Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081031a.jpg" width="353">
During September nominal personal income rose 0.2%, just half the revised 0.4% August increase. Moreover, a slowing growth trend was evident in the y/y gain of 3.9% which was down sharply from last year&#39;s 6.1% rise and the 7.1% increase during 2006. The September increase in personal income exceeded Consensus expectations for a 0.1% rise.
Disposable personal income rose 0.2% last month after 1.0%-to-1.8% declines during the prior three months. They occurred due to the absence of tax rebate checks. Weaker job gains have slowed trend growth to 4.2% y/y after last year&#39;s rise of 5.5% and 6.4% during 2006.
Weaker gains in wage &amp; salary income very much reflect the soft jobs environment. Wages rose 0.1% last month, up 3.4% y/y. Three month growth of 3.1% (AR) was considerably below the 9.8% rate of growth early last year. Factory sector wages fell 0.3% (+0.2% y/y) for the second consecutive monthly decline. On a three-month growth basis, wages fell at a 1.3% annual rate after 2.0% growth last year. Wages &amp; salaries in the private service-providing industries ticked up 0.1% (3.6% y/y) and, here again, the trend growth of 3.0% is well below a 2006 gain of 6.4%. Wages in the government sector rose 0.4% (5.1% y/y) and three-month growth of 5.1% was stable.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081031c.jpg" width="353">
Proprietors&#39; income fell 0.3% (+1.8% y/y) after a 1.0% August decline. On a three-month basis, the 3.4% rate of negative growth very much reflects the weaker retail environment, after the 4.1% gain last year. Interest income rose 1.1% (-0.2% y/y) for the third straight month due to the recent rise in interest rates off their March lows. Dividend income fell 0.6% (+4.1% y/y) for the third consecutive month and prior months&#39; gains were revised away. Growth of 4.1% y/y compares to a 12.4% rise last year and a 21.7% rise during 2006.
Personal consumption expenditures fell 0.3% after the unrevised sideways movement in August. Adjusted for price inflation, real spending fell 0.4% (-0.4% y/y) last month for the third decline in the last four months. Three-month growth in real spending dropped to negative 3.9% (AR) after the 2.8% gain last year. Real spending on motor vehicles fell at a 23.5% annual rate during the last three months while furniture spending fell at a 10.9% rate following an 8.0% gain last year. Spending on clothing fell at a 14.6% rate during the last three months after a 4.7% rise last year.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081031b.jpg" width="353">
The PCE chain price index rose just 0.1% as a 0.7% decline (+31.5% y/y) in gasoline prices was offset by a 0.7% rise in food prices. On a three-month basis, food prices were up at a 9.1% rate after a 3.8% rise last year. The core PCE price index rose 0.2% for the second consecutive month but the rise surpassed Consensus expectations for a 0.1% uptick. Three-month growth of 2.6% was up from a 2.2% during all of last year. Apparel prices have been rising at a 6.6% rate after a 0.8% decline last year and transportation costs have been rising at a 5.2% rate after 2.7% growth last year.
The personal savings rate recovered to 1.3% as spending fell.
The figures noted above are available in the Haver USECON and in the USNA databases.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a> (%)</th>
<th scope="col">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">Personal Income</td>
<td>0.2</td>
<td>0.4</td>
<td>3.9</td>
<td>6.1</td>
<td>7.1</td>
<td>5.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Disposable Personal Income</td>
<td>0.2</td>
<td>-1.0</td>
<td>4.2</td>
<td>5.5</td>
<td>6.4</td>
<td>4.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption</td>
<td>-0.3</td>
<td>0.0</td>
<td>3.8</td>
<td>5.5</td>
<td>5.9</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>1.3</td>
<td>0.8</td>
<td>0.6 (Sept. &#39;07)</td>
<td>0.5</td>
<td>0.7</td>
<td>0.3</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>0.1</td>
<td>0.0</td>
<td>4.2</td>
<td>2.6</td>
<td>2.8</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.2</td>
<td>0.2</td>
<td>2.4</td>
<td>2.2</td>
<td>2.3</td>
<td>2.1</td>
</tr>
</tbody>
</table>
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During September nominal personal income rose 0.2%, just half the revised 0.4% August increase. Moreover, a slowing growth trend was evident in the y/y gain of 3.9% which was down sharply from last year's 6.1% rise and the 7.1% [...]

