Tom Moeller

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Personal consumption expenditures fell 0.2% during September (+3.5%
y/y) following an unrevised 0.5% August improvement. A 0.1% uptick had been
expected in the Action Economics Forecast Survey. A 5.3% decline (+9.6% y/y) in
motor vehicle purchases offset a 6.3% rise. Furnishings and durable household
equipment spending fell 0.4% (+1.4% y/y), counterbalancing the 0.4% August rise.
Apparel purchases fell 0.9% (+1.9% y/y) after a 0.6% increase but services
spending added 0.2% (3.9% y/y) to the 0.5% gain. In constant dollars, spending
was down 0.2% (+2.1% y/y).

Disposable personal income ticked up just 0.1% (3.9% y/y), the weakest
performance since December. In constant dollars, disposable income was unchanged
(2.5% y/y). Overall personal income increased 0.2% (4.1% y/y), just short of
expectations for a 0.3% rise. Wages &amp; salaries improved 0.2% (5.1% y/y)
while rental income gained 0.2% (6.9% y/y). Personal transfer receipts increased
0.3% (5.6% y/y), bolstered by a 0.8% rise in Medicaid income (15.6% y/y).
Earnings from dividends rose 0.5% (2.7% y/y). To the downside, interest income
fell 0.4% (+0.3% y/y) for the third straight month, while proprietors income
slipped 0.1% (+1.6% y/y).

The decline in spending coupled with a rise in income caused the personal
saving rate to recover to 5.6%, matching the highest level since December
2012. Personal savings rebounded 4.3% (11.4% y/y) and made up a 3.6% August
decline.

The chain price index nudged 0.1% higher last month (1.4% y/y) after a
0.1% dip. Energy prices fell 0.8% (-0.9% y/y) while food prices gained 0.2% (2.5%
y/y). Durable goods prices dipped 0.1% (-2.3% y/y) while nondurable prices
slipped marginally (+1.0% y/y). Services prices gained 0.1% (2.2% y/y). The price
index excluding food &amp; energy edged 0.1% higher (1.5% y/y) for a third
straight month.

The personal income &amp; consumption figures are available in Haver's USECON
and USNA databases. The consensus expectation figure is in the AS1REPNA
database. 

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	<colgroup><col><col><col><col><col><col><col><col></colgroup>
	
 <thead>
 <tr>
 <th class="firstcol" scope="col" >Personal Income &amp; Outlays
 (%)</th>
 <th scope="col" >Sep</th>
 <th scope="col" >Aug</th>
 <th scope="col" >Jul</th>
 <th scope="col" >Y/Y</th>
 <th scope="col" >2013</th>
 <th scope="col" >2012</th>
 <th scope="col" >2011</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Personal Income</td>
 <td >0.2</td>
 <td >0.3</td>
 <td >0.3</td>
 <td >4.1</td>
 <td >2.2</td>
 <td >5.2</td>
 <td >6.2</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Wages &amp; Salaries</td>
 <td >0.2</td>
 <td >0.5</td>
 <td >0.3</td>
 <td >5.1</td>
 <td >2.8</td>
 <td >4.5</td>
 <td >4.0</td>
 </tr>
 <tr>
 <td class="firstcol" >Disposable Personal Income</td>
 <td >0.1</td>
 <td >0.3</td>
 <td >0.2</td>
 <td >3.9</td>
 <td >1.0</td>
 <td >4.9</td>
 <td >5.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Personal Consumption Expenditures</td>
 <td >-0.2</td>
 <td >0.5</td>
 <td >0.0</td>
 <td >3.5</td>
 <td >3.6</td>
 <td >3.7</td>
 <td >4.8</td>
 </tr>
 <tr>
 <td class="firstcol" >Personal Saving Rate</td>
 <td >5.6</td>
 <td >5.4</td>
 <td >5.6</td>
 <td >5.2 
 (Sep '13)</td>
 <td >4.9</td>
 <td >7.2</td>
 <td >6.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >PCE Chain Price Index</td>
 <td >0.1</td>
 <td >-0.1</td>
 <td >0.1</td>
 <td >1.4</td>
 <td >1.2</td>
 <td >1.8</td>
 <td >2.5</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Less Food &amp; Energy</td>
 <td >0.1</td>
 <td >0.1</td>
 <td >0.1</td>
 <td >1.5</td>
 <td >1.3</td>
 <td >1.8</td>
 <td >1.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Real Disposable Income</td>
 <td >0.0</td>
 <td >0.3</td>
 <td >0.1</td>
 <td >2.5</td>
 <td >-0.2</td>
 <td >3.0</td>
 <td >2.5</td>
 </tr>
 <tr>
 <td class="firstcol" >Real Personal Consumption Expenditures</td>
 <td >-0.2</td>
 <td >0.5</td>
 <td >-0.0</td>
 <td >2.1</td>
 <td >2.4</td>
 <td >1.8</td>
 <td >2.3</td>
 </tr>
 </tbody>
 </table>
 
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Personal consumption expenditures fell 0.2% during September (+3.5% y/y) following an unrevised 0.5% August improvement. A 0.1% uptick had been expected in the Action Economics Forecast Survey. A 5.3% decline (+9.6% y/y) in motor [...]

U.S. Consumer Spending Declines as Disposable Income Growth Subsides

Robert Brusca

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The EU overall sentiment index rose to a level of 104 in October from 103.5 in September, an increase that was unexpected. European Monetary Union data, especially the PMI data on manufacturing and service sectors, have continued to be weak.

The five sector readings on the EU show that four of five improved in October. The industrial sector improved in October with its index reading rising to -3.7 this month from -4.3 in September. Consumer confidence also improved in October, rising to -7.4 from -8. The retail sector worsened, falling to -2.5 from -1.8. The construction sector improved, rising to -20 from -21. The services sector also improved, rising to 8.1 from 7.4. As you can see, four of five sectors improved on the month. However, the deteriorating sector was the important retail sector. A counterpoint consumer confidence did improve.

Next we turn our attention to the data for the absolute standing of these responses for the various EU sectors. The EU overall index stands in the 55th percentile of its historic queue, meaning that 45% of the values are higher and 55% of values are lower. By definition, the median for the EU index falls at a 50% queue standing. The industrial sector is at a 56 percentile reading that is marginally above its historic median. Consumer confidence is relatively more robust, in the 74th percentile. The retailing sector stands at its 66th percentile. Construction is in its 47th percentile, below its historic median. The services sector is in its 58th percentile, nearly at 59th. Readings between the 50th and 59th percentile, are still rather weak. Readings in the 60th percentile are moderate. Readings in the 70th percentile begin to get firmer. Readings in the 80th and 90th percentiles are quite firm to quite strong, but nothing is in that range.

Next we look at the specific countries and at EMU member economic sentiment gauges. For the European Monetary Union, the overall index rose by 0.8% in October after a 0.7% decline in September. The EMU reading is distinct from the EU reading; its stance is at its 45th percentile, five percentage points below its historic median. EMU countries are doing worse than the EU overall. Remember that the EU contains all of EMU countries plus some extra members. The results for October show that there was an improvement in the sentiment indices in Germany, France and Italy with only Spain among the big four EMU countries posting a decline. Germany sits in the 59th percentile of its historic queue while France sits in the low 34th percentile with Italy in the 31st percentile and Spain in its 45th percentile. Among the big four countries, only Germany is anywhere close to being moderately firm.

