCE chain price index was strong again and rose 0.6%, firm due to higher energy prices. The gain in the core PCE price index also remained firm with a 0.3% increase. That matched Consensus forecasts but three-month growth increased to 2.8%, the firmest growth rate since early 2006. Durable goods prices ticked up 0.1% (-1.0% y/y) for the second month. Last month&#39;s small increase was held back by a 0.2% decline in furniture prices (-4.4% y/y). Prices for nondurable goods, however, were quite firm and they posted 1.2% gain (8.2% y/y). Apparel prices also were firm and they rose 0.1% y/y after the 2.2% rate of deflation reached this past March. Services prices jumped 0.4% (3.8% y/y) led higher by a 4.1% (15.2% y/y) jump in electricity costs.
Personal consumption expenditures ticked up 0.2% after the 0.6% rise during June. Adjusted for price inflation, however, real spending fell another 0.4% after a 0.1% downtick during June. Three-month growth in real spending amounted to a negative 0.7% (AR) with real spending on motor vehicles down at a 25.2% rate. Furniture spending rose at a 6.0% rate during the last three months but spending on clothing fell at a 5.2% rate.
The personal savings rate halved to 1.2% from 2.5% in June and 4.9% in May.
The figures noted above are available in the Haver USECON and in the USNA databases.

<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/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a> (%)</th>
<th scope="col">July</th>
<th scope="col">June</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">Personal Income</td>
<td>-0.7</td>
<td>0.1</td>
<td>4.2</td>
<td>6.1</td>
<td>7.1</td>
<td>5.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Disposable Personal Income</td>
<td>-1.1</td>
<td>-1.9</td>
<td>5.8</td>
<td>5.5</td>
<td>6.4</td>
<td>4.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption</td>
<td>0.2</td>
<td>0.6</td>
<td>5.3</td>
<td>5.5</td>
<td>5.9</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>1.2</td>
<td>2.5</td>
<td>0.3 (July &#39;07)</td>
<td>0.5</td>
<td>0.7</td>
<td>0.3</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>0.6</td>
<td>0.7</td>
<td>4.5</td>
<td>2.6</td>
<td>2.8</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.3</td>
<td>0.3</td>
<td>2.4</td>
<td>2.2</td>
<td>2.3</td>
<td>2.1</td>
</tr>
</tbody>
</table>
</body>
</html>

Nominal personal income fell 0.7% in July after gains of 0.1% and 1.8% during the prior two months. Those increases were lifted by $90B from the government's tax rebate checks. The June drop in personal income exceeded Consensus [...]

U.S. Income Fell Without the Stimulus Checks

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080829a.jpg" align="left" border="0" height="265" width="353">
Nominal personal income fell 0.7% in July
after gains of 0.1% and 1.8% during the prior two months. Those
increases were lifted by $90B from the government's tax rebate checks.
The June drop in personal income exceeded Consensus expectations for a
0.2% decline.
Disposable personal income fell 1.1% last
month following a 1.9% decline during June and a 5.7% jump during May.
Net taxes increased 1.8% last month, due to the absence of rebates,
after an 18.7% June jump.
Wage &amp; salary income increased a modest 0.3% (4.1%
y/y) after a 0.2% rise during June. These increases left the annualized
three-month growth in wages low at 3.2% versus a 5.6% increase during
2007 and a 6.3% 2006 gain. Factory sector wages ticked up 0.1% (1.1%
y/y) and three-month growth totaled 2.1%. Wages &amp; salaries in
the private service-providing industries increased 0.2% (4.3% y/y)
while three-month growth amounted to 2.6% after last year's gain of
6.4%. Wages in the government sector were firm again and rose 0.4%
(5.5% y/y) rise and three-month growth rose to 5.8%.
Interest income jumped 1.1% (-1.7% y/y) and made up the prior
month's decline. Interest income rose 7.9% during all of 2007. Dividend
income rose 0.6% (8.2% y/y) for the third consecutive month. That
followed a 12.4% rise last year and a 21.7% gain during 2006.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080829b.jpg" align="right" border="0" height="265" width="353">
The PCE chain price index was strong
again and rose 0.6%, firm due to higher energy prices. The gain in the core
PCE price index also remained firm with a 0.3% increase. That
matched Consensus forecasts but three-month growth increased to 2.8%,
the firmest growth rate since early 2006. Durable goods prices ticked
up 0.1% (-1.0% y/y) for the second month. Last month's small increase
was held back by a 0.2% decline in furniture prices (-4.4% y/y). Prices
for nondurable goods, however, were quite firm and they posted 1.2%
gain (8.2% y/y). Apparel prices also were firm and they rose 0.1% y/y
after the 2.2% rate of deflation reached this past March. Services
prices jumped 0.4% (3.8% y/y) led higher by a 4.1% (15.2% y/y) jump in
electricity costs.
Personal consumption expenditures ticked up 0.2% after the
0.6% rise during June. Adjusted for price inflation, however, real
spending fell another 0.4% after a 0.1% downtick during June.
Three-month growth in real spending amounted to a negative 0.7% (AR)
with real spending on motor vehicles down at a 25.2% rate. Furniture
spending rose at a 6.0% rate during the last three months but spending
on clothing fell at a 5.2% rate.
The personal savings rate halved to 1.2% from 2.5% in June and
4.9% in May.
The figures noted above are available in the Haver USECON
and in the USNA databases.