U.S. September Income Rose, Spending Fell: Trend Growth of Both Down

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081031a.jpg" align="left" border="0" height="265" width="353">
During September nominal personal income rose
0.2%, just half the revised 0.4% August increase. Moreover, a slowing
growth trend was evident in the y/y gain of 3.9% which was down sharply
from last year's 6.1% rise and the 7.1% increase during 2006. The
September increase in personal income exceeded Consensus expectations
for a 0.1% rise.
Disposable personal income rose 0.2% last
month after 1.0%-to-1.8% declines during the prior three months. They
occurred due to the absence of tax rebate checks. Weaker job gains have
slowed trend growth to 4.2% y/y after last year's rise of 5.5% and 6.4%
during 2006.
Weaker gains in wage &amp; salary income very much reflect
the soft jobs environment. Wages rose 0.1% last month, up 3.4% y/y.
Three month growth of 3.1% (AR) was considerably below the 9.8% rate of
growth early last year. Factory sector wages fell 0.3% (+0.2% y/y) for
the second consecutive monthly decline. On a three-month growth basis,
wages fell at a 1.3% annual rate after 2.0% growth last year. Wages
&amp; salaries in the private service-providing industries ticked
up 0.1% (3.6% y/y) and, here again, the trend growth of 3.0% is well
below a 2006 gain of 6.4%. Wages in the government sector rose 0.4%
(5.1% y/y) and three-month growth of 5.1% was stable.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081031c.jpg" align="right" border="0" height="265" width="353">
Proprietors' income fell 0.3% (+1.8% y/y) after a 1.0% August
decline. On a three-month basis, the 3.4% rate of negative growth very
much reflects the weaker retail environment, after the 4.1% gain last
year. Interest income rose 1.1% (-0.2% y/y) for the third straight
month due to the recent rise in interest rates off their March lows.
Dividend income fell 0.6% (+4.1% y/y) for the third consecutive month
and prior months' gains were revised away. Growth of 4.1% y/y compares
to a 12.4% rise last year and a 21.7% rise during 2006.
Personal consumption expenditures fell 0.3% after the
unrevised sideways movement in August. Adjusted for price inflation, real
spending fell 0.4% (-0.4% y/y) last month for the third
decline in the last four months. Three-month growth in real spending
dropped to negative 3.9% (AR) after the 2.8% gain last year. Real
spending on motor vehicles fell at a 23.5% annual rate during the last
three months while furniture spending fell at a 10.9% rate following an
8.0% gain last year. Spending on clothing fell at a 14.6% rate during
the last three months after a 4.7% rise last year.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081031b.jpg" align="left" border="0" height="265" width="353">
The PCE chain price index rose just 0.1%
as a 0.7% decline (+31.5% y/y) in gasoline prices was offset by a 0.7%
rise in food prices. On a three-month basis, food prices were up at a
9.1% rate after a 3.8% rise last year. The core PCE price
index rose 0.2% for the second consecutive month but the rise
surpassed Consensus expectations for a 0.1% uptick. Three-month growth
of 2.6% was up from a 2.2% during all of last year. Apparel
prices have been rising at a 6.6% rate after a 0.8% decline last year
and transportation costs have been rising at a 5.2% rate after 2.7%
growth last year.
The personal savings rate recovered to 1.3% as spending fell.
The figures noted above are available in the Haver USECON
and in the USNA databases.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition
of Personal Income</a> (%)</th>
<th scope="col">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">Personal Income</td>
<td>0.2</td>
<td>0.4</td>
<td>3.9</td>
<td>6.1</td>
<td>7.1</td>
<td>5.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Disposable
Personal Income</td>
<td>0.2</td>
<td>-1.0</td>
<td>4.2</td>
<td>5.5</td>
<td>6.4</td>
<td>4.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption</td>
<td>-0.3</td>
<td>0.0</td>
<td>3.8</td>
<td>5.5</td>
<td>5.9</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>1.3</td>
<td>0.8</td>
<td>0.6 (Sept. '07)</td>
<td>0.5</td>
<td>0.7</td>
<td>0.3</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>0.1</td>
<td>0.0</td>
<td>4.2</td>
<td>2.6</td>
<td>2.8</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Less food
&amp; energy</td>
<td>0.2</td>
<td>0.2</td>
<td>2.4</td>
<td>2.2</td>
<td>2.3</td>
<td>2.1</td>
</tr>
</tbody>
</table>
Michigan Consumer Sentiment
Collapsed With The Stock Market &amp; The Opinion of Gov't 
by <a href="/comment/Moeller.html">Tom
Moeller</a> October 31 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081031f.jpg" align="left" border="0" height="265" width="353">
The University of Michigan's October reading of consumer
sentiment collapsed by 18.1% from the September level, to 57.6. That
was very much the same as reported at mid-month and the latest level
was the lowest for the series since June which in turn was the lowest
since early-1980. The drop was a record m/m decline for the index which
dates back to the late 1970s. The full-month figure matched Consensus
expectations.
During the last ten years there has been a 55% correlation
between the level of sentiment and the three-month change in real
consumer spending.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081031g.jpg" align="right" border="0" height="265" width="353">
The opinion of government policy, which apparently influences
economic expectations, fell sharply from September (-39.0% y/y) but it
was slightly better than the mid-month read. Only five
percent of respondents thought that a good job was being done by
government while 55% thought a poor job was being done. That
was the highest percentage on record.
As reported at mid-month, the current conditions index led the
collapse with 22.1% decline. The view of current personal finances gave
back all of a September improvement with a m/m decline of one-third.
The index of buying conditions for large household goods fell 16.8% m/m
to the lowest level since 1980, down 37.3% y/y.
The expectations component of consumer sentiment aided the m/m
decline in the total with a 15.6% drop. Expectations for business
conditions during the next years collapsed by 24.6%, as reported at
mid-month. Expectations for conditions during the next five years fell
14.5% but they remained well up from their historic lows.The expected
change in personal finances fell 11.7%. 
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081031h.jpg" align="left" border="0" height="265" width="353">
The mean expected rate of inflation during the next year
slipped to 4.3% with lower oil prices, down from the mid-month
expectation. It was as high as 7.0% in May but the expectation was
still above prior years. The expected inflation rate during the next
five years fell to 3.1%, the lowest level since 2003.
The University of Michigan survey is not seasonally
adjusted.The reading is based on telephone interviews with about 500
households at month-end; the mid-month results are based on about 300
interviews. The summary indexes are in Haver's USECON database,
with details in the proprietary UMSCA database.
What Is Liquidity Risk? from the
Federal Reserve Bank of San Francisco and it can be found <a href="http://www.frbsf.org/publications/economics/letter/2008/el2008-33.pdf">here</a>.
Monetary Policy Transparency and Private Sector
Forecasts: Evidence from Survey Data from the Federal
Reserve Bank of Kansa City is available <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/3q08Sellon.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University
of Michigan</a></th>
<th scope="col">October</th>
<th scope="col">Mid-October</th>
<th scope="col">September</th>
<th scope="col">October y/y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>57.6</td>
<td>57.5</td>
<td>70.3</td>
<td>-28.8%</td>
<td>85.6</td>
<td>87.3</td>
<td>88.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>58.4</td>
<td>58.9</td>
<td>75.0</td>
<td>-40.2</td>
<td>101.2</td>
<td>105.1</td>
<td>105.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>57.0</td>
<td>56.7</td>
<td>67.2</td>
<td>-18.7</td>
<td>75.6</td>
<td>75.9</td>
<td>77.4</td>
</tr>
</tbody>
</table>
U.S. Employment Cost Index
Increase Stable During 3Q 
by <a href="/comment/Moeller.html">Tom
Moeller</a> October 31, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081031d.jpg" align="left" border="0" height="265" width="353">
The employment cost index for private industry workers
increased by 0.6% last quarter. It was stable with 2Q and that was the
weakest rate of gain since 1Q 2006. It also fell short of Consensus
expectations for a 0.7% rise. The rise held roughly steady with the
3.0% y/y growth in compensation during the last three years.
During the last twenty years there has been a 54% correlation
between the growth in employee compensation and the rise in the PCE
price index. That level of correlation goes neither up or down, when
either series is led or lagged the other. This suggests a self
reinforcing effect between the two series.
Wage and salary growth again dipped slightly, last quarter to
0.6% versus 0.7% to 0.8% increases during the prior four quarters.
Wages account for roughly 70% of the compensation index. Wages in the
services industries grew 0.6% and the y/y gain of 2.8% was the slowest
since 2006, down from 4.6% growth back in 2000. Wages in the goods
producing industries rose 0.4% (2.7% y/y) and that y/y growth compares
to a recent peak of 4.5% in 2004.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081031e.jpg" align="right" border="0" height="265" width="353">
The rise in benefit costs picked up slightly to 0.6% but the
2.4% year-to-year rise was near the slowest since 1999. In the goods
producing sector benefits ticked up 0.1% (2.2% y/y) and in services
they rose 0.6% (2.5% y/y), the same as during the prior two quarters.
Health benefit costs rose 3.9% y/y and that was the slowest
rate of growth since 1999.


<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/@EB08/@EB08.HTM">ECI
- Private Industry Workers</a> (%)</th>
<th scope="col">3Q '08</th>
<th scope="col">2Q '08</th>
<th scope="col">1Q '08</th>
<th scope="col">3Q 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">Compensation</td>
<td>0.6</td>
<td>0.6</td>
<td>0.8</td>
<td>2.8</td>
<td>3.1</td>
<td>2.9</td>
<td>3.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wages &amp;
Salaries</td>
<td>0.6</td>
<td>0.7</td>
<td>0.8</td>
<td>2.9</td>
<td>3.4</td>
<td>2.9</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Benefit Costs</td>
<td>0.6</td>
<td>0.5</td>
<td>0.6</td>
<td>2.4</td>
<td>2.4</td>
<td>2.9</td>
<td>4.6</td>
</tr>
</tbody>
</table>
German Retail Sales Run Soft 
by <a href="/comment/Brusca.html">Robert
Brusca</a> October 31 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081031i.jpg" align="left" border="0" height="265" width="353">
The German consumer has kept a stiff upper lip according to
the November reading on the consumer from GfK. Still the consumer has
been stiffening more than just his and her lip. The old wallet seems to
have become a bit less pliable as Germans have tightened up on
spending. Retail sales plunged in September, dropping by 2.5% and
obliterating the 2.4% pop in August. The drop will still leave NOMINAL
German retail sales advancing in Q3 but real ex auto German sales are
shrinking in Q3 at a 0.5% annual rate.
The sequential growth rates on German nominal retail spending
are very flat. The real retail sales ex auto sequential growth rates
are similarly steady but at shallow negative rates of growth.
The good news for Germany is that the September drop in retail
sales can be called a plunge but it only offsets the spike in August.
There is nothing in the data or trends that suggest things are about to
get much worse. But that does not mean that they won&#8217;t either. 

