Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081110d.jpg" align="left" border="0" height="265" width="353">
The OECD trend-adjusted cyclical leading indicators showed a
clear pattern of growth deteriorating in the OECD region. The downturn
is of increasing severity. Even Japan after a brief flirtation with
improving is getting weaker again. Over 3, 6 and 12 months it is Europe
that is now declining the most rapidly.
The OECD prefers to look at these indicators over six months.
On that basis the weakness is just as present. As we prepare for the
G-20 meeting the OECD area is shrinking rapidly.
Over six months the pace of decline for the OECD is at a rate
of 6.5%. Six months ago the six month pace for that index was -2%. One
year ago the pace was just -0.8%. And 18n months ago that pace was an
increase of 2.5%. All that
amounts to a pretty fast drop off. That is the sort of thing that is
typical, not of a slowdown, but of a recession.


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="5" scope="col"> OECD Trend-Restored Leading Indicators</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="5" class="firstcol">Growth Progression-SAAR</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>3Mos</td>
<td>6Mos</td>
<td>12mos</td>
<td>Yr-Ago</td>
</tr>
<tr>
<td class="firstcol">OECD</td>
<td>-9.8%</td>
<td>-6.5%</td>
<td>-4.3%</td>
<td>0.8%</td>
</tr>
<tr>
<td class="firstcol">OECD 7</td>
<td>-11.1%</td>
<td>-6.7%</td>
<td>-5.0%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">OECD Europe</td>
<td>-12.1%</td>
<td>-9.2%</td>
<td>-5.8%</td>
<td>0.2%</td>
</tr>
<tr>
<td class="firstcol">OECD Japan</td>
<td>-6.8%</td>
<td>-2.3%</td>
<td>0.0%</td>
<td>-4.0%</td>
</tr>
<tr>
<td class="firstcol">OECD US</td>
<td>-10.6%</td>
<td>-5.6%</td>
<td>-5.3%</td>
<td>1.3%</td>
</tr>
<tr class="even">
<td colspan="5" class="firstcol">Six month readings at 6-Mo
Intervals</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Recent six</td>
<td>6Mo Ago</td>
<td>12Mo Ago</td>
<td>18MO Ago</td>
</tr>
<tr>
<td class="firstcol">OECD</td>
<td>-6.5%</td>
<td>-2.0%</td>
<td>-0.8%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">OECD 7</td>
<td>-6.7%</td>
<td>-3.2%</td>
<td>-1.2%</td>
<td>1.3%</td>
</tr>
<tr>
<td class="firstcol">OECD Europe</td>
<td>-9.2%</td>
<td>-2.3%</td>
<td>-1.0%</td>
<td>1.3%</td>
</tr>
<tr>
<td class="firstcol">OECD Japan</td>
<td>-2.3%</td>
<td>2.2%</td>
<td>-7.8%</td>
<td>-0.1%</td>
</tr>
<tr>
<td class="firstcol">OECD US</td>
<td>-5.6%</td>
<td>-5.0%</td>
<td>0.8%</td>
<td>1.9%</td>
</tr>
<tr>
<td colspan="5" class="firstcol">Slowdowns indicated by BOLD RED.</td>
</tr>
</tbody>
</table>
</body></html>

The OECD trend-adjusted cyclical leading indicators showed a clear pattern of growth deteriorating in the OECD region. The downturn is of increasing severity. Even Japan after a brief flirtation with improving is getting weaker again. [...]

OECD Slowdown is Broad-Based and More Severe

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081110c.jpg" align="left" border="0" height="265" width="353">
EMU IP is sinking fast. Add Italy and France to the list of
large EMU countries with industrial output dropping like a stone. The
Q3 growth rates for IP in France and in Italy each are negative,
Italy&#8217;s drop is at a huge -8.4% pace while France&#8217;s drop is a still
weak at -2.7%. In Italy
consumer goods, capital goods and intermediate goods output each is
falling. Transportation is twice as weak in Italy as it is in France
for the quarter. In France intermediate goods output is even a bit
weaker than it is in Italy in Q3 but the drop in output of capital
goods is quite a bit less severe and consumer goods output in France
continued to rise strongly in Q3. French consumer goods output, in
fact, has risen in each month of the third quarter as well.
On balance, as the accompanying chart shows, IP is falling
rapidly in Germany, Italy and France. The drop in France shows some
signs of leveling off in its pace of decline over the past few months
while Italy and Germany are still plunging at what seem to be
accelerating rates of decline. Italy &#8217;s pattern of decline is a bit
more complicated than that for Germany and France. But Germany has the
most severe weakness. While it has so far the smallest Yr/Yr drop, its
output has decelerated more sharply since German output was growing so
much more strongly until early 2008 when the pace of increase suddenly
and sharply moved lower and into a state of decline.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">French IP
Excluding Construction </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Saar except m/m</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Quarter-to-date</td>
</tr>
<tr class="odd">
<td class="firstcol">IP total</td>
<td>-0.5%</td>
<td>-0.4%</td>
<td>1.3%</td>
<td>1.6%</td>
<td>-4.2%</td>
<td>-1.9%</td>
<td>-2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer</td>
<td>0.4%</td>
<td>0.1%</td>
<td>1.5%</td>
<td>8.2%</td>
<td>2.8%</td>
<td>-0.4%</td>
<td>6.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital</td>
<td>0.7%</td>
<td>0.0%</td>
<td>0.3%</td>
<td>4.2%</td>
<td>0.5%</td>
<td>1.7%</td>
<td>-3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate</td>
<td>-1.5%</td>
<td>-0.8%</td>
<td>1.3%</td>
<td>-4.1%</td>
<td>-7.2%</td>
<td>-4.4%</td>
<td>-5.0%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">Memo</td>
</tr>
<tr class="odd">
<td class="firstcol">Auto</td>
<td>-3.1%</td>
<td>-1.2%</td>
<td>4.2%</td>
<td>-1.3%</td>
<td>-14.8%</td>
<td>-8.3%</td>
<td>-9.3%</td>
</tr>
<tr class="even">
<td colspan="8" class="firstcol">Italy IP Excluding
Construction</td>
</tr>
<tr class="even">
<td class="firstcol">Saar except m/m</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Quarter-to-date</td>
</tr>
<tr class="odd">
<td class="firstcol">IP-MFG</td>
<td>-2.3%</td>
<td>0.4%</td>
<td>-1.3%</td>
<td>-12.1%</td>
<td>-8.0%</td>
<td>-5.7%</td>
<td>-8.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer</td>
<td>-3.3%</td>
<td>0.8%</td>
<td>-2.3%</td>
<td>-18.0%</td>
<td>-6.5%</td>
<td>-5.4%</td>
<td>-10.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital</td>
<td>-2.5%</td>
<td>-0.9%</td>
<td>-0.5%</td>
<td>-14.9%</td>
<td>-11.1%</td>
<td>-8.2%</td>
<td>-13.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate</td>
<td>-2.6%</td>
<td>1.1%</td>
<td>-0.3%</td>
<td>-7.2%</td>
<td>-5.9%</td>
<td>-5.4%</td>
<td>-3.5%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">Memo</td>
</tr>
<tr class="odd">
<td class="firstcol">Transportation</td>
<td>-5.7%</td>
<td>1.9%</td>
<td>-3.9%</td>
<td>-27.2%</td>
<td>-21.1%</td>
<td>-13.1%</td>
<td>-22.4%</td>
</tr>
</tbody>
</table>
</body></html>

EMU IP is sinking fast. Add Italy and France to the list of large EMU countries with industrial output dropping like a stone. The Q3 growth rates for IP in France and in Italy each are negative, Italy’s drop is at a huge -8.4% pace [...]

