Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081023a.jpg" width="353">
Initial claims for unemployment insurance rose 15,000 during last week to 448,000. That offset an 18,000 decline during the week prior which was revised slightly shallower.The Labor Department estimates that another 12,000 claims in the latest week were due to Hurricane Ike in Texas, the same as during the week prior but less than the 17,000 and 45,000 lifts during the two prior periods.
The four-week moving average of initial claims fell slightly to 480,250 (46.5% y/y), just barely off the cycle high.
The latest figures are for the survey week for October non-farm payrolls and initial claims rose 20,000 (4.4%) from the September period. During the last ten years there has been a 76% inverse correlation between the level of initial claims and the m/m change in non-farm payrolls.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081023b.jpg" width="353">
The largest increases in initial claims for the week ending Oct. 11 were in New York (+5,224), Michigan (+3,383), Florida (+3,007), California (+2,781), and South Carolina (+2,723), while the largest decreases were in Texas (-5,968), Ohio (-4,317), Alabama (-1,534), Louisiana (-828), and Delaware (-827).
Continuing claims for unemployment insurance during the week of October 11 fell 6,000 after a revised 55,000 increase during the prior week, initially reported at up 40,000. The four-week average of claims rose to this cycle&#39;s high of 3,680,000, 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.
The insured rate of unemployment was stable w/w at 2.8% during the week of October 11, this cycle&#39;s high and the highest since mid-2003. The high in that recessionary period was the 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">10/18/08</th>
<th scope="col">10/11/08</th>
<th scope="col">10/04/08</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;463</td>
<td>481</td>
<td>43.5%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,720</td>
<td>3,726</td>
<td>46.1</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial claims for unemployment insurance rose 15,000 during last week to 448,000. That offset an 18,000 decline during the week prior which was revised slightly shallower.The Labor Department estimates that another 12,000 claims in [...]

U.S. Weekly Initial Claims for Jobless Insurance Ticked Higher

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081023a.jpg" align="left" border="0" height="265" width="353">
Initial claims for unemployment insurance rose 15,000 during
last week to 448,000. That offset an 18,000 decline during the week
prior which was revised slightly shallower.The Labor Department
estimates that another 12,000 claims in the latest week were due to
Hurricane Ike in Texas, the same as during the week prior but less than
the 17,000 and 45,000 lifts during the two prior periods.
The four-week moving average of initial claims fell slightly
to 480,250 (46.5% y/y), just barely off the cycle high.
The latest figures are for the survey week for October
non-farm payrolls and initial claims rose 20,000 (4.4%) from the
September period. During the last ten years there has been a 76%
inverse correlation between the level of initial claims and the m/m
change in non-farm payrolls.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081023b.jpg" align="right" border="0" height="265" width="353">
The largest increases in initial claims for the week ending
Oct. 11 were in New York (+5,224), Michigan (+3,383), Florida (+3,007),
California (+2,781), and South Carolina (+2,723), while the largest
decreases were in Texas (-5,968), Ohio (-4,317), Alabama (-1,534),
Louisiana (-828), and Delaware (-827).
Continuing claims for unemployment insurance during the week
of October 11 fell 6,000 after a revised 55,000 increase during the
prior week, initially reported at up 40,000. The four-week average of
claims rose to this cycle's high of 3,680,000, 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.
The insured rate of unemployment was stable w/w at 2.8% during
the week of October 11, this cycle's high and the highest since
mid-2003. The high in that recessionary period was the 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">10/18/08</th>
<th scope="col">10/11/08</th>
<th scope="col">10/04/08</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;463</td>
<td>481</td>
<td>43.5%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,720</td>
<td>3,726</td>
<td>46.1</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
&nbsp;© 2008&nbsp; HAVER
ANALYTICS. All rights reserved. 
by <a href="/comment/Brusca.html">Robert
Brusca</a> European Orders Head Sharply Lower In August October
23, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081023c.jpg" align="left" border="0" height="265" width="353">
Industrial orders in the e-zone fell by a relatively sharp
1.2% in August. Still there has been enough strength recently for the
3-mo growth rate of e-Zone orders to stand at a positive 5.3%. Over six
months and 12-months orders are still declining. And in the quarter-to
date orders are falling as well at a sharp -6% pace. Order weakness
continues to be led by orders from abroad (see table). Domestic orders
are not so much stronger (see chart) as they are more volatile. 