The production sector reading for EMU shows an improvement to -5 in October from -6 in September with most of the improvement coming in the production expectation index which moved up to a 6 reading from 5, export orders which also improved to -15 from -16 and selling price expectations which moved up to zero from -2. Other indicators were flat with employment expectations worsening to a reading of -7 from -5 in September. By country, conditions worsened in Germany, were unchanged in Spain and improved slightly in France and Italy. The queue percentile standing for industry in all of EMU is in its 54th percentile with Germany providing the strongest percentile reading at the 56.9 percentile, Spain is in its 49th percentile, France is in its 47th percentile and Italy is much lower in its 32nd percentile. There's a good deal of variability just among the big four countries. Among them only Germany is anywhere near being firm and it still falls short of that label.

The consumer confidence reading for the EMU improved slightly to -11.1 from a level of -11.4. We see some improvements in the economic situation expected over the next 12 months and in unemployment expectations as well as in the ability to save and the environment for making major purchases in the next 12 months. By country, conditions were unchanged in Germany and in France and Spain, with Italy moving lower by two points month-to-month. The queue percentile standing of consumer confidence is in its 56th percentile for all of EMU. The German percentile standing is in its 74th percentile with Spain in its 63rd percentile. Italy is in its 46th percentile and France at a very weak 25th percentile standing. Consumer confidence in France is only weaker about one quarter of the time.

Retail confidence in the EMU rose by 1 point to -6 in October from -7 in September. Those improving items included the expected business situation, and in orders placed, with the other indicators substantially unchanged on the month. By country, Germany and Spain worsened while France improved by three points month-to-month as Italy improved by one point. The queue percentile standings for retail overall in the EMU is in its 70th percentile. Germany stands firm in the 75th percentile. Spain's is even stronger (relatively) in its 96th percentile. Italy is in its 55th percentile, while France is in its 25th percentile near the bottom quarter of its historic queue.

In the EMU services sector, conditions improved in October by 1 point to 4 from 3. There were slight improvements across most categories, including current demand, expected demand, current employment, and expected employment, with the business climate being unchanged from month-to-month. By country, Germany showed an increase month-to-month along with France and Italy. Only Spain among the big four countries showed a decline in conditions; it's deteriorated by four points. The queue percentile standing for services is weak, standing only in its 44.9 percentile, below its median. For Germany, the queue standing is in its 65th percentile; for Spain, it's in its 53rd percentile; for Italy it's in its 42nd percentile; and for France, it's in its 29th percentile.

The October EMU construction indicator improved to -25 from -28 in September. There were improvements in each of the big four countries except France. There was a significant strong improvement in Spain. The construction indicator for the euro area sits in its 42nd percentile. For Germany, the reading is in its 90th percentile, extremely strong. For Spain, the indicator is in its bottom 38th percentile. For Italy, it is in its bottom 24th percentile. For France, the indicator is in its bottom 10th percentile. Once again conditions in France are extremely weak.

While the EMU readings and the EU readings for October were surprisingly up instead of lower, a detailed assessment of these sectors and member countries shows that there continues to be a great deal of weakness in the EMU as well as in the EU. The percentile standings for these indicators are for the most part no better than moderate and in many cases weak to quite weak. It's against this perspective that we are not particularly impressed about the rebound in the European indicators this month and would caution against viewing the bounce as anything that's fundamental or that will necessarily start a lasting uptrend. Europe still has a great deal of troubles and the European Central Bank has very few degrees of freedom. Fiscal policy is still in handcuffs and is being held in solitary confinement across the euro area.



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The EU overall sentiment index rose to a level of 104 in October from 103.5 in September, an increase that was unexpected. European Monetary Union data, especially the PMI data on manufacturing and service sectors, have continued to [...]

EU Indices Head Higher in October

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Initial claims for unemployment insurance during the week ended October 25
rose to 287,000 (-17.1% y/y) from 284,000, revised from 283,000. The Action
Economics Forecast Survey expected 281,000 claims in the latest week. The
four-week moving average of initial claims remained steady at 281,000, the
lowest level since May 2000.

Continuing claims for unemployment insurance in the week ended October 18
rose 29,000 (-17.7% y/y) to 2.384 million. The four-week moving average fell to
2.377 million, the lowest level since May 2006. The insured rate of unemployment
held at 1.8% for the seventh straight week, the lowest level since May 2007.

By state, in the week ended October 11, the insured rate of unemployment continued 
to vary greatly with North Dakota (0.32%), Nebraska (0.64%), Indiana (0.83%), Ohio 
(1.03%), Maine (1.05%) and Texas (1.13%) at the low end of the range. At the high 
end were Maryland (1.82%), Massachusetts (1.98%), Pennsylvania (2.08%), Nevada (2.18%), 
California (2.23%) and New Jersey (2.69%). These data are not seasonally adjusted.

Data on weekly unemployment insurance are contained in Haver's WEEKLY
database and they are summarized monthly in USECON. Data for individual
states are in REGIONW. The expectations figure is from the Action
Economics survey, carried in the AS1REPNA database.

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	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" 0801 >Unemployment Insurance (000s)</th>
 <th 0801 >10/25/14</th>
 <th 0801 >10/18/14</th>
 <th 0801 >10/11/14</th>
 <th 0801 >Y/Y %</th>
 <th 0801 >2013</th>
 <th 0801 >2012</th>
 <th 0801 >2011</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" 0801 >Initial Claims</td>
 <td 0801 >287</td>
 <td 0801 >284</td>
 <td 0801 >266</td>
 <td 0801 >-17.1</td>
 <td 0801 >343</td>
 <td 0801 >375</td>
 <td 0801 >409</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" 0801 >Continuing Claims</td>
 <td 0801 >--</td>
 <td 0801 >2,384</td>
 <td 0801 >2,355</td>
 <td 0801 >-17.7</td>
 <td 0801 >2,977</td>
 <td 0801 >3,319</td>
 <td 0801 >3,742</td>
 </tr>
 <tr>
 <td class="firstcol" 0801 >Insured Unemployment Rate (%)</td>
 <td 0801 >--</td>
 <td 0801 >1.8</td>
 <td 0801 >1.8</td>
 <td 0801 >2.2 
 (10/13)</td>
 <td 0801 >2.3</td>
 <td 0801 >2.6</td>
 <td 0801 >3.0</td>
 </tr>
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Initial claims for unemployment insurance during the week ended October 25 rose to 287,000 (-17.1% y/y) from 284,000, revised from 283,000. The Action Economics Forecast Survey expected 281,000 claims in the latest week. The four-week [...]

U.S. Initial Claims for Jobless Insurance Tick Higher

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GDP grew 3.5% last quarter (2.3% y/y) following an unrevised 4.6% rise. The
gain exceeded expectations for 3.0% growth in the Action Economics Forecast
Survey. Last quarter's strength was due to trade deficit improvement and firm
growth in government spending. Growth in the price index moderated.

Improvement in the foreign trade deficit added 1.3 percentage points to
overall economic growth last quarter. This followed two quarters of subtraction
from growth. It reflected a 7.8% rise (4.6% y/y) in exports and a 1.7% decline
(+3.2% y/y) in imports. Countering the addition to growth from trade was a 0.6
percentage point subtraction due to slower inventory accumulation.

Consumer spending growth also slowed to a 1.8% annual rate (2.3% y/y) from
2.5%. The 7.2% gain (7.5% y/y) in spending on durable goods was half its Q2 growth 
as spending growth on motor vehicles eased to 9.9% (9.9% y/y). Furniture
&amp; home furnishings spending slowed to a 3.6% rate (5.3% y/y). Purchases of
nondurable goods eased to 1.1% (1.5% y/y) as apparel spending slowed to 0.9%
(1.3% y/y). Food &amp; beverage purchases declined 1.1% (-0.2% y/y), down for
the third straight quarter, and gasoline purchases were off 2.3% (-0.9% y/y).
Services spending growth rose a steady 1.1% (1.8% y/y), the gain held back by a
2.9% decline (-1.4% y/y) in recreation.

