Robert Brusca

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Globally PMIs are losing momentum. China had been seeing industrial decay early this year then it kicked out of that erosion with a jump in March. But that gain did not hold; the Chinese PMI was slipping again in May and dipping below 50, signaling manufacturing sector contraction. The March breakout, led by a surge in orders and output has now proved to be a false signal. The averages for China's manufacturing PMIs over three months, six months and 12 months have been hovering around the 50% mark back to 2011. In 2017 there was a minor revival but that eroded in 2018 and now China's manufacturing sector is quite sluggish again and without momentum, trying to sustain output increases in the face of an escalating trade war with an increasingly negative geopolitical environment.

Growth = Security 
China has long sought growth and strength to be the foundation for political stability. With the tariffs imposed on China, growth is having a hard time making headway. China, that was making some progress on reducing its massive build-up of debt, has since had to reverse that policy to use debt to stimulate the economy. China is feeling the pain and looking to 'return the favor.'


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Trade talk break down comes out of the blue.. 
China and the United States, for years to come, will point fingers at one another over the responsibility for the Trade Talk breakdown. But it is clear that it came when China called a special meeting and thereafter the U.S. found that many conditions important to the U.S. that the U.S. thought had been accepted by China were suddenly viewed as extreme and unacceptable. China has been a rogue in terms of its stand on technology transfer (it steals it) and copyright and trade mark infringement (China does not enforce foreign claims or protect them; China is the epicenter of a global counterfeiting ring of various corporate products featuring handbags, watches and so much more). The U.S. sought not just 'a deal with China' but a specific deal with benchmark numbers and with an underpinning that would make the various agreed elements of the deal identifiable and enforceable. Without enforcement, a deal would mean nothing.

China's view 
China's view is that the U.S. asked for too much and infringed on China's sovereignty. Maybe that is true. But there were things China once was agreeing to do. I'm not quite sure how to assess the blame with their backtracking. Nor is it possible to know on what timeline trade negotiations now lay.

The U.S.: The Great Enabler 
The U.S.-China situation can be viewed in a paradigm in which the U.S. has been the enabler. For years, China got away with doing things that it should not have been allowed to do. The U.S. ignored it and thereby enabled or even encouraged this activity largely because China was still developing. Suddenly, the U.S. wants China to be well-behaved. But it never made this demand in the past. So China feels it is being dealt with unfairly because the rules have changed. Actually, it is practice and expectations that are changing and now the rules are to be enforced.

Politics of the New Millennial 
Negotiations with China now highlight a whole new aspect of international relations. It began in some sense with Russia interfering with U.S. elections. This was not just Russia beating on the U.S. economy or clashing over borders and spheres of influence as in Crimea, Ukraine and Venezuela. Nor was it like supporting a rogue state as in Syria. It was Russia digging at the roots of our democracy. What China did was to build on this idea. Its counter-tariffs (in response to U.S. tariffs imposed on Chinese goods) were set in a way to do maximum political damage to the sitting U.S. President. The tariffs were not aimed at the U.S. economy but at the U.S. President. Recently, Kim Jong-un has revealed that he is following the U.S. primary elections in the U.S. He sent out a message to one-in-twenty-some Democrat candidate, Joe Biden, when Biden said something about Kim that he did not like. U.S. politics are being followed very closely overseas. There is every reason to believe that the motivation for China's backtracking on Trump was its perception that the President was damaged goods politically and would need a trade deal and might settle for much less than what China had put on the table. However, when China pulled those things off the table Trump did not cave in and China seems to have made a political miscalculation that could be costly to both sides.

There is no domestic-international divide anymore on anything 
Still, there is a very important message here. As much as Democrats accuse Trump of being divisive, Trump who was not charged in the Mueller report and was cleared of any conspiracy (collusion) with Russia is still being pursued by Democrats over potential obstruction of justice charges on which Mueller was vague. But this is a very technical political situation since there was no crime committed and there was nothing Trump was trying to hide that was embarrassing; he just wanted the investigation stopped because it offended him. What we see is that if Democrats pursue impeachment against Trump we can expect our foreign adversaries to use that to try to weaken the United States.

What's at stake... 
We are not talking about unimportant hypothetical possibilities. Kim Jong-un who has still been ranting about the U.S. and the broken down negotiations between the U.S. and North Korea just executed his special envoy to the U.S. and one other member of that delegation for the failure of those talks. In recent weeks, Kim has been blaming the U.S. and Secretary of State Pompeo and National Security advisor John Bolton. Now he kills two members of his own team for their failure and he continues to launch adverse rhetoric at the U.S. for seizing one of North Korea's largest ships that was carrying goods in violation on U.S. sanctions.

Trump: the lightening rod 
Trump is a divisive and combative figure. But he has made progress in negotiating deals; albeit some have not closed yet. And if Democrats will not consider a vote on his North America trade pact, it will fail. And if Democrats keep undercutting Trump, he will probably not be able to successfully negotiate with China either. Past presidents – both Republican and Democrat- never had the stomach to do what Trump has been doing and what is now and only now being recognized as critically important and long overdue on the trade front.

Kool Aid- No Mas 
Previous to Trump, many were willing to drink the Kool Aid of 'It's free trade.' But 'it' has not been free trade or anything like free trade. Losing jobs and never getting any replacement work or output is not free trade. The exchange rate mechanism that is supposed to drive trade adjustment and turn 'free trade' into a dynamic perpetual motion machine has been coopted. Trump has chosen to use the only weapon he has, tariffs, to try to force change.

Back or forward to the future? 
The real question is what will the future look like? Donald Trump may only have the final year and one-half of his administration left. He might get reelected. It is still hard to tell. America is polarized and the difference between Trump or a New Progressive Democrat candidate is like night and day or more like matter vs. anti-matter. Under Trump, the economy has begun to perform better. There are 'jobs for all' but many do not seek jobs and many of the good jobs are simply not on offer. Trade policy is trying to change that. The U.S. has a lot of work to do and what happens will depend a lot on its negotiations with China.

Tariffs the 'Schmoo' weapon <a href="https://en.wikipedia.org/wiki/Shmoo">(everything weapon)</a>. 
The President has gone a bit tariff happy threatening tariffs on vehicle imports then setting that aside and now imposing tariffs on Mexico for its role in letting so many immigrants bang on our southern border doors and walls. If the U.S. could handle its own border problem domestically, Trump would not involve Mexico. But Democrats are in some strange denial about the Southern border. By making it a public policy that everyone who whispers the magic word (Asylum!) will be admitted, legions have been attracted to the U.S. Meanwhile, Democrats blame Trump for the border problems and do not give him the financial resources to deal with it. Democrats are trying to force a 'catch and release' program which will simply lead to a new influx of untraceable illegal residents.

Unilateral is multilateral in a one dimension world 
Politics is playing out across our border and in our international relations. Many legal scholars are upset by the increasingly unilateral actions of the President, but he is increasing being isolated and given insufficient tools to do his job. There is blame aplenty for both sides and a building sense of crisis. China is being more bellicose. This is the country that grabbed the South China Sea after no provocation and just decided it wanted it. It got no backing for this. The World Court denied China's claim. China still has it. China as a Communist country has great influence on its firms. It's enabling government support that has vaulted Huawei to the forefront in technology. This is another example of how China works. Huawei is trying to fight U.S. allegations of being not trustable. China is warning Canada about the consequence of choosing to side with the U.S. China is preparing a hit list of U.S. firms and people for sanctions <a href="https://www.reuters.com/article/us-usa-trade-china-talks/china-threatens-corporate-hit-list-on-eve-of-new-tariffs-on-u-s-imports-idUSKCN1T107K">(more here)</a>.

Beyond trade wars 
Prepare not for a trade war but total economic war. We have not seen the worst of it. It has become an ugly world. People liked the U.S. a lot more when it let others take advantage of it and cheat it. Standing up for its rights and for fair play has not been popular globally. I understand there is a strong undercurrent of blaming Trump, but in the end that is not the answer. His aggressiveness has helped to kick this off. But without that confrontation, the U.S. was headed for permanent status as an industrial backwater and U.S. firms were to be milked by China for their trade secrets. Meanwhile, China has spread its influence through a devious 'belt and road' program, something XI says it will now stop abusing. We will see. But as you well know if you do not fight the powers that be (to use Spike Lee's phrase) they will 'be' forever and they will get stronger. Republicans and Democrats would do well sit down and look this increasingly hostile global situation in the eye and find common ground instead of never ending uncommon disagreements.


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Globally PMIs are losing momentum. China had been seeing industrial decay early this year then it kicked out of that erosion with a jump in March. But that gain did not hold; the Chinese PMI was slipping again in May and dipping below [...]

