Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029b.jpg" width="353">
During September, new orders for durable goods ticked up 0.8% after falling 5.5% during August, a decline revised from the -4.5% figure reported initially. Though the September rise in orders beat Consensus expectations for a 1.0% decline, there where few, if any, areas of strength. The gain mostly reflected a 21.8% (-16.6% y/y) jump in new orders for aircraft &amp; parts that offset most of a decline during August. (Nondefense aircraft orders rose 29.7% (-34.1% y/y).
Highlighting the weakness in durable goods orders last month was a 1.1% decline in new orders less the transportation sector altogether. That followed a 4.1% drop during August, initially reported at down 3.0%. The September decline about matched Consensus expectations but during the last three months, orders less the transportation sector fell at a 19.0% annual rate.
The rise in aircraft orders did lift overall orders for nondefense capital goods by 0.8%, but that followed a little-revised 7.7% plunge during August. Without aircraft, nondefense capital goods orders fell 1.4% after 2.2% drop during August. These declines lowered the three-month growth rate to -12.4%, the worst since early last year. During the last ten years there has been an 80% correlation between the y/y gain in nondefense capital goods orders and the rise in equipment &amp; software spending in the GDP accounts. The correlation of the GDP figure with capital goods shipments is, as one would expect, a larger 92%.
The industry detail highlights the recent weakness in factory orders. Orders for machinery ticked up just 0.5% after a 6.4% drop during August. That left the three-month growth rate at -9.5%.Primary metals orders fell sharply for the second consecutive month with a 4.5% (+1.6% y/y) drop which followed a downwardly revised 12.5% August plunge. New orders for electrical equipment increased 1.5% (1.1% y/y) after a 3.5% August decline. On a three-month basis these orders were down at a 35.0% annual rate.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029c.jpg" width="353">
New orders for computers &amp; electronic products continued on their weaker trend-line with a 1.4% drop last month. On a three-month basis these orders fell at a 15.0% annual rate after their 2.1% decline during all of last year. Orders for just computers &amp; related products fell 2.8% and on a three-month basis they were off at a 47.9% annual rate. New orders for communications equipment also have been quite weak and they fell 14.6% last month. Three-month growth was -36.6% (AR) after last year&#39;s 7.5% decline.
Reflecting past weakness in new orders was a 0.2% rise in overall shipments of durable goods which made up little of a 4.2% August fall. During the last three months growth was a negative 7.6% (AR) after last year&#39;s negligible 0.1% uptick. For comparison, industrial production of durable goods during the last three months fell at a 13.5%. During the last ten years there has been a 62% correlation between the three-month change in shipments of durable goods and the change in durables industrial production. Less transportation, shipments of durable goods fell 0.4% following a 2.9% August drop. Three-month growth fell to -4.8% (AR).
Inventories of durable goods rose just 0.4% (8.1% y/y), the weakest monthly increase since last October. Three-month growth eased slightly to a still strong 8.8%. Less transportation, inventories rose a weaker 0.5% and the three-month growth rate eased slightly to 9.4% (AR) after the 1.4% rise during 2007.
Addressing the Credit Crisis is a speech given earlier this month by Dallas Fed President Richard W. Fisher and it can be found <a href="http://dallasfed.org/news/speeches/fisher/2008/fs081012.cfm">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/@ED/@ED01/@ED0101/@ED0101.HTM">NAICS Classification</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">Durable Goods Orders</td>
<td>0.8</td>
<td>-5.5</td>
<td>-3.6</td>
<td>1.4</td>
<td>6.2</td>
<td>10.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Excluding Transportation</td>
<td>-1.1</td>
<td>-4.1</td>
<td>-0.6</td>
<td>-0.3</td>
<td>9.1</td>
<td>9.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>0.8</td>
<td>-7.7</td>
<td>-7.2</td>
<td>3.5</td>
<td>9.4</td>
<td>17.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>-1.4</td>
<td>-2.2</td>
<td>0.5</td>
<td>-2.7</td>
<td>10.7</td>
<td>11.6</td>
</tr>
</tbody>
</table>
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During September, new orders for durable goods ticked up 0.8% after falling 5.5% during August, a decline revised from the -4.5% figure reported initially. Though the September rise in orders beat Consensus expectations for a 1.0% [...]