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Business investment growth eased to a still-firm 5.5% (6.7% y/y). Spending on
equipment grew 7.2% (7.7% y/y), led by a 30.2% rise (16.6% y/y) in
transportation equipment, offset by an 11.6% decline (-0.3% y/y) in information
processing. Investment in intellectual property products gained 4.2%
(4.5% y/y). Structures investment improved at a 3.7% rate (7.9% y/y). Slowing
was residential investment growth to 1.9% (-1.0% y/y). Government spending
purchases grew at a 4.6% rate (0.4% y/y), the quickest growth since Q2'09.
Defense spending firmed at a 15.9% rate (-0.1% y/y), nondefense grew 0.5% (-1.5%
y/y) and state &amp; local buying rose 1.3% (1.0% y/y).

The GDP price index increased at a 1.3% annual rate (1.6% y/y). The personal
consumption index slowed to 1.2% (1.5% y/y) as durable goods prices fell 1.9%
(-2.3% y/y). The service price index rose 1.7% (2.2% y/y), the weakest gain in
two years. The nonresidential investment price index rose at a steady 1.1% rate (1.3% y/y)
but the residential index jumped 6.5% (5.8% y/y).

The latest GDP figures can be found in Haver's USECON and USNA
databases; USNA contains basically all of the Bureau of Economic
Analysis' detail in the national accounts, including the integrated economic
accounts and the recently added GDP data for U.S. Territories. The Action
Economics consensus estimates can be found in AS1REPNA.

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	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" ><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM" ;>Chained
 2009 $, %, AR</a></th>
 <th scope="col" >Q3'14 (Advance Estimate)</th>
 <th scope="col" >Q2'14 </th>
 <th scope="col" >Q1'14</th>
 <th scope="col" >Q3 Y/Y</th>
 <th scope="col" >2013</th>
 <th scope="col" >2012</th>
 <th scope="col" >2011</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Gross Domestic Product</td>
 <td >3.5</td>
 <td >4.6</td>
 <td >-2.1</td>
 <td >2.3</td>
 <td >2.2</td>
 <td >2.3</td>
 <td >1.6</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Inventory Effect</td>
 <td >-0.6</td>
 <td >1.4</td>
 <td >-1.2</td>
 <td >-0.2</td>
 <td >0.0</td>
 <td >0.1</td>
 <td >-0.1</td>
 </tr>
 <tr>
 <td class="firstcol" >Final Sales</td>
 <td >4.2</td>
 <td >3.2</td>
 <td >-1.0</td>
 <td >2.5</td>
 <td >2.2</td>
 <td >2.2</td>
 <td >1.7</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Foreign Trade Effect</td>
 <td >1.3</td>
 <td >-0.3</td>
 <td >-1.7</td>
 <td >0.1</td>
 <td >0.3</td>
 <td >0.1</td>
 <td >0.0</td>
 </tr>
 <tr>
 <td class="firstcol" >Domestic Final Sales</td>
 <td >2.7</td>
 <td >3.4</td>
 <td >0.7</td>
 <td >2.4</td>
 <td >1.9</td>
 <td >2.1</td>
 <td >1.7</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colspan="8" >Demand Components</td>
 </tr>
 <tr>
 <td class="firstcol" >Personal Consumption Expenditures</td>
 <td >1.8</td>
 <td >2.5</td>
 <td >1.2</td>
 <td >2.3</td>
 <td >2.4</td>
 <td >1.8</td>
 <td >2.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Business Fixed Investment</td>
 <td >5.5</td>
 <td >9.7</td>
 <td >1.6</td>
 <td >6.7</td>
 <td >3.0</td>
 <td >7.2</td>
 <td >7.7</td>
 </tr>
 <tr>
 <td class="firstcol" >Residential Investment</td>
 <td >1.9</td>
 <td >8.8</td>
 <td >-5.3</td>
 <td >-1.0</td>
 <td >11.9</td>
 <td >13.5</td>
 <td >0.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Government Spending</td>
 <td >4.6</td>
 <td >1.7</td>
 <td >-0.8</td>
 <td >0.4</td>
 <td >-2.0</td>
 <td >-1.4</td>
 <td >-3.0</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colspan="8" >Chain-Type Price Index</td>
 </tr>
 <tr>
 <td class="firstcol" >GDP&nbsp;&nbsp; &nbsp;&nbsp;</td>
 <td >1.3</td>
 <td >2.1</td>
 <td >1.3</td>
 <td >1.6</td>
 <td >1.5</td>
 <td >1.8</td>
 <td >2.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Personal Consumption Expenditures</td>
 <td >1.2</td>
 <td >2.3</td>
 <td >1.4</td>
 <td >1.5</td>
 <td >1.2</td>
 <td >1.8</td>
 <td >2.5</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Less Food/Energy</td>
 <td >1.4</td>
 <td >2.0</td>
 <td >1.2</td>
 <td >1.5</td>
 <td >1.3</td>
 <td >1.8</td>
 <td >1.5</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

GDP grew 3.5% last quarter (2.3% y/y) following an unrevised 4.6% rise. The gain exceeded expectations for 3.0% growth in the Action Economics Forecast Survey. Last quarter's strength was due to trade deficit improvement and firm [...]

U.S. GDP Growth in Q3 Is Stronger Than Expected

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 <a href="/comment/141030a_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/141030a.png"></a>
 <a href="/comment/141030b_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/141030b.png"></a>
 
GDP grew 3.5% last quarter (2.3% y/y) following an unrevised 4.6% rise. The
gain exceeded expectations for 3.0% growth in the Action Economics Forecast
Survey. Last quarter's strength was due to trade deficit improvement and firm
growth in government spending. Growth in the price index moderated.

The latest GDP figures can be found in Haver's USECON and USNA
databases; USNA contains basically all of the Bureau of Economic
Analysis' detail in the national accounts, including the integrated economic
accounts and the recently added GDP data for U.S. Territories. The Action
Economics consensus estimates can be found in AS1REPNA.

<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" ><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM" ;>Chained
 2009 $, %, AR</a></th>
 <th scope="col" >Q3'14 (Advance Estimate)</th>
 <th scope="col" >Q2'14 </th>
 <th scope="col" >Q1'14</th>
 <th scope="col" >Q2 Y/Y</th>
 <th scope="col" >2013</th>
 <th scope="col" >2012</th>
 <th scope="col" >2011</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Gross Domestic Product</td>
 <td >3.5</td>
 <td >4.6</td>
 <td >-2.1</td>
 <td >2.3</td>
 <td >2.2</td>
 <td >2.3</td>
 <td >1.6</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Inventory Effect</td>
 <td >-0.6</td>
 <td >1.4</td>
 <td >-1.2</td>
 <td >-0.2</td>
 <td >0.0</td>
 <td >0.1</td>
 <td >-0.1</td>
 </tr>
 <tr>
 <td class="firstcol" >Final Sales</td>
 <td >4.2</td>
 <td >3.2</td>
 <td >-1.0</td>
 <td >2.5</td>
 <td >2.2</td>
 <td >2.2</td>
 <td >1.7</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Foreign Trade Effect</td>
 <td >1.3</td>
 <td >-0.3</td>
 <td >-1.7</td>
 <td >0.1</td>
 <td >0.3</td>
 <td >0.1</td>
 <td >0.0</td>
 </tr>
 <tr>
 <td class="firstcol" >Domestic Final Sales</td>
 <td >2.7</td>
 <td >3.4</td>
 <td >0.7</td>
 <td >2.4</td>
 <td >1.9</td>
 <td >2.1</td>
 <td >1.7</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colspan="8" >Demand Components</td>
 </tr>
 <tr>
 <td class="firstcol" >Personal Consumption Expenditures</td>
 <td >1.8</td>
 <td >2.5</td>
 <td >1.2</td>
 <td >2.3</td>
 <td >2.4</td>
 <td >1.8</td>
 <td >2.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Business Fixed Investment</td>
 <td >5.5</td>
 <td >9.7</td>
 <td >1.6</td>
 <td >6.7</td>
 <td >3.0</td>
 <td >7.2</td>
 <td >7.7</td>
 </tr>
 <tr>
 <td class="firstcol" >Residential Investment</td>
 <td >1.9</td>
 <td >8.8</td>
 <td >-5.3</td>
 <td >-1.0</td>
 <td >11.9</td>
 <td >13.5</td>
 <td >0.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Government Spending</td>
 <td >4.6</td>
 <td >1.7</td>
 <td >-0.8</td>
 <td >0.4</td>
 <td >-2.0</td>
 <td >-1.4</td>
 <td >-3.0</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colspan="8" >Chain-Type Price Index</td>
 </tr>
 <tr>
 <td class="firstcol" >GDP&nbsp;&nbsp; &nbsp;&nbsp;</td>
 <td >1.3</td>
 <td >2.1</td>
 <td >1.3</td>
 <td >1.6</td>
 <td >1.5</td>
 <td >1.8</td>
 <td >2.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Personal Consumption Expenditures</td>
 <td >1.2</td>
 <td >2.3</td>
 <td >1.4</td>
 <td >1.5</td>
 <td >1.2</td>
 <td >1.8</td>
 <td >2.5</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Less Food/Energy</td>
 <td >1.4</td>
 <td >2.0</td>
 <td >1.2</td>
 <td >1.5</td>
 <td >1.3</td>
 <td >1.8</td>
 <td >1.5</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