China's PMI Erodes; The Trade War Escalates

Tom Moeller

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The Chicago Purchasing Managers Business Barometer increased
to 54.2 during May from April's 52.6, which was the lowest reading since January
2017. The Action Economics Forecast Survey expected a lesser increase to 53.8.
The Chicago Purchasing Managers figures are diffusion indexes where readings
above 50 indicate growth.

In contrast to the ISM Composite Index, which is constructed
from five components, Chicago's General Business Barometer is based on the
answer to a single question. Haver Analytics uses Chicago's components to build
a headline index using methodology similar to that used to calculate the ISM
index. This measure improved to 54.5 in May from 52.6 in April. Over the past 15
years, this ISM-adjusted Chicago index has an 83% correlation with the national
ISM Manufacturing Index, which is scheduled for release on Monday.

Improvement in the overall index was accompanied by increases
in the readings covering production, new orders and inventories. These gains
were offset by declines in the order backlog and supplier delivery series, the
latter indicating the quickest rate of order fulfillment since March 2017.

The employment index fell slightly to the lowest point since
October 2017. Seventeen percent of respondents (NSA) reported more hiring versus
24% who did so last May. Seventeen percent of respondents also reported less
hiring versus 14% twelve months earlier. During the last ten years there has
been a 64% correlation between the employment index and the m/m change in
factory sector payrolls.

The prices paid index rose slightly but remained well below
the highs during the third quarter of last year. Twenty three percent (NSA) of
respondents reported higher pries versus 56% a year earlier. Seven percent of
respondents reported lower prices versus two percent last year.

The MNI Chicago Report is produced by MNI in partnership with
ISM-Chicago. The survey covers a sample of over 200 purchasing professionals in
the Chicago area with a monthly response rate of about 50%. Summary data are
contained in Haver's USECON database, with detail including the ISM-style
index in the SURVEYS database. The Action Economics Forecast Survey is
available in AS1REPNA.

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" >Chicago Purchasing Managers Index (%,
 SA)</th>
 <th scope="col" >May</th>
 <th scope="col" >Apr</th>
 <th scope="col" >Mar</th>
 <th scope="col" >May '18</th>
 <th scope="col" >2018</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >General Business Barometer</td>
 <td>54.2</td>
 <td>52.6</td>
 <td>58.7</td>
 <td>63.5</td>
 <td>62.4</td>
 <td>60.7</td>
 <td>53.0</td>
 </tr>
 <tr>
 <td class="firstcol" >ISM-Adjusted General Business Barometer</td>
 <td>54.5</td>
 <td>52.6</td>
 <td>57.7</td>
 <td>61.3</td>
 <td>60.7</td>
 <td>59.0</td>
 <td>51.9</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Production</td>
 <td>57.3</td>
 <td>50.5</td>
 <td>64.2</td>
 <td>66.3</td>
 <td>64.5</td>
 <td>64.2</td>
 <td>54.5</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;New Orders</td>
 <td>58.6</td>
 <td>54.6</td>
 <td>59.8</td>
 <td>64.7</td>
 <td>63.8</td>
 <td>63.6</td>
 <td>55.6</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Order Backlogs</td>
 <td>41.1</td>
 <td>51.2</td>
 <td>44.7</td>
 <td>59.7</td>
 <td>58.0</td>
 <td>55.2</td>
 <td>47.1</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Inventories</td>
 <td>51.4</td>
 <td>49.9</td>
 <td>47.4</td>
 <td>55.2</td>
 <td>55.3</td>
 <td>54.9</td>
 <td>47.2</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Employment</td>
 <td>50.0</td>
 <td>50.4</td>
 <td>56.2</td>
 <td>55.0</td>
 <td>55.2</td>
 <td>52.9</td>
 <td>49.4</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Supplier Deliveries</td>
 <td>55.4</td>
 <td>57.4</td>
 <td>60.9</td>
 <td>65.3</td>
 <td>64.8</td>
 <td>59.4</td>
 <td>52.8</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Prices Paid</td>
 <td>53.8</td>
 <td>50.8</td>
 <td>64.5</td>
 <td>71.6</td>
 <td>74.0</td>
 <td>64.1</td>
 <td>53.2</td>
 </tr>
 </tbody>
 </table>
 
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The Chicago Purchasing Managers Business Barometer increased to 54.2 during May from April's 52.6, which was the lowest reading since January 2017. The Action Economics Forecast Survey expected a lesser increase to 53.8. The Chicago [...]

U.S. Chicago Business Barometer Improves

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 Personal consumption expenditures increased 0.3% (4.3%
 y/y) during April following a 1.1% March gain, revised from 0.9%. A 0.2%
 increase had been expected in the Action Economics Forecast Survey.
 Nondurable goods spending strengthened 0.7% (3.8% y/y) reflecting a 6.7%
 rise (4.6% y/y) in spending on gasoline &amp; other energy products.
 Apparel purchases held steady (2.2% y/y) after strengthening 1.3%, and
 spending at restaurants edged 0.1% higher (2.2% y/y) following a 1.0% rise.
 Outlays on services rose 0.3% (4.9% y/y) on the heels of a 0.6% surge.
 Recreation services spending rose 0.2% (3.3% y/y) following a 1.9% surge.
 Housing &amp; utilities outlays inched 0.1% higher (4.0% y/y) following
 three months of strong increase. Health care spending rose a weakened 0.4%
 (4.8% y/y) and outlays on transportation services rose 0.3% (4.1% y/y),
 the same as in March. Spending on durable goods offset these gains with a
 0.8% decline (+1.0% y/y) following a 3.6% surge. Spending on motor vehicle
 &amp; parts weakened 2.0% (-0.3% y/y) following a 9.2% jump (1.8% y/y).
 Outlays on autos have declined in four of the last five months. Spending
 on home furnishings &amp; appliances eased 0.1% (+1.1% y/y) after a 0.9%
 rise. Recreational goods &amp; vehicle outlays fell 0.2% (+3.3% y/y) after
 a 0.8% rise.

 The PCE chain price index rose 0.3% (1.5% y/y), the
 strongest increase since January of last year. The price index excluding
 food &amp; energy increased 0.2% (1.6% y/y), the largest rise since
 December. Nondurable product prices jumped 0.5% (0.2% y/y) as fuel prices
 surged 5.1% (3.2% y/y), strong for a second straight month. This strength
 was offset by a 0.9% decline (-3.6% y/y) in the clothing &amp; footwear
 price index. Food &amp; beverage prices also were off by 0.3% (+0.8% y/y).
 The services price index rose 0.4% (2.4% y/y), equaling the strongest
 monthly rise in roughly ten years. Both transportation services and
 finance &amp; insurance costs jumped 1.2% and 2.7% y/y. Recreation
 services prices strengthened 0.4% (2.8% y/y). Housing &amp; utilities
 prices rose a steady 0.3% (3.1% y/y) but the health care price index
 inched just 0.1% higher (1.4% y/y) for a second straight month. A 0.4%
 decline (-1.8% y/y) in the durable goods price index offset some of these
 strong price gains, extending many years of price declines across most
 durable product categories.

 Personal income increased 0.5% (3.9% y/y) following an
 unrevised 0.1% rise. The 3.9% y/y gain was below growth during 2018 and
 2017. A 0.3% increase had been expected. Wages &amp; salaries increased 0.3%
 but y/y growth of 3.6% remained below the 5.1% high in August 2017.
 Proprietors income held steady (2.3% y/y) after three straight months of
 decline. Rental income improved 0.2% (5.4% y/y) after three consecutive
 months of strong increase. Receipts on assets jumped 1.6% (2.6% y/y). A
 2.3% gain (1.6% y/y) in interest income accompanied a 0.7% rise (4.0% y/y)
 in dividend earnings. Personal transfer receipts increased 0.6% (7.2% y/y)
 for the third straight month. Medicare receipts surged another 0.9% (10.6%
 y/y). Income from Social Security rose 0.2% (6.4% y/y), and Medicaid
 receipts strengthened 1.4% (5.4% y/y). Jobless insurance income declined
 4.0% (-8.4% y/y) after a 0.8% drop.

 In constant dollars, personal spending held steady m/m
 (2.7% y/y) following a 0.9% jump. Real personal disposable income rose 0.1%
 (2.2% y/y) after a 0.2% decline.

 The strength in spending held the personal savings rate
 at 6.2%, below December's 7.4% high. The level of personal savings fell 5.9% y/y.