U.S. Durable Goods Orders Ticked Up

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029a.jpg" align="left" border="0" height="265" width="353">
Japan&#8217;s IP fell sharply by 3.5% in August, but it has made a
substantial rebound in September. Still the trends for IP all are
lower, as the sequential growth rates in the table below show. The
rebounds by sector in September are only about one-third of the drop
made in August.
Year-over-year, Japan&#8217;s IP is still rising at a 2.7% pace.
Consumer goods output is up by a strong 3.9% while investment goods
output is up by 0.5% at an annual rate. The investment goods side is
slowing down faster than the consumer goods side.
That trend is in place for the quarter as well. With the
September figures just in to complete the quarter, Q3 reveals that
overall IP is falling at a 5% pace in MFG. Investment goods output is
dropping at a sizeable 13.2% pace while the output of consumer goods is
still up at a 4.1% pace. Since consumers are showing weakness around
the world in terms of lower confidence and reduced spending and since
Japan is a strong exporter of consumer goods this sector is due to get
hit much harder.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="9" scope="col">Japan Industrial Production Trends </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">m/m %</td>
<td colspan="3">Saar %</td>
<td>Yr/Yr</td>
<td>Qtr-to-Date</td>
</tr>
<tr class="odd">
<td class="firstcol">seas adjusted</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>% AR</td>
</tr>
<tr>
<td class="firstcol">Mining &amp; Mfg</td>
<td>1.2%</td>
<td>-3.5%</td>
<td>1.3%</td>
<td>-4.1%</td>
<td>-1.3%</td>
<td>-1.9%</td>
<td>2.7%</td>
<td>-4.8%</td>
</tr>
<tr>
<td class="firstcol">Total Industry</td>
<td>1.1%</td>
<td>-3.6%</td>
<td>1.5%</td>
<td>-4.1%</td>
<td>-1.3%</td>
<td>-2.1%</td>
<td>3.0%</td>
<td>-4.5%</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>1.1%</td>
<td>-3.5%</td>
<td>1.2%</td>
<td>-4.8%</td>
<td>-1.7%</td>
<td>-2.1%</td>
<td>2.8%</td>
<td>-5.0%</td>
</tr>
<tr>
<td class="firstcol">Textiles</td>
<td>-1.4%</td>
<td>-0.2%</td>
<td>-2.9%</td>
<td>-16.6%</td>
<td>-13.7%</td>
<td>-10.6%</td>
<td>-6.8%</td>
<td>-16.2%</td>
</tr>
<tr>
<td class="firstcol">T-port</td>
<td>4.4%</td>
<td>-9.8%</td>
<td>4.0%</td>
<td>-7.9%</td>
<td>-1.2%</td>
<td>-1.3%</td>
<td>10.4%</td>
<td>-7.4%</td>
</tr>
<tr class="odd">
<td colspan="9" class="firstcol">Product Group</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods</td>
<td>0.9%</td>
<td>-3.3%</td>
<td>3.6%</td>
<td>4.5%</td>
<td>4.3%</td>
<td>0.6%</td>
<td>3.9%</td>
<td>4.1%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>0.5%</td>
<td>-2.3%</td>
<td>-0.2%</td>
<td>-7.8%</td>
<td>-3.6%</td>
<td>-1.8%</td>
<td>3.4%</td>
<td>-5.6%</td>
</tr>
<tr>
<td class="firstcol">Investment Goods</td>
<td>4.7%</td>
<td>-5.2%</td>
<td>-0.5%</td>
<td>-5.1%</td>
<td>-2.4%</td>
<td>-4.9%</td>
<td>0.5%</td>
<td>-13.2%</td>
</tr>
<tr>
<td class="firstcol">Mining</td>
<td>-4.4%</td>
<td>1.6%</td>
<td>4.2%</td>
<td>4.7%</td>
<td>2.5%</td>
<td>-1.4%</td>
<td>1.8%</td>
<td>12.4%</td>
</tr>
<tr>
<td class="firstcol">Electricity &amp; Gas</td>
<td>2.0%</td>
<td>-7.6%</td>
<td>6.3%</td>
<td>0.4%</td>
<td>-0.8%</td>
<td>-3.9%</td>
<td>8.8%</td>
<td>-1.8%</td>
</tr>
</tbody>
</table>
</body></html>