<html>

<head>
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<meta name="GENERATOR" content="Microsoft FrontPage 4.0">
<meta name="ProgId" content="FrontPage.Editor.Document">
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<body>

 


The Mortgage Bankers Association reported that their total Mortgage Market
Volume Index declined 6.6% last week (-20.2% y/y) following three week's of
improvement. Applications to refinance an existing loan fell 7.4% (-22.4%
y/y) following the prior week's surge. Home purchase applications
declined 5.0% (-15.9% y/y), the same as during the week prior.

The effective interest rate on a 15-year mortgage held steady w/w at 3.34%,
remaining at the lowest level since May 2013. The effective rate on a 30-year
fixed rate loan ticked up to 4.19% but remained down from 4.49% five weeks ago.
The rate on a Jumbo 30-year loan rose to 4.17%. For adjustable 5-year mortgages,
the effective interest rate was roughly stable at 3.10%. It was down versus last
year's 3.74% peak and at the lowest level since June 2013.

The average mortgage loan size pulled back w/w to $270,700. For home purchases,
it fell slightly to $283,600; for refinancings, it declined to $263,600.

Applications for fixed interest rate loans declined 21.7% y/y while adjustable
rate loan applications rose 1.2% y/y.

The survey covers over 75 percent of all U.S. retail residential mortgage
applications, and has been conducted weekly since 1990. Respondents include
mortgage bankers, commercial banks and thrifts. The base period and value for
all indexes is March 16, 1990=100. The figures for weekly mortgage applications
and interest rates are available in Haver's SURVEYW database.

Do Unemployment Benefits Expirations Help Explain the Surge in Job
Openings? from the Federal Reserve Bank of New York is available <a href="http://libertystreeteconomics.newyorkfed.org/2014/09/do-unemployment-benefits-expirations-help-explain-the-surge-in-job-openings.html#.VFDyLRaOp5c">here</a>.

 <thead>
 <tr>
 <th class="firstcol" scope="col" 0925 0918 width="871">MBA Mortgage
 Applications (SA, 3/16/90=100)</th>
 <th scope="col" 0925 0918 width="142">10/24/14</th>
 <th scope="col" 0925 0918 width="142">10/17/14</th>
 <th scope="col" 0925 0918 width="142">10/10/14</th>
 <th scope="col" 0925 0918 width="142">Y/Y %</th>
 <th scope="col" 0925 0918 width="142">2013</th>
 <th scope="col" 0925 0918 width="143">2012</th>
 <th scope="col" 0925 0918 width="143">2011</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" 0925 0918 width="871">Total Market Index</td>
 <td 0925 0918 align="center" width="142">386.1</td>
 <td 0925 0918 align="center" width="142">413.2</td>
 <td 0925 0918 align="center" width="142">370.4</td>
 <td 0925 0918 align="center" width="142">-20.2</td>
 <td 0925 0918 align="center" width="142">616.6</td>
 <td 0925 0918 align="center" width="143">813.8</td>
 <td 0925 0918 align="center" width="143">572.3</td>
 </tr>
 <tr>
 <td class="firstcol" 0925 0918 width="871">&nbsp;Purchase</td>
 <td 0925 0918 align="center" width="142">155.2</td>
 <td 0925 0918 align="center" width="142">163.4</td>
 <td 0925 0918 align="center" width="142">171.7</td>
 <td 0925 0918 align="center" width="142">-15.9</td>
 <td 0925 0918 align="center" width="142">197.5</td>
 <td 0925 0918 align="center" width="143">187.8</td>
 <td 0925 0918 align="center" width="143">182.6</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" 0925 0918 width="871">&nbsp;Refinancing</td>
 <td 0925 0918 align="center" width="142">1,715.3</td>
 <td 0925 0918 align="center" width="142">1,852.3</td>
 <td 0925 0918 align="center" width="142">1,502.4</td>
 <td 0925 0918 align="center" width="142">-22.4</td>
 <td 0925 0918 align="center" width="142">3,070.0</td>
 <td 0925 0918 align="center" width="143">4,505.0</td>
 <td 0925 0918 align="center" width="143">2,858.4</td>
 </tr>
 <tr>
 <td class="firstcol" 0925 0918 width="871">15-Year Mortgage Effective
 Interest Rate (%)</td>
 <td 0925 0918 align="center" width="142">3.34</td>
 <td 0925 0918 align="center" width="142">3.34</td>
 <td 0925 0918 align="center" width="142">3.48</td>
 <td 0925 0918 align="center" width="142">3.57 
 (10/13)</td>
 <td 0925 0918 align="center" width="142">3.42</td>
 <td 0925 0918 align="center" width="143">3.25</td>
 <td 0925 0918 align="center" width="143">3.97</td>
 </tr>
 </tbody>



</body>

</html>

The Mortgage Bankers Association reported that their total Mortgage Market Volume Index declined 6.6% last week (-20.2% y/y) following three week's of improvement. Applications to refinance an existing loan fell 7.4% (-22.4% y/y) [...]

U.S. Mortgage Loan Applications Pull Back

<html>

<head>
<meta http-equiv="Content-Type" content="text/html; charset=windows-1252">
<meta name="GENERATOR" content="Microsoft FrontPage 4.0">
<meta name="ProgId" content="FrontPage.Editor.Document">
<title>New Page 1</title>
</head>



 

The Mortgage Bankers Association reported that their total Mortgage Market
Volume Index declined 6.6% last week (-20.2% y/y) following three week's of
improvement. Applications to refinance an existing loan fell 7.4% (-22.4%
y/y) following the prior week's surge. Home purchase applications
declined 5.0% (-15.9% y/y), the same as during the week prior.
The effective interest rate on a 15-year mortgage held steady w/w at 3.34%,
remaining at the lowest level since May 2013. The effective rate on a 30-year
fixed rate loan ticked up to 4.19% but remained down from 4.49% five weeks ago.
The rate on a Jumbo 30-year loan rose to 4.17%. For adjustable 5-year mortgages,
the effective interest rate was roughly stable at 3.10%. It was down versus last
year's 3.74% peak and at the lowest level since June 2013.
The average mortgage loan size pulled back w/w to $270,700. For home purchases,
it fell slightly to $283,600; for refinancings, it declined to $263,600.
Applications for fixed interest rate loans declined 21.7% y/y while adjustable
rate loan applications rose 1.2% y/y.
The survey covers over 75 percent of all U.S. retail residential mortgage
applications, and has been conducted weekly since 1990. Respondents include
mortgage bankers, commercial banks and thrifts. The base period and value for
all indexes is March 16, 1990=100. The figures for weekly mortgage applications
and interest rates are available in Haver's SURVEYW database.
Do Unemployment Benefits Expirations Help Explain the Surge in Job
Openings? from the Federal Reserve Bank of New York is available <a href="http://libertystreeteconomics.newyorkfed.org/2014/09/do-unemployment-benefits-expirations-help-explain-the-surge-in-job-openings.html#.VFDyLRaOp5c">here</a>.