IP Dropping Fast in Key EMU Countries

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081110b.jpg" width="353">
The National Association of Realtors reported that September pending sales of existing homes fell 4.6% from the prior month. Sales had risen 7.5% during August. Consensus expectations were for a slightly more moderate m/m drop.
Despite the latest decline, the level of sales on a three-month basis was up 6.6% from its March low.
The home sales figures are analogous to the new home sales data from the Commerce Department in that they measure existing home sales when the sales contract is signed, not at the time the sale is closed. The series dates back to 2001.
The Mortgage Meltdown, Financial Markets, and the Economy is adapted from a speech by San Francisco Federal Reserve Bank President Janet Yellen and it can be found <a href="http://www.frbsf.org/publications/economics/letter/2008/el2008-35-36.pdf">here</a>.
Across the country&#39;s regions the pattern of recent sales movements has been very erratic. Sales in the West led the September increase with a 3.7% m/m rise on the heels of an 18.4% spurt upward in August. The latest was the highest level of sales since early 2006. But that was all of the good news in the latest home sales report. Sales in the Northeast slumped 16.8% m/m to a new low for the series. Sales in the South fell 7.9% and the decline reversed most of the modest firming of sales during the prior three months. Home sales in the Midwest ticked down 0.7% though sales still were a moderate 12.4% higher than the March low.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081110a.jpg" width="353">
Weak home sales are encouraging potential sellers to keep their homes off the market. The Realtors Association indicated in an earlier report that the number of homes on the market and available for sale fell a not seasonally adjusted 1.6% (-2.4% y/y) after a 5.2% August decline. That was the second y/y decline since early 2005.
At the current sales rate there was a 9.9 months&#39; supply of homes on the market, the lowest since February but still higher than 8.9 months last year and 6.5 months during 2006. For single family homes the months&#39; supply fell to 9.4, the lowest since March but still well above the 8.7 average of last year.
The median sales price of an existing single family home fell 5.7% (-9.0% y/y) during September. Prices were down 16.3% from their peak during June of last year. For single family homes, prices fell 5.6% (-8.6% y/y) and they were off 16.8% from last year&#39;s June peak.
The pending home sales data are available in Haver&#39;s PREALTOR database and the number of homes on the market and prices are in the REALTOR database.
The Federal Reserve Board and the U.S. Treasury announced the restructuring of the government&#39;s financial support to the American International Group (AIG) and the text of the announcement can be found <a href="http://www.federalreserve.gov/newsevents/press/other/20081110a.htm">here</a>
What Is Liquidity Risk? also is from the Federal Reserve Bank of San Francisco and it is available <a href="http://www.frbsf.org/publications/economics/letter/2008/el2008-33.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Pending Home Sales (2001=100)&nbsp;</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>89.2</td>
<td>&nbsp;93.5</td>
<td>&nbsp;&nbsp; 1.6%</td>
<td>95.7</td>
<td>112.1&nbsp;</td>
<td>124.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>66.4</td>
<td>79.8</td>
<td>-9.4</td>
<td>85.6</td>
<td>98.5</td>
<td>108.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>83.3</td>
<td>83.9</td>
<td>-3.1</td>
<td>89.6</td>
<td>102.0</td>
<td>116.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>89.0</td>
<td>96.6</td>
<td>-11.3</td>
<td>107.3</td>
<td>127.3</td>
<td>134.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>113.6</td>
<td>109.5</td>
<td>39.6</td>
<td>92.1</td>
<td>109.5</td>
<td>128.6</td>
</tr>
</tbody>
</table>
</body>
</html>

The National Association of Realtors reported that September pending sales of existing homes fell 4.6% from the prior month. Sales had risen 7.5% during August. Consensus expectations were for a slightly more moderate m/m drop. [...]

