Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090630f.jpg" align="left" border="0" height="265" width="353">
According to the Conference Board, consumer confidence slipped
this month following gains during the prior three months. The slip did
not, however, alter the picture of improvement in consumer attitudes.
Confidence remained up by more than one-half from the February low and
roughly equal to the year ago level. The Conference Board data can be
found in Haver's CBDB database.
During the last ten years there has been an 86% correlation
between the level of consumer confidence and the y/y change in real
consumer spending.
The expectations component of confidence slipped the most last
month with an 8.4% decline following three strong monthly increases.
Still, the index remained near the highest level since late 2007. The
percentage of respondents expecting business conditions to improve
slipped to 21.2% but that remained near the highest level since 2004. A
much reduced 20.2% expected conditions to worsen. That improvement was
expected by 17.4 of respondents to generate more jobs, more than double
the percentage at the recent low.
Consumers' assessment of the current economic conditions also
slipped m/m and remained near its recent low. It remained off by nearly
two-thirds from a year earlier. Jobs were seen as hard to get by a
still-high 44.8% of respondents and jobs were seen as plentiful by only
4.5% of respondents. Business conditions were seen as good by just 8.0%
and that was near the 1991 low. Consumers who thought business
conditions were bad rose slightly to 45.6%, still near the highest
since 1983.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090630g.jpg" align="right" border="0" height="265" width="353">
Expectations for the inflation rate in twelve months have been
roughly stable at 5.9%. That's down from last year's high of 7.7%.
Expectations about interest rates have increased sharply with 51.7% of
respondents expecting higher rates while 16.3% expect rates to fall. A
greatly increased 31.5% of respondents expected stock prices to rise.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Conference
Board &nbsp;(SA, 1985=100)</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y %</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer
Confidence Index</td>
<td>49.3</td>
<td>54.8</td>
<td>-3.3</td>
<td>57.9</td>
<td>103.4</td>
<td>105.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Present Situation</td>
<td>24.8</td>
<td>29.7</td>
<td>-62.1</td>
<td>69.9</td>
<td>128.8</td>
<td>130.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
Expectations</td>
<td>65.5</td>
<td>71.5</td>
<td>58.2</td>
<td>50.0</td>
<td>86.4</td>
<td>89.7</td>
</tr>
</tbody>
</table>
</body></html>

According to the Conference Board, consumer confidence slipped this month following gains during the prior three months. The slip did not, however, alter the picture of improvement in consumer attitudes. Confidence remained up by more [...]

U.S. Consumer Confidence Slips

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090630e.jpg" align="left" border="0">
&#8216;Official&#8217; train wreck?? Maybe I shouldn&#8217;t
say &#8216;officially&#8217; since no one in officialdom has really declared it so.
And I don&#8217;t want those with policies at Lloyds to come running for
remuneration because they are insured against injury inflicted by a
train gone amok. Still, the sharp downward revision to UK GDP is
stunning and it gives us a new take on reality. 
 

Capital spending takes a dive &#8211; If capital
spending were a prize-fighter, the boxing officials would be streaming
in for an investigation of such a sudden dive. UK capital spending in
Q1 &#8216;did in&#8217; an already weak UK GDP showing in 2009-Q1 by falling at an
even steeper 27% annual rate. The annualized drop in UK GDP as a result
has sunk back to near double digit losses, showing a decline of at a
pace of 9.3% compared to -7.3% as last reported. And, yeah, they are
both bad numbers, but 9.3% is simply awful. 
 

Bigger than a pot-hole: The GDP hole that
the UK must dig itself out of is deeper than we thought. And in this,
the UK is not alone. Not seasonally adjusted Irish GDP was revised
lower in Q1 to an annual rate drop of 8.5% from 7.5% previously.
Excluding its key international sector, Ireland&#8217;s GDP fell 12% in Q1.
Downward revisions have been an ongoing theme&#8230; 
 

Yes we have no INFLATION!!! (for now) --
These sorts of downward revisions business activity help to explain
some of the other &#8216;news du jour&#8217; such as the lowest inflation rate in
40 years in Italy (+0.5% Yr/Yr in June); the first-time-ever drop in
the EMU CPI (-0.1% in the twelve months ended in June); and, the lowest
inflation reading in at least 38 years for the OECD area (+0.1% Yr/Yr
in May). 
 

Let&#8217;s do the twist...or let&#8217;s not -- There
has been some great twisting of inflation trends recently. As short a
time ago as July of 2008 OECD inflation had reached an 11-year high at
4.9% Yr/Yr; the plunge in the rate of inflation has a lot to do with
the global credit crisis and the deflating of the individual OECD
economies as well as the global economy. To the extent we may wish to
consider it a separate event, it also has to do with oil prices
falling. Energy prices in the OECD fell by 16.2% in the 12 months to
May obviously having a lot to do with the drop in that headline
inflation rate. That which twists can untwist&#8230; 
 

The GDP-Gap trap - These huge hits to GDP
are behind us. The legacy of those hits is something economists call
the GDP-Gap. The Gap is the difference between where GDP is currently
compared to where it could have been had the economy grown at its
&#8216;full-potential&#8217;. You get a good simple approximation of this by just
extending GDP&#8217;s growth trend before the economy slowed and fell and
looking at the resulting gap of that extrapolated line Vs actual GDP.
That gap will persist for some time into the future even if the economy
grows swiftly for several quarters. 
 

The plot thickens - While no one expects
declines of the past order of magnitude to continue going forward,
there is considerable debate about the speed of the individual
economies and of the global economy. The turning point location for GDP
growth rates to become positive and the pace at which growth will
proceed once that happens are critical ingredients in the outlook for
inflation. 
 

Risk source: Gap trap Vs central bankers at nap -
To Keynesian types these issues are the key; to others &#8216;the Gap&#8217; is
still an issue that matters but monetarists look for the impact on
inflation to come from all the special reserve injections by various
central banks. 
 

Market pricing, or groping - So the stage
is set. We can expect these issues to continue to be contentious as the
recession slows and recoveries re-start. Stock markets have rebounded
less on the expectation of strong GDP recovery growth rates and more on
the notion that huge drops in GDP are behind us and the companion
thought that at least some growth lies ahead. Bonds have been battered
back by those with fears of inflation from central-bank reserve growth
and the notion that the special times for distress pricing and the
flight to quality are behind us. 
 