The selected country level reports in the table shows weakness
of a significant magnitude across the group albeit there are timing
differences and volatility in orders within this group. But in
Q3-to-date only Italy shows an order rise. The UK shows an annual rate
of decline at a -40% rate. Italy is posting a gain in the quarter at
nearly a 10% pace. Germany and France are showing quarter-to-date order
drops on the order of 6% to 7%. 
 
 


<table border="0" cellspacing="0" width="100%"> <colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col">E-zone
and UK Industrial Orders &amp; Sales Trends </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar except m/m</td>
<td colspan="3">% m/m</td>
<td>Aug 
08</td>
<td>Aug 
08</td>
<td>Aug 
08</td>
<td>Aug 
07</td>
<td>Aug 
06</td>
<td>Qtr-2 
Date</td>
</tr>
<tr>
<td class="firstcol">Ezone Detail</td>
<td>Aug 
08</td>
<td>Jul 
08</td>
<td>Jun 
08</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-mo</td>
<td>12-mo</td>
<td>Saar</td>
</tr>
<tr>
<td class="firstcol">MFG Sales</td>
<td>0.6%</td>
<td>0.4%</td>
<td>0.2%</td>
<td>4.9%</td>
<td>3.7%</td>
<td>4.6%</td>
<td>6.4%</td>
<td>7.8%</td>
<td>4.5%</td>
</tr>
<tr>
<td class="firstcol">Consumer</td>
<td>0.4%</td>
<td>0.3%</td>
<td>0.1%</td>
<td>3.3%</td>
<td>1.9%</td>
<td>1.8%</td>
<td>6.4%</td>
<td>7.8%</td>
<td>2.9%</td>
</tr>
<tr>
<td class="firstcol">Capital</td>
<td>0.3%</td>
<td>0.2%</td>
<td>0.1%</td>
<td>2.6%</td>
<td>2.2%</td>
<td>3.4%</td>
<td>4.4%</td>
<td>4.2%</td>
<td>2.3%</td>
</tr>
<tr>
<td class="firstcol">Intermediate</td>
<td>-0.4%</td>
<td>1.8%</td>
<td>1.4%</td>
<td>11.8%</td>
<td>0.1%</td>
<td>1.5%</td>
<td>8.3%</td>
<td>7.1%</td>
<td>5.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG Orders</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>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>-1.2%</td>
<td>2.0%</td>
<td>0.5%</td>
<td>5.3%</td>
<td>-5.1%</td>
<td>-1.5%</td>
<td>5.1%</td>
<td>11.6%</td>
<td>-1.5%</td>
</tr>
<tr>
<td class="firstcol">E-13 Domestic MFG orders</td>
<td>-0.4%</td>
<td>1.8%</td>
<td>1.4%</td>
<td>11.8%</td>
<td>0.1%</td>
<td>1.5%</td>
<td>2.6%</td>
<td>7.6%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">E-13 Foreign MFG orders</td>
<td>-2.1%</td>
<td>1.9%</td>
<td>-0.3%</td>
<td>-2.4%</td>
<td>-11.9%</td>
<td>-4.0%</td>
<td>7.1%</td>
<td>16.4%</td>
<td>-5.5%</td>
</tr>
<tr>
<td class="firstcol">Countries:</td>
<td>Aug 
08</td>
<td>Jul 
08</td>
<td>Jun 
08</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-mo</td>
<td>12-mo</td>
<td>Qtr-2 
Date</td>
</tr>
<tr>
<td class="firstcol">Germany:</td>
<td>3.3%</td>
<td>-0.7%</td>
<td>-2.5%</td>
<td>-0.3%</td>
<td>-6.4%</td>
<td>0.1%</td>
<td>5.5%</td>
<td>17.0%</td>
<td>-6.0%</td>
</tr>
<tr>
<td class="firstcol">France:</td>
<td>-7.2%</td>
<td>4.3%</td>
<td>1.4%</td>
<td>-6.9%</td>
<td>-18.5%</td>
<td>-7.8%</td>
<td>8.6%</td>
<td>-5.3%</td>
<td>-7.4%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>-0.3%</td>
<td>2.7%</td>
<td>0.7%</td>
<td>13.2%</td>
<td>-1.4%</td>
<td>1.1%</td>
<td>-0.6%</td>
<td>18.2%</td>
<td>9.8%</td>
</tr>
<tr>
<td class="firstcol">UK(EU)</td>
<td>-15.2%</td>
<td>2.4%</td>
<td>-5.0%</td>
<td>-53.6%</td>
<td>-37.2%</td>
<td>-16.4%</td>
<td>4.2%</td>
<td>-3.3%</td>
<td>-40.7%</td>
</tr>
</tbody>
</table>
</body></html>