 <thead>
 <tr>
 <th class="firstcol" scope="col" 0925 0918 width="871">MBA Mortgage
 Applications (SA, 3/16/90=100)</th>
 <th scope="col" 0925 0918 width="142">10/24/14</th>
 <th scope="col" 0925 0918 width="142">10/17/14</th>
 <th scope="col" 0925 0918 width="142">10/10/14</th>
 <th scope="col" 0925 0918 width="142">Y/Y %</th>
 <th scope="col" 0925 0918 width="142">2013</th>
 <th scope="col" 0925 0918 width="143">2012</th>
 <th scope="col" 0925 0918 width="143">2011</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" 0925 0918 width="871">Total Market Index</td>
 <td 0925 0918 align="center" width="142">386.1</td>
 <td 0925 0918 align="center" width="142">413.2</td>
 <td 0925 0918 align="center" width="142">370.4</td>
 <td 0925 0918 align="center" width="142">-20.2</td>
 <td 0925 0918 align="center" width="142">616.6</td>
 <td 0925 0918 align="center" width="143">813.8</td>
 <td 0925 0918 align="center" width="143">572.3</td>
 </tr>
 <tr>
 <td class="firstcol" 0925 0918 width="871">&nbsp;Purchase</td>
 <td 0925 0918 align="center" width="142">155.2</td>
 <td 0925 0918 align="center" width="142">163.4</td>
 <td 0925 0918 align="center" width="142">171.7</td>
 <td 0925 0918 align="center" width="142">-15.9</td>
 <td 0925 0918 align="center" width="142">197.5</td>
 <td 0925 0918 align="center" width="143">187.8</td>
 <td 0925 0918 align="center" width="143">182.6</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" 0925 0918 width="871">&nbsp;Refinancing</td>
 <td 0925 0918 align="center" width="142">1,715.3</td>
 <td 0925 0918 align="center" width="142">1,852.3</td>
 <td 0925 0918 align="center" width="142">1,502.4</td>
 <td 0925 0918 align="center" width="142">-22.4</td>
 <td 0925 0918 align="center" width="142">3,070.0</td>
 <td 0925 0918 align="center" width="143">4,505.0</td>
 <td 0925 0918 align="center" width="143">2,858.4</td>
 </tr>
 <tr>
 <td class="firstcol" 0925 0918 width="871">15-Year Mortgage Effective
 Interest Rate (%)</td>
 <td 0925 0918 align="center" width="142">3.34</td>
 <td 0925 0918 align="center" width="142">3.34</td>
 <td 0925 0918 align="center" width="142">3.48</td>
 <td 0925 0918 align="center" width="142">3.57 
 (10/13)</td>
 <td 0925 0918 align="center" width="142">3.42</td>
 <td 0925 0918 align="center" width="143">3.25</td>
 <td 0925 0918 align="center" width="143">3.97</td>
 </tr>
 </tbody>



 <div id="rightside">
 </div>
 &nbsp;
 &nbsp;
 FOMC Ends QE As Economy Improves &amp;
 Inflation Remains Low 
 by <a href="http://www.haver.com/comment/Moeller.html">Tom
 Moeller</a>&nbsp;&nbsp;October 29, 2014
 
 
 
 At today's meeting of the Federal Open Market Committee, the Fed
 indicated that labor market improvement, moderate growth in household
 spending and positive business investment growth allowed for ending its
 asset purchase program, known as Quantitative Easing (QE). That end came
 in the context of stability in both inflation pressures and long-term
 inflation expectations. 
 Measured inflation, however, was expected to rise. &quot;Although
 inflation in the near term will likely be held down by lower energy prices
 and other factors, the Committee judges that the likelihood of inflation
 running persistently below 2 percent has diminished somewhat since early
 this year.&quot; 
 Ongoing economic improvement was to be assessed
 in the context of the duel objectives of maximum employment and price
 stability (2% inflation).&nbsp;&nbsp; 
 The Federal funds rate was left unchanged in a range of 0.00% - 0.25%
 and the discount rate remained at 0.75%. &quot;Economic conditions may,
 for some time, warrant keeping the target federal funds rate below levels
 the Committee views as normal in the longer run.&quot;
 The press release for today's FOMC meeting can be found <a href="http://www.federalreserve.gov/newsevents/press/monetary/20141029a.htm">here</a>.
 The backdrop to today's meeting was slower M2 growth of 5.5% y/y and
 slower growth in the monetary base of 13.6% y/y.
 Haver's SURVEYS database contains the economic projections from
 the Federal Reserve Board.
 <table class="centered" border="0" cellSpacing="0" width="1871">
 <colgroup>
 <col>
 <col>
 <col>
 <col>
 <col>
 <col>
 <col>
 <col>
 </colgroup>
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="801"></th>
 <th scope="col" width="177">Current</th>
 <th scope="col" width="177">Last</th>
 <th scope="col" width="178">2013</th>
 <th scope="col" width="178">2012</th>
 <th scope="col" width="178">2011</th>
 <th scope="col" width="178">2010</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" width="801">Federal Funds Rate, % (Target)</td>
 <td align="center" width="177">0.00-0.25</td>
 <td align="center" width="177">0.00-0.25</td>
 <td align="center" width="178">0.11</td>
 <td align="center" width="178">0.14</td>
 <td align="center" width="178">0.10</td>
 <td align="center" width="178">0.17</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="801">Discount Rate, %</td>
 <td align="center" width="177">0.75</td>
 <td align="center" width="177">0.75</td>
 <td align="center" width="178">0.75</td>
 <td align="center" width="178">0.75</td>
 <td align="center" width="178">0.75</td>
 <td align="center" width="178">0.72</td>
 </tr>
 </tbody>
 </table>
 
 
 


<div id="footer" class="sprites">
 <ul>
 </ul>
</div>




</html>

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
</head>
<body>
	 
 
 
 
 
 <a href="/comment/141029f_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/141029f.png"></a>
 <a href="/comment/141029g_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/141029g.png"></a>
 
 At today's meeting of the Federal Open Market Committee, the Fed
 indicated that labor market improvement, moderate growth in household
 spending and positive business investment growth allowed for ending its
 asset purchase program, known as Quantitative Easing (QE). That end came
 in the context of stability in both inflation pressures and long-term
 inflation expectations.
 
 Measured inflation, however, was expected to rise. &quot;Although
 inflation in the near term will likely be held down by lower energy prices
 and other factors, the Committee judges that the likelihood of inflation
 running persistently below 2 percent has diminished somewhat since early
 this year.&quot;
 
 Ongoing economic improvement was to be assessed
 in the context of the dual objectives of maximum employment and price
 stability (2% inflation).
 