Markets will continue to toss and turn on these issues. Some
will revel in the existence of the GDP-Gap as a protector against
inflation. Others will dismiss it or diminish it. It is the wave of the
future. 
 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="9" scope="col">UK GDP </th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td colspan="3">Consumption</td>
<td>Capital Formation</td>
<td>&nbsp;</td>
<td></td>
<td>Domestic</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>GDP</td>
<td>Private</td>
<td>Public</td>
<td>Total</td>
<td>Housing</td>
<td>Exports</td>
<td>Imports</td>
<td>Demand</td>
</tr>
<tr class="grey2">
<td colspan="9" class="firstcol">% change Q/Q</td>
</tr>
<tr class="grey3">
<td class="firstcol">Q1-09</td>
<td>-9.3%</td>
<td>-5.0%</td>
<td>0.9%</td>
<td>-26.9%</td>
<td>-41.5%</td>
<td>-25.0%</td>
<td>-24.1%</td>
<td>-9.5%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Q1-09 Previous</td>
<td>-7.3%</td>
<td>-4.7%</td>
<td>1.2%</td>
<td>-14.2%</td>
<td>#N/A</td>
<td>-22.1%</td>
<td>-21.5%</td>
<td>-7.6%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Q4-08</td>
<td>-7.0%</td>
<td>-4.3%</td>
<td>4.3%</td>
<td>-4.7%</td>
<td>-12.7%</td>
<td>-15.6%</td>
<td>-20.2%</td>
<td>-8.7%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Q3-08</td>
<td>-2.9%</td>
<td>-1.5%</td>
<td>1.9%</td>
<td>-10.7%</td>
<td>-25.6%</td>
<td>-1.7%</td>
<td>-2.8%</td>
<td>-3.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Q2-08</td>
<td>-0.2%</td>
<td>-1.5%</td>
<td>4.0%</td>
<td>-8.8%</td>
<td>-21.9%</td>
<td>-1.8%</td>
<td>-5.3%</td>
<td>-1.2%</td>
</tr>
<tr class="grey2">
<td colspan="9" class="firstcol">% change Yr/Yr</td>
</tr>
<tr class="grey3">
<td class="firstcol">Q1-09</td>
<td>-4.9%</td>
<td>-3.1%</td>
<td>2.8%</td>
<td>-13.2%</td>
<td>-26.2%</td>
<td>-11.6%</td>
<td>-13.6%</td>
<td>-5.7%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Q4-08</td>
<td>-1.8%</td>
<td>-0.8%</td>
<td>3.5%</td>
<td>-7.8%</td>
<td>-15.9%</td>
<td>-3.8%</td>
<td>-7.7%</td>
<td>-2.9%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Q3-08</td>
<td>0.5%</td>
<td>0.7%</td>
<td>2.6%</td>
<td>-3.9%</td>
<td>-14.8%</td>
<td>0.5%</td>
<td>-1.7%</td>
<td>0.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Q2-08</td>
<td>1.8%</td>
<td>1.4%</td>
<td>2.9%</td>
<td>-0.8%</td>
<td>-8.6%</td>
<td>2.8%</td>
<td>3.5%</td>
<td>2.2%</td>
</tr>
<tr class="grey3">
<td class="firstcol">5-Yrs</td>
<td>0.9%</td>
<td>1.2%</td>
<td>1.8%</td>
<td>0.7%</td>
<td>-5.1%</td>
<td>1.7%</td>
<td>1.1%</td>
<td>0.8%</td>
</tr>
</tbody>
</table>
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‘Official’ train wreck?? Maybe I shouldn’t say ‘officially’ since no one in officialdom has really declared it so. And I don’t want those with policies at Lloyds to come running for remuneration because they are insured against injury [...]

UK GDP Is Officially A Train Wreck Impact Of GDP-Gap To Become A More Serious Matter For Argumentation

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090630c.jpg" align="left" border="0" height="265" width="353">
For all of last week, the energy markets continued to discount
weakness in the economic environment. The likelihood of an easing in
demand lowered the weekly average retail price for a gallon of regular
gasoline slipped to $2.64 per gallon, down a nickel from the prior
week. Yesterday, however, that decline stalled with heightened concerns
regarding Mideast crude oil supplies. The Monday spot market price for
a gallon of unleaded gasoline jumped roughly ten cents from last week's
average to $1.90 per gallon. That jump did not, however, recover the
price declines during prior weeks from the daily high of $2.04. The
figures are reported by the U.S. Department of Energy and can be found
in Haver's WEEKLY &amp; DAILY databases.
The energy market's volatility was notably evident in crude
oil prices. The price for a barrel of West Texas Intermediate crude oil
jumped to $71.49 yesterday which was the highest level since the first
week of the month. Prices averaged $68.76 per barrel last week. Against
this backdrop crude oil production rose 3.6% y/y during the latest four
weeks. In addition, supplies of crude oil continue plentiful as
evidenced by a 13.3% y/y rise in inventories of crude oil &amp;
petroleum products. The figures on crude oil production and inventories
are available in Haver's OILWKLY database.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090630d.jpg" align="right" border="0" height="265" width="353">
The gasoline demand figures continued to improve modestly but
the comparisons still are negative. Year-to-year gasoline
demand last week fell by 1.3%. That remained improved from
the roughly 5.0% y/y decline of last fall. The change in demand is
measured using the latest four weeks versus the same four weeks in
2008. Demand for all petroleum products was down
6.6% y/y in the latest week led by a 15.1% drop in distillate demand.
These numbers also are available in Haver's OILWKLY database.
Finally, natural gas prices remained weak last week and fell
to $3.86 per mmbtu (-70.0% y/y). Yesterday, natural gas prices held
steady at $3.88 per mmbtu. Current prices are down by two-thirds from
the high reached in early-July of $13.19/mmbtu.
Developing a Liquid Market for Inflation-Indexed
Government Securities: Lessons from Earlier Experiences from
the Federal Reserve Bank of St. Louis can be found <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/09q1Shen.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/@W4/@W4.HTM">Weekly
Prices</a></th>
<th scope="col">06/29/09</th>
<th scope="col">06/22/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per
Gallon, Regular)</td>
<td>2.64</td>
<td>2.69</td>
<td>-35.5%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil,
WTI&nbsp; ($ per bbl.)</td>
<td>68.76</td>
<td>70.61</td>
<td>-49.9%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
</body></html>

For all of last week, the energy markets continued to discount weakness in the economic environment. The likelihood of an easing in demand lowered the weekly average retail price for a gallon of regular gasoline slipped to $2.64 per [...]