<table border="0" cellspacing="0" width="100%"> <colgroup><col></colgroup>
<thead><tr>
<th colspan="8" scope="col"> German
Real and Nominal Retail Sales </th>
<th scope="col">QTR</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Nominal</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>YrAgo</td>
<td>Saar</td>
</tr>
<tr>
<td class="firstcol">Retail Ex auto</td>
<td>-2.5%</td>
<td>2.4%</td>
<td>0.2%</td>
<td>0.0%</td>
<td>0.8%</td>
<td>0.8%</td>
<td>0.4%</td>
<td>2.2%</td>
</tr>
<tr>
<td class="firstcol">Food, Bev &amp; Tobacco</td>
<td>-1.6%</td>
<td>3.1%</td>
<td>-0.2%</td>
<td>5.0%</td>
<td>0.4%</td>
<td>0.9%</td>
<td>0.0%</td>
<td>2.6%</td>
</tr>
<tr>
<td class="firstcol">Clothing footwear</td>
<td>8.7%</td>
<td>-1.2%</td>
<td>4.1%</td>
<td>56.7%</td>
<td>30.0%</td>
<td>0.6%</td>
<td>18.5%</td>
<td>10.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Real</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Retail Ex auto</td>
<td>-2.3%</td>
<td>1.9%</td>
<td>-0.1%</td>
<td>-2.0%</td>
<td>-1.4%</td>
<td>-2.1%</td>
<td>-0.6%</td>
<td>-0.5%</td>
</tr>
</tbody>
</table>
</body></html>

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081030f.jpg" align="left" border="0" height="265" width="353">
The news this month for the EU/EMU region is bad. The EU
reading is in the bottom 10% of its range of value. The EMU reading is
a bit better, in the bottom 17% of its range. Both are quite weak. The
drop in the index is the largest since the data have been collected in
1991. All sectors made larger
falls in Oct compared to Sept. The
main EMU countries also saw large drops in their respective overall
sentiment indices.
By sector, services is relatively the hardest hit standing at
the lowest point of its range since that survey began. But that only
goes back to October of 1996 instead of 1991 as for the other surveys.
Still this result parallels the sort of readings we have been getting
in the US with a very weak service sector checking in.
Is this more than coincidence? You bet! This crisis is
hitting intrinsically domestic sectors harder like real estate and
finance. Typically banks populate every community; the same with real
estate businesses. These sectors are not like mining or autos or
textiles that may have a particular regional representation. The
troubled sectors in this cycle are spread everywhere and the troubled
asset class &#8216;housing&#8217; is everywhere, as well. It&#8217;s as true in Europe as
in the US.INDUSTRY 
 

Europe&#8217;s industry reading at -18 (EMU) is only in the 32nd
percentile of its range (bottom third of its range) and so is weak but
not desperately weak. Germany and France carry percentile positions for
their respective readings in the high thirty percentiles while Spain&#8217;s
is at the 33rd percentile and the UK is at the 27Th
percentile; Italy is looking desperate at the 17Th
percentile. These are weak readings but the most troubling for Italy.
The components of the industry index show that the production
trend is the weakest relative reading standing in the bottom 3% of its
historic range. Production
expectations are better but still weak in their 12th
percentile. For some reason Europeans think that a worse time lies
behind it not ahead of it. That explains a lot about the government
attitudes. Europe has been in and seem to remain in DENIAL. Order volumes are still relatively
firm in their 44th range percentile; export
orders are in about the same relative range position and that is also
where the expected selling price resides. Contrarily workers are more
exposed with employment expectations in the bottom 16 percentile of
their range. If worker readings are RIGHT then the rest of the readings
are too high.CONFIDENCE
By main countries confidence readings are all over the map
except that they are limited being to all over intrinsically weak
territory. The EU&#8217;s UK reading is in the bottom 2.9% of its all-time
range. Among large EMU nations Spain is weakest posting the lowest
confidence reading ever. It is followed by France with a bottom 5
percentile reading. Germany&#8217;s percentile reading at the 43% mark and is
similar to its industrial sector reading but at 37.5 Italy&#8217;s percentile
reading is way above its industry percentile. So, Italian consumer
confidence is more upbeat than it is for Italian industry.
As for the reason for this angst, ee find over all EMU
responses on &#8216;time to buy&#8217; are at the very worst for making major
purchases now or in the next 12 months. The economic situation in the
past 12-months is rated as the worst ever but looking ahead for the
next 12-months the out look is &#8216;only&#8217; a bottom 13% ordeal. Respondents
may want to rethink that one. The financial situation for this past and
this next 12-months each rate in their respective 12th
percentile. In short the readings really are weak. Unemployment
expectations are &#8216;only up to the 58th percentile
of their range &#8211; elevated, but not by much.RETAIL
The retail readings across EU countries are weakest in the UK,
residing in their bottom 3 range percentile followed by Spain (bottom
13%), Germany (bottom 26%), France (bottom 43%), and Italy (63rd
percentile &#8211; still above its range midpoint). Retailers are not as
downbeat as consumers and that could spell some troubles for them and
for their inventories. Retail orders are put in the bottom 14% of their
range. The expected business situation is only a bottom 38% rating
similar to the present business situation. And maybe the retailers are
just putting up a brave front since their orders are so weak. They may
be planning for something even weaker than what they say they expect&#8230; SERVICES
Service sector reading span the gamut form bad to worst. The
UK and Italy have the worst service sector readings ever. Spain&#8217;s
reading is in the bottom 6% of its range. German is a bottom 25%
reading; for France the reading is a bottom one-third of range reading.
All of theses are weak. For
EMU the overall reading is the worst ever. The business climate is a
bottom 7% affair, but expected demand is worse in the bottom 2% of its
range. Current demand is rated as in only the 16th percentile. Current
and expected employment readings are in the 20th
percentile of their respective ranges, and the reading is lower for
expected unemployment. Things will get worse. Maybe industry workers
are better protected by unions that service sector workers.CONSTRUCTION
The construction sector is the least impacted off all. For
overall sentiment, construction stands in the 49th
percentile of its range. Of course that implies a raw reading of -20.
One issue for construction it that its participants have considered it
sub-par all along. So now the outlook is being impacted construction
respondents are not looking for things to get that much worse. Spain is
an exception having had a boom its current reading; it is a bottom 19th
percentile reading. For the UK the residential property bubble busting
has helped to drag its reading to the 31st
percentile. France and Germany still carry mid range readings at or
above their expected range midpoints. Italy&#8217;s sector has a relatively
strong construction reading in the 60th
percentile.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="12" scope="col"> EU
Sectors and Country level Overall Sentiment</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">EU</td>
<td>Oct 
08</td>
<td>Sep 
08</td>
<td>Aug 
08</td>
<td>Jul 
08</td>
<td>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
<td>R-SQ 
w/Overall</td>
</tr>
<tr class="even">
<td class="firstcol">Overall</td>
<td>77.5</td>
<td>84.9</td>
<td>86.7</td>
<td>88.8</td>
<td>9.8</td>
<td>209</td>
<td>116</td>
<td>73</td>
<td>43</td>
<td>99</td>
<td>1.00</td>
</tr>
<tr>
<td class="firstcol">Industrial</td>
<td>-19</td>
<td>-13</td>
<td>-10</td>
<td>-7</td>
<td>23.5</td>
<td>204</td>
<td>7</td>
<td>-27</td>
<td>34</td>
<td>-7</td>
<td>0.86</td>
</tr>
<tr>
<td class="firstcol">Consumer Confidence</td>
<td>-23</td>
<td>-19</td>
<td>-19</td>
<td>-20</td>
<td>13.8</td>
<td>205</td>
<td>2</td>
<td>-27</td>
<td>29</td>
<td>-11</td>
<td>0.83</td>
</tr>
<tr>
<td class="firstcol">Retail</td>
<td>-16</td>
<td>-13</td>
<td>-14</td>
<td>-11</td>
<td>18.5</td>
<td>214</td>
<td>6</td>
<td>-21</td>
<td>27</td>
<td>-6</td>
<td>0.51</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>-25</td>
<td>-20</td>
<td>-18</td>
<td>-17</td>
<td>37.8</td>
<td>150</td>
<td>3</td>
<td>-42</td>
<td>45</td>
<td>-17</td>
<td>0.41</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>-10</td>
<td>-4</td>
<td>-2</td>
<td>0</td>
<td>0.0</td>
<td>145</td>
<td>32</td>
<td>-10</td>
<td>42</td>
<td>16</td>
<td>0.81</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% m/m</td>
<td>
Oct 
08</td>
<td colspan="2">Based on Level</td>
<td colspan="4">Level</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">EMU</td>
<td>-8.1%</td>
<td>-1.1%</td>
<td>-1.1%</td>
<td>80.4</td>
<td>16.8</td>
<td>206</td>
<td>117</td>
<td>73</td>
<td>44</td>
<td>99</td>
<td>0.94</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>-5.1%</td>
<td>-1.4%</td>
<td>-2.7%</td>
<td>88.6</td>
<td>23.5</td>
<td>186</td>
<td>121</td>
<td>79</td>
<td>42</td>
<td>99</td>
<td>0.61</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>-7.0%</td>
<td>-0.6%</td>
<td>-0.1%</td>
<td>86.5</td>
<td>31.6</td>
<td>196</td>
<td>119</td>
<td>72</td>
<td>47</td>
<td>100</td>
<td>0.79</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>-6.9%</td>
<td>0.6%</td>
<td>2.7%</td>
<td>82.1</td>
<td>21.6</td>
<td>206</td>
<td>121</td>
<td>71</td>
<td>50</td>
<td>99</td>
<td>0.78</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>-5.0%</td>
<td>-2.0%</td>
<td>-4.3%</td>
<td>66.1</td>
<td>0.0</td>
<td>220</td>
<td>118</td>
<td>66</td>
<td>52</td>
<td>99</td>
<td>0.62</td>
</tr>
<tr>
<td class="firstcol">Memo: UK</td>
<td>-7.5%</td>
<td>-5.2%</td>
<td>-6.1%</td>
<td>70.4</td>
<td>3.4</td>
<td>219</td>
<td>118</td>
<td>69</td>
<td>50</td>
<td>100</td>
<td>0.42</td>
</tr>
<tr>
<td colspan="12" class="firstcol">Since 1990
except Services (Oct
1996) 247-Count; Services: 145-Count</td>
</tr>
<tr>
<td colspan="12" class="firstcol">Sentiment
is an index, sector
readings are net balance diffusion measures.</td>
</tr>
</tbody>
</table>
</body></html>