 The Federal funds rate was left unchanged in a range of 0.00% - 0.25%
 and the discount rate remained at 0.75%. &quot;Economic conditions may,
 for some time, warrant keeping the target federal funds rate below levels
 the Committee views as normal in the longer run.&quot;
 
 The press release for today's FOMC meeting can be found <a href="http://www.federalreserve.gov/newsevents/press/monetary/20141029a.htm">here</a>.
 The backdrop to today's meeting was slower M2 growth of 5.5% y/y and
 slower growth in the monetary base of 13.6% y/y.
 
 Haver's SURVEYS database contains the economic projections from
 the Federal Reserve Board.
 
 <a href="/comment/141029h_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/141029h.png"></a>
 <a href="/comment/141029i_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/141029i.png"></a>
 
 <table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" ></th>
 <th scope="col" >Current</th>
 <th scope="col" >Last</th>
 <th scope="col" >2013</th>
 <th scope="col" >2012</th>
 <th scope="col" >2011</th>
 <th scope="col" >2010</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" >Federal Funds Rate, % (Target)</td>
 <td >0.00-0.25</td>
 <td >0.00-0.25</td>
 <td >0.11</td>
 <td >0.14</td>
 <td >0.10</td>
 <td >0.17</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Discount Rate, %</td>
 <td >0.75</td>
 <td >0.75</td>
 <td >0.75</td>
 <td >0.75</td>
 <td >0.75</td>
 <td >0.72</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

At today's meeting of the Federal Open Market Committee, the Fed indicated that labor market improvement, moderate growth in household spending and positive business investment growth allowed for ending its asset purchase program, [...]

FOMC Ends QE As Economy Improves & Inflation Remains Low

Job openings less than the number unemployed in July for first time since 2021

Reaccelerating goods price inflation along with sticky services inflation clouds the outlook

Falling oil prices aren't pulling down inflation expectations, pointing to a boost from increased tariffs

Equity market exuberance outpacing macroeconomic data

Apart from Japan, Blue Chip forecasters expect further sizable monetary easing

US production rebounded in Q2, but demand continued to slow

US leader, Germany trailer for real GDP growth over past 3 years

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

With escalation of Israel/Iran conflict, geopolitical risk has recently surged while US trade policy uncertainty has ebbed

Renewed supply chain pressures point to a rebound in global inflation ahead

Apart from Japan, Blue Chip forecasters look for further significant monetary policy easing

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

Even with expected tariff-induced increases in inflation, BCFF forecasters look for a more aggressive round of monetary easing

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

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The **Industrial Materials Price Index** from the Foundation for International Business and Economic Research (FIBER) declined 1.0% during the last four weeks, after weakening 1.9% in the prior four weeks. Despite these declines, prices rose 0.5% during the last twelve months. During July, factory sector production held steady but rose an improved 1.4% y/y.

**Crude Oil & Benzene** group costs continued to lead the overall price weakening as they moved 1.9% lower (-10.3% y/y) in the latest four week period. The price of West Texas Intermediate crude oil declined 1.7% to $64.27 per barrel and remained 8.9% lower y/y. It had fallen to a low of $58.50 per barrel in the second week of May. The cost of the petrol-chemical benzene, used for making plastics & synthetic fibers, weakened 6.5% (-31.7% y/y). Excluding crude oil, the industrial commodity price index weakened 0.9% (+1.1% y/y) during the last four weeks.

Lower **Miscellaneous** group prices followed with a 4.0% decline in the latest four week period, but prices remained up 1.8% y/y. Lumber prices fell 21.2% (+10.2% y/y) during the last four weeks, and tallow costs (used in the soap industry) declined 3.9% (+34.4% y/y). Moving higher, the cost of rubber rose 2.8% in four weeks, but fell 18.6% y/y.

**Metals** group prices rose 1.7% (4.1% y/y) over four weeks. Copper scrap prices rose 2.3% (9.6% y/y). Aluminum prices increased 1.3% in four weeks (9.1% y/y), and the cost of zinc moved up 3.8% in four weeks, and did the same y/y. Tin prices rose 4.8% (13.1% y/y) in four weeks. Lead prices edged up 0.7% (-2.3% y/y) but steel scrap costs fell 1.9% (-6.3% y/y) over the same period.

Prices in the **Textile** group moved 0.5% higher (1.6% y/y) during the last four weeks. Burlap costs surged 6.9% (22.2% y/y), but cotton prices fell 1.3% (-3.4% y/y).

The Foundation for International Business and Economic Research (FIBER) develops economic measurement techniques as applied to business cycles and inflation in the U.S. and other market economies. The commodity price data can be found in Haver's **DAILY**, **WEEKLY**, **USECON** and **CMDTY** databases.

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- Decline extends last month’s weakness. 
- Crude oil costs & lumber costs decline.
- Metals prices improve.

FIBER: Industrial Commodity Prices Continue to Decline in Latest Four Weeks

Tian Yong Woon

This week, we review the state of play in Southeast Asia and Australia. In Thailand, political uncertainty lingers after the removal of former Prime Minister Paetongtarn, with investors now eyeing fresh elections in the coming months. The ongoing political flux has only deepened concerns over Thailand’s persistent economic underperformance relative to regional peers (chart 1). Indonesia, too, has faced recent political turmoil, as protests over lawmakers’ housing allowances turned violent. While tensions have since eased and financial markets partially recovered (chart 2), the episode highlighted the fragility of investor confidence.

Elsewhere in Southeast Asia, some economies are pressing ahead. Malaysia has made significant strides in establishing itself as a global tech hub, supported by robust direct investment flows (chart 3). Vietnam, likewise, continues to position itself as a manufacturing and electronics powerhouse. Its strong export performance has driven growth but also drawn scrutiny, particularly as the US trade deficit with Vietnam has widened alongside rising imports (chart 4).

In the Pacific, Australia has shown encouraging signs, with Q2 GDP growth outperforming expectations on the back of stronger household consumption (chart 5). This has bolstered expectations that the RBA will pause rate cuts at its month-end meeting. Even so, close attention remains on the labour market (chart 6), potential headwinds from US tariffs, and a broader productivity challenge.

**Thailand**
Thailand continues to struggle to regain its footing, weighed down by ongoing political turmoil. Former Prime Minister Paetongtarn was removed from office by the Constitutional Court in late August, following her July 1st suspension over a leaked phone call with former Cambodian leader Hun Sen. In her place, lawmakers elected former Deputy Prime Minister Anutin as the new premier. However, as part of the deal that secured his appointment, Anutin has pledged to dissolve parliament within four months and call a general election. This political upheaval compounds Thailand’s broader economic challenges. Growth has persistently lagged behind its Southeast Asian peers (chart 1), with tourism—a key revenue source—stalled and still short of pre-pandemic levels. At a time when deeper reforms are needed to unlock the country’s full potential, Thailand instead faces prolonged political flux, leaving policy clarity and direction uncertain even as neighbours forge ahead.

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**Indonesia**
Thailand is not alone in Southeast Asia in grappling with political turmoil. Indonesia has recently faced its own unrest, as initially peaceful demonstrations against housing allowances for lawmakers turned violent after a motorbike taxi driver was fatally struck by a police vehicle during an earlier rally in Jakarta. Although protests have since subsided, the turmoil comes on the heels of policy moves that have already unsettled some investors. Concerns have centred on the fiscal strain from large-scale spending programs such as Prime Minister Prabowo’s free school meals initiative. While the program is well-intentioned—aimed at reducing poverty and improving child development—its hefty cost implies spending cuts elsewhere and higher taxes, fuelling unease. Markets have reflected these concerns, with Indonesian equities and the rupiah selling off during the recent protests, though both have staged a partial rebound as tensions eased (chart 2).