Japan’s IP fell sharply by 3.5% in August, but it has made a substantial rebound in September. Still the trends for IP all are lower, as the sequential growth rates in the table below show. The rebounds by sector in September are only [...]

Japan’s Industrial Output Recoups Some of Loss

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029b.jpg" align="left" border="0" height="265" width="353">
During September, new orders for durable goods ticked up 0.8%
after falling 5.5% during August, a decline revised from the -4.5%
figure reported initially. Though the September rise in orders beat
Consensus expectations for a 1.0% decline, there where few, if any,
areas of strength. The gain mostly reflected a 21.8% (-16.6% y/y) jump
in new orders for aircraft &amp; parts that offset most of a
decline during August. (Nondefense aircraft orders rose 29.7% (-34.1%
y/y).
Highlighting the weakness in durable goods orders last month
was a 1.1% decline in new orders less the transportation sector
altogether. That followed a 4.1% drop during August, initially reported
at down 3.0%. The September decline about matched Consensus
expectations but during the last three months, orders less the
transportation sector fell at a 19.0% annual rate.
The rise in aircraft orders did lift overall orders for
nondefense capital goods by 0.8%, but that followed a little-revised
7.7% plunge during August. Without aircraft, nondefense capital goods
orders fell 1.4% after 2.2% drop during August. These declines lowered
the three-month growth rate to -12.4%, the worst since early last year.
During the last ten years there has been an 80% correlation between the
y/y gain in nondefense capital goods orders and the rise in equipment
&amp; software spending in the GDP accounts. The correlation of the
GDP figure with capital goods shipments is, as one would expect, a
larger 92%.
The industry detail highlights the recent weakness in factory
orders. Orders for machinery ticked up just 0.5% after a 6.4% drop
during August. That left the three-month growth rate at -9.5%.Primary
metals orders fell sharply for the second consecutive month with a 4.5%
(+1.6% y/y) drop which followed a downwardly revised 12.5% August
plunge. New orders for electrical equipment increased 1.5% (1.1% y/y)
after a 3.5% August decline. On a three-month basis these orders were
down at a 35.0% annual rate.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029c.jpg" align="right" border="0" height="265" width="353">
New orders for computers &amp; electronic products
continued on their weaker trend-line with a 1.4% drop last month. On a
three-month basis these orders fell at a 15.0% annual rate after their
2.1% decline during all of last year. Orders for just computers
&amp; related products fell 2.8% and on a three-month basis they
were off at a 47.9% annual rate. New orders for communications
equipment also have been quite weak and they fell 14.6% last month.
Three-month growth was -36.6% (AR) after last year's 7.5% decline.
Reflecting past weakness in new orders was a 0.2% rise in
overall shipments of durable goods which made up little of a 4.2%
August fall. During the last three months growth was a negative 7.6%
(AR) after last year's negligible 0.1% uptick. For comparison,
industrial production of durable goods during the last three months
fell at a 13.5%. During the last ten years there has been a 62%
correlation between the three-month change in shipments of durable
goods and the change in durables industrial production. Less
transportation, shipments of durable goods fell 0.4% following a 2.9%
August drop. Three-month growth fell to -4.8% (AR).
Inventories of durable goods rose just 0.4% (8.1% y/y), the
weakest monthly increase since last October. Three-month growth eased
slightly to a still strong 8.8%. Less transportation, inventories rose
a weaker 0.5% and the three-month growth rate eased slightly to 9.4%
(AR) after the 1.4% rise during 2007.
Addressing the Credit Crisis is a speech
given earlier this month by Dallas Fed President Richard W. Fisher and
it can be found <a href="http://dallasfed.org/news/speeches/fisher/2008/fs081012.cfm">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/@ED/@ED01/@ED0101/@ED0101.HTM">NAICS
Classification</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">Durable Goods Orders</td>
<td>0.8</td>
<td>-5.5</td>
<td>-3.6</td>
<td>1.4</td>
<td>6.2</td>
<td>10.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Excluding Transportation</td>
<td>-1.1</td>
<td>-4.1</td>
<td>-0.6</td>
<td>-0.3</td>
<td>9.1</td>
<td>9.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>0.8</td>
<td>-7.7</td>
<td>-7.2</td>
<td>3.5</td>
<td>9.4</td>
<td>17.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>-1.4</td>
<td>-2.2</td>
<td>0.5</td>
<td>-2.7</td>
<td>10.7</td>