U.S. Pending Home Sales Retraced Most of August Rise; Trend Still Up

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081110b.jpg" align="left" border="0" height="265" width="353">
The National Association of Realtors reported that September
pending sales of existing homes fell 4.6% from the prior month. Sales
had risen 7.5% during August. Consensus expectations were for a
slightly more moderate m/m drop.
Despite the latest decline, the level of sales on a
three-month basis was up 6.6% from its March low.
The home sales figures are analogous to the new home sales
data from the Commerce Department in that they measure existing home
sales when the sales contract is signed, not at the time the sale is
closed. The series dates back to 2001.
The Mortgage Meltdown, Financial Markets, and
the Economy is adapted from a speech by San Francisco
Federal Reserve Bank President Janet Yellen and it can be found <a href="http://www.frbsf.org/publications/economics/letter/2008/el2008-35-36.pdf">here</a>.
Across the country's regions the pattern of recent sales
movements has been very erratic. Sales in the West led the September
increase with a 3.7% m/m rise on the heels of an 18.4% spurt upward in
August. The latest was the highest level of sales since early 2006. But
that was all of the good news in the latest home sales report. Sales in
the Northeast slumped 16.8% m/m to a new low for the series. Sales in
the South fell 7.9% and the decline reversed most of the modest firming
of sales during the prior three months. Home sales in the Midwest
ticked down 0.7% though sales still were a moderate 12.4% higher than
the March low.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081110a.jpg" align="right" border="0" height="265" width="353">
Weak home sales are encouraging potential sellers to keep
their homes off the market. The Realtors Association indicated in an
earlier report that the number of homes on the market and available for
sale fell a not seasonally adjusted 1.6% (-2.4% y/y) after a 5.2%
August decline. That was the second y/y decline since early 2005.
At the current sales rate there was a 9.9 months' supply of
homes on the market, the lowest since February but still higher than
8.9 months last year and 6.5 months during 2006. For single family
homes the months' supply fell to 9.4, the lowest since March but still
well above the 8.7 average of last year.
The median sales price of an existing single family home fell
5.7% (-9.0% y/y) during September. Prices were down 16.3% from their
peak during June of last year. For single family homes, prices fell
5.6% (-8.6% y/y) and they were off 16.8% from last year's June peak.
The pending home sales data are available in Haver's PREALTOR
database and the number of homes on the market and prices are
in the REALTOR database.
The Federal Reserve Board and the U.S. Treasury
announced the restructuring of the government's financial support to
the American International Group (AIG) and the text of the
announcement can be found <a href="http://www.federalreserve.gov/newsevents/press/other/20081110a.htm">here</a>
What Is Liquidity Risk? also is
from the Federal Reserve Bank of San Francisco and it is available <a href="http://www.frbsf.org/publications/economics/letter/2008/el2008-33.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Pending
Home Sales (2001=100)&nbsp;</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>89.2</td>
<td>&nbsp;93.5</td>
<td>&nbsp;&nbsp; 1.6%</td>
<td>95.7</td>
<td>112.1&nbsp;</td>
<td>124.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>66.4</td>
<td>79.8</td>
<td>-9.4</td>
<td>85.6</td>
<td>98.5</td>
<td>108.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>83.3</td>
<td>83.9</td>
<td>-3.1</td>
<td>89.6</td>
<td>102.0</td>
<td>116.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>89.0</td>
<td>96.6</td>
<td>-11.3</td>
<td>107.3</td>
<td>127.3</td>
<td>134.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>113.6</td>
<td>109.5</td>
<td>39.6</td>
<td>92.1</td>
<td>109.5</td>
<td>128.6</td>
</tr>
</tbody>
</table>
OECD Slowdown is Broad-Based andMore Severe 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 10, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081110d.jpg" align="left" border="0" height="265" width="353">
The OECD trend-adjusted cyclical leading indicators showed a
clear pattern of growth deteriorating in the OECD region. The downturn
is of increasing severity. Even Japan after a brief flirtation with
improving is getting weaker again. Over 3, 6 and 12 months it is Europe
that is now declining the most rapidly.
The OECD prefers to look at these indicators over six months.
On that basis the weakness is just as present. As we prepare for the
G-20 meeting the OECD area is shrinking rapidly.
Over six months the pace of decline for the OECD is at a rate
of 6.5%. Six months ago the six month pace for that index was -2%. One
year ago the pace was just -0.8%. And 18n months ago that pace was an
increase of 2.5%. All that
amounts to a pretty fast drop off. That is the sort of thing that is
typical, not of a slowdown, but of a recession.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="5" scope="col"> OECD
Trend-Restored Leading Indicators</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="5" class="firstcol">Growth
Progression-SAAR</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>3Mos</td>
<td>6Mos</td>
<td>12mos</td>
<td>Yr-Ago</td>
</tr>
<tr>
<td class="firstcol">OECD</td>
<td>-9.8%</td>
<td>-6.5%</td>
<td>-4.3%</td>
<td>0.8%</td>
</tr>
<tr>
<td class="firstcol">OECD 7</td>
<td>-11.1%</td>
<td>-6.7%</td>
<td>-5.0%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">OECD Europe</td>
<td>-12.1%</td>
<td>-9.2%</td>
<td>-5.8%</td>
<td>0.2%</td>
</tr>
<tr>
<td class="firstcol">OECD Japan</td>
<td>-6.8%</td>
<td>-2.3%</td>
<td>0.0%</td>
<td>-4.0%</td>
</tr>
<tr>
<td class="firstcol">OECD US</td>
<td>-10.6%</td>
<td>-5.6%</td>
<td>-5.3%</td>
<td>1.3%</td>
</tr>
<tr class="even">
<td colspan="5" class="firstcol">Six
month readings at 6-Mo
Intervals</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Recent six</td>
<td>6Mo Ago</td>
<td>12Mo Ago</td>
<td>18MO Ago</td>
</tr>
<tr>
<td class="firstcol">OECD</td>
<td>-6.5%</td>
<td>-2.0%</td>
<td>-0.8%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">OECD 7</td>
<td>-6.7%</td>
<td>-3.2%</td>
<td>-1.2%</td>
<td>1.3%</td>
</tr>
<tr>
<td class="firstcol">OECD Europe</td>
<td>-9.2%</td>
<td>-2.3%</td>
<td>-1.0%</td>
<td>1.3%</td>
</tr>
<tr>
<td class="firstcol">OECD Japan</td>
<td>-2.3%</td>
<td>2.2%</td>
<td>-7.8%</td>
<td>-0.1%</td>
</tr>
<tr>
<td class="firstcol">OECD US</td>
<td>-5.6%</td>
<td>-5.0%</td>
<td>0.8%</td>
<td>1.9%</td>
</tr>
<tr>
<td colspan="5" class="firstcol">Slowdowns
indicated by BOLD RED.</td>
</tr>
</tbody>
</table>
IP Dropping Fast in Key
EMUCountries 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 10, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081110c.jpg" align="left" border="0" height="265" width="353">
EMU IP is sinking fast. Add Italy and France to the list of
large EMU countries with industrial output dropping like a stone. The
Q3 growth rates for IP in France and in Italy each are negative,
Italy&#8217;s drop is at a huge -8.4% pace while France&#8217;s drop is a still
weak at -2.7%. In Italy
consumer goods, capital goods and intermediate goods output each is
falling. Transportation is twice as weak in Italy as it is in France
for the quarter. In France intermediate goods output is even a bit
weaker than it is in Italy in Q3 but the drop in output of capital
goods is quite a bit less severe and consumer goods output in France
continued to rise strongly in Q3. French consumer goods output, in
fact, has risen in each month of the third quarter as well.
On balance, as the accompanying chart shows, IP is falling
rapidly in Germany, Italy and France. The drop in France shows some
signs of leveling off in its pace of decline over the past few months
while Italy and Germany are still plunging at what seem to be
accelerating rates of decline. Italy &#8217;s pattern of decline is a bit
more complicated than that for Germany and France. But Germany has the
most severe weakness. While it has so far the smallest Yr/Yr drop, its
output has decelerated more sharply since German output was growing so
much more strongly until early 2008 when the pace of increase suddenly
and sharply moved lower and into a state of decline.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">French IP
Excluding Construction </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Saar except m/m</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Quarter-to-date</td>
</tr>
<tr class="odd">
<td class="firstcol">IP total</td>
<td>-0.5%</td>
<td>-0.4%</td>
<td>1.3%</td>
<td>1.6%</td>
<td>-4.2%</td>
<td>-1.9%</td>
<td>-2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer</td>
<td>0.4%</td>
<td>0.1%</td>
<td>1.5%</td>
<td>8.2%</td>
<td>2.8%</td>
<td>-0.4%</td>
<td>6.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital</td>
<td>0.7%</td>
<td>0.0%</td>
<td>0.3%</td>
<td>4.2%</td>
<td>0.5%</td>
<td>1.7%</td>
<td>-3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate</td>
<td>-1.5%</td>
<td>-0.8%</td>
<td>1.3%</td>
<td>-4.1%</td>
<td>-7.2%</td>
<td>-4.4%</td>
<td>-5.0%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">Memo</td>
</tr>
<tr class="odd">
<td class="firstcol">Auto</td>
<td>-3.1%</td>
<td>-1.2%</td>
<td>4.2%</td>
<td>-1.3%</td>
<td>-14.8%</td>
<td>-8.3%</td>
<td>-9.3%</td>
</tr>
<tr class="even">
<td colspan="8" class="firstcol">Italy
IP Excluding
Construction</td>
</tr>
<tr class="even">
<td class="firstcol">Saar except m/m</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Quarter-to-date</td>
</tr>
<tr class="odd">
<td class="firstcol">IP-MFG</td>
<td>-2.3%</td>
<td>0.4%</td>
<td>-1.3%</td>
<td>-12.1%</td>
<td>-8.0%</td>
<td>-5.7%</td>
<td>-8.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer</td>
<td>-3.3%</td>
<td>0.8%</td>
<td>-2.3%</td>
<td>-18.0%</td>
<td>-6.5%</td>
<td>-5.4%</td>
<td>-10.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital</td>
<td>-2.5%</td>
<td>-0.9%</td>
<td>-0.5%</td>
<td>-14.9%</td>
<td>-11.1%</td>
<td>-8.2%</td>
<td>-13.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate</td>
<td>-2.6%</td>
<td>1.1%</td>
<td>-0.3%</td>
<td>-7.2%</td>
<td>-5.9%</td>
<td>-5.4%</td>
<td>-3.5%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">Memo</td>
</tr>
<tr class="odd">
<td class="firstcol">Transportation</td>
<td>-5.7%</td>
<td>1.9%</td>
<td>-3.9%</td>
<td>-27.2%</td>
<td>-21.1%</td>
<td>-13.1%</td>
<td>-22.4%</td>
</tr>
</tbody>
</table>
Declines in Commodity Prices
Leading to Lower Inflation Rates Worldwide 
by <a href="/comment/Curley.html">Louise
Curley</a> November 10, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081110e.jpg" align="left" border="0" height="265" width="353">
Inflation is beginning to take a back seat in the
deliberations of Central Bankers. The financial crisis, rising
unemployment and declining production are overshadowing inflation fears
at the same time that these fears are lessening. No matter the actual
level of inflation, incoming data are showing that inflation rates are
declining worldwide.
Today Egypt, Greece, Latvia and the Czech Republic reported
their Consumer Price Indexes for October. The inflation rate as
measured by the year-to-year increase in the CPI has recently been
declining at varying degrees of speed in each country. Egypt, with
inflation over 20%, has seen its inflation rate decline in the last two
months from 23.8% in August to 20.1% in October. Another high inflation
rate country, Latvia, has experienced declines in its inflation rate in
the last five months, from 17.7% in June to 13.8% in October. Greece
and the Czech Republic with relatively low inflation rates have
nevertheless also witnessed declines in their inflation rates.
Inflation in Greece has come down to 3.9% in October from 4.8% in June,
and to 6.0% from 6.7%, respectively, in the Czech republic. The "core"
inflation rate in the Czech Republic has declined to 1.65 % in October
from 2.64 % in June. Inflation rates for the four countries are shown
in the first chart.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081110f.jpg" align="right" border="0" height="265" width="353">
Dramatic declines in commodity prices over the past year are
responsible for much of the improved inflation outlook worldwide. The
second chart shows the prices of wheat, copper and oil over the past
year.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">INFLATION
RATES&nbsp;</th>
<th scope="col">Oct 08</th>
<th scope="col">Sep&nbsp;&nbsp;
08&nbsp;</th>
<th scope="col">Aug 08&nbsp;</th>
<th scope="col">Jul&nbsp; 08&nbsp;</th>
<th scope="col">Jun 08&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Czech Republic:
Total</td>
<td>6.0</td>
<td>6.6</td>
<td>6.5</td>
<td>6.9</td>
<td>6.7</td>
</tr>
<tr>
<td class="firstcol">Czech Republic: Core</td>
<td>1.65</td>
<td>2.54</td>
<td>2.54</td>
<td>2.64</td>
<td>2.64</td>
</tr>
<tr class="odd">
<td class="firstcol">Greece: Total</td>
<td>3.90</td>
<td>4.58</td>
<td>4.68</td>
<td>4.83</td>
<td>4.89</td>
</tr>
<tr>
<td class="firstcol">Egypt: Total</td>
<td>20.13</td>
<td>21.52</td>
<td>23.79</td>
<td>22.15</td>
<td>20.22</td>
</tr>
<tr class="odd">
<td class="firstcol">Latvia: Total</td>
<td>13.73</td>
<td>14.88</td>
<td>15.72</td>
<td>16.61</td>
<td>17.74</td>
</tr>
</tbody>
</table>
</body></html>