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081022c.jpg" align="left" border="0" height="265" width="353">
Italy&#8217;s consumer sentiment trend and retail sales trends
continue to show each other the way lower. While some speak
disparagingly about consumer surveys, it is clear that the consumer&#8217;s
habits are bang in line with what the consumer is telling various
surveyors. 
 

In the quarter to date (two-months into Q3), nominal sales are
still rising. But on the more important inflation-adjusted basis sales
are dropping at a -3.4% annual rate - that&#8217;s quite weak. 
 

Nominal sales trends have bee negative over three, six and
twelve month horizons. In August weakness seems to have hit all the
major categories together. While July showed a nominal sales gain, it
is now clear that it was not heralding a period of better growth ahead
That much has become clear in August. 
 

Italy remains a trouble EMU economy, led by consumer sector
weakness. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="9" scope="col"> Italy Retail Sales Growth</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">mo/mo %</td>
<td colspan="4">At annual rates</td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Nominal</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>Jun-08</td>
<td>3-MO</td>
<td>6-MO</td>
<td>12-MO</td>
<td>YrAgo</td>
<td>Q-2-Date</td>
</tr>
<tr>
<td class="firstcol">Retail Trade</td>
<td>-0.5%</td>
<td>0.6%</td>
<td>-0.4%</td>
<td>-1.1%</td>
<td>-1.5%</td>
<td>-0.7%</td>
<td>0.7%</td>
<td>0.9%</td>
</tr>
<tr>
<td class="firstcol">Food Bev &amp; Tobacco</td>
<td>-0.3%</td>
<td>0.6%</td>
<td>-0.1%</td>
<td>1.0%</td>
<td>0.3%</td>
<td>0.9%</td>
<td>1.5%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">Clothing&amp;Furniture</td>
<td>-6.1%</td>
<td>6.3%</td>
<td>-3.0%</td>
<td>-12.2%</td>
<td>-10.7%</td>
<td>-3.7%</td>
<td>-0.3%</td>
<td>12.8%</td>
</tr>
<tr>
<td class="firstcol">Total Real Retail</td>
<td>-0.7%</td>
<td>0.3%</td>
<td>-0.9%</td>
<td>-5.1%</td>
<td>-5.4%</td>
<td>-4.6%</td>
<td>-0.9%</td>
<td>-3.4%</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">Retial Ex auto</td>
<td>-0.7%</td>
<td>0.3%</td>
<td>-0.9%</td>
<td>-5.1%</td>
<td>-5.4%</td>
<td>-4.6%</td>
<td>-0.9%</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body></html>

Italy’s consumer sentiment trend and retail sales trends continue to show each other the way lower. While some speak disparagingly about consumer surveys, it is clear that the consumer’s habits are bang in line with what the consumer [...]