The news this month for the EU/EMU region is bad. The EU reading is in the bottom 10% of its range of value. The EMU reading is a bit better, in the bottom 17% of its range. Both are quite weak. The drop in the index is the largest [...]

EU Indices Are Scraping Low Levels: It Will Get Worse…

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081030d.jpg" width="353">
Initial claims for jobless insurance were stable last week at 479,000, near the high for this cycle. The figure was about as expected. The four-week moving average of initial claims fell slightly to 475,500 (44.2% y/y), still just off the cycle high.
The largest increases in initial claims for the week ending Oct. 18 were in Tennessee (+1,956), Oregon (+1,802), Indiana (+1,297), Virginia (+898), and Florida (+543), while the largest decreases were in New York (-6,080), Michigan (-5,894), Illinois (-3,795), Ohio (-2,923), and Kentucky (-2,494).
Continuing claims for unemployment insurance during the week of October 18 fell 12,000 after a revised 7,000 increase during the prior week, initially reported as a slight decline. The four-week average of continuing claims rose further to this cycle&#39;s high of 3,709,500, the highest level since early 2003. Continuing claims provide some indication of workers&#39; ability to find employment and they lag the initial claims figures by one week.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081030e.jpg" width="353">
The insured rate of unemployment was stable for the third week at 2.8%. That was this cycle&#39;s high and the highest since mid-2003. The high in that recessionary period was 3.0% reached in late June 2003.
What Exactly Is a Recession&#151;and Are We in One? from the Federal Reserve Bank of Cleveland can be found <a href="http://www.clevelandfed.org/research/trends/2008/1108/01ecoact.cfm">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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">10/25/08</th>
<th scope="col">10/18/08</th>
<th scope="col">10/11/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>478</td>
<td>&nbsp;479</td>
<td>463</td>
<td>44.3%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,715</td>
<td>3,727</td>
<td>43.0</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial claims for jobless insurance were stable last week at 479,000, near the high for this cycle. The figure was about as expected. The four-week moving average of initial claims fell slightly to 475,500 (44.2% y/y), still just off [...]