 The personal income and consumption figures are
 available in Haver's USECON database with detail in the USNA
 database. The Action Economics figures are in the AS1REPNA database

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	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >Personal Income &amp;
 Outlays (%)</th>
 <th>Apr</th>
 <th>Mar</th>
 <th>Feb</th>
 <th>Apr Y/Y</th>
 <th>2018</th>
 <th>2017</th>
 <th>2016</th>
 </tr>
 </thead>
 
 <tr class="odd">
 <td class="firstcol" >Personal Income</td>
 <td>0.5</td>
 <td>0.1</td>
 <td>0.2</td>
 <td>3.9</td>
 <td>4.4</td>
 <td>4.4</td>
 <td>2.6</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Wages &amp; Salaries</td>
 <td>0.3</td>
 <td>0.4</td>
 <td>0.3</td>
 <td>3.6</td>
 <td>4.3</td>
 <td>4.6</td>
 <td>2.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Disposable Personal Income</td>
 <td>0.4</td>
 <td>0.1</td>
 <td>0.2</td>
 <td>3.8</td>
 <td>4.9</td>
 <td>4.4</td>
 <td>2.8</td>
 </tr>
 <thead>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" >Personal Consumption Expenditures</td>
 <td>0.3</td>
 <td>1.1</td>
 <td>-0.0</td>
 <td>4.3</td>
 <td>4.7</td>
 <td>4.3</td>
 <td>3.8</td>
 </tr>
 <tr>
 <td class="firstcol" >Personal Saving Rate</td>
 <td>6.2</td>
 <td>6.1</td>
 <td>7.0</td>
 <td>6.8 (Apr.'18)</td>
 <td>6.7</td>
 <td>6.7</td>
 <td>6.7</td>
 </tr>
 <tr>
 <td class="firstcol" >PCE Chain Price Index</td>
 <td>0.3</td>
 <td>0.2</td>
 <td>0.1</td>
 <td>1.5</td>
 <td>2.0</td>
 <td>1.8</td>
 <td>1.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Less Food &amp; Energy</td>
 <td>0.2</td>
 <td>0.1</td>
 <td>0.0</td>
 <td>1.6</td>
 <td>1.9</td>
 <td>1.6</td>
 <td>1.7</td>
 </tr>
 <tr>
 <td class="firstcol" >Real Disposable Income</td>
 <td>0.1</td>
 <td>-0.2</td>
 <td>0.1</td>
 <td>2.2</td>
 <td>2.8</td>
 <td>2.6</td>
 <td>1.7</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Real Personal Consumption
 Expenditures</td>
 <td>-0.0</td>
 <td>0.9</td>
 <td>-0.1</td>
 <td>2.7</td>
 <td>2.6</td>
 <td>2.5</td>
 <td>2.7</td>
 </tr>
 </tbody>
 
 

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Personal consumption expenditures increased 0.3% (4.3% y/y) during April following a 1.1% March gain, revised from 0.9%. A 0.2% increase had been expected in the Action Economics Forecast Survey. Nondurable goods spending strengthened [...]