<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/@E7/@E711/@E71102/@E71102.HTM">Disposition
of Personal Income</a> (%)</th>
<th scope="col">July</th>
<th scope="col">June</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">Personal Income</td>
<td>-0.7</td>
<td>0.1</td>
<td>4.2</td>
<td>6.1</td>
<td>7.1</td>
<td>5.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Disposable
Personal Income</td>
<td>-1.1</td>
<td>-1.9</td>
<td>5.8</td>
<td>5.5</td>
<td>6.4</td>
<td>4.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption</td>
<td>0.2</td>
<td>0.6</td>
<td>5.3</td>
<td>5.5</td>
<td>5.9</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>1.2</td>
<td>2.5</td>
<td>0.3 (July '07)</td>
<td>0.5</td>
<td>0.7</td>
<td>0.3</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>0.6</td>
<td>0.7</td>
<td>4.5</td>
<td>2.6</td>
<td>2.8</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Less food
&amp; energy</td>
<td>0.3</td>
<td>0.3</td>
<td>2.4</td>
<td>2.2</td>
<td>2.3</td>
<td>2.1</td>
</tr>
</tbody>
</table>
Michigan Consumer Sentiment
Improved Further in August 
by <a href="/comment/Moeller.html">Tom
Moeller</a> August 29, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080829c.jpg" align="left" border="0" height="265" width="353">
The University of Michigan's reading of consumer sentiment for
this month rose 2.9% from July to an index level of 63.0. That was
firmer than a 0.8% uptick reported in the mid-month survey. The gain
followed a 8.5% increase in July and the level was higher than
Consensus expectations for a reading of 62.0. The latest level of
sentiment was the highest since March.
During the last ten years there has been a 47% correlation
between the level of sentiment and the three-month change in real
consumer spending.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080829d.jpg" align="right" border="0" height="265" width="353">
The expectations component of overall sentiment continued firm
and rose 8.2% after the 8.7% increase during July. Expectations for
business conditions during the next year jumped and expectations for
conditions during the next five years rose firmly as well.The expected
change in personal finances were unchanged after a strong July increase.
The current conditions index fell 2.9% for the month and
reversed much of the improvement during July. The decline was due to a
sharp decline in the index of whether now is a good time to buy large
household goods. It reversed half of the July gain. The view of current
personal finances also fell slightly.
The opinion of government policy, which apparently influences
economic expectations, stabilized after a sharp decline in July. Only
six percent of respondents thought that a good job was being done by
government.
The mean expected rate of inflation during the next twelve
months fell further to 5.3%. During the next five years, however, the
expected inflation rate rose to 3.9% .
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'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></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">August</th>
<th scope="col">August&nbsp; (Prelim.)</th>
<th scope="col">July</th>
<th scope="col">Aug. 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>63.0</td>
<td>61.7</td>
<td>61.2</td>
<td>-24.5% </td>
<td>85.6</td>
<td>87.3</td>
<td>88.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>71.0</td>
<td>69.3</td>
<td>73.1</td>
<td>-27.8%</td>
<td>101.2</td>
<td>105.1</td>
<td>105.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>57.9</td>
<td>56.8</td>
<td>53.5</td>
<td>-21.4%</td>
<td>75.6</td>
<td>75.9</td>
<td>77.4</td>
</tr>
</tbody>
</table>
EMU Indices Continue to Lose Ground 
by <a href="/comment/Brusca.html">Robert
Brusca</a> August 29, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080829e.jpg" align="left" border="0" height="265" width="353">
This Month - The European Commission&#8217;s monthly indices show
that the area continued to lose ground as economic sentiment slipped
from 88.8 in July to 86.9 in August. All main sector gauges fell in the
month save consumer confidence which advanced one thin point but
remained negative overall and weak in its historic range. 
 

Assessing the levels of the various indicators - The EU
sentiment gauge stands in the 31st percentile of its range in August
2008. The gage for EMU is slightly stronger in its 35.8th percentile.
France did not report on time this month and that often seem to be the
case for France when things are deteriorating. Reporting later does not
make things better. Germany and Italy have overall sentiment gauges
that lie in about the 35th percentile of their respective historic
ranges. Spain is in the bottom 8 percentile of its range. The UK, an EU
member, drags down the average with a heavy weight as its gauge stands
in the bottom 19 percent of its historic range. 
 

Assessing the sectors this month: In August the retail index
fell especially hard, dropping by 4 points. This compares to a three
point drop for the industrial sector. Services backtracked by only one
point, but that sector is the relative weakest in the 13th percentile
of its historic range. Retailing is in the 22nd percentile of its
historic range and consumer confidence with its one-point rise stands
in the 27th percentile of its range. Construction at a deeply negative
-18 is still in the 51st percentile of its historic range while MFG at
a -10 is at the 50th percentile the dead middle of its range. 
 

EMU inflation, the EU Commission survey and more - There is a
lot of concern about inflation in EMU at the moment. The day also saw
the release of the EMU July HICP. That preliminary reading showed
inflation has notched down to 3.8% from 4% - a move in the right
direction but still distant from the 2% ECB ceiling for inflation. In
the EU Commission survey there was some evidence that inflation
expectations were adjusting in a positive direction. For industrial
selling prices, expectations fell by three months to a +17 level and
stand in the 75th percentile of their historic range- still high. For
consumers, expected price trends in the next 12-months broke sharply
lower dropping by 8 points on the month to stand at +22 in the 57th
percentile of their historic range. In construction prices expectations
stood at a +4 down in the month and down sharply from +111 in June but
still held in the 63rd percentile of their range. All in all actual
inflation did edge lower in the month of July and expectations are
moving in the right direction, lower, in August. The ECB can breathe
somewhat of a sigh of relief. The bad inflation news on the day came
form Germany where more first half wage agreements showed signs of
edging over 4%. So it was not a perfect day but it was a good day for
inflation-watchers. 