<td>11.6</td>
</tr>
</tbody>
</table>
U.S. Mortgage Applications
Recovered Last Week; Off Two-Thirds From Peak 
by <a href="/comment/Moeller.html">Tom
Moeller</a> October 29, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029d.jpg" align="left" border="0">
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 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's decline with an 8.5% rise. For October so
far, however, purchase applications reversed most of the prior month'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'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 src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029e.jpg" align="right" border="0">
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'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>
FOMC Cut Funds Rate to 1.00%; The
Lowest Since 2004 
by <a href="/comment/Moeller.html">Tom
Moeller</a> October 29, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029f.jpg" align="left" border="0" height="265" 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, "extraordinary liquidity
measures" and actions to strengthen financial systems.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029g.jpg" align="right" border="0" height="265" width="353">
The decision was unanimous amongst FOMC voters.
For the complete text of the Fed'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>
Japan&#8217;s Industrial Output Recoups
Some of Loss 
by <a href="/comment/Brusca.html">Robert
Brusca</a> October 29, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029a.jpg" align="left" border="0" height="265" width="353">
Japan&#8217;s IP fell sharply by 3.5% in August, but it has made a
substantial rebound in September. Still the trends for IP all are
lower, as the sequential growth rates in the table below show. The
rebounds by sector in September are only about one-third of the drop
made in August.
Year-over-year, Japan&#8217;s IP is still rising at a 2.7% pace.
Consumer goods output is up by a strong 3.9% while investment goods
output is up by 0.5% at an annual rate. The investment goods side is
slowing down faster than the consumer goods side.
That trend is in place for the quarter as well. With the
September figures just in to complete the quarter, Q3 reveals that
overall IP is falling at a 5% pace in MFG. Investment goods output is
dropping at a sizeable 13.2% pace while the output of consumer goods is
still up at a 4.1% pace. Since consumers are showing weakness around
the world in terms of lower confidence and reduced spending and since
Japan is a strong exporter of consumer goods this sector is due to get
hit much harder.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr> <th colspan="9" scope="col">Japan
Industrial Production Trends </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">m/m %</td>
<td colspan="3">Saar %</td>
<td>Yr/Yr</td>
<td>Qtr-to-Date</td>
</tr>
<tr class="odd">
<td class="firstcol">seas adjusted</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>% AR</td>
</tr>
<tr>
<td class="firstcol">Mining &amp; Mfg</td>
<td>1.2%</td>
<td>-3.5%</td>
<td>1.3%</td>
<td>-4.1%</td>
<td>-1.3%</td>
<td>-1.9%</td>
<td>2.7%</td>
<td>-4.8%</td>
</tr>
<tr>
<td class="firstcol">Total Industry</td>
<td>1.1%</td>
<td>-3.6%</td>
<td>1.5%</td>
<td>-4.1%</td>
<td>-1.3%</td>
<td>-2.1%</td>
<td>3.0%</td>
<td>-4.5%</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>1.1%</td>
<td>-3.5%</td>
<td>1.2%</td>
<td>-4.8%</td>
<td>-1.7%</td>
<td>-2.1%</td>
<td>2.8%</td>
<td>-5.0%</td>
</tr>
<tr>
<td class="firstcol">Textiles</td>
<td>-1.4%</td>
<td>-0.2%</td>
<td>-2.9%</td>
<td>-16.6%</td>
<td>-13.7%</td>
<td>-10.6%</td>
<td>-6.8%</td>
<td>-16.2%</td>
</tr>
<tr>
<td class="firstcol">T-port</td>
<td>4.4%</td>
<td>-9.8%</td>
<td>4.0%</td>
<td>-7.9%</td>
<td>-1.2%</td>
<td>-1.3%</td>
<td>10.4%</td>
<td>-7.4%</td>
</tr>
<tr class="odd">
<td colspan="9" class="firstcol">Product Group</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods</td>
<td>0.9%</td>
<td>-3.3%</td>
<td>3.6%</td>
<td>4.5%</td>
<td>4.3%</td>
<td>0.6%</td>
<td>3.9%</td>
<td>4.1%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>0.5%</td>
<td>-2.3%</td>
<td>-0.2%</td>
<td>-7.8%</td>
<td>-3.6%</td>
<td>-1.8%</td>
<td>3.4%</td>
<td>-5.6%</td>
</tr>
<tr>
<td class="firstcol">Investment Goods</td>
<td>4.7%</td>
<td>-5.2%</td>
<td>-0.5%</td>
<td>-5.1%</td>
<td>-2.4%</td>
<td>-4.9%</td>
<td>0.5%</td>
<td>-13.2%</td>
</tr>
<tr>
<td class="firstcol">Mining</td>
<td>-4.4%</td>
<td>1.6%</td>
<td>4.2%</td>
<td>4.7%</td>
<td>2.5%</td>
<td>-1.4%</td>
<td>1.8%</td>
<td>12.4%</td>
</tr>
<tr>
<td class="firstcol">Electricity &amp; Gas</td>
<td>2.0%</td>
<td>-7.6%</td>
<td>6.3%</td>
<td>0.4%</td>
<td>-0.8%</td>
<td>-3.9%</td>
<td>8.8%</td>
<td>-1.8%</td>
</tr>
</tbody>
</table>
</body></html>