U.S. Initial Claims for Unemployment Insurance Stable But High

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081030a.jpg" width="353">
U.S. real GDP fell a modest 0.3% (AR) last quarter after 2.8% growth during 2Q. Consensus expectations had been for a decline at a 0.5% rate. The decline last quarter mirrored a 0.2% decline during the fourth quarter of last year. The y/y rate of growth of 0.8% was the weakest since the end of the 2001 recession.
Real final sales to domestic purchasers were notably weak in 3Q as they posted a 1.8% (AR) decline. That was the largest quarterly decline since the end of the 1990-91 recession. The year-to-year dip of 0.1%, while modest, was the first since 1991.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081030b.jpg" width="353">
Real personal consumption declined at a 3.1% (0.0% y/y) annual rate, reversing a 1.2% rise during 2Q. The 2Q gain presumably was fueled by tax rebate checks but the lift seems to have been slight. Spending on autos &amp; light trucks fell at a 25.6% (-14.7% y/y) annual rate after declining at a 19.7% rate during 2Q. Spending on furniture &amp; other household equipment fell at a 7.6% rate (+2.7% y/y) and the decline reversed roughly half of the 2Q increase. Spending on apparel fell at an 11.0% rate (-0.4% y/y) and that reversed all of the 2Q jump. Spending on consumer services also weakened to a 0.6% growth rate. That about matched the 2Q rise but the y/y change of 1.3% was the weakest since 1981. Growth in real PCE subtracted 2.3 percentage points from 3Q real GDP growth after a 0.9 point add during 2Q.
Residential construction fell again, last quarter at a 19.1% (-21.3% y/y) annual rate after a 13.3% rate of decline during 2Q. The 3Q drop subtracted 0.7 percentage points from GDP growth.
Growth in business fixed investment fell for the first time since fourth quarter, 2006. The 1.0% decline (+1.8% y/y) followed 2.5% growth during 2Q, a 4.9% rise during 2007 and roughly 7.5% growth in 2006 and 2005. Equipment investment repeated its 2Q performance and declined at a 5.5% rate (-2.6% y/y). Conversely, structures investment was firm again and rose at a 7.9% annual rate (10.8% y/y).<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081030c.jpg" width="353">
An improved foreign trade deficit again was the main source of lift to GDP growth, though the 1.1 percentage point addition was almost a third of that in 2Q. Exports grew at a slower 5.9% rate (6.9% y/y), half that in 2Q. Growth in imports weakened with the slowdown in overall economic growth. They fell at a 1.9% rate (-3.1% y/y).
Inventory accumulation added 0.6 percentage points to GDP growth after three consecutive quarters of subtraction.
Spending by governments was strong again and the 5.8% (3.1% y/y) rise was the quickest since early 2003.
The GDP chain price index surged at a 4.2% annual rate. The accelerated rate of increase owed to a 5.4% jump in the PCE price index which was fueled by higher energy prices. Capital spending prices rose at an accelerated 4.2% rate (2.2% y/y) while the residential investment price deflator declined for the fourth straight quarter (-1.8% y/y).
Fed, Central Banks in Brazil, Mexico, Korea and Singapore, Announce Swap Lines and the Fed&#39;s announcement can be found <a href="http://www.federalreserve.gov/newsevents/press/monetary/20081029b.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained 2000$, % AR</a></th>
<th scope="col">3Q &#39;08 (Advance)</th>
<th scope="col">2Q &#39;08</th>
<th scope="col">3Q Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>-0.3</td>
<td>2.8</td>
<td>0.8</td>
<td>2.0</td>
<td>2.8</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>0.6</td>
<td>-1.5</td>
<td>-0.4</td>
<td>-0.4</td>
<td>0.0</td>
<td>-0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>-0.8</td>
<td>4.4</td>
<td>1.3</td>
<td>2.4</td>
<td>2.8</td>
<td>3.1</td>
</tr>
<tr>
<td class="firstcol">Foreign Trade Effect</td>
<td>1.1</td>
<td>2.9</td>
<td>1.7</td>
<td>0.6</td>
<td>0.2</td>
<td>0.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>-1.8</td>
<td>1.3</td>
<td>-0.1</td>
<td>1.8</td>
<td>2.6</td>
<td>3.1</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>4.2</td>
<td>1.1</td>
<td>2.7</td>
<td>2.7</td>
<td>3.2</td>
<td>3.3</td>
</tr>
</tbody>
</table>


</html>

U.S. real GDP fell a modest 0.3% (AR) last quarter after 2.8% growth during 2Q. Consensus expectations had been for a decline at a 0.5% rate. The decline last quarter mirrored a 0.2% decline during the fourth quarter of last year. The [...]

U.S. 3Q'08 GDP Fell Modestly

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081030a.jpg" align="left" border="0" height="265" width="353">
U.S. real GDP fell a modest 0.3% (AR)
last quarter after 2.8%
growth during 2Q. Consensus expectations had been for a decline at a
0.5% rate. The decline last quarter mirrored a 0.2% decline during the
fourth quarter of last year. The y/y rate of growth of 0.8% was the
weakest since the end of the 2001 recession.
Real final sales to domestic purchasers
were notably weak in
3Q as they posted a 1.8% (AR) decline. That was the largest quarterly
decline since the end of the 1990-91 recession. The year-to-year dip of
0.1%, while modest, was the first since 1991.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081030b.jpg" align="right" border="0" height="265" width="353">
Real personal consumption declined at a
3.1% (0.0% y/y)
annual rate, reversing a 1.2% rise during 2Q. The 2Q gain presumably
was fueled by tax rebate checks but the lift seems to have been slight.
Spending on autos &amp; light trucks fell at a 25.6% (-14.7% y/y)
annual rate after declining at a 19.7% rate during 2Q. Spending on
furniture &amp; other household equipment fell at a 7.6% rate
(+2.7%
y/y) and the decline reversed roughly half of the 2Q increase. Spending
on apparel fell at an 11.0% rate (-0.4% y/y) and that reversed all of
the 2Q jump. Spending on consumer services also weakened to a 0.6%
growth rate. That about matched the 2Q rise but the y/y change of 1.3%
was the weakest since 1981. Growth in real PCE subtracted 2.3
percentage points from 3Q real GDP growth after a 0.9 point add during
2Q.
Residential construction fell again, last
quarter at a 19.1%
(-21.3% y/y) annual rate after a 13.3% rate of decline during 2Q. The
3Q drop subtracted 0.7 percentage points from GDP growth.
Growth in business fixed investment fell
for the first time
since fourth quarter, 2006. The 1.0% decline (+1.8% y/y) followed 2.5%
growth during 2Q, a 4.9% rise during 2007 and roughly 7.5% growth in
2006 and 2005. Equipment investment repeated its 2Q performance and
declined at a 5.5% rate (-2.6% y/y). Conversely, structures investment
was firm again and rose at a 7.9% annual rate (10.8% y/y).<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081030c.jpg" align="left" border="0" height="265" width="353">
An improved foreign trade deficit again
was the main source
of lift to GDP growth, though the 1.1 percentage point addition was
almost a third of that in 2Q. Exports grew at a slower 5.9% rate (6.9%
y/y), half that in 2Q. Growth in imports weakened with the slowdown in
overall economic growth. They fell at a 1.9% rate (-3.1% y/y).
Inventory accumulation added 0.6 percentage
points to GDP growth after three consecutive quarters of subtraction.
Spending by governments was strong again
and the 5.8% (3.1% y/y) rise was the quickest since early 2003.
The GDP chain price index surged at a 4.2%
annual rate. The
accelerated rate of increase owed to a 5.4% jump in the PCE price index
which was fueled by higher energy prices. Capital spending prices rose
at an accelerated 4.2% rate (2.2% y/y) while the residential investment
price deflator declined for the fourth straight quarter (-1.8% y/y).
Fed, Central Banks in Brazil, Mexico, Korea and
Singapore, Announce Swap Lines and the Fed's announcement
can be found <a href="http://www.federalreserve.gov/newsevents/press/monetary/20081029b.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained
2000$, % AR</a></th>
<th scope="col">3Q '08 (Advance)</th>
<th scope="col">2Q '08</th>
<th scope="col">3Q Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>-0.3</td>
<td>2.8</td>
<td>0.8</td>
<td>2.0</td>
<td>2.8</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory
Effect</td>
<td>0.6</td>
<td>-1.5</td>
<td>-0.4</td>
<td>-0.4</td>
<td>0.0</td>
<td>-0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>-0.8</td>
<td>4.4</td>
<td>1.3</td>
<td>2.4</td>
<td>2.8</td>
<td>3.1</td>
</tr>
<tr>
<td class="firstcol">Foreign Trade Effect</td>
<td>1.1</td>
<td>2.9</td>
<td>1.7</td>
<td>0.6</td>
<td>0.2</td>
<td>0.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>-1.8</td>
<td>1.3</td>
<td>-0.1</td>
<td>1.8</td>
<td>2.6</td>
<td>3.1</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>4.2</td>
<td>1.1</td>
<td>2.7</td>
<td>2.7</td>
<td>3.2</td>
<td>3.3</td>
</tr>
</tbody>
</table>
U.S. Initial Claims for
Unemployment Insurance Stable But High 
by <a href="/comment/Moeller.html">Tom
Moeller</a> October 30, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081030d.jpg" align="left" border="0" height="265" width="353">
Initial claims for jobless insurance were stable last week at
479,000, near the high for this cycle. The figure was about as
expected. The four-week moving average of initial claims fell slightly
to 475,500 (44.2% y/y), still just off the cycle high.
The largest increases in initial claims for the week ending
Oct. 18
were in Tennessee (+1,956), Oregon (+1,802), Indiana (+1,297), Virginia
(+898), and Florida (+543), while the largest decreases were in New
York (-6,080), Michigan (-5,894), Illinois (-3,795), Ohio (-2,923), and
Kentucky (-2,494).
Continuing claims for unemployment insurance during the week
of
October 18 fell 12,000 after a revised 7,000 increase during the prior
week, initially reported as a slight decline. The four-week average of
continuing claims rose further to this cycle's high of 3,709,500, the
highest level since early 2003. Continuing claims provide some
indication of workers' ability to find employment and they lag the
initial claims figures by one week.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081030e.jpg" align="right" border="0" height="265" width="353">
The insured rate of unemployment was stable for the third week
at
2.8%. That was this cycle's high and the highest since mid-2003. The
high in that recessionary period was 3.0% reached in late June 2003.
What Exactly Is a Recession&#8212;and Are We in One? from
the Federal Reserve Bank of Cleveland can be found <a href="http://www.clevelandfed.org/research/trends/2008/1108/01ecoact.cfm">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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment
Insurance (000s)</a>&nbsp;</th>
<th scope="col">10/25/08</th>
<th scope="col">10/18/08</th>
<th scope="col">10/11/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>478</td>
<td>&nbsp;479</td>
<td>463</td>
<td>44.3%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,715</td>
<td>3,727</td>
<td>43.0</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
EU Indices Are Scraping Low
Levels: It Will Get Worse&#8230; 
by <a href="/comment/Brusca.html">Robert
Brusca</a> October 30, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081030f.jpg" align="left" border="0" height="265" width="353">
The news this month for the EU/EMU region is bad. The EU
reading is
in the bottom 10% of its range of value. The EMU reading is a bit
better, in the bottom 17% of its range. Both are quite weak. The drop
in the index is the largest since the data have been collected in 1991. All sectors made larger falls in Oct
compared to Sept. The main
EMU countries also saw large drops in their respective overall
sentiment indices.
By sector, services is relatively the hardest hit standing at
the
lowest point of its range since that survey began. But that only goes
back to October of 1996 instead of 1991 as for the other surveys. Still
this result parallels the sort of readings we have been getting in the
US with a very weak service sector checking in.
Is
this more than coincidence? You bet! This crisis is hitting
intrinsically domestic sectors harder like real estate and finance.
Typically banks populate every community; the same with real estate
businesses. These sectors are not like mining or autos or textiles that
may have a particular regional representation. The troubled sectors in
this cycle are spread everywhere and the troubled asset class &#8216;housing&#8217;
is everywhere, as well. It&#8217;s as true in Europe as in the US.INDUSTRY 
 