<table border="0" cellspacing="0" width="100%"> <colgroup></colgroup>
<thead><tr>
<th colspan="12" scope="col">EU
Sectors and Country level Overall Sentiment </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">EU</td>
<td>Aug 
08</td>
<td>Jul 
08</td>
<td>Jun 
08</td>
<td>May 
08</td>
<td>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
<td>R-SQ 
w/Overall</td>
</tr>
<tr>
<td class="firstcol">Overall</td>
<td>86.9</td>
<td>88.8</td>
<td>94.5</td>
<td>97.1</td>
<td>31.8</td>
<td>230</td>
<td>116</td>
<td>73</td>
<td>43</td>
<td>101</td>
<td>1.00</td>
</tr>
<tr>
<td class="firstcol">Industrial</td>
<td>-10</td>
<td>-7</td>
<td>-4</td>
<td>-3</td>
<td>50.0</td>
<td>156</td>
<td>7</td>
<td>-27</td>
<td>34</td>
<td>-6</td>
<td>0.86</td>
</tr>
<tr>
<td class="firstcol">Consumer Confidence</td>
<td>-19</td>
<td>-20</td>
<td>-17</td>
<td>-14</td>
<td>27.6</td>
<td>225</td>
<td>2</td>
<td>-27</td>
<td>29</td>
<td>-10</td>
<td>0.83</td>
</tr>
<tr>
<td class="firstcol">Retail</td>
<td>-15</td>
<td>-11</td>
<td>-5</td>
<td>-3</td>
<td>22.2</td>
<td>239</td>
<td>6</td>
<td>-21</td>
<td>27</td>
<td>-5</td>
<td>0.49</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>-18</td>
<td>-17</td>
<td>-14</td>
<td>-11</td>
<td>51.1</td>
<td>157</td>
<td>5</td>
<td>-42</td>
<td>47</td>
<td>-15</td>
<td>0.42</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>-1</td>
<td>0</td>
<td>7</td>
<td>6</td>
<td>13.2</td>
<td>130</td>
<td>32</td>
<td>-6</td>
<td>38</td>
<td>17</td>
<td>0.80</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>% m/m</td>
<td>&nbsp;</td>
<td>Aug 
08</td>
<td colspan="2">Based on Level</td>
<td colspan="4">Level</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">EMU</td>
<td>-0.8%</td>
<td>-5.6%</td>
<td>-2.9%</td>
<td>88.8</td>
<td>35.8</td>
<td>226</td>
<td>117</td>
<td>73</td>
<td>44</td>
<td>101</td>
<td>0.93</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>-2.7%</td>
<td>-4.1%</td>
<td>-1.5%</td>
<td>94.7</td>
<td>37.9</td>
<td>182</td>
<td>121</td>
<td>79</td>
<td>42</td>
<td>101</td>
<td>0.64</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>N/A</td>
<td>-4.6%</td>
<td>-3.0%</td>
<td>N/A</td>
<td>N/A</td>
<td>N/A</td>
<td>N/A</td>
<td>N/A</td>
<td>N/A</td>
<td>N/A</td>
<td>N/A</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>4.8%</td>
<td>-10.1%</td>
<td>-0.1%</td>
<td>89.5</td>
<td>35.7</td>
<td>224</td>
<td>122</td>
<td>71</td>
<td>51</td>
<td>101</td>
<td>0.80</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>-4.3%</td>
<td>1.6%</td>
<td>-7.8%</td>
<td>71.0</td>
<td>8.4</td>
<td>243</td>
<td>118</td>
<td>67</td>
<td>51</td>
<td>100</td>
<td>0.60</td>
</tr>
<tr>
<td class="firstcol">Memo:UK</td>
<td>-6.1%</td>
<td>-7.8%</td>
<td>2.3%</td>
<td>80.3</td>
<td>19.0</td>
<td>235</td>
<td>130</td>
<td>69</td>
<td>61</td>
<td>101</td>
<td>0.42</td>
</tr>
<tr>
<td colspan="5" class="firstcol">Since
1990
except Services (Oct
1996)
247</td>
<td>-Count</td>
<td>Services:</td>
<td>142</td>
<td>-Count</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td colspan="9" class="firstcol">Sentiment
is
an index, sector
readings are net balance diffusion measures</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body></html>

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080828d.jpg" width="353">
Initial claims for unemployment insurance dipped last week to an expected 425,000 from 435,000 during the prior week. The latest was the third decline in as many weeks.
A program to locate people eligible for jobless benefits may have continued to play a role in last week&#39;s elevated level of claims.
The four-week moving average dipped to 440,250 (35.6% y/y), the highest level since near the end of the 2001 recession 2001. During July claims averaged 393,000.
A claims level below 400,000 typically has been associated with growth in nonfarm payrolls. During the last ten years there has been a (negative) 76% correlation between the level of initial claims and the m/m change in nonfarm payroll employment. Over the longer period of time, the level of claims for jobless insurance has not trended higher with the size of the labor force due to a higher proportion of self-employed workers who are not eligible for benefits.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080828e.jpg" width="353">
Continuing claims for unemployment insurance during the latest week jumped 64,000. The four-week moving average of continuing claims rose to 3,423,000 which was its highest level since late-2003.
Continuing claims provide some indication of workers&#39; ability to find employment and they lag the initial claims figures by one week.
The insured rate of unemployment rose further to 2.6%, the highest level since late-2003.
Thoughts About the Phillips Curve is a paper presented by Paul A. Samuelson and it is available <a href="http://www.bos.frb.org/economic/conf/conf53/papers/Samuelson.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">08/23/08</th>
<th scope="col">08/16/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;425</td>
<td>435</td>
<td>28.0%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,423</td>
<td>32.9%</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial claims for unemployment insurance dipped last week to an expected 425,000 from 435,000 during the prior week. The latest was the third decline in as many weeks. A program to locate people eligible for jobless benefits may have [...]