U.S. Personal Spending Weakens as Price Inflation Picks Up

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Gross domestic
product, adjusted for price inflation, increased 3.1% during Q1'19, revised from
3.2%. Despite the revision, the 3.2% rate of growth during the last four quarters
remained the strongest increase
since Q2'15. The rise compared to expectations for a 3.0% increase in the Action
Economics Forecast Survey. Inventory and fixed investment estimates were
reduced.
After-tax corporate profits with inventory and capital
consumption adjustments declined $72.8 billion (+1.9% y/y), the first decline
since Q3'16. Before-tax profits with IVA &amp; CCA fell $65.3 billion (3.1%
y/y). Domestic nonfinancial profits fell $62.0 billion (+7.0% y/y), the first
decline since Q3'17. Profits earned abroad were off $10.8 billion (-2.5% y/y),
the first decline since Q2'17, but earnings in the domestic financial sector
gained $7.5 billion (-1.7% y/y).&nbsp;&nbsp;&nbsp;&nbsp;
The contribution to growth in real GDP from inventory investment
was lessened to 0.6 percentage points from 0.7 following a 0.1 percentage point addition in Q4'18. Improvement in the foreign trade
deficit added an unrevised 1.0 percentage points to growth following two quarters of
subtraction. Export growth of 4.8% (2.6% y/y) was the largest gain since Q2'18.
Imports fell a lessened 2.5% (+2.0% y/y).&nbsp;
Growth in final sales to domestic purchasers fell to 1.5% (2.6%
y/y), revised from 1.4% and remained the
weakest rate of growth since Q4'15. Consumer spending rose 1.3% (2.8% y/y), the
weakest rise in a year. A 4.6% decline (+2.7% y/y) in durable goods demand was
led by a 15.9% decline (-1.2% y/y) in motor vehicle &amp; parts sales. Demand
for home furnishings &amp; household equipment fell 2.1% (+1.3% y/y), off for
the second straight quarter. These declines were offset by an increase in sales of recreational goods &amp;
vehicles of 6.9%, both q/q and y/y. Nondurable product sales
increased 2.0% (3.1% y/y). The rise centered in the &quot;other&quot; category,
as apparel &amp; shoes demand fell 4.9% (+3.9% y/y). Food &amp; restaurant sales
declined 1.6% (+1.3% y/y) and demand for gasoline &amp; oil held steady (1.0% y/y).
Demand for services increased 2.1% (2.7% y/y) as transportation sales surged
4.2% (0.9% y/y) and demand for financial services &amp; insurance strengthened
3.5% (2.0% y/y). Health care services demand rose a strong 4.7% (2.9% y/y) and
housing &amp; utilities purchases rose 1.3% (1.6% y/y). Offsetting these
increases was a&nbsp; 1.6% decline (+0.6% y/y) in the demand for recreation
services, the second decline in three quarters.
Business fixed investment grew&nbsp; a little-changed 2.3%
(4.7% y/y) after a 5.4% strengthening in Q4'18. Investment in structures
increased 1.7% (2.0% y/y) after two quarters of decline. Equipment demand fell a weakened
1.0% (+3.3% y/y) as an 8.1% decline (+2.4% y/y) in &quot;other&quot; equipment offset
a 6.2% rise in transportation equipment purchases. Investment in intellectual property products surged
7.2% (8.5% y/y). Industrial
equipment sales declined 2.9% (+2.1% y/y) and demand for information processing equipment
was little changed (3.5% y/y).
Holding back the gain in overall demand was a 3.5% decline
(-3.3% y/y) in residential investment, which has been declining since its peak
in Q4'17.
Government expenditures grew at an improved 2.5% rate (1.8%
y/y). State &amp; local government spending growth of 4.0% (1.6% y/y) was
accompanied by a 0.1% easing (+2.0% y/y) in federal government expenditures. A
4.0% jump (5.3% y/y) in defense spending offset a 5.9% decline (-2.5% y/y) in
nondefense outlays.
The GDP price index increased 0.8% (1.8% y/y), the weakest
rise in three years. It compared to a 0.9% expected gain. The PCE chain price
index increase of 0.4% (1.4% y/y) was underpinned by a 1.0% rise (1.6% y/y) in
the index excluding food &amp; energy. The business fixed investment price index
rose 1.5% (1.5% y/y) and the residential price index gained 2.5% (4.0% y/y. The
government spending price index increased 1.1% (2.3% y/y).
The GDP figures can be found in Haver's USECON and USNA
database. USNA contains virtually all of the Bureau of Economic Analysis'
detail in the national accounts. Both databases include tables of the newly
published not seasonally adjusted data. The Action Economics consensus estimates
can be found in AS1REPNA.
Is There Too Much Business Debt? from the Federal
Reserve Bank of New York can be found here <a href="https://libertystreeteconomics.newyorkfed.org/2019/05/is-there-too-much-business-debt.html">https://libertystreeteconomics.newyorkfed.org/2019/05/is-there-too-much-business-debt.html</a>
<table width="1871" class="centered" border="0" cellSpacing="0">
 <colgroup>
 </colgroup>
 <colgroup>
 <col>
 <col>
 <col>
 <col>
 <col>
 <col>
 <col>
 <col>
 </colgroup>
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="517">Chained 2012 $ (%, AR)</th>
 <th align="center" width="168">Q1'19 (Second Estimate)</th>
 <th align="center" width="168">Q1'19 (Advance Estimate)</th>
 <th align="center" width="169">Q4'18</th>
 <th align="center" width="169">Q3'18</th>
 <th align="center" width="169">Q1'19 Y/Y</th>
 <th align="center" width="169">2018</th>
 <th align="center" width="169">2017</th>
 <th align="center" width="169">2016</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" width="517">Gross Domestic Product</td>
 <td align="center" width="168">3.1</td>
 <td align="center" width="168">3.2</td>
 <td align="center" width="169">2.2</td>
 <td align="center" width="169">3.4</td>
 <td align="center" width="169">3.2</td>
 <td align="center" width="169">2.9</td>
 <td align="center" width="169">2.2</td>
 <td align="center" width="169">1.6</td>
 </tr>
 <tr>
 <td class="firstcol" width="517">&nbsp; Inventory Effect (%-point)</td>
 <td align="center" width="168">0.6</td>
 <td align="center" width="168">0.7</td>
 <td align="center" width="169">0.1</td>
 <td align="center" width="169">2.3</td>
 <td align="center" width="169">0.5</td>
 <td align="center" width="169">0.1</td>
 <td align="center" width="169">0.0</td>
 <td align="center" width="169">-0.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="517">Final Sales</td>
 <td align="center" width="168">2.5</td>
 <td align="center" width="168">2.5</td>
 <td align="center" width="169">2.1</td>
 <td align="center" width="169">1.0</td>
 <td align="center" width="169">2.7</td>
 <td align="center" width="169">2.7</td>
 <td align="center" width="169">2.2</td>
 <td align="center" width="169">2.1</td>
 </tr>
 <tr>
 <td class="firstcol" width="517">&nbsp; Foreign Trade Effect (%-point)</td>
 <td align="center" width="168">1.0</td>
 <td align="center" width="168">1.0</td>
 <td align="center" width="169">-0.1</td>
 <td align="center" width="169">-2.0</td>
 <td align="center" width="169">0.1</td>
 <td align="center" width="169">-0.2</td>
 <td align="center" width="169">-0.3</td>
 <td align="center" width="169">-0.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="517">Domestic Final Sales</td>
 <td align="center" width="168">&nbsp;1.5</td>
 <td align="center" width="168">1.4</td>
 <td align="center" width="169">2.1</td>
 <td align="center" width="169">2.9</td>
 <td align="center" width="169">2.6</td>
 <td align="center" width="169">2.9</td>
 <td align="center" width="169">2.5</td>
 <td align="center" width="169">2.3</td>
 </tr>
 <tr>
 <td class="firstcol" width="517">&nbsp; &nbsp;</td>
 <td align="center" width="168"></td>
 <td align="center" width="168"></td>
 <td align="center" width="169"></td>
 <td align="center" width="169"></td>
 <td align="center" width="169"></td>
 <td align="center" width="169"></td>
 <td align="center" width="169"></td>
 <td align="center" width="169"></td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="517">&nbsp; Personal Consumption Expenditure</td>
 <td align="center" width="168">1.3</td>
 <td align="center" width="168">1.2</td>
 <td align="center" width="169">2.5</td>
 <td align="center" width="169">3.5</td>
 <td align="center" width="169">2.8</td>
 <td align="center" width="169">2.6</td>
 <td align="center" width="169">2.5</td>
 <td align="center" width="169">2.7</td>
 </tr>
 <tr>
 <td class="firstcol" width="517">&nbsp; Nonresidential Fixed Investment</td>
 <td align="center" width="168">2.3</td>
 <td align="center" width="168">2.7</td>
 <td align="center" width="169">5.4</td>
 <td align="center" width="169">2.5</td>
 <td align="center" width="169">4.7</td>
 <td align="center" width="169">6.9</td>
 <td align="center" width="169">5.3</td>
 <td align="center" width="169">0.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="517">&nbsp; Residential Investment</td>
 <td align="center" width="168">-3.5</td>
 <td align="center" width="168">-2.8</td>
 <td align="center" width="169">-4.7</td>
 <td align="center" width="169">-3.5</td>
 <td align="center" width="169">-3.3</td>
 <td align="center" width="169">-0.3</td>
 <td align="center" width="169">3.3</td>
 <td align="center" width="169">6.5</td>
 </tr>
 <tr>
 <td class="firstcol" width="517">&nbsp; Government Spending</td>
 <td align="center" width="168">2.5</td>
 <td align="center" width="168">2.4</td>
 <td align="center" width="169">-0.4</td>
 <td align="center" width="169">2.6</td>
 <td align="center" width="169">1.8</td>
 <td align="center" width="169">1.5</td>
 <td align="center" width="169">-0.1</td>
 <td align="center" width="169">1.4</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="517">Chain-Type Price Index</td>
 <td align="center" width="168"></td>
 <td align="center" width="168"></td>
 <td align="center" width="169"></td>
 <td align="center" width="169"></td>
 <td align="center" width="169"></td>
 <td align="center" width="169"></td>
 <td align="center" width="169"></td>
 <td align="center" width="169"></td>
 </tr>
 <tr>
 <td class="firstcol" width="517">&nbsp;&nbsp; GDP</td>
 <td align="center" width="168">0.8</td>
 <td align="center" width="168">0.9</td>
 <td align="center" width="169">1.7</td>
 <td align="center" width="169">1.8</td>
 <td align="center" width="169">1.8</td>
 <td align="center" width="169">2.2</td>
 <td align="center" width="169">1.9</td>
 <td align="center" width="169">1.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="517">&nbsp;&nbsp;&nbsp; Personal Consumption
 Expenditure</td>
 <td align="center" width="168">0.4</td>
 <td align="center" width="168">0.6</td>
 <td align="center" width="169">1.5</td>
 <td align="center" width="169">1.6</td>
 <td align="center" width="169">1.4</td>
 <td align="center" width="169">2.0</td>
 <td align="center" width="169">1.8</td>
 <td align="center" width="169">1.1</td>
 </tr>
 <tr>
 <td class="firstcol" width="517">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
 Less Food &amp; Energy</td>
 <td align="center" width="168">1.0</td>
 <td align="center" width="168">1.0</td>
 <td align="center" width="169">1.8</td>
 <td align="center" width="169">1.6</td>
 <td align="center" width="169">1.6</td>
 <td align="center" width="169">1.9</td>
 <td align="center" width="169">1.6</td>
 <td align="center" width="169">1.7</td>
 </tr>
 <tr>
 <td class="firstcol" width="517">&nbsp;&nbsp;&nbsp; Nonresidential
 Investment</td>
 <td align="center" width="168">1.5</td>
 <td align="center" width="168">1.3</td>
 <td align="center" width="169">1.1</td>
 <td align="center" width="169">1.6</td>
 <td align="center" width="169">1.5</td>
 <td align="center" width="169">1.2</td>
 <td align="center" width="169">0.7</td>
 <td align="center" width="169">-0.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="517">&nbsp;&nbsp;&nbsp; Residential Investment</td>
 <td align="center" width="168">2.5</td>
 <td align="center" width="168">1.8</td>
 <td align="center" width="169">2.6</td>
 <td align="center" width="169">3.6</td>
 <td align="center" width="169">4.0</td>
 <td align="center" width="169">5.6</td>
 <td align="center" width="169">4.5</td>
 <td align="center" width="169">3.6</td>
 </tr>
 </tbody>
</table>


</body>

</html>

Gross domestic product, adjusted for price inflation, increased 3.1% during Q1'19, revised from 3.2%. Despite the revision, the 3.2% rate of growth during the last four quarters remained the strongest increase since Q2'15. The rise [...]

U.S. GDP Growth is Lessened and Corporate Profits Decline

Sandy Batten

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The labor market remains on a firm footing. Initial claims for unemployment insurance
eased 1,000 to 211,000 (-7.6% y/y) during the week ended May 18......

Continuing claims for unemployment insurance rose 12,000 to
1.676 million (-4.2% y/y) in the week ending May 11........



Data on weekly unemployment claims going back to 1967 are
contained in Haver's WEEKLY database, and they are summarized monthly in USECON.
Data for individual states are in REGIONW. The expectations figure is in the
AS1REPNA database.

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" >Unemployment Insurance (SA, 000s)</th>
 <th>05/25/19</th>
 <th>05/18/19</th>
 <th>05/11/19</th>
 <th>Y/Y %</th>
 <th>2018</th>
 <th>2017</th>
 <th>2016</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Initial Claims</td>
 <td >215</td>
 <td >212</td>
 <td >212</td>
 <td >-2.7</td>
 <td >220</td>
 <td >244</td>
 <td >262</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Continuing Claims&nbsp;</td>
 <td >--</td>
 <td >1,657</td>
 <td >1,683</td>
 <td >-4.8</td>
 <td >1,756</td>
 <td >1,961</td>
 <td >2,135</td>
 </tr>
 <tr>
 <td class="firstcol" >Insured Unemployment Rate (%)</td>
 <td >--</td>
 <td >1.2</td>
 <td >1.2</td>
 <td >
 1.2 
 (May 2018)
 </td>
 <td >1.2</td>
 <td >1.4</td>
 <td >1.6</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

The labor market remains on a firm footing. Initial claims for unemployment insurance eased 1,000 to 211,000 (-7.6% y/y) during the week ended May 18...... Continuing claims for unemployment insurance rose 12,000 to 1.676 million [...]