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081028g.jpg" align="left" border="0" height="265" width="353">
Reflecting turbulence in the financial markets, the Conference
Board reported that its October index of consumer confidence collapsed
by more than one-third m/m to a record low level.
The latest index level of 38.0, off by two-thirds from last year,
followed a level of 61.4 during September. Consensus expectations had
been for a lesser m/m decline to a reading of 52.0.
During the last ten years there has been a 79% correlation
between the level of consumer confidence and the y/y change in real
consumer spending.
This month's decline reflected a 42.3% m/m plunge in the
expectations component of the index. The index was at a record low
level and the October drop followed increases during the prior three
months.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081028h.jpg" align="right" border="0" height="265" width="353">
Fewer jobs were seen by 41.5% of respondents, the highest
since 1980. Only 4.4% planned to buy an automobile and just 3.3%
planned to buy carpet. Both of these percentages set the record low for
the series. Twenty six percent of respondents planned to buy a major
appliance within six months, near the fifteen year low. Only 2.7% of
respondents planned to buy a home within six months, down from the high
near 5% in 1999.
The percentage of respondents expecting business conditions to
worsen in six months jumped to 36.6%, the highest level since the
credit crunch of 1980. Only 9.9% expected improvement in conditions.
Down by nearly one-third m/m, the present conditions index
fell to the lowest level since 1992. Jobs were seen as hard to get by
37.2% of respondents, the highest since 1993 and jobs were seen as
plentiful by just 8.9%. Business conditions were seen as good by just
9.2%, the lowest since 1991. Those who thought it bad rose to 38.3%,
also the highest since 1992.
Expectations for the inflation rate in twelve months
surprisingly rose to 6.9%, the highest level since July. 
The Enduring Challenge of Concentrated Poverty: Case
Studies from Communities Across the U.S. from the U.S.
Federal Reserve Board is available <a href="http://www.federalreserve.gov/newsevents/press/other/20081024a.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">Conference
Board &nbsp;(SA, 1985=100)</th>
<th scope="col">October</th>
<th scope="col">September</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">Consumer
Confidence Index</td>
<td>38.0</td>
<td>61.4</td>
<td>-60.1</td>
<td>103.4</td>
<td>105.9</td>
<td>100.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Present Situation</td>
<td>41.9</td>
<td>61.1</td>
<td>-64.5</td>
<td>128.8</td>
<td>130.2</td>
<td>116.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
Expectations</td>
<td>35.5</td>
<td>61.5</td>
<td>-55.6</td>
<td>86.4</td>
<td>89.7</td>
<td>89.7</td>
</tr>
</tbody>
</table>
</body></html>