U.S. Initial Unemployment Insurance Claims Dipped

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080828a.jpg" width="353">
U.S. real GDP growth during 2Q &#39;08 was revised sharply higher to 3.3% from the advance estimate of 1.9% growth. Last quarter&#39;s growth was the quickest since the third quarter of last year and it was faster than Consensus expectations for a revised 2.7% rate of increase.
Growth in corporate profits, however, did not share in that improvement and they posted a 9.2% (AR, -7.0% y/y) decline. The drop was led by a 21.8% (-17.4% y/y) rate of decline in domestic nonfinancial profitability. That was the sixth drop in profits in the last seven quarters. Earnings in the financial sector, conversely, continued to make up declines late last year and grew at a 26.5% rate (-8.6% y/y). Foreign sector profits fell for the second straight quarter. The 14.8% rate of decline last period left earnings up a reduced 26.4% y/y. 
An improved foreign trade deficit added 3.1 percentage points to GDP growth after the initial estimate of a 2.4 percentage point add. That was the largest addition since the third quarter of 1980. Exports grew at a much quicker 13.2% annual rate while growth in imports fell about as estimated earlier at a 7.5% (-2.0% y/y) rate. That was the steepest quarterly rate of decline since the recession year of 2001.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080828b.jpg" width="353">
Inventory decumulation reduced 2Q GDP growth by a lesser 1.4 percentage points. That still was the largest subtraction in three years.
Growth in final sales to domestic purchasers was revised up slightly to a still moderate 1.5% versus the initial estimate of 1.3% growth. The increase followed two quarters of no change in the level of domestic demand.
Residential construction was revised down slightly and it fell at a 15.8% annual rate (-22.2% y/y). That decline subtracted 0.6 percentage points from 2Q GDP growth after subtractions exceeding 1.0 points during the prior two quarters.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080828c.jpg" width="353">
Growth in real personal consumption rose at a little-revised 1.7% (1.4% y/y). The tax rebate checks presumably helped growth improve from the 0.9% growth averaged during the prior two quarters. Spending on autos &amp; light trucks fell at an 19.3% (-9.6% y/y) annual rate but spending on furniture &amp; other household equipment jumped at a 14.2% (7.1% y/y) rate. Spending on apparel surged at a 10.7% (3.6% y/y). Growth in real PCE added 1.2 percentage points to 2Q real GDP growth after a 0.6 point add during 1Q.
Growth in business fixed investment held steady with 1Q at a little-revised 2.2% rate (4.2% y/y). These latest rates of growth are down sharply from 4.9% increases last year and growth above 7.0% during 2006 and 2005. Last quarter, equipment investment fell at a 3.2% (+0.2% y/y) rate while structures investment jumped at a 13.6% (12.7% y/y) rate.
The GDP chain price index was little revised and grew at a 1.2% rate. The small increase was due to a 2.1% (-1.1% y/y) rate of decline in residential investment prices. That was the fourth decline in the last five quarters. The PCE price index grew at an unrevised, accelerated 4.2% (3.7% y/y) rate. Capital spending prices rose at an accelerated 2.3% rate (1.0% y/y).
The Evolution of the World Income Distribution from the Federal Reserve Bank of Philadelphia is available <a href="http://www.philadelphiafed.org/files/br/2008/q2/sill_evolution-of-world-income-distribution.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">2Q &#39;08 (Preliminary)</th>
<th scope="col">2Q &#39;08 (Advance)</th>
<th scope="col">1Q &#39;08</th>
<th scope="col">4Q &#39;07</th>
<th scope="col">2Q 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>3.3</td>
<td>1.9</td>
<td>0.9</td>
<td>-0.2</td>
<td>2.2</td>
<td>2.0</td>
<td>2.8</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>-1.4</td>
<td>-1.9</td>
<td>-0.0</td>
<td>-1.0</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>4.8</td>
<td>3.9</td>
<td>0.9</td>
<td>0.8</td>
<td>2.6</td>
<td>2.4</td>
<td>2.8</td>
<td>3.1</td>
</tr>
<tr>
<td class="firstcol">Foreign Trade Effect</td>
<td>3.1</td>
<td>2.4</td>
<td>0.8</td>
<td>0.9</td>
<td>1.7</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>1.5</td>
<td>1.3</td>
<td>0.1</td>
<td>-0.1</td>
<td>0.9</td>
<td>1.8</td>
<td>2.6</td>
<td>3.1</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>1.2</td>
<td>1.1</td>
<td>2.6</td>
<td>2.8</td>
<td>2.0</td>
<td>2.7</td>
<td>3.2</td>
<td>3.3</td>
</tr>
</tbody>
</table>


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U.S. real GDP growth during 2Q '08 was revised sharply higher to 3.3% from the advance estimate of 1.9% growth. Last quarter's growth was the quickest since the third quarter of last year and it was faster than Consensus expectations [...]

U.S. 2Q'08 GDP Growth Revised Sharply Higher

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080828a.jpg" width="353">
U.S. real GDP growth during 2Q &#39;08 was revised sharply higher to 3.3% from the advance estimate of 1.9% growth. Last quarter&#39;s growth was the quickest since the third quarter of last year and it was faster than Consensus expectations for a revised 2.7% rate of increase.
Growth in corporate profits, however, did not share in that improvement and they posted a 9.2% (AR, -7.0% y/y) decline. The drop was led by a 21.8% (-17.4% y/y) rate of decline in domestic nonfinancial profitability. That was the sixth drop in profits in the last seven quarters. Earnings in the financial sector, conversely, continued to make up declines late last year and grew at a 26.5% rate (-8.6% y/y). Foreign sector profits fell for the second straight quarter. The 14.8% rate of decline last period left earnings up a reduced 26.4% y/y. 
An improved foreign trade deficit added 3.1 percentage points to GDP growth after the initial estimate of a 2.4 percentage point add. That was the largest addition since the third quarter of 1980. Exports grew at a much quicker 13.2% annual rate while growth in imports fell about as estimated earlier at a 7.5% (-2.0% y/y) rate. That was the steepest quarterly rate of decline since the recession year of 2001.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080828b.jpg" width="353">
Inventory decumulation reduced 2Q GDP growth by a lesser 1.4 percentage points. That still was the largest subtraction in three years.
Growth in final sales to domestic purchasers was revised up slightly to a still moderate 1.5% versus the initial estimate of 1.3% growth. The increase followed two quarters of no change in the level of domestic demand.
Residential construction was revised down slightly and it fell at a 15.8% annual rate (-22.2% y/y). That decline subtracted 0.6 percentage points from 2Q GDP growth after subtractions exceeding 1.0 points during the prior two quarters.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080828c.jpg" width="353">
Growth in real personal consumption rose at a little-revised 1.7% (1.4% y/y). The tax rebate checks presumably helped growth improve from the 0.9% growth averaged during the prior two quarters. Spending on autos &amp; light trucks fell at an 19.3% (-9.6% y/y) annual rate but spending on furniture &amp; other household equipment jumped at a 14.2% (7.1% y/y) rate. Spending on apparel surged at a 10.7% (3.6% y/y). Growth in real PCE added 1.2 percentage points to 2Q real GDP growth after a 0.6 point add during 1Q.
Growth in business fixed investment held steady with 1Q at a little-revised 2.2% rate (4.2% y/y). These latest rates of growth are down sharply from 4.9% increases last year and growth above 7.0% during 2006 and 2005. Last quarter, equipment investment fell at a 3.2% (+0.2% y/y) rate while structures investment jumped at a 13.6% (12.7% y/y) rate.
The GDP chain price index was little revised and grew at a 1.2% rate. The small increase was due to a 2.1% (-1.1% y/y) rate of decline in residential investment prices. That was the fourth decline in the last five quarters. The PCE price index grew at an unrevised, accelerated 4.2% (3.7% y/y) rate. Capital spending prices rose at an accelerated 2.3% rate (1.0% y/y).
The Evolution of the World Income Distribution from the Federal Reserve Bank of Philadelphia is available <a href="http://www.philadelphiafed.org/files/br/2008/q2/sill_evolution-of-world-income-distribution.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">2Q &#39;08 (Preliminary)</th>
<th scope="col">2Q &#39;08 (Advance)</th>
<th scope="col">1Q &#39;08</th>
<th scope="col">4Q &#39;07</th>
<th scope="col">2Q 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>3.3</td>
<td>1.9</td>
<td>0.9</td>
<td>-0.2</td>
<td>2.2</td>
<td>2.0</td>
<td>2.8</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>-1.4</td>
<td>-1.9</td>
<td>-0.0</td>
<td>-1.0</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>4.8</td>
<td>3.9</td>
<td>0.9</td>
<td>0.8</td>
<td>2.6</td>
<td>2.4</td>
<td>2.8</td>
<td>3.1</td>
</tr>
<tr>
<td class="firstcol">Foreign Trade Effect</td>
<td>3.1</td>
<td>2.4</td>
<td>0.8</td>
<td>0.9</td>
<td>1.7</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>1.5</td>
<td>1.3</td>
<td>0.1</td>
<td>-0.1</td>
<td>0.9</td>
<td>1.8</td>
<td>2.6</td>
<td>3.1</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>1.2</td>
<td>1.1</td>
<td>2.6</td>
<td>2.8</td>
<td>2.0</td>
<td>2.7</td>
<td>3.2</td>
<td>3.3</td>
</tr>
</tbody>
</table>
U.S. Initial Unemployment Insurance Claims Dipped 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 28, 2008