Energy Prices Are Volatile With Weak Demand & Short Supply Prospects

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090630a.jpg" align="right" border="0" height="265" width="353"><The ="">S&amp;P/Case-Shiller
Home Price Composite Index of twenty metro-markets slipped just 0.9%
during April versus March. The latest monthly decline was the smallest
since late 2007; however, it still left prices 18.1% lower
during the last twelve months and down by nearly one-third since their
peak in May 2006. The April decline in prices was less than
the expected 18.9% y/y drop.</The>The series dates back only to 2001. The
S&amp;P/Case-Shiller home price series can be found in Haver's USECON
database and the city data highlighted below is in the REGIONAL
database.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090630b.jpg" align="right" border="0" height="265" width="353">
The Case-Shiller index of 20 U.S. cities and their
surrounding areas is weighted to reflect price changes due to extensive
remodeling, home additions or extreme neglect.&nbsp; For example,
smaller weights are assigned to sales of homes that have undergone
extensive remodeling.The Case-Shiller composite index of homes in 10
metropolitan areas, which has a longer history and dates back to 1987,
also fell a lessened 1.0% and was down 18.0% year-to-year. The measure
also was down by nearly one-third since the 2006 peak.· Less
Weak Regions:&nbsp; In Cleveland, Ohio prices ticked up
slightly m/m (-10.5% y/y) and in Dallas prices rose slightly as well
(5.0% y/y). Prices also rose 0.7% in Denver (-4.9% y/y). In addition,
in Boston the monthly decline in prices moderated substantially (-7.7%
y/y) and in Chicago home prices were roughly unchanged m/m (-18.7%
y/y).&nbsp; In New York, the price decline showed little moderation
(12.5% y/y), off roughly 20% from their 2006 peak. In Charlotte, North
Carolina prices also continued down moderately (10.0% y/y.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090630h.jpg" align="right" border="0" height="265" width="353">
Weakest
Regions: Home prices in Phoenix, Nevada were quite weak and
fell 35.3% y/y and in San Francisco prices fell a lessened 28.0% y/y.
However, they still were off by nearly one-half from their early-2006
peak. Home prices in Las Vegas, Nevada continued their rapid rate of
decline, 32.1% y/y, and also were down by roughly one half from their
peak. The rate of price decline in Miami eased slightly (27.3% y/y
while home prices in Los Angeles continued to fall sharply 21.2% y/y.
In Tampa, the rate of monthly price decline slowed slightly (-21.3%
y/y). In Detroit, the monthly rate of price decline also eased
considerably (-25.4% y/y) but was off by early one-half from the
peak.Here is a <a href="http://www2.standardandpoors.com/spf/pdf/index/CSHomePrice_Release_063055.pdf">link</a>
to the latest press release from Standard &amp; Poor's. An overview
of the S&amp;P/Case-Shiller home price series can be found <a href="http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,1,0,0,0,0,0.html">here</a>.
The history of the Case-Shiller data is available in Haver's USECON
database.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">S&amp;P/Case-Shiller
Home Price Index (SA, Jan 00 = 100)</th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">20 City Composite
Index</td>
<td>140.10</td>
<td>141.36</td>
<td>-18.1%</td>
<td>-15.8%</td>
<td>-3.8%</td>
<td>7.6%</td>
</tr>
</tbody>
</table>
</body></html>

S&P/Case-Shiller Home Price Composite Index of twenty metro-markets slipped just 0.9% during April versus March. The latest monthly decline was the smallest since late 2007; however, it still left prices 18.1% lower during the last [...]

Decline In Case-Shiller Home Price Index Eases

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090630a.jpg" align="right" border="0" height="265" width="353"><The ="">S&amp;P/Case-Shiller
Home Price Composite Index of twenty metro-markets slipped just 0.9%
during April versus March. The latest monthly decline was the smallest
since late 2007; however, it still left prices 18.1% lower
during the last twelve months and down by nearly one-third since their
peak in May 2006. The April decline in prices was less than
the expected 18.9% y/y drop.</The>
The series dates back only to 2001. The
S&amp;P/Case-Shiller home price series can be found in Haver's USECON
database and the city data highlighted below is in the REGIONAL
database.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090630b.jpg" align="right" border="0" height="265" width="353">The
Case-Shiller index of 20 U.S. cities and their
surrounding areas is weighted to reflect price changes due to extensive
remodeling, home additions or extreme neglect.&nbsp; For example,
smaller weights are assigned to sales of homes that have undergone
extensive remodeling.
The Case-Shiller composite index of homes in 10
metropolitan areas, which has a longer history and dates back to 1987,
also fell a lessened 1.0% and was down 18.0% year-to-year. The measure
also was down by nearly one-third since the 2006 peak.· Less
Weak Regions:&nbsp; In Cleveland, Ohio prices ticked up
slightly m/m (-10.5% y/y) and in Dallas prices rose slightly as well
(5.0% y/y). Prices also rose 0.7% in Denver (-4.9% y/y). In addition,
in Boston the monthly decline in prices moderated substantially (-7.7%
y/y) and in Chicago home prices were roughly unchanged m/m (-18.7%
y/y).&nbsp; In New York, the price decline showed little moderation
(12.5% y/y), off roughly 20% from their 2006 peak. In Charlotte, North
Carolina prices also continued down moderately (10.0% y/y.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090630h.jpg" align="right" border="0" height="265" width="353">Weakest
Regions: Home prices in Phoenix, Nevada were quite weak and
fell 35.3% y/y and in San Francisco prices fell a lessened 28.0% y/y.
However, they still were off by nearly one-half from their early-2006
peak. Home prices in Las Vegas, Nevada continued their rapid rate of
decline, 32.1% y/y, and also were down by roughly one half from their
peak. The rate of price decline in Miami eased slightly (27.3% y/y
while home prices in Los Angeles continued to fall sharply 21.2% y/y.
In Tampa, the rate of monthly price decline slowed slightly (-21.3%
y/y). In Detroit, the monthly rate of price decline also eased
considerably (-25.4% y/y) but was off by early one-half from the
peak.
Here is a <a href="http://www2.standardandpoors.com/spf/pdf/index/CSHomePrice_Release_063055.pdf">link</a>
to the latest press release from Standard &amp; Poor's. An overview
of the S&amp;P/Case-Shiller home price series can be found <a href="http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,1,0,0,0,0,0.html">here</a>.
The history of the Case-Shiller data is available in Haver's USECON
database.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">S&amp;P/Case-Shiller
Home Price Index (SA, Jan 00 = 100)</th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">20 City Composite
Index</td>
<td>140.10</td>
<td>141.36</td>
<td>-18.1%</td>
<td>-15.8%</td>
<td>-3.8%</td>
<td>7.6%</td>
</tr>
</tbody>
</table>
Energy Prices Are Volatile With
Weak Demand &amp; Short Supply Prospects 
by <a href="/comment/Moeller.html">Tom
Moeller</a> June 30, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090630c.jpg" align="left" border="0" height="265" width="353">
For all of last week, the energy markets continued to discount
weakness in the economic environment. The likelihood of an easing in
demand lowered the weekly average retail price for a gallon of regular
gasoline slipped to $2.64 per gallon, down a nickel from the prior
week. Yesterday, however, that decline stalled with heightened concerns
regarding Mideast crude oil supplies. The Monday spot market price for
a gallon of unleaded gasoline jumped roughly ten cents from last week's
average to $1.90 per gallon. That jump did not, however, recover the
price declines during prior weeks from the daily high of $2.04. The
figures are reported by the U.S. Department of Energy and can be found
in Haver's WEEKLY &amp; DAILY databases.
The energy market's volatility was notably evident in crude
oil prices. The price for a barrel of West Texas Intermediate crude oil
jumped to $71.49 yesterday which was the highest level since the first
week of the month. Prices averaged $68.76 per barrel last week. Against
this backdrop crude oil production rose 3.6% y/y during the latest four
weeks. In addition, supplies of crude oil continue plentiful as
evidenced by a 13.3% y/y rise in inventories of crude oil &amp;
petroleum products. The figures on crude oil production and inventories
are available in Haver's OILWKLY database.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090630d.jpg" align="right" border="0" height="265" width="353">
The gasoline demand figures continued to improve modestly but
the comparisons still are negative. Year-to-year gasoline
demand last week fell by 1.3%. That remained improved from
the roughly 5.0% y/y decline of last fall. The change in demand is
measured using the latest four weeks versus the same four weeks in
2008. Demand for all petroleum products was down
6.6% y/y in the latest week led by a 15.1% drop in distillate demand.
These numbers also are available in Haver's OILWKLY database.
Finally, natural gas prices remained weak last week and fell
to $3.86 per mmbtu (-70.0% y/y). Yesterday, natural gas prices held
steady at $3.88 per mmbtu. Current prices are down by two-thirds from
the high reached in early-July of $13.19/mmbtu.
Developing a Liquid Market for Inflation-Indexed
Government Securities: Lessons from Earlier Experiences from
the Federal Reserve Bank of St. Louis can be found <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/09q1Shen.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/@W4/@W4.HTM">Weekly
Prices</a></th>
<th scope="col">06/29/09</th>
<th scope="col">06/22/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per
Gallon, Regular)</td>
<td>2.64</td>
<td>2.69</td>
<td>-35.5%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil,
WTI&nbsp; ($ per bbl.)</td>
<td>68.76</td>
<td>70.61</td>
<td>-49.9%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>