Italy’s Consumer Confidence and Retail Sales Trends Continue to Drop

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081022a.jpg" width="353">
The total number of mortgage applications fell 16.6% last week from the prior period to their lowest level since late-2000, according to the Mortgage Bankers Association. The decline pulled the October average 17.6% below September during which there had been a brief upturn in applications.
Applications for a mortgage to purchase a home tumbled 10.9% w/w and the decline pulled the month-to-date average 13.5% below September. Last month, purchase applications rose 8.7% from August during which these applications fell 6.1% m/m (-27.0% y/y). The August decline was accompanied by a 2.4% m/m decline (-12.7% y/y) in new plus existing single family home sales.
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.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081022b.jpg" width="353">
Applications to refinance a home mortgage tumbled 23.5% last week and the decline lowered applications so far this month 22.3% below the September average. During September, applications to refinance had risen 61.9% from August as 15-year mortgage rates fell briefly to 5.54%.
The effective interest rate on a conventional 15-year mortgage rose last week to 6.33% following an average of 6.01% last month. For a 30-year mortgage, rates fell w/w to 6.50%. 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 rose to 7.07% from 6.70% averaged 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 USWEEKLY database.
Strategic Risk Management in an Interconnected World is the title of a speech given Monday by Fed Governor Randall S. Kroszner and it can be found <a href="http://http://www.federalreserve.gov/newsevents/speech/kroszner20081020a.htm">here</a>.
Unprecedented Times in our Economy* are remarks offered last week by Chicago Fed President Charles L. Evans and they are available <a href="http://www.chicagofed.org/news_room/speeches/fond%20du%20lac_Speech.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/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">10/17/08</th>
<th scope="col">10/10/08</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>408.1</td>
<td>489.3</td>
<td>-37.8%</td>
<td>652.6</td>
<td>584.2</td>
<td>708.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>279.3</td>
<td>313.5</td>
<td>-32.8%</td>
<td>424.9</td>
<td>406.9</td>
<td>470.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,158.8</td>
<td>1,514.2</td>
<td>-43.7%</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 fell 16.6% last week from the prior period to their lowest level since late-2000, according to the Mortgage Bankers Association. The decline pulled the October average 17.6% below September [...]

U.S. Mortgage Applications Lowest Since 2000

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081022a.jpg" align="left" border="0" height="265" width="353">
The total number of mortgage applications fell 16.6% last week
from the prior period to their lowest level since late-2000, according
to the Mortgage Bankers Association. The decline pulled the October
average 17.6% below September during which there had been a brief
upturn in applications.
Applications for a mortgage to purchase a home tumbled 10.9%
w/w and the decline pulled the month-to-date average 13.5% below
September. Last month, purchase applications rose 8.7% from August
during which these applications fell 6.1% m/m (-27.0% y/y). The August
decline was accompanied by a 2.4% m/m decline (-12.7% y/y) in new plus
existing single family home sales.
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.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081022b.jpg" align="right" border="0" height="265" width="353">
Applications to refinance a home mortgage tumbled 23.5% last
week and the decline lowered applications so far this month 22.3% below
the September average. During September, applications to refinance had
risen 61.9% from August as 15-year mortgage rates fell briefly to 5.54%.
The effective interest rate on a conventional 15-year mortgage
rose last week to 6.33% following an average of 6.01% last month. For a
30-year mortgage, rates fell w/w to 6.50%. 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 rose to 7.07% from 6.70% averaged 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 USWEEKLY database.
Strategic Risk Management in an Interconnected World is
the title of a speech given Monday by Fed Governor Randall S. Kroszner
and it can be found <a href="%7Fhttp:/www.federalreserve.gov/newsevents/speech/kroszner20081020a.htm">here</a>.
Unprecedented Times in our Economy* are
remarks offered last week by Chicago Fed President Charles L. Evans and
they are available <a href="http://www.chicagofed.org/news_room/speeches/fond%20du%20lac_Speech.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/SURVEYW/@S5/@S5.HTM">BA
Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">10/17/08</th>
<th scope="col">10/10/08</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>408.1</td>
<td>489.3</td>
<td>-37.8%</td>
<td>652.6</td>
<td>584.2</td>
<td>708.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>279.3</td>
<td>313.5</td>
<td>-32.8%</td>
<td>424.9</td>
<td>406.9</td>
<td>470.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,158.8</td>
<td>1,514.2</td>
<td>-43.7%</td>
<td>1,997.9</td>
<td>1,634.0</td>
<td>2,092.3</td>
</tr>
</tbody>
</table>
Italy&#8217;s Consumer Confidence and
Retail Sales Trends Continue to Drop 
by <a href="/comment/Brusca.html">Robert
Brusca</a> October 22, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081022c.jpg" align="left" border="0" height="265" width="353">
Italy&#8217;s consumer sentiment trend and retail sales trends
continue to show each other the way lower. While some speak
disparagingly about consumer surveys, it is clear that the consumer&#8217;s
habits are bang in line with what the consumer is telling various
surveyors. 
 

In the quarter to date (two-months into Q3), nominal sales are
still rising. But on the more important inflation-adjusted basis sales
are dropping at a -3.4% annual rate - that&#8217;s quite weak. 
 

Nominal sales trends have bee negative over three, six and
twelve month horizons. In August weakness seems to have hit all the
major categories together. While July showed a nominal sales gain, it
is now clear that it was not heralding a period of better growth ahead
That much has become clear in August. 
 