U.S. Initial Unemployment Insurance Claims Edge Up

Gerald D. Cohen

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The National Association of Realtors (NAR) reported that pending home sales fell 1.5% in April (-2.0% year-on-year), reversing some of March’s 3.9% gain. Meanwhile, mortgage rates continue on their downtrend. The effective rate on a 15-year fixed-rate mortgage declined to 3.95% in April, the lowest level since the beginning of 2018. The declining trend in interest rates has had some positive impact on housing activity. Pending sales are up 5.7%, since the four-and-a-half year low reached at the end of last year.

The number of signed contracts in April declined in every region of the country except the Midwest. Pending sales dropped 2.5% in the South (-1.8% y/y), and fell 1.8% in both the Northeast and West (-2.1% and -1.5% y/y respectively). Meanwhile activity increased 1.3% in the Midwest (-2.4% y/y).


The pending home sales index measures sales at the time the contract for
an existing home is signed, analogous 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.
In developing the pending home sales index, the NAR found that the level of monthly sales contract
activity anticipates the level of closed existing home sales in the following two months. The series
dates back to 2001, and the data are available in Haver's PREALTOR database. Mortgage interest rates
from the Mortgage Bankers Association can be found in the SURVEYW database.

<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >Pending Home Sales (SA,
 2001=100)</th>
 <th>Apr</th>
 <th>Mar</th>
 <th>Feb</th>
 <th>Apr Y/Y %</th>
 <th>2018</th>
 <th>2017</th>
 <th>2016</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" >Total</td>
<td >104.3</td>
<td >105.9</td>
<td >101.9</td>
<td >-2.0</td>
<td >104.7</td>
<td >109.1</td>
<td >109.8</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp; Northeast</td>
<td >88.9</td>
<td >90.5</td>
<td >92.1</td>
<td >-2.1</td>
<td >92.4</td>
<td >97.1</td>
<td >96.4</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp; Midwest</td>
<td >96.8</td>
<td >95.6</td>
<td >93.2</td>
<td >-2.4</td>
<td >100.2</td>
<td >104.9</td>
<td >107.4</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp; South</td>
<td >124.0</td>
<td >127.2</td>
<td >121.8</td>
<td >-1.8</td>
<td >121.6</td>
<td >123.9</td>
<td >123.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp; West</td>
<td >93.5</td>
<td >95.2</td>
<td >87.5</td>
<td >-1.5</td>
<td >92.3</td>
<td >99.5</td>
<td >102.3</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

The National Association of Realtors (NAR) reported that pending home sales fell 1.5% in April (-2.0% year-on-year), reversing some of March’s 3.9% gain. Meanwhile, mortgage rates continue on their downtrend. The effective rate on a [...]

U.S. Pending Home Sales Decline Despite Lower Mortgage Rates

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Gross domestic product, adjusted for price inflation, increased 3.1% during Q1'19,
revised from 3.2%. Despite the revision, the 3.2% rate of growth during the last four quarters
remained the strongest increase since Q2'15. The rise compared to expectations for a 3.0% increase
in the Action Economics Forecast Survey. Inventory and fixed investment estimates were reduced.

After-tax corporate profits with inventory and capital
consumption adjustments declined $72.8 billion (+1.9% y/y), the first decline
since Q3'16. Before-tax profits with IVA &amp; CCA fell $65.3 billion (+3.1%
y/y). Domestic nonfinancial profits fell $62.0 billion (+7.0% y/y), the first
decline since Q3'17. Profits earned abroad were off $10.8 billion (-2.5% y/y),
the first decline since Q2'17, but earnings in the domestic financial sector
gained $7.5 billion (-1.7% y/y).

The contribution to growth in real GDP from inventory investment
was lessened to 0.6 percentage points from 0.7 following a 0.1 percentage point addition in Q4'18.
Improvement in the foreign trade deficit added an unrevised 1.0 percentage points to growth
following two quarters of subtraction. Export growth of 4.8% (2.6% y/y) was the largest gain since Q2'18.
Imports fell a lessened 2.5% (+2.0% y/y).

Growth in final sales to domestic purchasers fell to 1.5% (2.6%
y/y), revised from 1.4% and remained the weakest rate of growth since Q4'15. Consumer spending
rose 1.3% (2.8% y/y), the weakest rise in a year. A 4.6% decline (+2.7% y/y) in durable goods demand was
led by a 15.9% decline (-1.2% y/y) in motor vehicle &amp; parts sales. Demand
for home furnishings &amp; household equipment fell 2.1% (+1.3% y/y), off for
the second straight quarter. These declines were offset by an increase in
sales of recreational goods &amp; vehicles of 6.9%, both q/q and y/y. Nondurable product sales
increased 2.0% (3.1% y/y). The rise centered in the &quot;other&quot; category,
as apparel &amp; shoes demand fell 4.9% (+3.9% y/y). Food &amp; restaurant sales
declined 1.6% (+1.3% y/y) and demand for gasoline &amp; oil held steady (1.0% y/y).
Demand for services increased 2.1% (2.7% y/y) as transportation sales surged
4.2% (0.9% y/y) and demand for financial services &amp; insurance strengthened
3.5% (2.0% y/y). Health care services demand rose a strong 4.7% (2.9% y/y) and
housing &amp; utilities purchases rose 1.3% (1.6% y/y). Offsetting these
increases was a&nbsp; 1.6% decline (+0.6% y/y) in the demand for recreation
services, the second decline in three quarters.

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Business fixed investment grew a little-changed 2.3%
(4.7% y/y) after a 5.4% strengthening in Q4'18. Investment in structures
increased 1.7% (2.0% y/y) after two quarters of decline. Equipment demand fell a weakened
1.0% (+3.3% y/y) as an 8.1% decline (+2.4% y/y) in &quot;other&quot; equipment offset
a 6.2% rise in transportation equipment purchases. Investment in intellectual property products surged
7.2% (8.5% y/y). Industrial equipment sales declined 2.9% (+2.1% y/y) and demand for information processing equipment
was little changed (3.5% y/y).

Holding back the gain in overall demand was a 3.5% decline
(-3.3% y/y) in residential investment, which has been declining since its peak in Q4'17.

Government expenditures grew at an improved 2.5% rate (1.8%
y/y). State &amp; local government spending growth of 4.0% (1.6% y/y) was
accompanied by a 0.1% easing (+2.0% y/y) in federal government expenditures. A
4.0% jump (5.3% y/y) in defense spending offset a 5.9% decline (-2.5% y/y) in
nondefense outlays.

The GDP chain price index increased 0.8% (1.8% y/y), the weakest
rise in three years. It compared to a 0.9% expected gain. The PCE chain price
index increase of 0.4% (1.4% y/y) was underpinned by a 1.0% rise (1.6% y/y) in
the index excluding food &amp; energy. The business fixed investment price index
rose 1.5% (1.5% y/y) and the residential price index gained 2.5% (4.0% y/y. The
government spending price index increased 1.1% (2.3% y/y).

The GDP figures can be found in Haver's USECON and USNA
database. USNA contains virtually all of the Bureau of Economic Analysis'
detail in the national accounts. Both databases include tables of the newly
published not seasonally adjusted data. The Action Economics consensus estimates
can be found in AS1REPNA.

Is There Too Much Business Debt? from the Federal
Reserve Bank of New York can be found <a href="https://libertystreeteconomics.newyorkfed.org/2019/05/is-there-too-much-business-debt.html">here</a>.

<a href="/comment/190530l.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/190530l.png"></a>
 <a href="/comment/190530m.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/190530m.png"></a>