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080828d.jpg" width="353">
Initial claims for unemployment insurance dipped last week to an expected 425,000 from 435,000 during the prior week. The latest was the third decline in as many weeks.
A program to locate people eligible for jobless benefits may have continued to play a role in last week&#39;s elevated level of claims.
The four-week moving average dipped to 440,250 (35.6% y/y), the highest level since near the end of the 2001 recession 2001. During July claims averaged 393,000.
A claims level below 400,000 typically has been associated with growth in nonfarm payrolls. During the last ten years there has been a (negative) 76% correlation between the level of initial claims and the m/m change in nonfarm payroll employment. Over the longer period of time, the level of claims for jobless insurance has not trended higher with the size of the labor force due to a higher proportion of self-employed workers who are not eligible for benefits.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080828e.jpg" width="353">
Continuing claims for unemployment insurance during the latest week jumped 64,000. The four-week moving average of continuing claims rose to 3,423,000 which was its highest level since late-2003.
Continuing claims provide some indication of workers&#39; ability to find employment and they lag the initial claims figures by one week.
The insured rate of unemployment rose further to 2.6%, the highest level since late-2003.
Thoughts About the Phillips Curve is a paper presented by Paul A. Samuelson and it is available <a href="http://www.bos.frb.org/economic/conf/conf53/papers/Samuelson.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">08/23/08</th>
<th scope="col">08/16/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;425</td>
<td>435</td>
<td>28.0%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,423</td>
<td>32.9%</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>


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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080827e.jpg" align="left" border="0" height="265" width="353">
Consumer confidence rebounded in Italy to 99.5 In August from
95.8 in July. This is a nice bounce but it still leaves the index at a
very low level. The best guess is that the pop in confidence stems from
the drop in global oil prices and the positive impact that has on short
term consumer budgets. Price trends over the next 12 months improved
slightly this month (to 23 from 23.5) and past price trends were
assessed as a lot lower this month as oil prices broke. The drop in
expected price trends is the first break in the uptrend in two months. 
 

The overall situation is assessed as better at a reading of
-30 up from -35 last month. But that reading is still in the 14th
percentile of its historic range, a weak position. The household budget
improved sharply month-to-month, most likely the result of lower energy
costs. Its improvement to +2 from -7 elevates it to the 22nd percentile
of its range, still weak but less severe. It&#8217;s the biggest one-month
shift in this category since at least December of 1998, although shifts
of 8 points m/m have been recorded. As you might expect if the sharp
drop in world oil prices is behind the improvement in sentiment
spending plans would not be changing much even though the budgets show
more breathing room, since oil will not help all that much with big
ticket purchases compared to monthly needs. Here we find major purchase
plans fell over the next 12 months to -70 from -67 in July and stand in
the bottom 10 percentile of their range since Dec 1998. This helps to
point the finger for improvement at lower oil and at the same time
raises a cautionary note about getting too hopeful on the notion that
Italy has reached a turning point. 
 

On balance the shifts in the ISAE survey of consumer
confidence are consistent with the notion that dropping energy prices
may be the catalyst for improved sentiment. The house hold budget feels
some relief and that improves the overall situation somewhat, but the
unemployment expectations and purchase plans are hardly affected. 
 

Europe is still caught in the grip of a slowdown. And, lower
energy prices could help to temporarily mollify consumers. Still, Italy
has been weak for some time. It has no special remedy in place to boost
its economy. Meanwhile, as surrounding nations are getting weaker,
Italy is increasingly challenged. This situation promises to make
Italian consumers worse off before they become better off. This month&#8217;s
improvement does not seem to be part of a trend as much as it reflects
a one-off reaction to cheaper oil. 
 

Still Italy&#8217;s result suggests we may see more widespread
improvement throughout the Euro Area this month. 
 