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081107a.jpg" width="353">
October Nonfarm payrolls declined 240,000, according to the Bureau of Labor Statistics. The decline, which exceeded Consensus expectations for a 198,000 drop, followed a revised 284,000 September decline that was much deeper than reported initially. So far in 2008, nonfarm payrolls are down 1.179 mil., or 0.9%.
During the last three months, payrolls fell at a 1.9% annual rate. That is the quickest rate of decline during this cycle and it now matches the rate of decline at the end of the 2001 recession.
The unemployment rate jumped to 6.5% last month, the highest level since March 1994. The increase also exceeded Consensus expectations for a rise to 6.3%. The jump owed to a 297,000 drop in employment (-0.7% y/y), as measured in the household survey. The latest decline in household sector employment was the eighth, and second largest, monthly decline this year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081107b.jpg" width="353">
The number of those who were unemployed last month rose 603,000 (38.3% y/y) and the number is up 2.425 mil. so far this year. The labor force rose 306,000 (+1.1% y/y) during October and that rate of increase has been steady. The labor force participation rate increased slightly to 66.1%. The number of people of who want a job but are not in the labor force fell last month but the figure is up 16.4% y/y, the most in over ten years.
The average duration of unemployment increased by more than one full week to 19.7 and the median duration of unemployment rose to a lesser 10.6 weeks, up from 8.5 weeks during all of last year. The number of those unemployed for more than 27 weeks increased 12.4% and that figure is up by three quarters over the last twelve months, the most since 2002.
From the establishment survey the number of private sector jobs fell 263,000 (-1.1% y/y) after a 243,000 September decline, initially reported down by 168,000. Private service sector industries shed 131,000 jobs (-0.4% y/y) and that was the ninth decline in the last ten months. Employment in trade, transportation &amp; utilities accounted for roughly half of that October decrease while retail sector jobs fell another 38,100 (-1.8% y/y) with motor vehicle dealerships (-4.8% y/y) accounting for most of the decline. Jobs in the information sector were unchanged last month (-1.5% y/y) but financial sector jobs fell 24,000 (-1.5% y/y). The professional &amp; business service industry shed 45,000 (-1.7% y/y) jobs after a 39,000 September decline (Here was where half of the big downward revision for September occurred). Temporary help services jobs which often are a leading indicator of employment growth, fell 36,600 (-11.6% y/y), the largest y/y decline since 2002. These declines were somewhat offset by a gain in education &amp; health industries jobs of 21,000 (2.8% y/y) but here again, revisions were big. The previously reported September gain of 25,000 now shows a 16,000 decline.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081107d.jpg" width="353">
Construction sector employment fell by 49,000 during October, the largest decline since June.
Factory sector jobs fell 90,000 (-3.7% y/y) after a little revised 56,000 worker decline during September. Motor vehicle &amp; parts jobs fell 9,100 (-13.5% y/y) and furniture &amp; parts jobs fell by 10,400 (-10.8% y/y. In the nondurables sector employment fell 15,000 (-2.4% y/y).
Government sector jobs moved higher by 23,000 (1.1% y/y). The gain followed a decline of 41,000 during September which initially was reported as a slight increase. (This was the source of the other half of the downward September revision in total nonfarm jobs.) Local governments added 21,000 (1.0% y/y) workers while the federal government added 6,000 (1.2% y/y) workers.
Comparing Current Payroll Employment Changes with Past Recessions from the Federal Reserve Bank of Cleveland is available <a href="http://www.clevelandfed.org/research/trends/2008/1108/04ecoact.cfm">here</a>.
The length of the average workweek held steady m/m at 33.6 hours, down slightly from the 3Q average.
Suggesting continued declines in employment was the one month diffusion index, which measures the breadth of job gain or loss (50 is the break-even level). It fell to its lowest level of this cycle (37.6%). The three-month index also was near its cycle low at 37.0% and the three-month figure for the factory sector was even weaker at 25.0%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081107c.jpg" width="353">
Average hourly earnings rose a modest 0.2%, as they did in September. A weaker employment market cooled wage increases in the factory sector where earnings fell 0.1% (+2.8% y/y). A 0.1% increase in the private services wages also indicated softness. The y/y gain eased to 3.5%, down from a 5.0% high during 2006.
The Promise and Peril of the New Financial Architecture is yesterday&#39;s speech by Fed Governor Kevin Warsh and it can be found <a href="http://www.federalreserve.gov/newsevents/speech/warsh20081106a.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB01/@EB01.HTM">Employment: 000s</a></th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>-240</td>
<td>-284</td>
<td>-127</td>
<td>-0.8%</td>
<td>1.1%</td>
<td>1.8%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Previous</td>
<td>--</td>
<td>-159</td>
<td>-73</td>
<td>--</td>
<td>1.3%</td>
<td>1.9%</td>
<td>1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-90</td>
<td>-56</td>
<td>-40</td>
<td>-3.7%</td>
<td>-1.9%</td>
<td>-0.5%</td>
<td>-0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>-49</td>
<td>-35</td>
<td>-20</td>
<td>-6.7%</td>
<td>-1.0%</td>
<td>4.9%</td>
<td>5.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Service Producing</td>
<td>-108</td>
<td>-201</td>
<td>-57</td>
<td>-0.1%</td>
<td>1.6%</td>
<td>1.8%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Average Weekly Hours</td>
<td>33.6</td>
<td>33.6</td>
<td>33.7</td>
<td>33.8 (Oct. &#39;07)</td>
<td>33.8</td>
<td>33.9</td>
<td>33.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Hourly Earnings</td>
<td>0.2%</td>
<td>0.2%</td>
<td>0.4%</td>
<td>3.5%</td>
<td>4.0%</td>
<td>3.9%</td>
<td>2.7%</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate</td>
<td>6.5%</td>
<td>6.1%</td>
<td>6.1%</td>
<td>4.8% (Oct. &#39;07)</td>
<td>4.6%</td>
<td>4.6%</td>
<td>5.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