<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >Chained 2012 $ (%, AR)</th>
 <th>Q1'19 (Second Estimate)</th>
 <th>Q1'19 (Advance Estimate)</th>
 <th>Q4'18</th>
 <th>Q3'18</th>
 <th>Q1'19 Y/Y</th>
 <th>2018</th>
 <th>2017</th>
 <th>2016</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" >Gross Domestic Product</td>
 <td>3.1</td>
 <td>3.2</td>
 <td>2.2</td>
 <td>3.4</td>
 <td>3.2</td>
 <td>2.9</td>
 <td>2.2</td>
 <td>1.6</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Inventory Effect (%-point)</td>
 <td>0.6</td>
 <td>0.7</td>
 <td>0.1</td>
 <td>2.3</td>
 <td>0.5</td>
 <td>0.1</td>
 <td>0.0</td>
 <td>-0.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Final Sales</td>
 <td>2.5</td>
 <td>2.5</td>
 <td>2.1</td>
 <td>1.0</td>
 <td>2.7</td>
 <td>2.7</td>
 <td>2.2</td>
 <td>2.1</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Foreign Trade Effect (%-point)</td>
 <td>1.0</td>
 <td>1.0</td>
 <td>-0.1</td>
 <td>-2.0</td>
 <td>0.1</td>
 <td>-0.2</td>
 <td>-0.3</td>
 <td>-0.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Domestic Final Sales</td>
 <td>&nbsp;1.5</td>
 <td>1.4</td>
 <td>2.1</td>
 <td>2.9</td>
 <td>2.6</td>
 <td>2.9</td>
 <td>2.5</td>
 <td>2.3</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; &nbsp;</td>
 <td></td>
 <td></td>
 <td></td>
 <td></td>
 <td></td>
 <td></td>
 <td></td>
 <td></td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Personal Consumption Expenditure</td>
 <td>1.3</td>
 <td>1.2</td>
 <td>2.5</td>
 <td>3.5</td>
 <td>2.8</td>
 <td>2.6</td>
 <td>2.5</td>
 <td>2.7</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Nonresidential Fixed Investment</td>
 <td>2.3</td>
 <td>2.7</td>
 <td>5.4</td>
 <td>2.5</td>
 <td>4.7</td>
 <td>6.9</td>
 <td>5.3</td>
 <td>0.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Residential Investment</td>
 <td>-3.5</td>
 <td>-2.8</td>
 <td>-4.7</td>
 <td>-3.5</td>
 <td>-3.3</td>
 <td>-0.3</td>
 <td>3.3</td>
 <td>6.5</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Government Spending</td>
 <td>2.5</td>
 <td>2.4</td>
 <td>-0.4</td>
 <td>2.6</td>
 <td>1.8</td>
 <td>1.5</td>
 <td>-0.1</td>
 <td>1.4</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Chain-Type Price Index</td>
 <td></td>
 <td></td>
 <td></td>
 <td></td>
 <td></td>
 <td></td>
 <td></td>
 <td></td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp; GDP</td>
 <td>0.8</td>
 <td>0.9</td>
 <td>1.7</td>
 <td>1.8</td>
 <td>1.8</td>
 <td>2.2</td>
 <td>1.9</td>
 <td>1.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;&nbsp; Personal Consumption
 Expenditure</td>
 <td>0.4</td>
 <td>0.6</td>
 <td>1.5</td>
 <td>1.6</td>
 <td>1.4</td>
 <td>2.0</td>
 <td>1.8</td>
 <td>1.1</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
 Less Food &amp; Energy</td>
 <td>1.0</td>
 <td>1.0</td>
 <td>1.8</td>
 <td>1.6</td>
 <td>1.6</td>
 <td>1.9</td>
 <td>1.6</td>
 <td>1.7</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;&nbsp; Nonresidential
 Investment</td>
 <td>1.5</td>
 <td>1.3</td>
 <td>1.1</td>
 <td>1.6</td>
 <td>1.5</td>
 <td>1.2</td>
 <td>0.7</td>
 <td>-0.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;&nbsp; Residential Investment</td>
 <td>2.5</td>
 <td>1.8</td>
 <td>2.6</td>
 <td>3.6</td>
 <td>4.0</td>
 <td>5.6</td>
 <td>4.5</td>
 <td>3.6</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

U.S. GDP Growth Is Lessened and Corporate Profits Decline

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
</head>
<body>
	 
 
 
 

<a href="/comment/190530f.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/190530f.png"></a>
 <a href="/comment/190530g.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/190530g.png"></a>

The National Association of Realtors (NAR) reported that pending home sales fell 1.5% in April (-2.0% year-on-year), reversing some of March's 3.9% gain. Meanwhile, mortgage rates continue on their downtrend. The effective rate on a 15-year fixed-rate mortgage declined to 3.95% in April, the lowest level since the beginning of 2018. The declining trend in interest rates has had some positive impact on housing activity. Pending sales are up 5.7%, since the four-and-a-half year low reached at the end of last year.

The number of signed contracts in April declined in every region of the country except the Midwest. Pending sales dropped 2.5% in the South (-1.8% y/y), and fell 1.8% in both the Northeast and West (-2.1% and -1.5% y/y respectively). Meanwhile activity increased 1.3% in the Midwest (-2.4% y/y).


The pending home sales index measures sales at the time the contract for
an existing home is signed, analogous 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.
In developing the pending home sales index, the NAR found that the level of monthly sales contract
activity anticipates the level of closed existing home sales in the following two months. The series
dates back to 2001, and the data are available in Haver's PREALTOR database. Mortgage interest rates
from the Mortgage Bankers Association can be found in the SURVEYW database.

<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >Pending Home Sales (SA,
 2001=100)</th>
 <th>Apr</th>
 <th>Mar</th>
 <th>Feb</th>
 <th>Apr Y/Y %</th>
 <th>2018</th>
 <th>2017</th>
 <th>2016</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" >Total</td>
<td >104.3</td>
<td >105.9</td>
<td >101.9</td>
<td >-2.0</td>
<td >104.7</td>
<td >109.1</td>
<td >109.8</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp; Northeast</td>
<td >88.9</td>
<td >90.5</td>
<td >92.1</td>
<td >-2.1</td>
<td >92.4</td>
<td >97.1</td>
<td >96.4</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp; Midwest</td>
<td >96.8</td>
<td >95.6</td>
<td >93.2</td>
<td >-2.4</td>
<td >100.2</td>
<td >104.9</td>
<td >107.4</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp; South</td>
<td >124.0</td>
<td >127.2</td>
<td >121.8</td>
<td >-1.8</td>
<td >121.6</td>
<td >123.9</td>
<td >123.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp; West</td>
<td >93.5</td>
<td >95.2</td>
<td >87.5</td>
<td >-1.5</td>
<td >92.3</td>
<td >99.5</td>
<td >102.3</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

The National Association of Realtors (NAR) reported that pending home sales fell 1.5% in April (-2.0% year-on-year), reversing some of March's 3.9% gain. Meanwhile, mortgage rates continue on their downtrend. The effective rate on a [...]

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

Announcement of snap French election is causing concern across Europe

The UK economy’s post-pandemic under-performance relative to its pre-pandemic trend

US Beveridge Curve back to near pre-pandemic levels

Negative economic surprises in the US but positive in Europe, especially the UK

Latest PMIs show US losing momentum while RoW is gaining momentum

Sticky services prices behind sticky overall PCE inflation

Flash April PMIs point to slower growth in the US but a pickup in Europe and Japan

Outlook strengthens for US while it weakens for other major economies

Crude petroleum prices are having a big impact on inflation expectations

Inflation surprising to upside in the US; by contrast to the downside in the euro area

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Nonfarm payrolls increased 254,000 (1.5% y/y) in September after rising 159,000 in August, revised from 142,000, and 144,000 in July, revised from 89,000. Expectations had been for a 150,000 rise in the Action Economics Forecast Survey. The three-month average change of 186,000 is the strongest since May.

Average hourly earnings increased 0.4% last month following a gain of 0.5% in August, revised from 0.4%. The y/y earnings gain edged up to 4.0% from 3.9% in August and 3.6% in July, but remained below the 5.9% high in March 2022. A 0.3% September increase had been expected.

The unemployment rate, measured in the household survey, edged down to 4.1% in September from 4.2% in August. It reached a low of 3.4% in April of last year. An unchanged 4.2% had been expected. Household employment rose 430,000 after increasing 168,000 in July. The labor force increased 150,000 after a 120,000 July gain. The overall unemployment rate, including workers who were marginally attached & working part-time for economic reasons declined to 7.7% from 7.9%.

In the **payroll survey**, private-sector employment increased 223,000 (1.4% y/y) in September after rising 114,000 in August. Construction sector employment increased 25,000 (2.8% y/y) last month after rising 31,000 in August. Factory sector payrolls eased 7,000 (-0.2% y/y) after falling 27,000. Mining & logging sector jobs rose 3,000 (-0.6% y/y) during September after rising 1,000 in each of the prior two months.

Private service-producing employment strengthened 202,000 in September (1.5% y/y) after a 109,000 August rise. Increases varied greatly amongst service sector categories. Private education & health service jobs rose 81,000 (3.8% y/y) after rising 60,000 in August while leisure & hospitality employment rose 78,000 (2.0% y/y) after a 53,000 gain. Professional & business service jobs rose 17,000 (0.4% y/y) after easing 4,000 in both August and July. Within that category, the number of temporary jobs fell 13,800 (-6.0% y/y) and have fallen consistently since a March 2022 high. Trade, transportation & utilities employment gained 13,000 (0.6% y/y) after falling 5,000 while financial activities jobs rose 5,000 in September (0.4% y/y) after improving 10,000 in August. Information sector employment increased 4,000 in last month (-0.2% y/y) after falling 7,000 in August.

Government sector payrolls improved 31,000 in September (2.1% y/y) after increasing 45,000 in August. Local government jobs improved 16,000 (2.0% y/y) after rising 33,000 in August while state government employment rose 13,000 (2.5% y/y) after an 11,000 gain. The number of federal government jobs increased 2,000 (1.7% y/y) following a 1,000 rise.