Oil prices have a more limited impact to improve sentiment in
Europe given high energy taxes. Compared to the US where at-the-pump
fuel prices will move more when world spot oil prices change, energy
shifts can be expected to boost sentiment less in Europe. So whatever
improvement in sentiment we might see this month in Europe, we should
not expect the improvement to be too dramatic and perhaps not even
lasting as deteriorating economic circumstances eventually catch up
with euro-consumers. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="11" scope="col"> Italy
ISAE Consumer Confidence</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td colspan="2">Since December 1998</td>
<td colspan="4"></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Aug 
08</td>
<td>Jul 
08</td>
<td>Jun 
08</td>
<td>May 
08</td>
<td>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
</tr>
<tr>
<td class="firstcol">Consumer Confidence</td>
<td>99.5</td>
<td>95.8</td>
<td>99.9</td>
<td>103.1</td>
<td>11.9</td>
<td>112</td>
<td>127</td>
<td>96</td>
<td>31</td>
<td>111</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="11">Last
12 months</td>
</tr>
<tr>
<td class="firstcol">OVERALL SITUATION</td>
<td>-79</td>
<td>-84</td>
<td>-82</td>
<td>-81</td>
<td>9.5</td>
<td>109</td>
<td>-22</td>
<td>-85</td>
<td>63</td>
<td>-56</td>
</tr>
<tr>
<td class="firstcol">PRICE TRENDS</td>
<td>-11.5</td>
<td>-16</td>
<td>-11</td>
<td>-15</td>
<td>57.7</td>
<td>55</td>
<td>4</td>
<td>-32</td>
<td>36</td>
<td>-14</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="11">Next
12months</td>
</tr>
<tr>
<td class="firstcol">OVERALL SITUATION</td>
<td>-30</td>
<td>-35</td>
<td>-16</td>
<td>-9</td>
<td>14.3</td>
<td>107</td>
<td>24</td>
<td>-39</td>
<td>63</td>
<td>-13</td>
</tr>
<tr>
<td class="firstcol">PRICE TRENDS</td>
<td>23</td>
<td>23.5</td>
<td>19.5</td>
<td>19</td>
<td>46.9</td>
<td>52</td>
<td>49</td>
<td>0</td>
<td>49</td>
<td>22</td>
</tr>
<tr>
<td class="firstcol">UNEMPLOYMENT</td>
<td>7</td>
<td>8</td>
<td>-5</td>
<td>-3</td>
<td>94.9</td>
<td>4</td>
<td>9</td>
<td>-30</td>
<td>39</td>
<td>-5</td>
</tr>
<tr>
<td class="firstcol">HOUSEHOLD BUDGET</td>
<td>2</td>
<td>-7</td>
<td>-1</td>
<td>-3</td>
<td>22.5</td>
<td>107</td>
<td>33</td>
<td>-7</td>
<td>40</td>
<td>14</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="11">HOUSEHOLD
FIN SITUATION</td>
</tr>
<tr>
<td class="firstcol">Last 12 months</td>
<td>-50</td>
<td>-56</td>
<td>-55</td>
<td>-53</td>
<td>12.2</td>
<td>111</td>
<td>-7</td>
<td>-56</td>
<td>49</td>
<td>-30</td>
</tr>
<tr>
<td class="firstcol">Next12 months</td>
<td>-19</td>
<td>-20</td>
<td>-15</td>
<td>-10</td>
<td>2.9</td>
<td>116</td>
<td>14</td>
<td>-20</td>
<td>34</td>
<td>-2</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="11">HOUSEHOLD
SAVINGS</td>
</tr>
<tr>
<td class="firstcol">Current</td>
<td>73</td>
<td>75</td>
<td>73</td>
<td>68</td>
<td>96.4</td>
<td>2</td>
<td>75</td>
<td>20</td>
<td>55</td>
<td>40</td>
</tr>
<tr>
<td class="firstcol">Future</td>
<td>-41</td>
<td>-44</td>
<td>-38</td>
<td>-38</td>
<td>17.9</td>
<td>112</td>
<td>-9</td>
<td>-48</td>
<td>39</td>
<td>-24</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="11">MAJOR
Purchases</td>
</tr>
<tr>
<td class="firstcol">Current</td>
<td>-55</td>
<td>-56</td>
<td>-64</td>
<td>-51</td>
<td>18.4</td>
<td>112</td>
<td>-15</td>
<td>-64</td>
<td>49</td>
<td>-40</td>
</tr>
<tr>
<td class="firstcol">Future</td>
<td>-70</td>
<td>-67</td>
<td>-69</td>
<td>-56</td>
<td>9.7</td>
<td>104</td>
<td>-42</td>
<td>-73</td>
<td>31</td>
<td>-62</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td colspan="3">Total number of months:</td>
<td>117</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body></html>

Consumer confidence rebounded in Italy to 99.5 In August from 95.8 in July. This is a nice bounce but it still leaves the index at a very low level. The best guess is that the pop in confidence stems from the drop in global oil prices [...]

Italy: Consumer Confidence Rebounds but Remains Very Weak

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

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

Only modest evidence of AI-related surge in US productivity growth

Previous Trump tariffs fading. A boost from new tariffs ahead?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

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Real GDP eased 0.3% SAAR (+2.1% y/y) during the first quarter of 2025 after increasing 2.4% in Q4’24 and 3.1% in Q3’24. A 0.4% increase had been expected in the Action Economics Forecast Survey. It was the first decline since Q1 2022.

Foreign trade subtracted 4.83 percentage points from growth last quarter as imports surged 41.3% (13.4% y/y) ahead of tariffs, which began to come into effect in the first quarter. The rise followed a 1.9% decline in Q4’24. Exports rose 1.8% (3.0% y/y) after easing 0.2% in Q4. Inventories added 2.25 percentage points to growth after subtracting 0.84 percentage point from Q4 growth.

Real final sales to domestic purchasers grew 2.3% (2.9% y/y) in Q1 after rising 3.0% in Q4. Personal consumption expenditures rose 1.8% (3.1% y/y) following a 4.0% gain. Durable goods spending fell 3.4% (+5.3% y/y) after surging 12.4% in Q4. Motor vehicle purchases declined 11.1% (+5.5% y/y) after strengthening 19.7% in Q4. Spending on home furnishings & appliances gained 1.5% (6.1% y/y) following a 5.4% rise. Recreational goods & vehicle outlays rose 2.5% (7.0% y/y) last quarter after a 13.9% Q4 increase.

Nondurable goods outlays rose 2.7% (3.0% y/y) following 3.1% growth in Q4. Apparel spending increased 6.7% (2.5% y/y) following a 5.0% rise. Food & beverage buying gained 2.5% (2.3% y/y) after a 1.8% increase. Gasoline & fuel oil purchases increased 4.6% (3.4% y/y) after falling 2.0% in Q4.