UK GDP Is Officially A Train Wreck
Impact Of GDP-Gap To Become A More Serious Matter For Argumentation 
by <a href="/comment/Brusca.html">Robert
Brusca</a> June 30, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090630e.jpg" align="left" border="0">
&#8216;Official&#8217; train wreck?? Maybe I shouldn&#8217;t
say &#8216;officially&#8217; since no one in officialdom has really declared it so.
And I don&#8217;t want those with policies at Lloyds to come running for
remuneration because they are insured against injury inflicted by a
train gone amok. Still, the sharp downward revision to UK GDP is
stunning and it gives us a new take on reality. 
 

Capital spending takes a dive &#8211; If capital
spending were a prize-fighter, the boxing officials would be streaming
in for an investigation of such a sudden dive. UK capital spending in
Q1 &#8216;did in&#8217; an already weak UK GDP showing in 2009-Q1 by falling at an
even steeper 27% annual rate. The annualized drop in UK GDP as a result
has sunk back to near double digit losses, showing a decline of at a
pace of 9.3% compared to -7.3% as last reported. And, yeah, they are
both bad numbers, but 9.3% is simply awful. 
 

Bigger than a pot-hole: The GDP hole that
the UK must dig itself out of is deeper than we thought. And in this,
the UK is not alone. Not seasonally adjusted Irish GDP was revised
lower in Q1 to an annual rate drop of 8.5% from 7.5% previously.
Excluding its key international sector, Ireland&#8217;s GDP fell 12% in Q1.
Downward revisions have been an ongoing theme&#8230; 
 

Yes we have no INFLATION!!! (for now) --
These sorts of downward revisions business activity help to explain
some of the other &#8216;news du jour&#8217; such as the lowest inflation rate in
40 years in Italy (+0.5% Yr/Yr in June); the first-time-ever drop in
the EMU CPI (-0.1% in the twelve months ended in June); and, the lowest
inflation reading in at least 38 years for the OECD area (+0.1% Yr/Yr
in May). 
 

Let&#8217;s do the twist...or let&#8217;s not -- There
has been some great twisting of inflation trends recently. As short a
time ago as July of 2008 OECD inflation had reached an 11-year high at
4.9% Yr/Yr; the plunge in the rate of inflation has a lot to do with
the global credit crisis and the deflating of the individual OECD
economies as well as the global economy. To the extent we may wish to
consider it a separate event, it also has to do with oil prices
falling. Energy prices in the OECD fell by 16.2% in the 12 months to
May obviously having a lot to do with the drop in that headline
inflation rate. That which twists can untwist&#8230; 
 

The GDP-Gap trap - These huge hits to GDP
are behind us. The legacy of those hits is something economists call
the GDP-Gap. The Gap is the difference between where GDP is currently
compared to where it could have been had the economy grown at its
&#8216;full-potential&#8217;. You get a good simple approximation of this by just
extending GDP&#8217;s growth trend before the economy slowed and fell and
looking at the resulting gap of that extrapolated line Vs actual GDP.
That gap will persist for some time into the future even if the economy
grows swiftly for several quarters. 
 

The plot thickens - While no one expects
declines of the past order of magnitude to continue going forward,
there is considerable debate about the speed of the individual
economies and of the global economy. The turning point location for GDP
growth rates to become positive and the pace at which growth will
proceed once that happens are critical ingredients in the outlook for
inflation. 
 

Risk source: Gap trap Vs central bankers at nap -
To Keynesian types these issues are the key; to others &#8216;the Gap&#8217; is
still an issue that matters but monetarists look for the impact on
inflation to come from all the special reserve injections by various
central banks. 
 

Market pricing, or groping - So the stage
is set. We can expect these issues to continue to be contentious as the
recession slows and recoveries re-start. Stock markets have rebounded
less on the expectation of strong GDP recovery growth rates and more on
the notion that huge drops in GDP are behind us and the companion
thought that at least some growth lies ahead. Bonds have been battered
back by those with fears of inflation from central-bank reserve growth
and the notion that the special times for distress pricing and the
flight to quality are behind us. 
 