October Nonfarm payrolls declined 240,000, according to the Bureau of Labor Statistics. The decline, which exceeded Consensus expectations for a 198,000 drop, followed a revised 284,000 September decline that was much deeper than [...]

U.S. Payrolls Off 240,000 in October; 6.5% Jobless Rate Highest Since 1994

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080904i.jpg" width="353">
Labor productivity in the nonfarm business sector rose 1.1% last quarter. That gain was down by two-thirds from the 2Q increase and by half from 1Q. Nonetheless, the y/y gain of 2.0% remained nearly the quickest since 2004. The latest increase about matched Consensus expectations for 3Q.
Output growth fell to a negative 1.7% (+0.3% y/y) which was its weakest since the 2001 recession. Productivity, however, still rose as hours worked were reduced by an even greater degree. They declined 2.7% (-1.7% y/y).
Growth in compensation per hour nevertheless accelerated to 4.7% and that raised the y/y growth to 4.3%.
As a result of weaker productivity and quicker compensation, unit labor cost growth jumped to 3.6%. That was off the recent highs near 4.0% but the trend is one of acceleration.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081106e.jpg" width="353">
In the factory sector productivity declined at a 1.0% (+1.1% y/y) rate and that was the second consecutive quarterly decline following a 3.4% increase last year. Output declined 2.6% y/y and hours worked were reduced by an even greater 3.7% y/y. Compensation growth quickened to 5.1%, the fastest since 2006. As a result, unit labor cost growth 6.1% last quarter and by 3.9% y/y, the fastest since late-2006.
The Current State of the U.S. Economy and the Fed&#146;s Response (With Reference to Irrational Exuberance and Virgil&#146;s Aeneid) from the Federal Reserve Bank of Dallas is available <a href="http://dallasfed.org/news/speeches/fisher/2008/fs081104.cfm">here</a>.
Multinationals Make the Most of IT from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/net/20080601/cover.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/USECON/@EC/@EC02/@EC02.HTM">Nonfarm Business Sector</a> (SAAR, %)</th>
<th scope="col">3Q &#39;08</th>
<th scope="col">2Q &#39;08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Output per Hour</td>
<td>1.1</td>
<td>3.6</td>
<td>2.0</td>
<td>1.4</td>
<td>1.0</td>
<td>1.8</td>
</tr>
<tr>
<td class="firstcol">Compensation per Hour</td>
<td>4.7</td>
<td>3.5</td>
<td>4.3</td>
<td>4.1</td>
<td>3.8</td>
<td>4.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor Costs</td>
<td>3.6</td>
<td>-0.1</td>
<td>2.3</td>
<td>2.7</td>
<td>2.8</td>
<td>2.2</td>
</tr>
</tbody>
</table>
</body>
</html>

Labor productivity in the nonfarm business sector rose 1.1% last quarter. That gain was down by two-thirds from the 2Q increase and by half from 1Q. Nonetheless, the y/y gain of 2.0% remained nearly the quickest since 2004. The latest [...]

U.S. Productivity Growth Weakened and Unit Labor Costs Surged

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081106c.jpg" align="left" border="0">
German officials have officially ended their excursion trip
with optimism. During their journey through fantasy land, they did take
their turns in showing how wrong they can be. From the start of the US
slowing, they thought Europe had decoupled and that the euro could
continue to rise with little ill effect on the Zone. When the other
e-Zone countries were affected they said Germany was different. When
the banking crisis hit the US they said German banks were strong and
did not have these sorts of problems. Recently they had believed
Germany was going to be so much less affected by the growing recession
in Europe as policymakers announced that Germany was better prepared to
meet the crisis. And so it may be. And we shall find out because ready
or not here it comes. 
 

The pop in orders in August may have errantly encouraged the
belief that Germany was wearing some sort of special recession-proof
vest. But now Super-Germany has met its Kryptonite. The Sept plunge in
orders of -8% is the largest drop since German unification and has
swept optimism aside. Germany is now, after all, just another European
country with an economy under pressure, not a special case 
 

Moreover a perusal of the trends makes is crystal clear that
this downturn has been building for some time. Optimism in retrospect
looks a bit like whistling past the graveyard. August&#8217;s orders gain was
a rogue rise of 3.5% sandwiched in between drops of 1.7% in July and
now 8% in September. The sequential growth rates get progressively more
negative from -9% over 12 months to -12% over six months to -23% over
three months. Similarly the foreign and domestic orders show the same
progressions. 
 

Germany is getting pulled down more by weakness from the
outside. So, in some sense, it is true that Germany has been faring
better. But in good times German export orders boomed beyond the reach
of domestic orders as well. Germany is simply a lower growth more
stable economy than the world in which it trades. Yet weakness abroad
will weigh on Germany just as a global boom will boost it. Because
Germany is plugged into that trading system, it shares the good and bad
times with the world it exports to. There is nothing unusual about that
or about the effect of that on Germany in this cycle. 
 

The German industrial sales figures underline the issues.
German sales are showing the same sort of progressive declines. For a
while Germany was growing better than its trading partners because it
deals a lot in capital goods. One year ago German capital goods growth
rates rose 8% Yr/Yr while overall German sales rose by just 5.8%. But
in September German capital goods orders are being crushed. They are
falling by 5.2% in Sept alone. Their three-month pace of contraction is
-14.4% rivaling the 15.5% drop in the usually volatile sales of
consumer durable goods. 
 

Germany has been caught in the same web of weakness that all
of Europe is in. Today&#8217;s industrial orders report combines with the
week&#8217;s earlier reports from the MFG and Services sector purchasers data
from Markit to show that weakness is spreading in Germany as well as
across the e-Zone. 
 