Spending on services increased 2.4% last quarter (2.7% y/y) after a 3.0% gain. Outlays on housing & utilities increased 3.4% (1.8% y/y) after rising 1.1% in Q4. Health care expenditures rose 4.0% (4.8% y/y) following a 4.7% strengthening. Transportation outlays increased 5.3% (4.6% y/y) after a 3.7% rise while recreation spending rose 4.7% (2.8% y/y) following a 4.5% rise. Restaurant & hotel expenditures declined 2.1% (+0.5% y/y) following a 2.8% rise. Financial services expenditures rose 1.9% (2.0% y/y) after a 3.1% Q4 increase.

Business fixed investment increased 9.8% (3.6% y/y) following a 3.0% decline in Q4. Expenditures on structures rose 0.4% (-0.4% y/y) after a 2.9% increase. Expenditures on producers’ durable equipment jumped 22.5% (8.0% y/y) after falling 8.7%.  Outlays on information processing equipment soared 69.3% (18.9% y/y) following a 7.3% decline. Industrial equipment investment fell 1.4% (-0.3% y/y) after easing 0.9%. Intellectual property product spending rose 4.1% (1.8% y/y) following a 0.5% decline. 

Residential structures investment increased 1.3% (-0.1% y/y) in Q1 after a 5.5% Q4 rise.

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Government spending fell 1.5% (+2.4% y/y) after a 3.1% Q4 rise. Federal government expenditures declined 5.1% (+2.9% y/y) after rising 4.0% in Q4. National defense expenditures declined 8.0% (+4.0% y/y) after increasing 4.8% in Q4. State & local government spending rose 0.8% (2.1% y/y) following a 2.5% rise.

The GDP price index rose 3.7% (2.6% y/y) after increasing 2.3% in Q4. It was the largest increase since Q4’22. A 2.4% increase had been expected. The PCE chain price index increased 3.6% (2.5% y/y) following a 2.4% rise. The PCE price index excluding food and energy rose 3.5% (2.8% y/y) after increasing 2.6% in Q4. The business fixed investment price index rose 0.4% (1.8% y/y) after 1.5% rise. The residential price index strengthened 3.9% (3.2% y/y) after a 1.9% rise while the government price index increased 4.7% (2.8% y/y) following a 2.1% 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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- Decline in GDP is first in three years.
- Foreign trade subtracts substantially ahead of tariffs.
- Domestic final demand growth weakens.
- Price index strengthens with higher core PCE prices.

U.S. GDP Unexpectedly Declines in Q1’25; Prices Strengthen

Michael J. Moran

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High-side readings on the price indexes for personal consumption expenditures in January and February caused some concern about emerging price pressure, especially with some policies of the Trump administration possibly adding to the upward force. However, March brought notable relief, with the headline price index falling slightly (-0.04%). A marked decline in energy prices was helpful (-2.7%), but core prices also were subdued, increasing less than 0.1%.  Year-over-year changes were still above the Fed’s target of 2%, but only barely so for the headline measure (2.3%). The core index backed away from the reading of 3.0% in February, but the latest reading of 2.7% was in line with observations in the past year, and still uncomfortably above target.

Consumers roused from a winter slumber in March, with nominal outlays increasing 0.7%. With inflation restrained, real outlays also posted a gain of 0.7%. Spending on durable gods stood out, with real outlays advancing 3.2%. Real outlays for both nondurable goods and services rose 0.4%, a solid pace. Signs of life were certainly welcome after an average decline of 0.1% in January and February. The March rebound left growth of 1.8% (annual rate) in the first quarter.

The brisk increase in spending in March was supported by a solid gain in personal income (0.5% in both nominal and real terms). Growth in wage income was firm at 0.5%, while proprietors’ income was robust with a gain of 1.8% (not annualized!). The farm sector led the advance in proprietors’ income, but the nonfarm sector also was strong (0.6%).

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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- Price pressure eases.
- Spending rebounds after two soft months.

Personal Income, Consumption, and Prices in March

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The Pending Home Sales Index, a forward-looking home sales measure based on contract signings, from the National Association of Realtors rose 6.1% to 76.5 (-0.6% y/y) during March after rising a little-revised 2.1% in February. These changes followed a 4.6% January decline.

The rise in March sales occurred as the rate on a 30-year mortgage eased to an average 6.65% from 6.84% in February. This rate was well above a low of 2.68% averaged in December 2020.

Pending home sales were up in most regions of the country. Sales in the Midwest rose 4.9% (1.4% y/y) last month after rising 1.8% in February. Sales in the South increased 9.8% (-0.4% y/y) following a 5.8% February rise. Sales in the West improved 4.8% (-2.0% y/y) after falling 3.0% in February. Sales in the Northeast were off 0.5% (-3.0% y/y) in March after falling 0.9% in February.

The pending home sales index measures sales at the time the contract for the purchase of an existing home is signed, similar to the Census Bureau's new home sales data. In contrast, the National Association of Realtors' existing home sales data are recorded when the sale is closed, which is usually a couple of months after the sales contract has been signed. In developing the pending home sales index, the NAR found that the level of monthly sales contract activity leads the level of closed existing home sales by about two months.

The series dates back to 2001 and are available in Haver's **PREALTOR** database. Weekly mortgage interest rates from the Mortgage Bankers Association can be found in the **WEEKLY** database.

- Sales rise to highest level in four months.
- Strength is evident throughout most of country.

U.S. Pending Home Sales Surge in March

Sandy Batten

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The employment cost index (ECI) for civilian workers, arguably the most accurate measure of labor compensation in the United States, rose 0.9% q/q (3.6% y/y) in Q1, the same quarterly increase as in last year’s Q4, according to the Bureau of Labor Statistics. The quarterly gains have fluctuated between 0.8% and 1.0% for the past six quarters. The Action Economics Forecast Survey had expected a 0.9% q/q increase and a 3.5% y/y gain.

Wages and salaries for civilian workers rose 0.8% q/q (3.5% y/y) in Q1, down from 1.0% q/q in Q4. This tied the Q3 2024 quarterly rise as the smallest increase since Q2 2021. It was also the smallest y/y increase since Q2 2021. Benefits increased by an outsized 1.2% q/q (3.9% y/y) in Q1 versus 0.8% q/q in Q4. This is the largest quarterly gain since Q2 2022. In general, employment cost gains remain above the pace observed prior to the pandemic but are slowing gradually.