The 0.4% September rise in private-sector average hourly earnings reflected a 0.5% gain (4.9% y/y) in the goods-producing sector which followed a 0.4% improvement in August. Earnings in construction improved 0.4% (4.6% y/y) while factory sector earnings rose 0.5% (5.1% y/y), following a 0.4% gain. In the private services-sector, earnings rose 0.3% last month (3.7% y/y) after a 0.5% gain. Professional & business service sector earnings strengthened 0.8% (5.0% y/y) after a 0.6% rise. Leisure & hospitality earnings improved 0.2% (4.3% y/y) after rising 0.3%. Financial sector earnings increased 0.2% (4.2% y/y) after a 0.5% gain. Private education & health services earnings improved 0.3% (3.1% y/y) for the fourth straight month. Trade, transportation and utilities pay edged 0.1% higher (2.8% y/y) in September after a 0.4% rise. Information sector earnings declined 0.4% (+3.6% y/y) after strengthening 1.1% in July.

241004C5.jpg

241004D5.jpg

The length of the average workweek in the private sector eased to 34.2 hours in September after rising in August to 34.3 hours. The workweek in the goods-producing sector of 39.9 hours compared to 39.8 hours in August. The construction sector average workweek lengthened to 39.2 hours from 39.0. The factory sector workweek held steady at 40.0 hours while the average workweek in the private service sector slipped to 33.1 hours. The aggregate weekly hours index in the private sector, a key indicator of production and income, slipped 0.1% in September (+0.9% y/y) after rising 0.3%. The Q3 average increased 0.2% (AR) from Q2’24.

In the **household survey**, the jobless rate fell to 4.1% as employment rose 0.3% and the size of the labor force edged 0.1% higher. The labor force participation rate was 62.7% for the third straight month. The rate for teenagers rebounded to 37.2%, while for individuals aged 20-24, it was little-change at 70.6%. For rate for workers aged 25-54, the rate fell to 83.8% but for workers 55 and over, it held steady at 38.6 hours.

The employment/population ratio for all workers rose to 60.2% in September and has been moving sideways since early last year. It remained below its high of 61.1% in February 2020, just prior to the pandemic.

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's **USECON** database. Detailed figures are in the **EMPL** and **LABOR** databases. The expectations figures are in the **AS1REPNA** database.

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241004F5.jpg

- Surprising job strength is narrowly based.
- Earnings increase is better-than-expected; August pay growth lifted.
- Jobless rate slips to three-month low.

U.S. Payroll Employment Accelerates in September and Wage Growth Firms; Jobless Rate Edges Lower

241004E.jpg

French industrial output rose sharply in August, a gain of 1.6% after declining by 0.2% in July. Output in August was led by consumer goods; nondurable goods output increased 4.2% month-to-month in August while consumer durable goods output increased by 3% month-to-month. Output of capital goods was also strong during the month, with a 1.6% gain, although intermediate goods output continued to be weak, falling by 0.4% in August and dropping for the second month in a row.

Sequentially French output explodes over three months although it's relatively mild mannered over 12 months and over six months. The strength in French output is relatively recent. Manufacturing output gains 0.3% over 12 months; over six months it is falling at a 0.5% annual rate but that transforms into a 31.1% annual rate over three months as output sharply recovered in June and in August.

**Sequential growth for MFG components**
Components find consumer durable goods output falling by 6.3% over 12 months, gaining at a 4% annual rate over six months then rising at a strong 14.9% annual rate over three months showing steady acceleration. Consumer nondurable goods output rises by 5.9% over 12 months; output slows to gain at a 4.3% annual rate over six months then it expands sharply to grow at a 19% annual rate over three months. French capital goods output is up only 0.3% over 12 months, but it then expands at a 1.5% annual rate over six months and gains at a 14.2% annual rate over three months showing steadily accelerating growth on this time sequence. Intermediate goods output falls by 3.4% over 12 months, falls more sharply, at a 6.6% annual rate over six months, then cuts that weakness to only a 0.2% annual rate drop over three months.

**Quarter-to-date**
With two months into the third quarter, manufacturing output is rising at 1.6% annual rate, with consumer nondurable output up at a 7% annual rate and consumer durable goods output up at a 3.8% annual rate. Capital goods output is up at a 4.3% annual rate; intermediate goods output is falling at a 5% annual rate in the quarter-to-date.

During this period when output has been experiencing some mild increases, they have transformed into strong increases over three months. Yet, motor vehicle registrations have been consistently weak. That important big ticket consumer item has not taken off.

241004.jpg

**Manufacturing: IP vs. PMI**
The chart shows that manufacturing output as measured by the IP index has been relatively flat. But output as signaled by the S&P PMI survey has showed building weakness in French manufacturing. The PMI trend to weakness was being arrested early in 2024 but then the incipient rebound turned into more weakness. Just this month there has been some small rebound and stabilization in the MFG PMI.

It's here from the PMI, that data give much more of a sense of French output being weak than we get from looking at the industrial output report itself. French industrial output has been fairly flat, but with a small uptrend in place.

Smoothed year-on-year gains show that French output generally saw year-on-year expansion from early-2022 to May 2024. Since then, output has been more erratic with a deep decline logged in May IP. The sector has subsequently been digging itself back out. This month’s surge in output is continuing evidence of that recovery in progress. We do not get the same sense of weakness from looking at French IP data that we form looking at French PMI data.

France

French IP Ignites for a Month

Andrew Cates

**Policy rate expectations**
Blue Chip panellists continue to forecast that policy rates in most major economies will decline sharply in coming months. The ECB, for example, is expected to lower its key policy rates by around 105 basis points over the next 12 months while the BoE is expected to lower its Bank rate by 125 bps over the same time frame. These forecasts contrast with the US where policy rates are expected to be lowered by 125 basis point between now and this time next year. The BoJ in the meantime continues to remain an outlier in this generic global trend with Japan’s policy rate specifically expected to climb by 45bps over the next 12 months.

241004Z1.jpg

**The US labour market**
Ahead of the payrolls data for September that are due later this week there have been some mixed messages on the state of the US labour market in recent days. September’s ADP report concerning private sector employment, for example, was a little stronger than expected. On the weaker side, the latest Job Openings and Labour Turnover (JOLTS) survey revealed a steep decline in the number of people in the US workforce that have been quitting their jobs, a strong signal that the labour market is loosening. As chart 2 below suggests, that ought to additionally imply weaker wages pressures in the period ahead as well.

241004Z2.jpg

**Geopolitical risks and oil prices**
Soft landing narratives have been aided by evidence suggesting that labour markets are cooling, that wage pressures are ebbing and that broader inflationary pressures are fading. But, as noted above, the escalation of geopolitical turbulence in the Middle East is now challenging these views. A widely watched gauge of geopolitical risks has bolted sharply higher in recent days off the heels of this turbulence, as evidenced in chart 3 below. And energy markets – oil prices in particular – appear to now be responding to this instability as well.

241004Z3.jpg

**The real consumer price of energy versus US productivity growth**
It goes without saying that energy prices exert a powerful influence over the world economy. Aside from headline inflation linkages, high real energy prices have arguably been a key factor that’s kept productivity growth in many major economies muted over the past few years. As chart 4 below indicates, longer-term upswings in US productivity growth have tended to be preceded by weaker real energy prices. Equally, longer-term downswings in productivity have typically followed periods when real energy prices have been rising.

241004Z4.jpg

**Globalisation versus de-globalisation** 
A further disruption of supply chains is also a looming threat to the world economy if the instability in the Middle East were to intensify. In the background to this, and thanks to several additional factors that have undermined world trade in recent years, a de-globalisation of the world economy has been unfolding. That said, latest data from the World Bank suggest we should not get too carried with that de-globalisation narrative. The level of world trade in services, for example, reached a record high in 2023.

241004Z5.jpg

**Indebtedness and interest rates**
There is no doubt that ongoing geopolitical instability, combined with other factors such as heightened protectionism, could accelerate a broader trend toward de-globalization in the coming period. This, along with other structural challenges such as high energy prices and ageing demographics, may be hindering long-term productivity growth. Offsetting factors do exist, most notably the productivity potential of Artificial Intelligence. However, until those offsets fully materialize, many policymakers are likely to again rely on monetary policy tools and other re-leveraging initiatives to boost economic growth to politically acceptable levels. The strong negative correlation between long-term US real interest rates and global indebtedness in chart 6 below highlights how these policy efforts have become central to maintaining economic stability, often at the expense of increasing financial vulnerabilities.