Germany is in the soup along with the rest of Europe although
it may be submerging at a slightly slower rate. There can be little
doubt that Germany, like the rest of Europe is submerging. Down
periscope. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="9" scope="col">German Orders and Sales By Sector and Origin </th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">Real and SA</td>
<td colspan="3">% M/M</td>
<td colspan="5">% Saar</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
<td>QTR-2-Date</td>
</tr>
<tr class="grey2">
<td class="firstcol">Total Orders</td>
<td>-8.0%</td>
<td>3.5%</td>
<td>-1.7%</td>
<td>-23.0%</td>
<td>-12.2%</td>
<td>-9.0%</td>
<td>6.4%</td>
<td>-14.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Foreign</td>
<td>-11.4%</td>
<td>4.3%</td>
<td>-1.2%</td>
<td>-30.7%</td>
<td>-16.7%</td>
<td>-13.6%</td>
<td>12.1%</td>
<td>-17.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Domestic</td>
<td>-4.3%</td>
<td>2.8%</td>
<td>-2.1%</td>
<td>-14.2%</td>
<td>-7.4%</td>
<td>-3.9%</td>
<td>0.8%</td>
<td>-11.4%</td>
</tr>
<tr class="grey1">
<td colspan="9" class="firstcol">Real Sector Sales</td>
</tr>
<tr class="grey2">
<td class="firstcol">MFG/Mining</td>
<td>-4.0%</td>
<td>4.5%</td>
<td>-2.4%</td>
<td>-8.2%</td>
<td>-4.2%</td>
<td>-1.9%</td>
<td>5.8%</td>
<td>-5.0%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Consumer</td>
<td>-0.6%</td>
<td>2.0%</td>
<td>-0.4%</td>
<td>4.0%</td>
<td>2.0%</td>
<td>-2.6%</td>
<td>1.3%</td>
<td>-0.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Consumer Durables</td>
<td>-6.3%</td>
<td>6.8%</td>
<td>-4.2%</td>
<td>-15.5%</td>
<td>-8.1%</td>
<td>-5.8%</td>
<td>2.4%</td>
<td>-7.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Consumer Non-Durable</td>
<td>0.6%</td>
<td>1.2%</td>
<td>0.3%</td>
<td>8.5%</td>
<td>4.2%</td>
<td>-1.9%</td>
<td>1.0%</td>
<td>0.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Capital Goods</td>
<td>-5.2%</td>
<td>5.7%</td>
<td>-4.0%</td>
<td>-14.4%</td>
<td>-7.5%</td>
<td>-1.2%</td>
<td>8.0%</td>
<td>-9.2%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Intermediate Goods</td>
<td>-4.3%</td>
<td>4.2%</td>
<td>-1.7%</td>
<td>-7.5%</td>
<td>-3.8%</td>
<td>-2.6%</td>
<td>6.0%</td>
<td>-2.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol">All MFG-Sales</td>
<td>-3.9%</td>
<td>4.4%</td>
<td>-2.2%</td>
<td>-7.4%</td>
<td>-3.8%</td>
<td>-1.9%</td>
<td>5.3%</td>
<td>-4.5%</td>
</tr>
</tbody>
</table>
</body></html>

German officials have officially ended their excursion trip with optimism. During their journey through fantasy land, they did take their turns in showing how wrong they can be. From the start of the US slowing, they thought Europe [...]

Germany's Flirtation with Rebound Is Smashed by a Stunning September Order Drop

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

Disrupted global supply chains placing upward pressure on US goods prices

Construction of data centers has overtaken transportation construction in US

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

US is big leader in global surge in private AI investment

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

Sharply rising share of AI-related jobs

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

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

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

Cost of transporting crude oil has soared to series high

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

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

Is recent drop in sentiment signaling softer growth ahead?

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

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

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

Accelerating positive economic surprises in the G10 are boosting the global economy

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Winnie Tapasanun

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New single-family home sales unexpectedly fell 7.3% m/m (-6.8% y/y) to a seasonally adjusted annual rate of 580,000 units in May following an upwardly revised 5.7% decline to 626,000 in April (initially -6.2%, 622,000) and an upwardly revised 5.4% increase to 664,000 in March (previously +3.4%, 663,000), according to data from the U.S. Census Bureau. The Action Economics Forecast Survey had expected May sales of 640,000. May marked the lowest level since January, down 23.4% from a high of 757,000 in November 2025 but up 8.4% from a low of 535,000 in July 2022. The May decline coincided with a rise in the average 30-year fixed mortgage rate to 6.44%, the highest since August 2025, from 6.33% in April, according to Freddie Mac.

Regionally, May new home sales showed a mixed performance. Sales in the West plummeted 26.9% (-17.0% y/y) to 117,000 in May, a seven-month low, reversing a 19.4% rebound to 160,000 in April. Sales in the South fell 4.1% (-5.4% y/y) to 350,000, the lowest level since January, on top of an 11.4% April drop to 365,000. In contrast, sales in the Midwest recovered 16.2% (-3.7% y/y) to 79,000, the third m/m gain in four months, after a 20.0% April plunge to 68,000. Sales in the Northeast increased 3.0% (17.2% y/y) to 34,000, the highest level since December, following a flat reading in April and a 73.7% surge in March. Notably, the South remained the dominant region, accounting for 60.3% of total U.S. new home sales.

The median sales price of a new home rose 2.0% (0.0% y/y) to $424,900 in May, the highest since December, following a 6.0% rise to $416,500 in April and three consecutive m/m decreases. The median sales price was 6.9% above a low of $397,600 in November 2024 but 7.7% below its record high of $460,300 in October 2022. The average sales price of a new home climbed 7.8% (5.0% y/y) to $540,600, the first m/m increase in three months and the highest level since July 2022, following a 1.3% April decline to $501,400. The average price was 13.7% above a low of $475,600 in August 2024 and just 0.1% below a peak of $541,200 in July 2022. These sales price data are not seasonally adjusted.

The number of unsold new homes on the market grew 2.3% (-1.4% y/y) to 496,000 in May, the third m/m rise in four months and the highest level since July 2025, after a 0.8% rebound to 485,000 in April. The latest figure was 17.0% above a low of 424,000 in May 2023. The seasonally adjusted months' supply of new homes for sale rose to 10.3 months in May from 9.3 months in April, remaining above a low of 6.9 months in May 2023 and matching a high last seen in July 2022.

The median number of months a new home stayed on the market increased to 3.7 months in May, the highest since July 2021, from 3.6 months in April. The latest reading was above its record low of 1.5 months in September and October 2022 but well below a peak of 5.1 months in March 2021. These figures date back to January 1975.

New home sales are recorded when the sales contract is signed. New home sales activity and prices are available in Haver's **USECON** database. The consensus expectation figure from Action Economics is available in the **AS1REPNA** database.

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- Sales -7.3% m/m (-6.8% y/y) to 580,000 in May; down 23.4% from a November high.
- Sales m/m down in the West (-26.9%) and South (-4.1%); up in the Midwest (+16.2%) and Northeast (+3.0%).
- Sales y/y down in all regions except the Northeast (+17.2%).
- Median sales price +2.0% m/m to $424,900, a 5-month high; avg. price +7.8% m/m to $540,600, highest since July ’22.
- Months' supply up to 10.3 mths., highest since July ’22.

U.S. New Home Sales Unexpectedly Hit a Four-Month Low in May

Michael J. Moran

260624A.jpg

260624B.jpg

The US current account balance, which consists of international trade and income flows, deteriorated slightly in the first quarter, moving to a deficit of $226.8 billion versus a shortfall of $221.1 billion in the fourth quarter of last year (chart, upper left). Trade flows moved slightly in favor of the US, as the deficit narrowed by $11.6 billion to $165.8 billion, with trade in both goods and services contributing to the improvement. The latest reading on the trade deficit was among the best of the post-pandemic period (chart, upper right).