Markets will continue to toss and turn on these issues. Some
will revel in the existence of the GDP-Gap as a protector against
inflation. Others will dismiss it or diminish it. It is the wave of the
future. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">UK GDP
</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td colspan="3">Consumption</td>
<td>Capital Formation</td>
<td>&nbsp;</td>
<td></td>
<td>Domestic</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>GDP</td>
<td>Private</td>
<td>Public</td>
<td>Total</td>
<td>Housing</td>
<td>Exports</td>
<td>Imports</td>
<td>Demand</td>
</tr>
<tr class="grey2">
<td colspan="9" class="firstcol">%
change Q/Q</td>
</tr>
<tr class="grey3">
<td class="firstcol">Q1-09</td>
<td>-9.3%</td>
<td>-5.0%</td>
<td>0.9%</td>
<td>-26.9%</td>
<td>-41.5%</td>
<td>-25.0%</td>
<td>-24.1%</td>
<td>-9.5%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Q1-09 Previous</td>
<td>-7.3%</td>
<td>-4.7%</td>
<td>1.2%</td>
<td>-14.2%</td>
<td>#N/A</td>
<td>-22.1%</td>
<td>-21.5%</td>
<td>-7.6%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Q4-08</td>
<td>-7.0%</td>
<td>-4.3%</td>
<td>4.3%</td>
<td>-4.7%</td>
<td>-12.7%</td>
<td>-15.6%</td>
<td>-20.2%</td>
<td>-8.7%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Q3-08</td>
<td>-2.9%</td>
<td>-1.5%</td>
<td>1.9%</td>
<td>-10.7%</td>
<td>-25.6%</td>
<td>-1.7%</td>
<td>-2.8%</td>
<td>-3.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Q2-08</td>
<td>-0.2%</td>
<td>-1.5%</td>
<td>4.0%</td>
<td>-8.8%</td>
<td>-21.9%</td>
<td>-1.8%</td>
<td>-5.3%</td>
<td>-1.2%</td>
</tr>
<tr class="grey2">
<td colspan="9" class="firstcol">%
change Yr/Yr</td>
</tr>
<tr class="grey3">
<td class="firstcol">Q1-09</td>
<td>-4.9%</td>
<td>-3.1%</td>
<td>2.8%</td>
<td>-13.2%</td>
<td>-26.2%</td>
<td>-11.6%</td>
<td>-13.6%</td>
<td>-5.7%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Q4-08</td>
<td>-1.8%</td>
<td>-0.8%</td>
<td>3.5%</td>
<td>-7.8%</td>
<td>-15.9%</td>
<td>-3.8%</td>
<td>-7.7%</td>
<td>-2.9%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Q3-08</td>
<td>0.5%</td>
<td>0.7%</td>
<td>2.6%</td>
<td>-3.9%</td>
<td>-14.8%</td>
<td>0.5%</td>
<td>-1.7%</td>
<td>0.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Q2-08</td>
<td>1.8%</td>
<td>1.4%</td>
<td>2.9%</td>
<td>-0.8%</td>
<td>-8.6%</td>
<td>2.8%</td>
<td>3.5%</td>
<td>2.2%</td>
</tr>
<tr class="grey3">
<td class="firstcol">5-Yrs</td>
<td>0.9%</td>
<td>1.2%</td>
<td>1.8%</td>
<td>0.7%</td>
<td>-5.1%</td>
<td>1.7%</td>
<td>1.1%</td>
<td>0.8%</td>
</tr>
</tbody>
</table>
U.S. Consumer Confidence Slips 
by <a href="/comment/Moeller.html">Tom
Moeller;</a> June 30, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090630f.jpg" align="left" border="0" height="265" width="353">
According to the Conference Board, consumer confidence slipped
this month following gains during the prior three months. The slip did
not, however, alter the picture of improvement in consumer attitudes.
Confidence remained up by more than one-half from the February low and
roughly equal to the year ago level. The Conference Board data can be
found in Haver's CBDB database.
During the last ten years there has been an 86% correlation
between the level of consumer confidence and the y/y change in real
consumer spending.
The expectations component of confidence slipped the most last
month with an 8.4% decline following three strong monthly increases.
Still, the index remained near the highest level since late 2007. The
percentage of respondents expecting business conditions to improve
slipped to 21.2% but that remained near the highest level since 2004. A
much reduced 20.2% expected conditions to worsen. That improvement was
expected by 17.4 of respondents to generate more jobs, more than double
the percentage at the recent low.
Consumers' assessment of the current economic conditions also
slipped m/m and remained near its recent low. It remained off by nearly
two-thirds from a year earlier. Jobs were seen as hard to get by a
still-high 44.8% of respondents and jobs were seen as plentiful by only
4.5% of respondents. Business conditions were seen as good by just 8.0%
and that was near the 1991 low. Consumers who thought business
conditions were bad rose slightly to 45.6%, still near the highest
since 1983.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090630g.jpg" align="right" border="0" height="265" width="353">
Expectations for the inflation rate in twelve months have been
roughly stable at 5.9%. That's down from last year's high of 7.7%.
Expectations about interest rates have increased sharply with 51.7% of
respondents expecting higher rates while 16.3% expect rates to fall. A
greatly increased 31.5% of respondents expected stock prices to rise.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Conference
Board &nbsp;(SA, 1985=100)</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y %</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer
Confidence Index</td>
<td>49.3</td>
<td>54.8</td>
<td>-3.3</td>
<td>57.9</td>
<td>103.4</td>
<td>105.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Present Situation</td>
<td>24.8</td>
<td>29.7</td>
<td>-62.1</td>
<td>69.9</td>
<td>128.8</td>
<td>130.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
Expectations</td>
<td>65.5</td>
<td>71.5</td>
<td>58.2</td>
<td>50.0</td>
<td>86.4</td>
<td>89.7</td>
</tr>
</tbody>
</table>
</body></html>

Decline In Case-Shiller Home PriceIndex Eases

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090629c.jpg" align="right" border="0" height="265" width="353">
The European Commission's Business Climate Indicator for the
Euro Area is designed to deliver a clear and early assessment of the
cyclical situation. The extent that it has done so in the past can be
seen in the first chart that shows the Indicator and the year to year
change in industrial production. With a correlation between the two
series of 90%, <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090629d.jpg" align="right" border="0" height="265" width="353">
the R-Square is 81%, indicating that the business
climate indicator accounts for about 81% of the changes in the
industrial production. The rise in the indicator for the third
successive month in June is a good sign, but it is still at an
historically low level.
The individual results of the surveys of industry, the
construction, services, and retail trade businesses are reported as a
percent balances between those expecting improving and <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090629e.jpg" align="right" border="0" height="265" width="353">
those expecting
deteriorating conditions in important aspects of business, such as
orders, production outlook, inventories, etc. Except for construction,
the other businesses have shown improvements over the last few months
as can be seen in the second chart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">European
Commission: Confidence Measures</th>
<th scope="col">Jun 09</th>
<th scope="col">May&nbsp; 09</th>
<th scope="col">Apr 09</th>
<th scope="col">Mar 09&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Business Climate Indicator (Pts
of Std. Dev/)</td>
<td>-2.97</td>
<td>-3.11</td>
<td>-3.21</td>
<td>-3.37</td>
</tr>
<tr class="odd">
<td class="firstcol">Business Confidence (% Balance)</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Industry</td>
<td>-31.9</td>
<td>-33.2</td>
<td>-35.0</td>
<td>-37.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services</td>
<td>-19.8</td>
<td>-22.5</td>
<td>-24.2</td>
<td>-25.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>-33.5</td>
<td>-33.7</td>
<td>-33.6</td>
<td>-31.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail Sales</td>
<td>-16.0</td>
<td>-14.2</td>
<td>-19.8</td>
<td>-17.0</td>
</tr>
<tr>
<td class="firstcol">Consumer Confidence (% Balance</td>
<td>-25.1</td>
<td>-28.1</td>
<td>-30.5</td>
<td>-34.2</td>
</tr>
</tbody>
</table>
</body></html>

The European Commission's Business Climate Indicator for the Euro Area is designed to deliver a clear and early assessment of the cyclical situation. The extent that it has done so in the past can be seen in the first chart that shows [...]