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**Malaysia**
While Thailand and Indonesia have been grappling with political woes, other Southeast Asian economies have pressed ahead. Malaysia, for instance, has made notable strides in establishing itself as a global tech hub, with significant advances in semiconductors—largely centred in Penang—and, more recently, in electric vehicles, where Malacca is emerging as a key industry hub. These developments have been fuelled in part by strong foreign investment flows, which, while healthy in recent years (chart 3), slipped to a five-year low in Q2 2025 on a directional basis. Still, Malaysia’s semiconductor push remains robust: Prime Minister Anwar announced earlier this year that the country had already secured more than 63 billion ringgit ($14.9 billion) in semiconductor investments, mostly from foreign sources, under its National Semiconductor Strategy—less than a year after the scheme’s launch. More broadly, Malaysia has pressed ahead on multiple fronts in its drive toward high-income status by 2030—an ambition that is looking increasingly attainable.

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**Vietnam**
Moving to Vietnam, the economy—like Malaysia’s—has been pushing hard to establish itself as a manufacturing and electronics hub. Vietnam continues to outpace its ASEAN peers in growth and shares Malaysia’s ambition of reaching high-income status, though with a later target of 2045. Its export boom has been central to past success but has also drawn scrutiny, particularly as the US trade deficit with Vietnam has widened with rising imports (chart 4). As a result, Vietnam now faces a more constrained trade environment even as it relies on exports as a key growth driver. For now, Vietnam has avoided a worst-case scenario with the US: a recent trade deal reduced the reciprocal tariff rate from a potential 46% to 20%, though US-perceived “transshipments” will still be hit with a 40% tariff. Beyond navigating this delicate global landscape, Vietnam is also instigating deep structural reforms—such as strengthening the role of the private sector—to sustain growth and meet its long-term development goals.

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**Australia**
Moving to the Pacific, Australia is among the few economies relatively insulated from US tariffs, facing only the baseline 10% rate under the revised tariff schedule that took effect in early August. On the domestic front, Australia’s economy outperformed expectations in Q2, with real GDP growth accelerating to 1.8% y/y. The pickup was driven by stronger household consumption (chart 5), offering an encouraging signal for the outlook and easing earlier concerns about economic momentum—perhaps also suggesting that the central bank’s earlier rate cuts are beginning to take effect. 

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Turning to monetary policy, the recent upbeat data have reinforced expectations that the RBA will hold rates steady at its September meeting, after cutting a cumulative 75 bps since the start of the year. That said, markets are still pricing in further easing down the line, supported by Australia’s disinflationary trend (chart 6) and lingering downside risks from weaker global demand amid US trade tariffs. Another key dimension is the labour market, which remains tight but has shown signs of softening in recent months. A broader concern is productivity, which has stagnated in recent quarters, raising questions about the sustainability of real wage growth.

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Asia

Economic Letter from Asia: Political Woes

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Nonfarm payrolls increased 22,000 during August after rising 79,000 in July, revised from 73,000 and falling 13,000 during June, revised from a 14,000 increase. Expectations had been for an 83,000 rise in the Action Economics Forecast Survey. The three-month average change in payrolls of 29,300 compared to 28,300 in July, but stood far below its high of 231,700 in January.

Average hourly earnings rose an expected 0.3% in August after unrevised gains of 0.3% in July and 0.2% in June. Earnings growth of 3.7% y/y equals that in June which is the lowest since July 2024, but has been trending lower from its 5.9% high in March 2022.

The unemployment rate, measured in the household survey, edged up m/m to an expected 4.3% from 4.2% in July and 4.1% in June. It reached a low of 3.4% in April 2023. The unemployment rate, including employees working part-time for economic reasons plus all marginally-attached workers, rose to 8.1% last month from 7.9% In July. It was 6.6% in April 2023.

In the **establishment survey**, private-sector employment in August rose 38,000 after rising 77,000 in July.  Factory sector jobs declined 12,000, off for the fourth straight month. Durable goods employment fell 19,000 after rising 5,000, as motor vehicle & parts hiring declined 7,300 after a 2,000 July gain. Nondurables employment rose 7,000, reversing a 7,000 July decline. Construction sector employment weakened 7,000, down for the third straight month. The number of mining & logging industry jobs declined 6,000, also registering the fourth consecutive month of decline.

Private service-sector employment increased 63,000 during August after improving 85,000 in July. Increases varied greatly amongst service-sector categories. Private education & health sector employment rose 46,000 last month, following a 77,000 increase in July. The number of leisure & hospitality jobs rose 28,000 after a 6,000 gain. Trade, transportation & utilities employment gained 2,000, following a 5,000 increase, but financial activities employment weakened 3,000 after increasing 9,000 in July. The number of professional & business services jobs fell 17,000, down for the fourth straight month as temporary help employment declined 9,800, also off for the fourth month in a row. Information sector employment declined 5,000, after falling 7,000 in July and 3,000 in June. Transportation & warehousing hiring weakened 3,600 last month following a 6,300 drop.

Government sector payrolls declined 16,000 last month following a 2,000 rise. Federal government employment weakened 15,000 and has fallen for seven straight months. State government payrolls declined 13,000 after falling in each of the prior three months. To the upside, local government hiring rose 12,000 following a 17,000 July increase.

Private-sector average hourly earnings rose 0.3% (3.7% y/y) in August, the same as in July. Earnings in the goods-producing sector increased 0.4% (4.0% y/y) in August, double the July rise. In construction, earnings rose 0.6% (4.2% y/y) following a 0.3% rise, while factory sector earnings improved 0.3% (3.9% y/y) after a 0.2% gain. In the service sector, earnings rose 0.3% (3.6% y/y) in August, the same as in July. Professional & business services pay increased 0.4% (5.0% y/y) for the second consecutive month while leisure & hospitality earnings also increased 0.4% (3.7% y/y) after two straight months of 0.3% increase. Information earnings rose 0.2% (4.6% y/y) for the second straight month.

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The length of the average workweek was 34.2 hours in August for the third straight month. The workweek in the goods-producing sector eased to 39.8 hours from 39.9 hours in July. The construction sector average workweek held at 39.0 hours while the factory sector workweek eased to 40.0 hours from 40.2 hours. The average workweek in the private service sector held at 33.2 hours. Information sector hours edged up to 37.0 from 36.9. Financial activities hours held at 37.6. Private education & health services hours eased to 32.7 from 32.8 in July.

In the **household survey**, the unemployment rate increased to 4.3% in August after rising to 4.2% in July from 4.1% in June as employment rose 288,000 after falling 260,000 in July and the size of the labor force increased 436,000 after three straight months of decline. The labor force participation rate rose to 62.3% last month from 62.2%, remaining well below the high of 63.3% early in 2020. The rate for teenagers eased to 34.8%, a five-year low. For workers aged 20-24, the rate plunged to 70.2%, a four year-low. For workers aged 25-54, the participation rate increased to 83.7%, an eleven-month high. For individuals 55 and over, the rate held steady at 38.1% but remained near a 20-year low of 38.0% in June.

The employment/population ratio for all workers steadied at 59.6% last month. It remained below the peak reading of 61.1% in February, 2020 just prior to the pandemic. For men, the rate rose to 65.0% from 64.7% in July and for women, the rate eased to 54.5 % on the heels of a slip to 54.7% in July.

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

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- Hiring weakens broadly; factory, construction & government jobs decline.
- Earnings gain slows y/y.
- Unemployment rate increases as job growth lags rise in labor force.