Reflecting turbulence in the financial markets, the Conference Board reported that its October index of consumer confidence collapsed by more than one-third m/m to a record low level. The latest index level of 38.0, off by two-thirds [...]

Consumer Confidence Collapses To Record Low

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081028e.jpg" align="left" border="0" height="265" width="353">
The S&amp;P/Case-Shiller Composite 20
Home Price Index fell another 1.0% in August which about matched the
July drop. Since their peak in July 2006 prices have fallen
20.0% -- down 16.6% during the last twelve months. The series
dates back only to 2000. The decline in August prices was as expected.
The Case-Shiller index of 20 U.S. cities and their surrounding
areas is weighted to reflect price changes due to extensive remodeling,
home additions or extreme neglect. For example, smaller weights are
assigned to sales of homes that have undergone extensive remodeling.
The Case-Shiller composite index of homes in 10 metropolitan
areas, which has a longer history and dates back to 1987, fell 1.1% in
August, the same as during July. The index was down 17.7% year-to-year.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081028f.jpg" align="right" border="0" height="265" width="353">
Home prices in Phoenix, Nevada continued quite weak and fell
2.9% during August (-30.7% y/y) and in San Diego prices fell 2.3%
(-25.8% y/y). Home prices in Las Vegas, Nevada were down 2.4% (-30.6%
y/y), about as they were in July. Prices in Miami also repeated their
August performance and fell 1.8% (-28.1% y/y) while the same was true
for home prices in Los Angeles, down 26.7% y/y. In San Francisco home
prices were off 27.3% y/y and prices in Tampa, Florida posted an 18.1%
y/y decline.
In the Northeast home prices have held up relatively well. In
New York prices fell a lesser 6.9% y/y and they were down 4.7% in
Boston. In Dallas prices also were off a modest 2.7% y/y and by 2.8% in
Charlotte, North Carolina. In Denver home prices were off 5.1% y/y and
they were down 6.6% in Cleveland Ohio.
The S&amp;P/Case-Shiller home price series can be found in
Haver's USECON database but the city data is in the
REGIONAL database.
The latest press release from Standard &amp; Poor's can be
found <a href="http://www2.standardandpoors.com/spf/pdf/index/CSHomePrice_Release_102831.pdf">here</a>.
An overview of the S&amp;P/Case-Shiller home price series
can be found <a href="http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,1,0,0,0,0,0.html">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">S&amp;P/Case-Shiller
Home Price Index (NSA, Jan 00 = 100)</th>
<th scope="col">August</th>
<th scope="col">July</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>
<td class="firstcol">20 City Composite
Index</td>
<td>164.57</td>
<td>166.29</td>
<td>-16.6%</td>
<td>-3.8%</td>
<td>7.6%</td>
<td>15.8%</td>
</tr>
</tbody>
</table>
</body></html>

The S&P/Case-Shiller Composite 20 Home Price Index fell another 1.0% in August which about matched the July drop. Since their peak in July 2006 prices have fallen 20.0% -- down 16.6% during the last twelve months. The series dates [...]