241004Z6.jpg

In recent weeks, financial markets have generally aligned with expectations of a soft landing for the global economy, facilitated by more accommodative policies from central banks (see chart 1). This week’s dataflow have largely reinforced these views (see chart 2) as have the communications from many policymakers. However, the escalation of geopolitical turbulence in the Middle East in recent days is now challenging this narrative. By potentially choking supply chains and raising risk premiums in energy markets, there could be growth and inflation-related consequences for the world economy in the coming weeks (see charts 3). This also serves as a reminder that there are longer-term headwinds that are placing a brake on global growth at present, including high real energy prices (chart 4), de-globalization pressures (chart 5) and lingering debt-related imbalances (see chart 6). And many of these issues could be exacerbated if the turmoil in the Middle East were to intensify.

<iframe style="border-radius:12px" src="https://open.spotify.com/embed/episode/7KICKDIZCtV4hBZetWzQxd?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: Geopolitical Scarring

Winnie Tapasanun

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The U.S. ISM Services PMI rose to 54.9 in September, the highest level since February 2023, after a 0.1-point uptick to 51.5 in August, according to today’s report by the Institute for Supply Management, indicating expansion in the services sector for the third straight month, in seven of nine months in 2024, and for the 49th time in 52 months. The September index was up from a four-year-low 48.8 in June, 53.4 in September 2023, and a low of 49.0 in December 2022; however, having remained down from a record-high 67.1 in November 2021. The 12-month average was 51.8, reflecting strong growth in the U.S. services sector. The Action Economics Forecast Survey had expected 51.7 for September.

Haver Analytics constructs a composite index combining the services index and the manufacturing reading. This index rose to 53.9 in September after a 0.2-point increase to 51.0 in August, showing expansion for fourth time in five months. The latest figure was higher than a four-year-low 48.8 in June, 52.8 in September 2023, and a low of 48.9 in December 2022; nevertheless, having remained well below a record-high 66.3 in November 2021. These series date back to July 1997.

In the latest services survey, the business activity index rebounded to 59.9 in September from 53.3 in August, indicating business activity expanded for the 51st time in 52 months and at the highest level since May. The index was up from its recent low of 49.6 in June and a low of 52.7 in December 2022 but below a record-high 69.5 in November 2021. An increased 30.1% of respondents (NSA) reported higher activity in September while a lessened 8.2% reported an activity decline. The new orders index advanced to 59.4 in September from 53.0 in August, indicating expansion in new orders for the 50th time in 52 months and at the fastest pace since February 2023. The index was up from its recent low of 47.3 in June and a low of 45.0 in December 2022 but down from a record-high 69.5 in October 2021. An increased 30.9% of respondents (NSA) reported higher orders in September while a lessened 10.4% reported a decline. Meanwhile, the supplier deliveries index (NSA) rose to 52.1 in September from 49.6 in August, indicating slower supplier delivery performance after two months in faster territory.

On the labor front, the employment index decreased to 48.1 in September on top of a 0.9-point decline to 50.2 in August, showing employment activity in the services sector contracted after two months of expansion. The latest reading, while above a low of 43.8 in December 2023, was below a high of 54.1 in August 2023 and a high of 58.3 in April 2021. A lessened 13.0% of respondents (NSA) indicated higher employment in September while 14.4% reported a decline.

On the inflation front, the prices index rose to 59.4 in September after a 0.3-point increase to 57.3 in August, indicating prices paid by services organizations for materials and services had risen (i.e., above 50) since June 2017 and at the fastest rate since January’s high of 64.0. The index was up versus its recent low of 53.4 in March and a low of 54.8 in June 2023; however, having remained significantly below a record-high 83.8 in March 2022. An increased 22.7% of respondents (NSA) reported price rises in September while a lessened 6.0% reported price declines.

Additionally, the new export orders index increased to 56.7 in September following a 7.6-point drop to 50.9 in August, indicating new export orders expanded for the 10th time in 11 months at a faster rate. The imports index rebounded to 52.7 in September from 50.3 in August, registering the third consecutive month of expansion after contracting in June and May. The inventories index advanced to 58.1 in September from 52.9 in August, indicating inventories expanded for the second successive month and at the fastest pace since May 2023. The inventory sentiment index fell to 54.0 in September after declining to 54.9 in August, showing continued expansion since May 2023 but at the slowest rising rate since June 2023. The backlog of orders index increased to 48.3 in September after dropping to 43.7 in August, posting the third contraction in four months. These series are not seasonally adjusted and not included in the ISM Services PMI total.

The ISM Services PMI is a composite index consisting of four equally weighted diffusion indexes (25% each): Business Activity, New Orders, Employment, and Supplier Deliveries. A reading above 50 indicates expansion in the services sector; below 50 suggests contraction. Supplier Deliveries is the only ISM index that is inversed; a reading above 50 indicates slower deliveries. The ISM figures are available in Haver's **USECON** database, with additional detail in the **SURVEYS** database. The expectations figure from Action Economics is in the **AS1REPNA** database.

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- 54.9 in September vs. 51.5 in August, higher than expected; 3.1 pts. above the 12-month avg. of 51.8.
- Business Activity (59.9, a four-month high), New Orders (59.4, the highest since Feb. ’23), Employment (48.1, the first contraction since June), and Supplier Deliveries (52.1 vs. 49.6).
- Prices Index rises 2.1 pts. to 59.4, the highest since January.

U.S. ISM Services PMI Jumps in September; Highest Level Since February ’23

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New orders for manufactured goods eased 0.2% (+0.9% y/y) during August, after strengthening 4.9% in July, revised from 5.0%, according to the Census Bureau. Orders declined 3.3% in June. The Action Economics Forecast Survey expected a 0.2% increase in total factory orders. Excluding the transportation sector, orders eased 0.1% (+0.5% y/y) after rising 0.3% in July.

New orders for durable goods were unchanged during August (+1.5% y/y), unrevised from the advance release, and followed a 9.8% July gain. The weakness in durable goods orders reflected a 0.8% easing (+2.5% y/y) in transportation sector orders. This followed a 34.6% jump in July, which was buoyed by higher civilian aircraft orders. Motor vehicle & parts orders eased 0.7% (-1.8% y/y) after a 1.0% decline. Orders for all factory products outside the transportation sector slipped 0.1% (+0.5% y/y) in August following a 0.3% July increase. Elsewhere, primary metals orders rose 0.2%, up 0.1% y/y. Machinery orders gained 0.4% (0.1% y/y), while computer & electronics rose 0.4% (2.8% y/y). Electrical equipment orders rose 2.4% (2.8% y/y), following a 0.8% decline.

Shipments by all manufacturing industries eased 0.5% in August (+1.0% y/y) after rising 0.8% in July. Durable goods shipments fell 0.6% (+1.7% y/y) after two months of roughly 1.1% gain. Transportation product shipments fell 2.0% (+5.0% y/y) after a 3.4% rise. Shipments excluding the transportation sector eased 0.2% (+0.2% y/y) after rising 0.3% in July. Machinery shipments rose 0.3% in August (-0.9% y/y) while computer & equipment shipments eased 0.2% (-0.1% y/y). Electrical equipment & appliance shipments rose 0.4% (+0.7% y/y). Nondurable goods shipments, which equal orders, fell 0.5% (+0.3% y/y) after increasing 0.6% in July. Food product shipments eased 0.1% (+1.3% y/y) while apparel shipments rose 0.4% (-2.4% y/y) after two months of decline. Textile product shipments weakened 1.7% both m/m and y/y after falling 0.3% in July. Paper product shipments rose 0.3% (2.1% y/y), following a 0.8% increase. Petroleum & coal product shipments declined 2.3% (-10.9% y/y) in August, after rising 0.5%. Basic chemical shipments rose 0.3% (5.8% y/y) after a 0.8% July increase.

There are no unfilled orders figures for nondurable goods industries. Unfilled orders for durable goods rose 0.4% (4.1% y/y) in August after a 0.2% rise. Transportation unfilled orders rose 0.5% (6.8% y/y) after increasing 0.3% in July. Excluding transportation, unfilled orders rose 0.2% (-0.4% y/y) after holding steady in July. Unfilled orders for durable goods less transportation have been trending sideways since 2022. Unfilled orders for machinery eased 0.1% (-3.7% y/y) while electrical equipment & appliance backlogs rose 0.4% (-0.0%) after a 0.2% decline.

Inventories of all manufactured products rose 0.1% in August (0.6% y/y) after holding steady in July. Durable goods inventories edged 0.1% higher (1.3% y/y) after holding steady in July. Transportation equipment inventories edged 0.1% higher (4.7% y/y) and inventories less transportation rose 0.2% (-0.4% y/y) after holding steady for five straight months. Nondurable goods inventories rose 0.2% (-0.5% y/y) after remaining unchanged for two months, though petroleum inventories rose 0.8% (-1.9% y/y) in August after easing 0.1% in July.

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

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- Improved y/y in orders momentum remains in place.
- Shipments weighed down by a decline in nondefense aircraft sales.
- Unfilled orders and inventories rise modestly.

Economy in Brief: May 2019

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