The improvement in trade was more than offset by softening in both primary income and secondary income. Primary income consists of net receipts of both investment income and employee compensation, with net flows defined as receipts of US residents from abroad less US payments to residents in foreign countries. Net investment income is by far the larger of the two components of primary income, and it accounted for nearly all the slippage in primary income, dropping $17.0 billion to -$7.8 billion. The shift pushed net investment income back into negative territory after a quarter in the plus column (chart, lower left). Employee compensation moved in favor of the US by 4.0%, but given the small size of employee compensation, the improvement represented an insignificant offset to the slippage in investment income.

Secondary income consists of transfer payments (payments made without receiving something of economic value in return); examples include personal remittances (foreign workers sending funds to families in their home countries), charitable donations, taxes, fines, and penalties. Payments made by US residents have always exceeded payments received, leaving a regular deficit in secondary income. This component of the current account slipped 1.3% in Q1, but it remained within the range of observations over the past year.

Annual revisions to the current account were notable, as both the trade balance and the balance on primary income were revised to show deeper deficits. The quarterly average trade deficit for 2025 now totals $233.0 billion versus a previous estimate of $227.9 billion. Primary income now shows a quarterly average deficit of $11.9 billion for 2025 versus a surplus of $3.2 billion.

The shift to a deficit position in primary income in 2025 is not shocking, as previously estimated positive readings on average in 2025 (and prior years) were surprising in light of the international investment position of the US. Foreign investors hold far larger amounts of US assets than US investors hold of foreign assets (chart, lower right). That is, the US has a deficit in investment holdings. However, despite the differential in asset holdings, US investors typically earned higher rates of return on their foreign investments than foreigners earned on their US investments. Although the gap in asset holdings has been large, the higher returns earned by US investors left net investment income positive. Revised data now suggest that the net international investment position of the US has slipped to such a degree that higher rates of return will no longer offset the differential in asset holdings. Positive quarterly readings on net investment income might be apparent at times (such as 2025-Q4), but net investment income (and primary income in total) will probably be negative in most coming quarters.

Balance of Payments data are in Haver’s **USINT** database, with summaries available in **USECON**. The expectations figure is in the **AS1REPNA** database.

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- Improvement in the trade balance offset by weaker net investment income.
- Annual revision showed wider deficit in 2025.


Q1 Current Account: Modest Slippage in Early 2026

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**PMIs in June mark some progress**
The PMI report from S&P shows modest firming in conditions in June, even with the Middle East situation unresolved.

**Monthly:** The median reading for the 8 reporting countries or regions rose to 50.8 in June from 50.1 in May. Manufacturing improved to 52.7 from 52.4, while the services reading rose to 50.3 from 49.6, leaving a month of mild contraction behind.

**Most show June improvement:** Most countries or regions improved in June; the exceptions were Germany, the United Kingdom, and India, which were weaker. India was dragged down by a weaker service sector reading in June; the U.K. and Germany showed weakening conditions across the board for the composite index, the manufacturing sector, and services. On the other side of the coin, France, Japan, Australia, and the U.S. all showed improvement in each of three sectors: the composite, manufacturing, and services, in June compared to May.

**Sequentially still mixed:** The broader sequential readings show ongoing weakness, but these are derived from hard data and lag the monthly observations in the table that include preliminary flash estimates. All the composite readings weakened based on three-month averages except for India. However, seven of eight reporting areas showed improvement in manufacturing over three months compared to six months; the exception was Australia. Over six months, conditions are mixed, with four composite readings weaker compared to 12 months and with four stronger. However, over six months, all eight manufacturing sectors improved compared to 12 months. The 12-month readings are consistently stronger than their readings of 12 months ago. The only composite that's weaker is the U.S., while the services sectors in the monetary union, Germany, France, and the U.S. are weaker than they were 12 months ago.

**Standings are weak:** The queue percentile standings evaluate the current diffusion index in June compared to where it has been since January 2022, a period of about 4½ years. The queue standings show weakness up and down the line, with the exception of the manufacturing sector; that has the standing above its historic median in the monetary union, Germany, France, the U.K., the U.S., and Japan. Only Australia and India show manufacturing sectors whose current monthly standings are below their medians of the last 4½ years. In addition, Japan has a strong composite reading at its 81st percentile. Overall, the services sectors are weak and below their 50% standing every place, and below that mark by a large margin, except for Japan, where the services sector has a 47th percentile standing, only a few ticks below its median.

260623.jpg

**Summing up: A glimmer of hope but still a lot of weakness**
Manufacturing is stronger sequentially over three months, six months, and 12 months for every reporter except for Australia over three months. The rest of the report is not very impressive. There is some rebound in June, but here we're talking about volatile monthly data. The services sectors still show sequential weakness over 12 months, six months, and three months in the European Monetary Union, Germany, France, and the U.S. The U.K. and Japan showed three-month and six-month weakness as well. That’s too much weakness in the key job creation sector to think that this report is a positive signal.

S&P PMIs in June Firm

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Danish consumer confidence rose to -14 in June from -19.8 in May, a small pickup for a still-negative net reading. In June, the reading has a standing at its 7.9 percentile on data back to 1995. So, this confidence headline still has a lower 8% reading overall.

On the month, all seven component readings improved compared to May, although the environmental assessments were little changed across four components. As for the environment, the most changed reading is the improved favorability of the time to save, a metric that is not always a positive category.

As for the seven categories, the readings on the financial situation, general economy and the unemployment rate all improved month-to-month, while the inflation metrics both backed down sharply.

These changes show the financial situation and general economy gauges all at rankings in the lower 20th percentiles, with the outlook for the next 12 months having a standing in their lower 10th percentiles and lower for both the financial situation and the general economy.

Consumer prices, despite a strong monthly step-back, have a 90.2 percentile standing for prices over the past 12 months and a 94.3 percentile standing for the CPI over the next 12 months. Despite some let-up in concerns about unemployment, the unemployment gauge has an 85.1 percentile standing, still substantially elevated.

The environmental readings are less negative, starting with the ‘favorability of the time to purchase,’ a bit weaker month-to-month but improved on balance over two months. The June reading is slightly better than its 12-month average but still has a ranking only in its 21st percentile. The favorability of the time to purchase over the next 12 months is a tick weaker month-to-month and about a point worse than its 12-month average. Its June ranking is in its lower 10th percentile of its historic queue. The favorability of the time to save has a stronger ranking, but this is a more equivocal category. It is improved month-to-month and only slightly stronger over two months The June reading is stronger than its 12-month average, with a ranking in its 47.6 percentile—improved compared to previous categories but still worse than its historic median since 1995 (the median occurs at a ranking of 50%). The ‘general financial situation of households now’ ticked lower in June from May but is stronger on balance over two months. The June reading is above its 12-month average and has a 59.2 percentile standing—above its median.

On balance, Denmark shows improving confidence, progressing slowly but on the right path. There is a sharp downward adjustment in inflation, especially over the next 12 months, despite global conditions. Still, the ranking of the confidence metrics are uniformly weak.