Home Prices Fell 20% Indicates Case-Shiller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081028c.jpg" width="353">
Consumer spending continued to weaken this month, according to the International Council of Shopping Centers-Goldman Sachs Index, chain store sales recovered just a piece of the prior week&#39;s decline. The 0.5% increase came after a 1.6% drop keeping October sales 1.1% below the September average. Chain store sales fell 1.9% during August.
The level of sales during the latest week remained near the lowest since December of last year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081028d.jpg" width="353">
During the last ten years there has been a 59% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The ICSC-Goldman Sachs retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
Portending further weakness in consumer spending was a 1.3% drop in the leading indicator of chain store sales from ICSC-Goldman Sachs. It fell 1.3% (-5.8% y/y) during the latest week to the lowest level since 1996.
The chain store sales figures 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/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">10/25/08</th>
<th scope="col">10/18/08</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>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>479.3</td>
<td>477.0</td>
<td>1.3%</td>
<td>2.8%</td>
<td>3.3%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>


</html>

Consumer spending continued to weaken this month, according to the International Council of Shopping Centers-Goldman Sachs Index, chain store sales recovered just a piece of the prior week's decline. The 0.5% increase came after a [...]

U.S. Chain Store Sales Further Confirm Weak Retail Spending

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081028a.jpg" width="353">
The retail price for a gallon of regular gasoline fell by twenty five cents last week. At $2.66 per gallon, according to the U.S. Department of Energy survey, the price was the lowest since March of 2007. Prices have now fallen roughly $1.50 per gallon, or by one-third, since their peak early this past July. The latest decline was accompanied by a drop in the average price for all grades of gasoline to $2.72 per gallon.
Yesterday, the spot market price for a gallon of regular gasoline fell further to $1.60, down twenty cents from last week&#39;s average. In futures trading the November contract closed down further at $1.48 per gallon.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081028b.jpg" width="353">
Weekly gasoline prices can be found in Haver&#39;s WEEKLY database. Daily prices are in the DAILY database.
In reaction to the general slowing of U.S. economic growth and relatively high prices, the demand for gasoline is down. The 4.2% y/y decline, according to the U.S. Department of Energy, was the largest y/y drop since late 1995 (the latest four weeks versus the same four weeks last year).
These DOE figures are available in Haver&#39;s OILWKLY database.
The price for a barrel of West Texas Intermediate crude oil fell sharply last week to an average $68.16 per barrel, down by more than one half from the high in July of $145.66. In futures trading, the two-month price for crude oil was down further yesterday at $63.71 per barrel.
Last week prices for natural gas were near their lowest level since August of last year. At an average $6.73 per mmbtu, prices ticked up slightly from the prior week but the average price this month was nearly one-half below the high for natural gas prices in early-July of $13.19/mmbtu.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">10/27/08</th>
<th scope="col">10/20/08</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>
<td class="firstcol">Retail Regular Gasoline ($ per Gallon)</td>
<td>2.66</td>
<td>2.91</td>
<td>-7.5%</td>
<td>2.80</td>
<td>2.57</td>
<td>2.27</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; ($ per bbl.)</td>
<td>68.18</td>
<td>75.21</td>
<td>-23.9%</td>
<td>72.25</td>
<td>66.12</td>
<td>56.60</td>
</tr>
</tbody>
</table>
</body>
</html>

The retail price for a gallon of regular gasoline fell by twenty five cents last week. At $2.66 per gallon, according to the U.S. Department of Energy survey, the price was the lowest since March of 2007. Prices have now fallen [...]

U.S. Gasoline Prices Lowest Since March '07 As Demand Falls

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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260623E.jpg

**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

260622E.jpg

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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