Business and Consumer Confidence Improve in the Euro Area

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090629a.jpg" align="right" border="0" height="265" width="353">
The National Activity Index published by the Chicago Federal
Reserve Bank remained roughly unchanged during May versus April.
Nevertheless, the index level of -2.30 was near its the highest level
since October of last year. The latest figure was up from the series'
low of -3.99 reached this past January. Since 1970 there has been a 75%
correlation between the level of the index and the q/q change in real
GDP. 
The three-month moving average of the index rose
slightly versus April and stood at its highest level since November. 
An index level at or below -0.70 typically has indicated
negative U.S. economic growth. A zero value of the CFNAI indicates that
the economy is expanding at its historical trend rate of growth of
roughly 3%. The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_june2009.pdf">here</a>
and the historical figures are available in Haver's SURVEYS database.
The Bank reported that fifteen of the 85 individual indicators
made positive contributions to the index in May while 70 made a
negative contribution. The employment-related components made the
largest positive contributions to the May CFNAI. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090629b.jpg" align="right" border="0" height="265" width="353">
The CFNAI is a weighted average of 85 indicators of economic
activity. The indicators reflect activity in the following categories:
production &amp; income, the labor market, personal consumption
&amp; housing, manufacturing &amp; trade sales, and inventories
&amp; orders.
In a separate survey, the Chicago Fed indicated that its
Midwest manufacturing index fell during April to its lowest level since
1994. Indicators for the steel, machinery and the auto sectors fell to
new lows but in the resource sector the figure rose slightly.
Fuel efficiency challenges the auto industry
from the Federal Reserve Bank of Chicago can be found <a href="http://midwest.chicagofedblogs.org/archives/2009/06/fuel_efficiency.html">
here</a>.
Residential Housing and Personal Bankruptcy from
the Federal Reserve Bank of Philadelphia is available <a href="http://www.philadelphiafed.org/research-and-data/publications/business-review/2009/q2/brq209_housing-and-bankruptcy.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/SURVEYS/@S5/@S503/@S503.HTM">Chicago
Fed</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">May '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-2.30</td>
<td>-2.27</td>
<td>-1.18</td>
<td>-1.77</td>
<td>-0.36</td>
<td>0.03</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Moving
Average</td>
<td>-2.67</td>
<td>-2.73</td>
<td>-1.12</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
</body></html>

The National Activity Index published by the Chicago Federal Reserve Bank remained roughly unchanged during May versus April. Nevertheless, the index level of -2.30 was near its the highest level since October of last year. The latest [...]

Chicago Fed Index Remains Stable in May At Highest Level Since October

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090629a.jpg" align="right" border="0" height="265" width="353">
The National Activity Index published by the Chicago Federal
Reserve Bank remained roughly unchanged during May versus April.
Nevertheless, the index level of -2.30 was near its the highest level
since October of last year. The latest figure was up from the series'
low of -3.99 reached this past January. Since 1970 there has been a 75%
correlation between the level of the index and the q/q change in real
GDP. 
The three-month moving average of the index rose
slightly versus April and stood at its highest level since November. 
An index level at or below -0.70 typically has indicated
negative U.S. economic growth. A zero value of the CFNAI indicates that
the economy is expanding at its historical trend rate of growth of
roughly 3%. The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_june2009.pdf">here</a>
and the historical figures are available in Haver's SURVEYS database.
The Bank reported that fifteen of the 85 individual indicators
made positive contributions to the index in May while 70 made a
negative contribution. The employment-related components made the
largest positive contributions to the May CFNAI. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090629b.jpg" align="right" border="0" height="265" width="353">
The CFNAI is a weighted average of 85 indicators of economic
activity. The indicators reflect activity in the following categories:
production &amp; income, the labor market, personal consumption
&amp; housing, manufacturing &amp; trade sales, and inventories
&amp; orders.
In a separate survey, the Chicago Fed indicated that its
Midwest manufacturing index fell during April to its lowest level since
1994. Indicators for the steel, machinery and the auto sectors fell to
new lows but in the resource sector the figure rose slightly.
Fuel efficiency challenges the auto industry
from the Federal Reserve Bank of Chicago can be found <a href="http://midwest.chicagofedblogs.org/archives/2009/06/fuel_efficiency.html">
here</a>.
Residential Housing and Personal Bankruptcy from
the Federal Reserve Bank of Philadelphia is available <a href="http://www.philadelphiafed.org/research-and-data/publications/business-review/2009/q2/brq209_housing-and-bankruptcy.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/SURVEYS/@S5/@S503/@S503.HTM">Chicago
Fed</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">May '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-2.30</td>
<td>-2.27</td>
<td>-1.18</td>
<td>-1.77</td>
<td>-0.36</td>
<td>0.03</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Moving
Average</td>
<td>-2.67</td>
<td>-2.73</td>
<td>-1.12</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
Business and Consumer Confidence
Improve in the Euro Area 
by <a href="/comment/Curley.html">Louise
Curley</a> June 29, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090629c.jpg" align="right" border="0" height="265" width="353">
The European Commission's Business Climate Indicator for the
Euro Area is designed to deliver a clear and early assessment of the
cyclical situation. The extent that it has done so in the past can be
seen in the first chart that shows the Indicator and the year to year
change in industrial production. With a correlation between the two
series of 90%, <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090629d.jpg" align="right" border="0" height="265" width="353">
the R-Square is 81%, indicating that the business
climate indicator accounts for about 81% of the changes in the
industrial production. The rise in the indicator for the third
successive month in June is a good sign, but it is still at an
historically low level.
The individual results of the surveys of industry, the
construction, services, and retail trade businesses are reported as a
percent balances between those expecting improving and <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090629e.jpg" align="right" border="0" height="265" width="353">
those expecting
deteriorating conditions in important aspects of business, such as
orders, production outlook, inventories, etc. Except for construction,
the other businesses have shown improvements over the last few months
as can be seen in the second chart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">European
Commission: Confidence Measures</th>
<th scope="col">Jun 09</th>
<th scope="col">May&nbsp; 09</th>
<th scope="col">Apr 09</th>
<th scope="col">Mar 09&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Business Climate Indicator (Pts
of Std. Dev/)</td>
<td>-2.97</td>
<td>-3.11</td>
<td>-3.21</td>
<td>-3.37</td>
</tr>
<tr class="odd">
<td class="firstcol">Business Confidence (% Balance)</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Industry</td>
<td>-31.9</td>
<td>-33.2</td>
<td>-35.0</td>
<td>-37.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services</td>
<td>-19.8</td>
<td>-22.5</td>
<td>-24.2</td>
<td>-25.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>-33.5</td>
<td>-33.7</td>
<td>-33.6</td>
<td>-31.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail Sales</td>
<td>-16.0</td>
<td>-14.2</td>
<td>-19.8</td>
<td>-17.0</td>
</tr>
<tr>
<td class="firstcol">Consumer Confidence (% Balance</td>
<td>-25.1</td>
<td>-28.1</td>
<td>-30.5</td>
<td>-34.2</td>
</tr>
</tbody>
</table>
</body></html>

Chicago Fed Index Remains Stablein May At Highest Level Since October

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

Resilient US economy is pushing up longer-term inflation expectations and interest rates

Positive US economic data surprises leading to upward adjustment of interest rate expectations

Recent aggressive policy easing in China has given a massive boost to equity prices

FOMC expects much more easing now than in June

US is clear world leader in business capital spending on artificial intelligence

Blue Chip forecasters expect US to lead aggressive policy rate cuts over coming year—apart from Japan

Ratio of job openings to the number unemployed in the US now below pre-pandemic level

U.S. layoffs not showing as much cooling in labor markets as unemployment rate

While goods prices have moderated, service price inflation remains elevated and sticky

Since Jan 2023, BCEI US outlook has improved, worsened for Japan and the euro area

Persistent negative US economic surprises leading to big rate-cut expectations

Germany is Euro area weakling

Flash PMIs show good start to Q3 in US; loss of momentum in the euro area

Chinese economy on downtrend could threaten global economy

Working age population labor force participation near all-time high as retirements increase

Blue Chip forecasters look for widespread policy rate cuts just ahead

Flash June PMIs point to a widespread slowdown apart from the US

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The Consumer Price Index increased 0.3% during November, up from four consecutive months of 0.2% gain. Expectations had been for a 0.2% rise in the Action Economics Forecast Survey. The y/y increase picked up to 2.7% from 2.6% in October and was the quickest rise in four months. The three-month increase rose to 3.0% (AR) from 2.5% but remained below the 4.6% high in April of this year. Prices excluding food & energy rose an expected 0.3% for the fourth consecutive month. Core consumer prices increased 3.7% (AR) during the last three months, up from 1.6% in July, and 3.3% y/y. Food prices rose 0.4% last month (2.4% y/y) after a 0.2% gain while energy prices rose 0.2% (-3.2% y/y) after holding steady in October.