Italy remains a trouble EMU economy, led by consumer sector
weakness. 


<table border="0" cellspacing="0" width="100%"> <colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col"> Italy
Retail Sales Growth</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">mo/mo %</td>
<td colspan="4">At annual rates</td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Nominal</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>Jun-08</td>
<td>3-MO</td>
<td>6-MO</td>
<td>12-MO</td>
<td>YrAgo</td>
<td>Q-2-Date</td>
</tr>
<tr>
<td class="firstcol">Retail Trade</td>
<td>-0.5%</td>
<td>0.6%</td>
<td>-0.4%</td>
<td>-1.1%</td>
<td>-1.5%</td>
<td>-0.7%</td>
<td>0.7%</td>
<td>0.9%</td>
</tr>
<tr>
<td class="firstcol">Food Bev &amp; Tobacco</td>
<td>-0.3%</td>
<td>0.6%</td>
<td>-0.1%</td>
<td>1.0%</td>
<td>0.3%</td>
<td>0.9%</td>
<td>1.5%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">Clothing&amp;Furniture</td>
<td>-6.1%</td>
<td>6.3%</td>
<td>-3.0%</td>
<td>-12.2%</td>
<td>-10.7%</td>
<td>-3.7%</td>
<td>-0.3%</td>
<td>12.8%</td>
</tr>
<tr>
<td class="firstcol">Total Real Retail</td>
<td>-0.7%</td>
<td>0.3%</td>
<td>-0.9%</td>
<td>-5.1%</td>
<td>-5.4%</td>
<td>-4.6%</td>
<td>-0.9%</td>
<td>-3.4%</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">Retial Ex auto</td>
<td>-0.7%</td>
<td>0.3%</td>
<td>-0.9%</td>
<td>-5.1%</td>
<td>-5.4%</td>
<td>-4.6%</td>
<td>-0.9%</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body></html>

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081021e.jpg" width="353">
The Confederation of Business Industry (CBI) released the results of its latest surveys of industrial trends. The quarterly survey gathers the opinions of manufacturers on a number of trends--the general business outlook, trends in their own output, orders, including foreign, capital spending, employment, prices and inventories. The monthly survey updates the opinions on trends in orders, inventories, prices and output--past and expected.
The latest quarterly survey shows that only 4% of the respondents were more optimistic about the general business situation than they had been in the previous survey, while 64% were more pessimistic, resulting in a -60 for the quarter. This was the most pessimistic reading of business confidence measure since the third quarter of 1980 when the excess of pessimists was 70%. The first chart shows the history of the CBI&#39;s confidence measure.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081021f.jpg" width="353">
Most of the components of the survey showed low points not seen for some time. For example, 31% more of the respondents expected output over the next three months to be lower than those expecting it to be higher. It is necessary to go back to the fourth quarter of 1980 to find as many pessimists on the outlook. A few of the components are shown in the table below together with the date when a comparable figure occurred.
Ian McCafferty, Chief Economic Adviser of CBI remarked that &quot;.....the sharp falls in orders and output show that the slowdown in the UK economy is now spreading to sectors previously resilient to the weakness in the banking and housing sectors. It is also of serious concern that constraints on capital now appear to be affecting manufacturers, in a way that had not been the case earlier.&quot; Indeed, there were spikes in the current quarter in the percentage of respondents who said credit or finance might be a factor in their negative appraisal of output, orders and capital spending, as can be seen in the second chart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">UNITED KINGDOM CBI INDUSTRIAL TRENDS SURVEY&nbsp;</th>
<th scope="col">Q4&nbsp; 08</th>
<th scope="col">Q3&nbsp;&nbsp;&nbsp; 08&nbsp;</th>
<th scope="col">Q2&nbsp; 08&nbsp;</th>
<th scope="col">Q1&nbsp; 08&nbsp;</th>
<th scope="col">PRE- VIOUS&nbsp;</th>
<th scope="col">DATE&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Output over next 3 months</td>
<td>-31</td>
<td>-7</td>
<td>0</td>
<td>8</td>
<td>-31</td>
<td>1980:4</td>
</tr>
<tr>
<td class="firstcol">Capital Spending Buildings</td>
<td>-44</td>
<td>-24</td>
<td>-21</td>
<td>-21</td>
<td>-49</td>
<td>1996:4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Capital Spending Plant &amp; Equipment</td>
<td>-38</td>
<td>-24</td>
<td>-18</td>
<td>-12</td>
<td>-46</td>
<td>1980:4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Domestic Orders</td>
<td>-42</td>
<td>-21</td>
<td>-9</td>
<td>-3</td>
<td>-42</td>
<td>1991:1</td>
</tr>
<tr class="odd">
<td class="firstcol">Export Orders</td>
<td>-21</td>
<td>-8</td>
<td>5</td>
<td>0</td>
<td>-34</td>
<td>2001:4</td>
</tr>
</tbody>
</table>
</body>
</html>