U.S. Payroll Employment Report Reveals Unexpected Weakness in August; Earnings Rise Steadily, but Jobless Rate Increases

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Germany's factory orders declined for the third straight month in July. Real new orders fell 2.9% month-on-month in July, against expectations for a small increase. The drop was sharper than a 0.2% decrease in June; foreign orders declined 3.1% in July, as orders from the euro area contracted 3.8%, and orders from outside the euro area fell by 2.8%. These metrics suggest that demand both inside and outside the euro area remains weak. Domestic orders dropped 2.5% in July, an exact offset to their gain in June. When ranked on growth rates over the last 30 years, all three sector growth rates are below their medians (below a ranking of 50%). However, when ranked on the real index number level, total orders rank at their 55.6 percentile, foreign orders rank at their 79.5 percentile and domestic orders rank at their 15.2 percentile. All-in-all it’s an unimpressive report.

**Orders sequentially and QTD:** Sequential trends are ambivalent but still clearly weak. Sequential growth rates do not show a clear acceleration/deceleration pattern. But for total, foreign and domestic real orders, both 3-month and 12-month growth rates are negative (one exception: foreign orders over 12 months). Domestic orders show negative growth over 6 months as well. Quarter-to-date growth rates are negative for all sectors.

**Sales trends:** Real sales are mixed in July, rising 0.9% overall on declines in two sectors: consumer durables and intermediate goods. Sector sales mostly maintain growth as manufacturing sales are positive based on growth rates over 12 months, 6 months, and 3 months. Consumer goods and intermediate goods sales show deceleration and ongoing contraction. Consumer durable goods and intermediate goods show QTD declines. On the manufacturing & mining to total, manufacturing and capital goods show index standings above their respective 50% on 30 years of data. That also shows above-median growth rates on annual data along with consumer goods and consumer nondurable goods.

**Industrial confidence:** Industrial confidence measures for Germany, France, Italy, and Spain, the four largest EMU members, show improved (but still net negative readings) in July compared to June. Over three months and six months, Germany and Italy show some improvement; France still shows steady deterioration. Spain shows improvement over 3 months and it is only slight improvement. The queue standings for the industrial reading over 30 years of data show Spain with an above-median reading in July. Germany and France are exceptionally weak and Italy has been weaker only 26% of the time based on the queue standing measure. Not only are German orders and demand weak and faltering but the broad EU Commission measures of industrial confidence show broadly weak readings for the largest economies in the EMU.

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Germany

German Factory Orders Plunge on Domestic Weakness

Andrew Cates

**Gold prices and trade policy uncertainty**
This week’s record-breaking surge in gold prices has coincided with renewed volatility in trade policy uncertainty, reflecting the market’s heightened sensitivity to political and legal developments in Washington. A series of legislative challenges to the administration’s latest tariff measures has raised the prospect that parts of the policy framework could be overturned or significantly diluted. That possibility has injected another layer of uncertainty into an already fragile trade environment, amplifying demand for gold as a hedge. Investors appear to be weighing not only the inflationary risks of tariffs that remain in place but also the destabilizing effects of unpredictable policy reversals, leaving gold prices at historic highs and the trade policy uncertainty index elevated.

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**US Tariffs**
Although the data in this chart extend only through June 2025, they clearly illustrate which trading partners would gain the most if US tariff policies were to be reversed. China stands out as the most heavily penalised, with effective tariff rates rising by more than 25 percentage points in just six months. Japan and South Korea have also faced significant tariff hikes, suggesting that their exporters would benefit substantially from any policy rollback. Taiwan, India, and the EU also feature prominently, though at more moderate levels. By contrast, ASEAN economies, Australia, and the UK have seen relatively smaller increases, leaving them less exposed. In aggregate, a broad reversal of tariffs would most immediately alleviate the pressure on East Asian exporters—particularly China—while also reducing costs for US importers and consumers who have been disproportionately affected by higher prices on goods from the region.

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**The Indian economy and US trade policy** 
India faces a particularly sharp squeeze from the latest wave of US tariff hikes, given that the US now absorbs nearly one-fifth of its exports. The imposition of higher barriers has dealt a direct blow to key sectors, such as textiles and jewellery, while also undermining investor confidence. That pressure is clearly visible in the sharp depreciation of India’s trade-weighted currency, which has accelerated in 2025. Rather than offering a competitiveness boost, the weaker rupee has compounded difficulties by lifting import costs and stoking inflation at home. The result is that tariffs have both curtailed India’s export earnings and strained its domestic economy, leaving policymakers with limited options beyond seeking trade diversification and targeted support measures.

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**Global monetary policy** 
The latest Blue Chip Financial Forecasts survey helps explain why equity markets have remained upbeat despite escalating geopolitical and trade tensions. The survey points to an expected sizeable policy easing over the coming year, particularly in the US and UK where forecasters anticipate close to a full percentage point of rate cuts. Australia and Canada are also projected to deliver meaningful reductions, while the euro area is expected to ease more modestly. Japan stands out as the exception, with expectations tilted toward further tightening. For equities, these projections of broad-based rate cuts provide a crucial cushion—supporting valuations, lowering discount rates, and reinforcing the sense that policymakers are prepared to offset the drag from tariffs and slowing global growth.

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**Euro area inflation** 
By contrast with the US and UK, where forecasters in the latest Blue Chip Financial Forecasts survey anticipate close to a full percentage point of rate cuts, expectations for the ECB are more restrained. This reflects the fact that the ECB has already delivered a relatively large degree of policy easing, while headline inflation has now fallen back to levels close to its target. Even so, further rate reductions remain likely if underlying price pressures continue to moderate. As the chart shows, services inflation has begun to move lower in line with a clear decline in wage growth, suggesting that disinflationary momentum is building. Should this trend persist, the ECB will have scope to add to its easing cycle, though at a slower and more cautious pace than peers such as the Fed or the Bank of England.

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**Prices and cost pressures in the US corporate sector** 
Corporate profitability has long been one of the best leading signals for US equity cycles, and the measure here (Non-financial corporate profits per unit of output – i.e. profit margins) has slipped from its late-2023 peak and moved sideways for much of the past year. That’s not a collapse, but it does raise questions about how long equities can keep rising without stronger profit momentum. The recent Q2 uptick—a 1.8% annualised gain—came despite a hefty rise in non-labour costs, with margins protected by modest pricing power and a notable 2.2% drop in unit labour costs. Whether that labour relief reflects softer wage pressures or a structural productivity boost—potentially tied to AI—will be crucial in determining if profits can remain resilient, or if this plateau is the prelude to a downturn.

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Equity markets have lost a little ground in recent days and bond markets have been more jittery, as legal challenges to US tariff policies add to a tense backdrop of geopolitical meetings between China, Russia, and India. Gold’s surge to record highs arguably captures the search for safe havens amid this uncertainty (chart 1), while the possibility of tariff reversals keeps alive the prospect of relief for the most affected exporters, notably China, Japan, and South Korea (chart 2). India’s position looks more precarious, with its reliance on the US market colliding with a weakening trade-weighted currency as tariffs bite into growth and investor confidence (chart 3). Monetary policy expectations, however, continue to offer some support, with the latest Blue Chip Financial Forecasts survey pointing to sizeable easing in the US and UK (chart 4). The ECB is expected to tread more cautiously after earlier cuts and with headline inflation now near target. Still, if inflation continues to ease, further action remains possible (chart 5). In the US, corporate resilience is also helping offset some of the gloom: despite tariff-driven spikes in non-labour costs, falling unit labour costs—possibly aided by AI productivity gains—and firmer prices allowed profits per unit of output to rise in Q2 (chart 6).

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Economy in Brief: 2014

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U.S. Consumer Spending Declines as Disposable Income Growth Subsides

EU Indices Head Higher in October

U.S. Initial Claims for Jobless Insurance Tick Higher

U.S. GDP Growth in Q3 Is Stronger Than Expected

U.S. GDP Growth in Q3 Is Stronger Than Expected

U.S. Mortgage Loan Applications Pull Back

U.S. Mortgage Loan Applications Pull Back

FOMC Ends QE As Economy Improves & Inflation Remains Low