The CPI less food, energy and shelter, another measure of core pricing power, rose 0.3% after a 0.2% gain. The 2.2% y/y rise was increased from a July low of 1.7% but remained below the 7.6% y/y peak in February 2022. It compared to a low of 0.3% y/y in May 2020.

Services costs less energy rose a steady 0.3% in November (4.6% y/y). Shelter costs rose 0.3% following a 0.4% rise in October. Its 4.7% y/y rise compares to an 8.2% peak in March 2023. Owners’ equivalent rent of primary residences increased 0.2% (4.9% y/y), following a 0.4% rise and was the weakest increase since April 2021. Rents of primary residences rose a similarly depressed 0.2% (4.4% y/y) after two consecutive months of 0.3% rise, but the cost of lodging away from home surged 3.2% (3.7% y/y) following a 0.4% October gain. Transportation service prices held steady last month (+7.1% y/y) after rising 0.4% in October, as public transportation prices also were unchanged (2.9% y/y) after a 2.4% October surge. Medical care service costs rose 0.4% (3.7% y/y) the same as in October. Education & communication prices eased 0.2% (+1.8% y/y) for the second straight month. Recreation services prices rose 0.7% (3.5% y/y), the same as in October.

During November, the CPI for goods less food & energy increased 0.3% (-0.6% y/y) after holding steady in October. Home furnishings prices rose 0.7% (-1.0% y/y), as appliance costs also rose 0.7% (-1.0% y/y).  Apparel costs rose 0.2% (1.1% y/y) after a 1.5% decline. Education & communication product costs fell 1.1% (-5.4% y/y) the same as in October while medical care product prices declined 0.1% (NSA, +0.4% y/y) in November. Prices for recreation products weakened 0.5% (-1.5% y/y), the fourth decline in five months. Transportation product prices rose 0.9% (-1.4% y/y) after improving 0.8%. New vehicle prices rose 0.6% (-0.7% y/y) after holding steady while used car & truck prices strengthened 2.0% (-3.4% y/y) after a 2.7% rise.

Food prices rose 0.4% (2.4% y/y) in November following a 0.2% October increase. Egg prices rebounded 8.2% (37.5% y/y) after a 6.4% decline. Meat, poultry & fish prices rebounded 1.1% (1.5% y/y) after falling 0.8% while cereal & bakery product prices weakened 1.1% (-0.5% y/y) after a 1.0% rise. Fruit & vegetable prices rose 0.2% (1.1	% y/y) after increasing 0.4%, while dairy prices eased 0.1% (+1.2% y/y) after rising 1.0% in October. Nonalcoholic beverage prices rose 1.5% (2.8% y/y) after a 0.4% October rise.

Energy prices rose 0.2% (-3.2% y/y) in November after holding steady in October. Gasoline prices rose 0.6	% (-8.1% y/y) after three straight monthly declines. Amongst other energy products, fuel oil & propane prices rose 0.4% (-10.7% y/y) after declining 2.2%. Electricity prices eased 0.4% (3.1% y/y) after a 1.2% gain, while natural gas prices jumped 1.0% (1.8% y/y) following a 0.3% October gain.

The Consumer Price figures can be found in Haver's **USECON** database. The expectations figure is contained in the **AS1REPNA** database.

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- Food prices pick up.
- Services price gains remain steady.
- Core goods prices pick up.

U.S. CPI Picks Up Modestly in November; Core Prices Rise Steadily

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The U.S. Treasury Department reported a U.S. government budget deficit of $624.2 billion budget deficit for the first two months of FY 2025 after a $380.6 billion deficit for the first two months of FY’24. For November alone, the government ran a budget deficit of $366.8 billion, which compared to a deficit of $314.0 billion twelve months earlier. The Action Economics Forecast Survey expected a $356.5 billion deficit in November.

Overall revenues this fiscal year so far declined 7.3% y/y as individual income tax receipts fell 11.6% y/y. The level of corporate tax receipts nearly halved y/y. Social insurance revenues increased 7.4% y/y and excise taxes increased 34.0% y/y in FY’25. Customs duties rose 6.1% y/y in the first two months of FY’15.

Federal government outlays increased 18.3% y/y in early FY’25 after a 16.7% rise early in FY’24. Defense spending rose 13.7% y/y, as it did early in FY’24. Social Security outlays rose 6.9% y/y after rising 12.0% y/y in FY’24. Interest payments rose 8.0% y/y in FY’25 after a 63.7% rise a year earlier. Health program spending rose 12.0% y/y after holding steady early in FY’24 while Medicare payments doubled y/y. Income security outlays rose 31.8% y/y compared to a 15.1% y/y decline in the first two months of FY’24.

Haver's data on Federal Government receipts & outlays are contained in **USECON**. The expectations figure is in the **AS1REPNA** database.


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- Personal income tax receipts weaken.
- Corporate tax payments roughly halve y/y.
- Social Security spending fuels outlay growth.

U.S. Government Budget Deficit Deepens So Far in FY 2025

Kathleen Stephansen, CBE

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Mortgage applications in the week ended December 6 increased 5.4% (15.9% y/y) after rising 2.8% (18.1% y/y) in the week ended November 29. Applications for loans to purchase a house dropped 4.1% (+3.5% y/y) in the December 6 week, after a rise of 5.6% (11.8% y/y) in the November 29 week, while applications to refinance a loan surged 27.2% (42.2% y/y) in the latest week after declining 0.6% (+33.5% y/y) the week before. These data are from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey and the amounts quoted here are seasonally adjusted.

The effective interest rate on a 30-year fixed rate loan was 6.86% in the week ended December 6, down slightly from 6.89% in the November 29 week. The rate on a 5-year ARM dropped 50bps to 5.96% in the latest week from 6.46% in the November 29 week, still higher than 5.84% in mid-September. The rate on a 30-year jumbo loan was 6.94% in the week ended December 6, down slightly from 6.96% in the November 29 week, but slightly higher than 6.90% in mid-October.

The share of applications to refinance an existing mortgage was 46.8% in the December 6 week, sharply higher than the 38.7% share in the November 29 week. The largest share in recent months was 55.7% the week of September 20. The share of applications for ARMs was 5.3% in the latest week, down from 6.0% in the November 29 week. The last time the share was 5.3% was in the week ended February 25, 2022.