Europe&#8217;s industry reading at -18 (EMU) is only in the 32nd
percentile of its range (bottom third of its range) and so is weak but
not desperately weak. Germany and France carry percentile positions for
their respective readings in the high thirty percentiles while Spain&#8217;s
is at the 33rd percentile and the UK is at the 27Th
percentile; Italy is looking desperate at the 17Th
percentile. These are weak readings but the most troubling for Italy.
The components of the industry index show that the production
trend
is the weakest relative reading standing in the bottom 3% of its
historic range. Production
expectations are better but still weak in their 12th
percentile. For some reason Europeans think that a worse time lies
behind it not ahead of it. That explains a lot about the government
attitudes. Europe has been in and seem to remain in DENIAL. Order volumes are still relatively
firm in their 44th
range percentile; export orders are in about the same relative range
position and that is also where the expected selling price resides.
Contrarily workers are more exposed with employment expectations in the
bottom 16 percentile of their range. If worker readings are RIGHT then
the rest of the readings are too high.CONFIDENCE
By main countries confidence readings are all over the map
except
that they are limited being to all over intrinsically weak territory.
The EU&#8217;s UK reading is in the bottom 2.9% of its all-time range. Among
large EMU nations Spain is weakest posting the lowest confidence
reading ever. It is followed by France with a bottom 5 percentile
reading. Germany&#8217;s percentile reading at the 43% mark and is similar to
its industrial sector reading but at 37.5 Italy&#8217;s percentile reading is
way above its industry percentile. So, Italian consumer confidence is
more upbeat than it is for Italian industry.
As for the reason for this angst, ee find over all EMU
responses on
&#8216;time to buy&#8217; are at the very worst for making major purchases now or
in the next 12 months. The economic situation in the past 12-months is
rated as the worst ever but looking ahead for the next 12-months the
out look is &#8216;only&#8217; a bottom 13% ordeal. Respondents may want to rethink
that one. The financial situation for this past and this next 12-months
each rate in their respective 12th percentile.
In short the readings really are weak. Unemployment expectations are
&#8216;only up to the 58th percentile of their range &#8211;
elevated, but not by much.RETAIL
The retail readings across EU countries are weakest in the UK,
residing in their bottom 3 range percentile followed by Spain (bottom
13%), Germany (bottom 26%), France (bottom 43%), and Italy (63rd
percentile &#8211; still above its range midpoint). Retailers are not as
downbeat as consumers and that could spell some troubles for them and
for their inventories. Retail orders are put in the bottom 14% of their
range. The expected business situation is only a bottom 38% rating
similar to the present business situation. And maybe the retailers are
just putting up a brave front since their orders are so weak. They may
be planning for something even weaker than what they say they expect&#8230; SERVICES
Service sector reading span the gamut form bad to worst. The
UK and
Italy have the worst service sector readings ever. Spain&#8217;s reading is
in the bottom 6% of its range. German is a bottom 25% reading; for
France the reading is a bottom one-third of range reading. All of
theses are weak. For EMU the
overall reading is
the worst ever. The business climate is a bottom 7% affair, but
expected demand is worse in the bottom 2% of its range. Current demand
is rated as in only the 16th percentile. Current and expected
employment readings are in the 20th percentile
of their
respective ranges, and the reading is lower for expected unemployment.
Things will get worse. Maybe industry workers are better protected by
unions that service sector workers.CONSTRUCTION
The construction sector is the least impacted off all. For
overall sentiment, construction stands in the 49th
percentile of its range. Of course that implies a raw reading of -20.
One issue for construction it that its participants have considered it
sub-par all along. So now the outlook is being impacted construction
respondents are not looking for things to get that much worse. Spain is
an exception having had a boom its current reading; it is a bottom 19th
percentile reading. For the UK the residential property bubble busting
has helped to drag its reading to the 31st
percentile. France and Germany still carry mid range readings at or
above their expected range midpoints. Italy&#8217;s sector has a relatively
strong construction reading in the 60th
percentile.