260622.jpg

Denmark

Danish Confidence Improves As Inflation Expectations Pull Back Sharply

Andrew Cates

**US Outperformance Holds; Europe and China Continue to Disappoint**
One of the most persistent features of the global macro landscape in 2026 has been the widening divergence between growth outcomes in the United States and those in Europe and China. Citigroup’s global growth surprise indices—which measure the gap between actual economic releases and consensus expectations—capture this divergence with unusual clarity. US data have continued to surprise on the upside, supported by resilient consumer spending, a stronger-than-expected labour market and the ongoing AI-driven capital spending boom. The picture elsewhere is less encouraging. Growth surprises have turned negative across the euro area, reflecting the cumulative toll of elevated energy costs, weak industrial activity and subdued business confidence. And China's growth surprise index has also fallen sharply in recent weeks, with weaker-than-expected retail sales and fixed asset investment data for May this week reinforcing concerns that domestic demand remains fragile and that policy support is yet to gain meaningful traction.

260618Z1.jpg

**The Oil Risk Premium in the UK Has Been Fading**
One of the more notable features of UK markets this year has been the close relationship between oil prices and two-year gilt yields. The link is not mechanical, but in an economy heavily exposed to imported energy, swings in oil prices can materially alter the inflation outlook and, by extension, expectations for Bank of England policy. That relationship was on display again this week. A softer-than-expected UK CPI reading for May—helped in part by easing energy price pressures—led investors to scale back expectations that inflation would remain persistently above target, pushing two-year gilt yields to their lowest level in six weeks. The question now is whether this marks the start of a more sustained easing in inflation pressures or merely a temporary reprieve. Much will depend on whether the recent decline in oil prices following the US-Iran ceasefire agreement proves durable.

260618Z2.jpg

**The AI Investment Boom Is Rewriting the Rule Book for the Chip Industry**
If the divergence in global growth surprises noted above tells a story of a world economy under strain, the semiconductor sales data tell a very different one — of a technology-driven investment cycle that is accelerating almost regardless of the broader macro environment. Global semiconductor sales have surged to record levels over the past twelve months, driven primarily by insatiable demand for the chips that underpin AI infrastructure: graphics processing units, high-bandwidth memory, and advanced logic chips. Data centre capital expenditure from the hyperscalers continues to exceed even the most optimistic forecasts from a year ago, and the investment pipeline shows no sign of moderating. The gains are concentrated in AI-adjacent products; legacy chips for consumer electronics and industrial applications remain relatively soft.

260618Z3.jpg

**Copper Holds Firm As Oil Retreats**
The commodity markets are telling two quite different stories this week, and the contrast is instructive. Oil has moved sharply lower on the US-Iran MoU news as investors trim the conflict risk premium that has been embedded in energy markets since March — a welcome development for inflation and central bank optionality alike. But the three commodities shown in this chart tell a different story. Copper, one of the most reliable proxies for global electricity infrastructure investment, remains near multi-year highs, reflecting the extraordinary volume of data centre construction, grid expansion and electrification spending flowing through the global economy. Aluminium — energy-intensive to produce and increasingly in demand for the structural components of both data centres and electric vehicles — has, until quite recently, held its ground. Lithium hydroxide, the battery-grade refining product that sits at the heart of the energy storage supply chain, has seen some cyclical softness but remains structurally underpinned by the scale of demand being projected for grid-scale storage and electric mobility over the next decade.

260618Z4.jpg

**Is Energy Availability a Binding Constraint on Growth?**
This next chart is a scatter plot that maps electricity generation per capita against GDP growth per capita across a broad sample of countries over the past five years. The positive relationship is striking. Economies with higher electricity generation per capita, including the United States, have generally delivered stronger GDP growth, while those with more constrained electricity systems have tended to lag. The obvious objection is reverse causality: richer economies generate more electricity because they have more to power. That is partly true. But the broader evidence is difficult to dismiss. The US shale revolution delivered an abundance of cheap energy that supported a sustained period of industrial outperformance relative to many advanced economies. Mainstream commentary often attributed this advantage to factors such as labour market flexibility or technological innovation, but energy costs were arguably at least as important.

260618Z5.jpg

**Corporate America Is Investing from a Position of Unusual Financial Strength**
The surge in US corporate investment—particularly in AI infrastructure, data centres and semiconductors—has inevitably drawn comparisons with the late-1990s dot-com boom. Yet the financial balance data suggest an important difference. During the dot-com era, US non-financial corporates moved into a financial deficit approaching 4% of GDP, relying heavily on external financing to fund investment. Today, despite another ambitious investment cycle, the sector remains in surplus, currently around 1.8% of GDP. Corporate America is investing aggressively, but it is still generating more cash than it is spending. The boom is being financed largely through profits rather than debt. Risks remain—not least the growing fiscal burden on the federal government—but the balance-sheet fragilities that turned previous investment booms into systemic crises appear far less pronounced. If a major constraint emerges in the years ahead, it may be energy and resources rather than leverage.

260618Z6.jpg

The signing of a Memorandum of Understanding (MoU) between the United States and Iran earlier this week has offered financial markets their most significant moment of geopolitical relief since the Middle East conflict escalated in early March. Oil prices fell sharply on the news, short-dated bond yields moved lower across several major economies, and risk assets recovered ground. But relief, as investors have learnt repeatedly over the past three months, is arguably not the same as resolution. The MoU sets a framework for negotiations rather than a final settlement, and the history of US-Iran diplomacy is not one that encourages complacency. Meanwhile, the Federal Reserve — concluding its June meeting yesterday under new chair Kevin Warsh — held rates steady but delivered a distinctly hawkish dot plot that shifted the median year-end projection from a cut to a hike, a reminder that the easing cycle the market had been pricing is no longer the base case. Against this backdrop, this week's charts take stock of where the global economy presently stands — and what the underlying data, beneath the geopolitical noise, are telling us. The picture that emerges is one of divergence. The United States continues to outperform consensus growth expectations while Europe and China disappoint (chart 1). UK short-dated yields have tracked oil prices with unusual consistency this year, and today's softer-than-expected CPI print for May — arriving just as the MoU has knocked crude lower — potentially changes the policy calculus for the Bank of England (chart 2). Global semiconductor sales, meanwhile, are storming ahead regardless of the geopolitical noise, powered by AI infrastructure spending that shows no sign of fatigue (chart 3). A cross-section of commodity prices tells two stories simultaneously: the geopolitical risk premium is draining out of oil, but the metals and materials the AI economy actually needs — copper, uranium, critical minerals — are holding firm (chart 4). Meanwhile a cross-country scatter of electricity generation and GDP growth over the past five years raises a question that deserves more attention than it typically gets: is energy availability a constraint on growth, or merely a consequence of it? The evidence, we would argue, points firmly in one direction (chart 5). And finally, for all the comparisons being drawn between the current investment boom and the late 1990s, the financial balance of the US corporate sector tells a rather different story — one that matters for how any correction might unfold (chart 6).

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Economy in Brief

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OECD Slowdown is Broad-Based and More Severe

IP Dropping Fast in Key EMU Countries

U.S. Pending Home Sales Retraced Most of August Rise; Trend Still Up

U.S. Pending Home Sales Retraced Most of August Rise; Trend Still Up

U.S. Payrolls Off 240,000 in October; 6.5% Jobless Rate Highest Since 1994

U.S. Payrolls Off 240,000 in October; 6.5% Jobless Rate Highest Since 1994

U.S. Productivity Growth Weakened and Unit Labor Costs Surged

Germany's Flirtation with Rebound Is Smashed by a Stunning September Order Drop