The average loan size in the December 6 week was $368,200, down 2.5% from $377,600 in the November 29 week, and up 3.6% from a year ago. The average size of an application for a loan to purchase a house was $416,200 in December 6 week, down from $431,900 in the week before, while the average size of an application to refinance an existing loan increased to $313,600 in the latest week from $291,500 in the November 29 week.

The Mortgage Bankers Association Survey covers 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver’s **SURVEYS** database.

- Applications to purchase a house drop, while applications to refinance surge.
- Slight decrease in rates on 30-year fixed-rate loans.
- Average loan size decreases modestly.

U.S. Mortgage Applications Rise in the December 6 Week

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U.S. nonfarm business productivity (output per hour) increased an unrevised 2.2% (SAAR) during Q3’24 after a 2.1% rise in Q2 and a 0.7% Q1 gain. The figure matched expectations in the Action Economics Survey. The 2.0% y/y increase remained below its 2.7% gain in 2023 (Q4/Q4) but was improved from a 1.4% decline in 2022. It also was greatly improved versus the 1.2% average between 2009 and 2019. Nonfarm business output increased 3.5% (2.8% y/y) after a 3.0% gain, revised from 3.5%, while hours-worked rose 1.2% (0.7% y/y) after increasing 0.9%.

Compensation growth slowed to 3.1% (4.3% y/y), revised from 4.2%, after a slightly revised 4.8% gain. As a result, unit labor costs grew 0.8% (2.2% y/y) last quarter, revised from 1.9% after a 1.1% decline, revised from a 2.4% increase. The Action Economics survey expected unit labor costs to rise 1.6% last quarter.

In the manufacturing sector, productivity in Q3 improved 0.9% (0.6% (y/y), revised from 1.0%, after rising a minimally changed 0.2% in Q2 and falling 0.7% in Q1. Compensation grew 2.6% (2.4% y/y), revised from 6.4%, following a 5.6% decline in Q2, revised from a 6.2% rise. Unit labor costs rose 1.7% (1.8% y/y), revised from 5.3%, after a 5.8% fall, revised from a 5.8% increase.

The productivity and labor cost data are available in Haver’s **USECON** database. The Action Economics expectations figures are in the **AS1REPNA** database.

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- Annual increase remains below last year’s gain.
- Compensation growth dips.
- Increase in unit labor costs slows.

U.S. Productivity Growth Is Steady & Unrevised in Q3’24

Winnie Tapasanun

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The NFIB Small Business Optimism Index rose to 101.7 in November, the seventh m/m rise in eight months and the highest level since June 2021, following a 2.2-point increase to 93.7 in October, according to the November 2024 Small Business Economic Trends survey conducted by the National Federation of Independent Business. This was the first time in 35 months that the index was above the 50-year average of 98. The index was also up from its recent low of 88.5 in March 2024, 90.6 in November 2023, and a low of 89.0 in April 2023; nevertheless, having remained below a high of 102.5 in June 2021. Nine of the 10 index components rose, none fell, and one was unchanged. The NFIB Small Business Uncertainty Index fell to 98 in November, the lowest level since August, from a record-high 110 in October; however, it was well above its recent low of 65 in November 2023 and a low of 55 in June 2022.

The outlook for business conditions in the next six months turned positive in the latest survey. The net balance of respondents expecting the economy to improve jumped to 36% in November, the sixth m/m rise in seven months and the highest level since June 2020, after a seven-point increase to -5% in October; it was significantly above a record low of -61% in June 2022. Expected real sales gained to a net 14% in November following a five-point rise to -4% in October, posting the highest level since February 2020. The latest reading was up from a low of -21% in May 2023 and a low of -29% in July 2022. A net -13% of respondents reported higher nominal sales in the past three months, up from -20% reported in October and registering the highest reading since June. The latest reading, however, was down from the most recent positive reading of 1% in May 2022 and a peak of 9% in June 2021.

Plans to make capital outlays rose to 28% in November from 22% in October, up from a low of 19% in September and a low of 19% in April 2023. The November number posted the highest reading since January 2022; nevertheless, having remained below a high of 31% in October 2021. Plans to expand the business advanced to 14% in November following a two-point increase to 6% in October; the latest figure, up from a low of 2% in March 2023, registered the best reading since a high of 15% in June 2021. Meanwhile, expected credit conditions edged up to -5% in November after a two-point increase to -6% in October; the latest number was slightly above its recent high of -6% in February 2024 but below a high of -4% in May 2022 and a high of -3% in November 2021.

On the labor front, labor markets remained relatively tight. Forty-eight percent of respondents reported that qualified workers to fill job openings were hard to find in November, up from 46% in October. These numbers were below a high of 57% in September 2023, a high of 61% in May 2022, and a peak of 62% in September 2021. A net 18% planned to increase employment in November, up from 15% in October and 15% in September, but it was down from a high of 26% in May 2022 and a peak of 32% in August 2021. Notably, 36% reported positions not able to be filled in November, up from 35% in October and registering the highest since August. These figures remained below a high of 51% in May 2022.

Overall earnings trends continued to improve in November while having remained in negative territory since December 2019. The figure increased to -26% in November, still a poor reading, following a one-point uptick to -33% in October; these numbers were below a high of -18% in March 2023.

On the pricing front, inflation pressures, while trending down, remained at an inflationary level. The net percent raising their average selling prices rose to 24% in November after a one-point decline to 21% in October; these numbers, however, were slightly down from 25% in November 2023 and well below a high of 66% in March 2022. The percentage planning to raise prices rose to 28% in November following a one-point increase to 26% in October; these figures were below 34% in November 2023 and a high of 52% in March 2022.

Wage inflation was still relatively high in the November survey. A net 32% of respondents raised compensation during the last three months, slightly up from 31% reported in the October survey. However, it was down from a high of 46% in February 2023 and a peak of 50% in January 2022. A net 28% of firms planned to raise worker compensation in the next three months, up from 23% reported in October and registering the highest reading since December 2023; nevertheless, having remained below a high of 30% in November 2023 and a high of 32% in October 2022.

Inflation continued to be an issue facing small businesses, as reported by 20% of NFIB members in November as the single most important problem. Registering the lowest reading since January 2024, the November figure was down from 23% in October and a peak of 37% in July 2022. The quality of labor was the second important concern with 19% in November, slightly down from 20% in October. Other concerns (in November vs. October) included taxes (14% vs. 16%), the cost of labor (11% vs 8%), and government requirements (8% vs. 8%).

According to the Small Business Administration, there are 33 million small businesses in the United States, which employ 62 million workers. The NFIB surveys anywhere from 500 to 2000 respondents each month and the typical firm employs 10 people and reports gross sales of about $500,000 a year. The NFIB figures can be found in Haver’s **SURVEYS** database.

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- November NFIB Small Business Optimism Index up 8.0 pts. to 101.7.
- Uncertainty Index down 12 pts. to a three-month-low 98.
- Expectations for economy up 41 pts. to 36%, the highest since June ’20.
- Expected real sales up 18 pts. to 14%, the highest since February ’20.
- Inflation (20%) remains top business problem, followed by Quality of Labor (19%); both slightly down from October.

Economy in Brief: June 2009

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