<table border="0" cellspacing="0" width="100%"> <colgroup></colgroup>
<thead><tr>
<th colspan="12" scope="col"> EU
Sectors and Country level Overall Sentiment</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">EU</td>
<td>Oct 
08</td>
<td>Sep 
08</td>
<td>Aug 
08</td>
<td>Jul 
08</td>
<td>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
<td>R-SQ 
w/Overall</td>
</tr>
<tr class="even">
<td class="firstcol">Overall</td>
<td>77.5</td>
<td>84.9</td>
<td>86.7</td>
<td>88.8</td>
<td>9.8</td>
<td>209</td>
<td>116</td>
<td>73</td>
<td>43</td>
<td>99</td>
<td>1.00</td>
</tr>
<tr>
<td class="firstcol">Industrial</td>
<td>-19</td>
<td>-13</td>
<td>-10</td>
<td>-7</td>
<td>23.5</td>
<td>204</td>
<td>7</td>
<td>-27</td>
<td>34</td>
<td>-7</td>
<td>0.86</td>
</tr>
<tr>
<td class="firstcol">Consumer Confidence</td>
<td>-23</td>
<td>-19</td>
<td>-19</td>
<td>-20</td>
<td>13.8</td>
<td>205</td>
<td>2</td>
<td>-27</td>
<td>29</td>
<td>-11</td>
<td>0.83</td>
</tr>
<tr>
<td class="firstcol">Retail</td>
<td>-16</td>
<td>-13</td>
<td>-14</td>
<td>-11</td>
<td>18.5</td>
<td>214</td>
<td>6</td>
<td>-21</td>
<td>27</td>
<td>-6</td>
<td>0.51</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>-25</td>
<td>-20</td>
<td>-18</td>
<td>-17</td>
<td>37.8</td>
<td>150</td>
<td>3</td>
<td>-42</td>
<td>45</td>
<td>-17</td>
<td>0.41</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>-10</td>
<td>-4</td>
<td>-2</td>
<td>0</td>
<td>0.0</td>
<td>145</td>
<td>32</td>
<td>-10</td>
<td>42</td>
<td>16</td>
<td>0.81</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% m/m</td>
<td>
Oct 
08</td>
<td colspan="2">Based on Level</td>
<td colspan="4">Level</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">EMU</td>
<td>-8.1%</td>
<td>-1.1%</td>
<td>-1.1%</td>
<td>80.4</td>
<td>16.8</td>
<td>206</td>
<td>117</td>
<td>73</td>
<td>44</td>
<td>99</td>
<td>0.94</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>-5.1%</td>
<td>-1.4%</td>
<td>-2.7%</td>
<td>88.6</td>
<td>23.5</td>
<td>186</td>
<td>121</td>
<td>79</td>
<td>42</td>
<td>99</td>
<td>0.61</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>-7.0%</td>
<td>-0.6%</td>
<td>-0.1%</td>
<td>86.5</td>
<td>31.6</td>
<td>196</td>
<td>119</td>
<td>72</td>
<td>47</td>
<td>100</td>
<td>0.79</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>-6.9%</td>
<td>0.6%</td>
<td>2.7%</td>
<td>82.1</td>
<td>21.6</td>
<td>206</td>
<td>121</td>
<td>71</td>
<td>50</td>
<td>99</td>
<td>0.78</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>-5.0%</td>
<td>-2.0%</td>
<td>-4.3%</td>
<td>66.1</td>
<td>0.0</td>
<td>220</td>
<td>118</td>
<td>66</td>
<td>52</td>
<td>99</td>
<td>0.62</td>
</tr>
<tr>
<td class="firstcol">Memo: UK</td>
<td>-7.5%</td>
<td>-5.2%</td>
<td>-6.1%</td>
<td>70.4</td>
<td>3.4</td>
<td>219</td>
<td>118</td>
<td>69</td>
<td>50</td>
<td>100</td>
<td>0.42</td>
</tr>
<tr>
<td colspan="12" class="firstcol">Since 1990
except Services (Oct
1996) 247-Count; Services: 145-Count</td>
</tr>
<tr>
<td colspan="12" class="firstcol">Sentiment
is an index, sector
readings are net balance diffusion measures.</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/081029f.jpg" width="353">
The Federal Open Market Committee today cut the Federal funds rate, as expected, to 1.00% from 1.50%. The discount rate also was cut to 1.25%. The latest Fed funds rate was its lowest since 2004.
The Fed indicated three specific reasons for lowering interest rates today. 1) A slowdown in U.S. economic growth due to slower consumer spending and weaker business investment spending 2) Financial market turmoil and 3) an expectation for moderation in inflation due to lower energy and other commodity prices as well as slower economic growth.
Credit market conditions were expected by the Fed to improve due to interest rate cuts around the world, &quot;extraordinary liquidity measures&quot; and actions to strengthen financial systems.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029g.jpg" width="353">
The decision was unanimous amongst FOMC voters.
For the complete text of the Fed&#39;s latest press release please follow this <a href="http://www.federalreserve.gov/newsevents/press/monetary/20081029a.htm">link</a>.
How Economic News Moves Markets from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/current_issues/ci14-6.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">&nbsp;</th>
<th scope="col">Current</th>
<th scope="col">Last</th>
<th scope="col">September</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Federal Funds Rate, % (Target)</td>
<td>1.00</td>
<td>1.50</td>
<td>2.00</td>
<td>5.05</td>
<td>4.96</td>
<td>3.19</td>
</tr>
<tr>
<td class="firstcol">Discount Rate, %</td>
<td>1.25</td>
<td>1.75</td>
<td>2.25</td>
<td>5.86</td>
<td>5.96</td>
<td>4.19</td>
</tr>
</tbody>
</table>
</body>
</html>

The Federal Open Market Committee today cut the Federal funds rate, as expected, to 1.00% from 1.50%. The discount rate also was cut to 1.25%. The latest Fed funds rate was its lowest since 2004. The Fed indicated three specific [...]

FOMC Cut Funds Rate to 1.00%; The Lowest Since 2004

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029d.jpg">
The total number of mortgage applications rose 28.5% last week and that recovered all of the prior period&#39;s decline, according to the Mortgage Bankers Association. Nevertheless, the October average fell 20.0% from September and applications were two-thirds below their peak reached this past January.
Last week, applications for a mortgage to purchase a home made up most of the prior week&#39;s decline with an 8.5% rise. For October so far, however, purchase applications reversed most of the prior month&#39;s gain with a 13.3% decline. During the latest week purchase applications were down 43% from their 2005 peak.
During the last ten years there has been a 61% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales. Figures covering sales of existing single-family home will be available this Friday while single-family home sales will be published early next week.
Applications to refinance a home mortgage recovered most of the prior week&#39;s decline with a 28.5% increase but applications in October overall remained 20% below September. During September, applications to refinance had risen 61.9% from August as 15-year mortgage rates fell briefly to 5.54%.<img align="right" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029e.jpg">
The effective interest rate on a conventional 15-year mortgage slipped last week to 6.30% following an average of 6.01% last month. For a 30-year mortgage, rates slipped w/w to 6.48%. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10-year Treasury securities. For an adjustable rate 1-Year mortgage the rate also slipped w/w to 6.95% after having averaged 6.70% last month.
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey covers roughly 50% of all U.S. residential mortgage applications processed each week by mortgage banks, commercial banks and thrifts. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.
The figures for weekly mortgage applications are available in Haver&#39;s SURVEYW database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">10/24/08</th>
<th scope="col">10/17/08</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">Total Market Index</td>
<td>476.7</td>
<td>408.1</td>
<td>-30.1%</td>
<td>652.6</td>
<td>584.2</td>
<td>708.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>303.1</td>
<td>279.3</td>
<td>-26.6%</td>
<td>424.9</td>
<td>406.9</td>
<td>470.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,489.4</td>
<td>1,158.8</td>
<td>-33.8%</td>
<td>1,997.9</td>
<td>1,634.0</td>
<td>2,092.3</td>
</tr>
</tbody>
</table>
</body>
</html>

The total number of mortgage applications rose 28.5% last week and that recovered all of the prior period's decline, according to the Mortgage Bankers Association. Nevertheless, the October average fell 20.0% from September and [...]