The Confederation of Business Industry (CBI) released the results of its latest surveys of industrial trends. The quarterly survey gathers the opinions of manufacturers on a number of trends--the general business outlook, trends in [...]

The Global Financial Crisis Hits British Industry

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081021d.jpg" width="353">
According to the International Council of Shopping Centers, chain store sales fell 1.6% last week. The decline more than reversed the gains of the prior two weeks. The level of sales so far October were 1.0% below the September average which fell 1.9% from August.
The level of sales during the latest week was near the lowest since December of last year.
During the last ten years there has been a 45% 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.
The leading indicator of chain store sales from ICSC-Goldman Sachs fell 0.2% (-4.8% y/y).
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">10/18/08</th>
<th scope="col">10/11/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>477.0</td>
<td>484.7</td>
<td>0.9%</td>
<td>2.8%</td>
<td>3.3%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>


</html>

According to the International Council of Shopping Centers, chain store sales fell 1.6% last week. The decline more than reversed the gains of the prior two weeks. The level of sales so far October were 1.0% below the September [...]

U.S. Chain Store Sales Fell

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081021c.jpg" width="353">
The National Activity Index (CFNAI) from the Chicago Federal Reserve Bank for September moved deeper into recession territory. The reading of -2.57 was the lowest since early during the 1981-82 recession.The current index level was then associated with -6.4% (AR) growth in real GDP during 1Q 1982.
The three-month moving average of the index also fell to -1.78 from -1.18 during August. The latest was its lowest since the last recession, early in 1991.
An index level at or below -0.70 typically has indicated negative U.S. economic growth. A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth of roughly 3%. During the last twenty years there has been a 68% correlation between the level of the CFNAI and q/q growth in real GDP.
The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_october2008.pdf">here</a> and the historical data are available in Haver&#39;s SURVEYS database.
The production and income categories made the largest negative contribution to the total index&#39;s decline during September, though each of the component categories added a negative influence.
Inflationary pressure also was indicated to be low for the coming year with price index at it&#39;s lowest since 1990.
The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production &amp; income, the labor market, personal consumption &amp; housing, manufacturing &amp; trade sales, and inventories &amp; orders.
In a separate survey, the Chicago Fed indicated that its Midwest manufacturing index fell. The August index level reversed its recent improvement and fell to the lowest level since 2003. A decline in the auto sector component of the series led the weakness.
Revisiting Useful Approaches to Data-Rich Macroeconomic Forecasting from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr327.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago Fed</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">September &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-2.57</td>
<td>-1.61</td>
<td>-0.30</td>
<td>-0.43</td>
<td>-0.03</td>
<td>0.27</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Average</td>
<td>-1.78</td>
<td>-1.18</td>
<td>-0.32</td>
<td>--</td>
<td>--</td>
<td>&nbsp;--</td>
</tr>
</tbody>
</table>
</body>
</html>

The National Activity Index (CFNAI) from the Chicago Federal Reserve Bank for September moved deeper into recession territory. The reading of -2.57 was the lowest since early during the 1981-82 recession.The current index level was [...]

Chicago Fed Index Fell Deeper Into Negative Territory

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.

260622.jpg

Denmark

Danish Confidence Improves As Inflation Expectations Pull Back Sharply

Andrew Cates

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

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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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U.S. Weekly Initial Claims for Jobless Insurance Ticked Higher

U.S. Weekly Initial Claims for Jobless Insurance Ticked Higher

Italy’s Consumer Confidence and Retail Sales Trends Continue to Drop

U.S. Mortgage Applications Lowest Since 2000

U.S. Mortgage Applications Lowest Since 2000

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Chicago Fed Index Fell Deeper Into Negative Territory