Private industry workers’ compensation rose 0.8% q/q (3.4% y/y) in Q1, down from 0.9% q/q (3.6% y/y) in Q4. Wages and salaries for private industry workers increased 0.8% q/q (3.4% y/y) in Q1 versus 0.8% q/q (3.7% y/y) in Q4. The quarterly gain in Q1 tied that in Q3 2024 as the smallest increase since Q4 2020. Benefits for private industry workers jumped 1.2% q/q (3.6% y/y). the largest quarterly gain since Q2 2022. The acceleration in benefits in Q1 was primarily in service-producing industries.

Compensation in private goods-producing industries increased 1.0% q/q (3.2% y/y) in Q1, the largest quarterly gain in five quarters, versus a 0.7% q/q increase in Q4. Compensation in construction jumped 1.3% q/q, its largest quarterly increase since Q2 2022, up from a 0.6% q/q gain in Q4. Manufacturing compensation growth slowed to 0.7% q/q, its slowest quarterly advance since Q4 2020, from 0.8% q/q in Q4. Compensation in private service-producing industries increased 0.8% q/q (3.5% y/y), down slightly from a 0.9% q/q gain in Q4. Compensation in education and health services jumped 1.3% q/q, its largest quarterly gain since Q3 2023. In contrast, compensation in other services edged up 0.1% q/q in Q1, its smallest quarterly advance since before the pandemic.

The employment cost index measures the change in the cost of labor, free from the influence of employment shifts across occupations and industries. It is provided by the Bureau of Labor Statistics and is available in Haver’s **USECON** database. Consensus estimates from the Action Economics Forecast Survey are in Haver’s **AS1REPNA** database.

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- Compensation grew 0.9 q/q in Q1, the same pace as in Q4.
- Wage growth slowed to 0.8% q/q while benefits surged 1.2% q/q, their largest quarterly increase since Q2 2022.

Employment Cost Growth Steady in Q1 2025

Kathleen Stephansen, CBE

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The ADP National Employment Report indicated that nonfarm private sector payrolls rose 62,000 (1.4% y/y) during April after increasing 147,000 (1.4% y/y) during March, revised from 155,000. A 124,000 April rise in ADP employment had been expected in the Action Economics Forecast Survey.

Growth in median annual pay for "job stayers" eased to 4.5% y/y during April, from 4.6% y/y in March and from 4.7% y/y in the prior two months. Manufacturing sector pay grew 4.6% y/y during April, down from 4.8% y/y in March. Construction sector pay was unchanged at 4.7% y/y. Natural resource & mining sector pay grew 4.4% y/y. Financial sector pay rose 5.1% y/y, while education & health services pay rose 4.7% y/y. Leisure & hospitality pay also increased 4.7% y/y. Professional & business service sector pay increased 4.3% y/y as did trade, transportation & utilities pay. Information pay rose 4.1% y/y. Median annual pay for “job changers” rose 6.9% y/y after 6.7% y/y in March.

Small business hiring (less than 50 employees) rose 11,000 (0.6% y/y) after rising 18,000 (0.6% y/y) in March, revised down from 52,000. Employment at medium-sized firms (50-499,000 employees) rose 40,000 (1.1% y/y) after rising 43,000 (1.1% y/y). Large business hiring (500+ employees) rose 12,000 (3.4% y/y) in April, after rising 61,000 (3.6% y/y) in March, revised from 59,000.

Goods-producing employment rose 26,000 (1.3% y/y) in April, after rising 16,000 (1.3% y/y) during March, revised from 24,000. Manufacturing jobs rose 4,000 (-0.2% y/y) after rising 17,000 (-0.3% y/y) in March. The number of construction sector jobs rose 16,000 (3.4% y/y) in April, following a 2,000 (3.6% y/y) March increase, revised from 6,000. Natural resources & mining jobs rose 6,000 (2.8% y/y) in April after falling 3,000 (+1.9% y/y) in March.

The number of service-producing jobs rose 34,000 (1.4% y/y) during April, following a rise of 131,000 (1.4% y/y) in March. Professional & business services employment fell 2,000 (0.6% y/y) after rising 46,000 (0.7% y/y) in the prior month, revised from 57,000. Employment in the financial industry rose 20,000 (2.1% y/y) in April, after rising 38,000 (2.0% y/y) in March. Leisure and hospitality employment increased 27,000 (3.0% y/y), following a 23,000 (2.9% y/y) March increase, revised from 17,000. The number of education & health care jobs fell 23,000 (1.6% y/y) in April, following a 15,000 (1.8% y/y) rise in March, revised from 12,000. Information sector employment fell 8,000 (-0.1% y/y) after a rise of 3,000 (0.2% y/y) in March. The number of jobs in trade, transportation & utilities rose 21,000 (0.4% y/y) in April, after falling 4,000 (+0.4% y/y) in March, revised from a 6,000 fall. Employment in “other” services rose fell 1,000 (+3.2% y/y) following a 10,000 (3.4% y/y) rise in March, revised from 11,000.

By region, employment in the Northeast increased 10,000 (1.9% y/y) in April, following an increase of 95,000 (2.0% y/y) in March, revised from 89,000. Employment in the Midwest rose 42,000 (1.5% y/y) after a gain of 84,000 (1.4% y/y) in March, revised from 81,000. In the South, employment rose 3,000 (1.3% y/y) during April, after rising 10,000 (1.4% y/y) in March, revised from 27,000. In the West, employment rose 9,000 (0.6% y/y) after declining 43,000 (+0.6% y/y), revised from a 41,000 decline in March.

The ADP National Employment Report and Pay Insights data can be found in Haver's **USECON** database. Historical figures date back to January 2010 for private employment. Pay data date back to October 2020. The expectation figure is available in Haver's **AS1REPNA** database.

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- Employment increase is modest in both services & factory sectors.
- Wage growth for “job stayers” moderates.
- Small and medium-sized business employment slows.

Economy in Brief: August 2008

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EMU Indices Continue to Lose Ground

Michigan Consumer Sentiment Improved Further in August

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