U.S. Mortgage Applications Recovered Last Week; Off Two-Thirds From Peak

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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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**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.

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**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.

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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.

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**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.

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**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.

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**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.

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**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.

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**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.

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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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Charts of the Week: Between Relief and Reality

Winnie Tapasanun

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The current general activity diffusion index rebounded to a slightly stronger-than-expected 10.3 in June following a 27.1-point drop to -0.4 in May, the latest Manufacturing Business Outlook Survey (MBOS) from the Federal Reserve Bank of Philadelphia showed, indicating a return to expansion in manufacturing activity in the Third Federal Reserve District this month. A reading of 10.0 for June had been expected by the Action Economics Forecast Survey. June marked the fifth m/m increase in six months, showing a sharp improvement from -1.4 in June 2025. In June, 32.1% of firms reported increases in current general activity (up from 22.5% in May), while 21.9% reported decreases (down from 22.9%); 45.4% reported no change (down from 54.6%). Survey responses were collected from June 8 to June 15.

Haver Analytics calculates an ISM-adjusted current activity diffusion index from five key components using the methodology along the lines of the national ISM index. The index rose to 53.1 in June after a 4.8-point decline to a contraction-level 49.7 in May, indicating manufacturing activity expanded for the third time in four months; it was slightly above 51.0 in June 2025.

In the latest survey, the new orders index surged to 27.3 in June following a 34.7-point plunge to -1.7 in May, signaling new orders expanded for the sixth time in seven months. The shipments index rebounded to 14.9 this month from 4.9 in May, registering the seventh consecutive expansion. The unfilled orders index advanced to 10.5 from -2.5, indicating expansion for the first time since July 2025 and the highest level since January 2025. In contrast, the inventories index dropped to -8.5 in June from 6.6 in May, showing inventories contracted for the second time in three months and at the lowest level since July 2024. Meanwhile, the delivery times index increased to -2.6 this month from -10.4 in May (the lowest reading since March 2024).

On the labor front, the number of employees index climbed to 7.9 in June from -2.8 in May, indicating employment expanded for the first time in three months and at the highest level since January. In June, a higher 17.0% of respondents reported increases in employment, while 9.2% reported declines; 73.8% reported no change in employment levels. The average employee workweek index fell to -6.5 this month, the first negative reading and lowest since February, from 1.2 in May.

Inflation indicators were mixed in June. The prices paid index rose to 53.2 this month following an 11.4-point drop to 47.9 in May. A higher 53.5% of respondents reported increases in input prices in June, while only 0.4% reported decreases. The prices received index fell to 20.3, a four-month low, after a 7.2-point May decline to 26.3. In June, 20.3% of respondents reported increases in prices received, while 0.0% reported decreases.

The future indexes remained in positive territory, signaling continued overall growth over the next six months, with most future indicators rising. The future general activity diffusion index edged down to 50.2 in June from 53.2 in May, staying positive since February 2024. Future indexes for new orders (60.8 vs. 53.5) and shipments (60.3 vs. 45.7) increased in June (vs. May) and remained positive. Notably, the future capital expenditures index rose to 41.2 this month, the highest level since June 2021, from 30.9 in May. The following future indexes slipped in June (vs. May) but stayed in positive territory: employment (30.8 vs. 31.7), unfilled orders (17.3 vs. 19.2), and inventories (10.0 vs. 11.8). Prices continued to increase, with the future prices paid index easing to a still-elevated 63.2 in June from 70.0 in May and the future prices received index rising to 67.2, the highest level since August 2021, from 60.5.

The Manufacturing Business Outlook Survey (MBOS), conducted by the Federal Reserve Bank of Philadelphia, is a monthly survey of manufacturers in the Third Federal Reserve District. Participants indicate the direction of change in overall business activity and in the various measures of activity at their plants. The diffusion indexes in the MBOS represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. The indexes range from -100 to +100 with positive values indicating an increase in activity. The series from the survey dating back to May 1968 can be found in Haver’s **SURVEYS** database. The expectations forecast figures are from the Action Economics Forecast Survey in **AS1REPNA**.

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- Current General Activity Index up 10.7 pts. to 10.3 in June; fifth rise in six months.
- New Orders (27.3), sixth expansion in seven mths.; Shipments (14.9), seventh straight expansion; Unfilled Orders (10.5), first expansion since July ’25.
- Employment (7.9), a five-month high after two mths. of contraction.
- Inflation indicators: Prices Paid up (53.2); Prices Received down (20.3, a four-month low).
- Future General Activity Index down to a still-expansion-level 50.2; most subindexes up and positive; future price indexes remaining above long-run avgs.

U.S. Philadelphia Fed Index Returns to Positive Territory in June

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Unemployment in the European Monetary Union stayed at 6.3% in April, just a tick above its all-time low. In the more inclusive EU, the unemployment rate hovered at 6%, just two tenths of a percentage point above its all-time low. Unemployment conditions in the monetary union remain low without many signs of acceleration.

The unemployment rate in April fell in Italy, Ireland, Greece, Portugal, and the Netherlands. The unemployment rate increased month-to-month in Finland.

In March, the unemployment rate declined in Austria, Belgium, Germany, Finland, Italy, and the Netherlands. It rose month-to-month in Greece and Luxembourg.

Over three months, the unemployment rate in these 12-early reporting monetary union members fell in five countries: Belgium, Germany, Italy, Ireland, and the Netherlands. In contrast, unemployment rose in five countries: Portugal, Greece, France, Finland, and Austria.

Over six months, unemployment rates fell in six countries: the Netherlands, Portugal, Italy, Germany, Belgium, and Austria. This was against increases in six countries: Greece, Finland, France, Luxembourg, Spain, and Ireland.

Year over year, the degree of inflation progress is much thinner, with the unemployment rates falling in only three countries Italy, Spain, and Portugal with increases in unemployment for all the other countries in the table.

Unemployment rates continue to rank low in the monetary union, with only three monetary union countries having their unemployment rates ranked above 50%, putting them above their respective medians on data back to the year 2000. Those three countries are Luxembourg, Finland, and Austria. For the remaining countries, the rankings of their unemployment rates over this period are not even as high as their 30th percentiles. Italy, at present, is experiencing its lowest unemployment rate of the period.

Unemployment conditions in the monetary union remain solid. The past two weeks were significant for monetary policy and global economics, with the ECB raising rates, Japan raising rates, and the United States keeping rates unchanged but moving away from an easing bias in policy that had been in effect for quite a number of months. Today the Bank of England, after experiencing some significant inflation progress, decided to keep its policy on hold for another session. An agreement between the U.S. and Iran securing an opening of the Strait of Hormuz was signed, paving the way for potentially improved oil flows, lower inflation, and less uncertainty in the period ahead.

Economy in Brief

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