Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080310h.jpg" align="left" border="0" height="265" width="353">
Japan&#8217;s economy watcher&#8217;s index made a long awaited bounce in
February. The future conditions index rebounded most sharply. The current conditions and current
employment indices each made soft rebounds as well. The future index is
now &#8216;only in the bottom 17th percentile of its
five year range instead of at the bottom. The overall economy watchers
index is only up to the bottom 7.1% of its range from the bottom.
Typically when the future index has been weak and makes a significant
rebound that rebound is meaningful. The rise in the various economy
watcher indices this month is encouraging. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">Japan
Economy Watchers Surveys </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="4">Raw readings of each survey</td>
<td colspan="3">Percent of 5Yr range*</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>Dec-07</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan="8">Diffusion</td>
</tr>
<tr>
<td class="firstcol">Economy Watchers</td>
<td>33.6</td>
<td>31.8</td>
<td>36.6</td>
<td>38.8</td>
<td>7.1%</td>
<td>0.0%</td>
<td>5.0%</td>
</tr>
<tr>
<td class="firstcol">Employment</td>
<td>35.0</td>
<td>34.1</td>
<td>37.5</td>
<td>41.9</td>
<td>2.8%</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Future</td>
<td>39.5</td>
<td>35.8</td>
<td>37.0</td>
<td>38.8</td>
<td>17.8%</td>
<td>0.0%</td>
<td>1.5%</td>
</tr>
</tbody>
</table>
</body></html>

Japan’s economy watcher’s index made a long awaited bounce in February. The future conditions index rebounded most sharply. The current conditions and current employment indices each made soft rebounds as well. The future index is now [...]

Economy Watchers Index Rebounds

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080310d.jpg" align="left" border="0" height="265" width="353">
China's balance on trade in goods declined substantially in
February to $8.6 billion from $19.5 billion in January. Both exports
and imports declined; the former by 20% and the latter by 13%. The
unadjusted figures are shown in the first chart. Part of the declines
in exports and imports may have resulted from the extreme weather
conditions which disrupted transportation. In addition, the variable
occurrence of the Chinese New Year always introduces anomalies in
Chinese statistics at the beginning of the year.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080310e.jpg" align="right" border="0" height="265" width="353">
Haver Analytics adjusts the data for seasonal factors and the
occurrence of the Chinese New Year. These adjusted data are shown in
the second chart. Even with seasonal adjustment, the decline in the
balance of trade remains significant. The seasonally adjusted exports
show a decline, the seasonally adjusted imports show a substantial rise.
While the total trade balance shows a decline of over 50% for
both the seasonally adjusted and the non adjusted data for February,
the balance of trade with the U. S. showed a smaller decline of about
20% for the seasonally adjusted and unadjusted. On a seasonally
adjusted basis Chinese exports to the U.S. were still positive. The
third chart compares the Chinese balance of trade with the U.S. on a
seasonally adjusted and an unadjusted basis. Finally the fourth chart
compares the total Chinese surplus on trade with the surplus on trade
with the U. S.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080310f.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080310g.jpg" border="0" height="265" width="312">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">CHINA
TRADE DATA (Mil. US%)&nbsp;</th>
<th scope="col">Feb 08</th>
<th scope="col">Jan 08&nbsp;</th>
<th scope="col">Feb 07&nbsp;</th>
<th scope="col">M/M %Chg&nbsp;</th>
<th scope="col">Y/Y %Chg&nbsp;</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Total Exports (NSA)</td>
<td>87368</td>
<td>109655</td>
<td>82020</td>
<td>-20.32</td>
<td>6.52</td>
<td>1218020</td>
<td>968935</td>
<td>461953</td>
</tr>
<tr class="even">
<td class="firstcol">Imports
(NSA)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>78813</td>
<td>90174</td>
<td>58336</td>
<td>-12.60</td>
<td>35.02</td>
<td>955821</td>
<td>791461</td>
<td>659953</td>
</tr>
<tr class="odd">
<td class="firstcol">Balance (NSA)</td>
<td>8555</td>
<td>19480</td>
<td>23694</td>
<td>-56.07</td>
<td>63.89</td>
<td>262200</td>
<td>177474</td>
<td>102000</td>
</tr>
<tr class="even">
<td class="firstcol">Exports&nbsp;(SA)&nbsp;</td>
<td>113616</td>
<td>116995</td>
<td>101012</td>
<td>-289</td>
<td>12.48</td>
<td>1218020</td>
<td>968935</td>
<td>461953</td>
</tr>
<tr class="even">
<td class="firstcol">Imports&nbsp;(SA)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>101525</td>
<td>92259</td>
<td>73790</td>
<td>10.05</td>
<td>37.59</td>
<td>955821</td>
<td>791461</td>
<td>659953</td>
</tr>
<tr class="odd">
<td class="firstcol">Balance (SA)</td>
<td>12091</td>
<td>24741</td>
<td>27222</td>
<td>-51.03</td>
<td>-55.58</td>
<td>262200</td>
<td>177474</td>
<td>102000</td>
</tr>
<tr class="even">
<td class="firstcol">Exports to
US&nbsp;Domestic
(NSA)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>15478</td>
<td>19162</td>
<td>16336</td>
<td>-19.22</td>
<td>-5.25</td>
<td>232761</td>
<td>203512</td>
<td>162937</td>
</tr>
<tr class="even">
<td class="firstcol">Imports from US (NSA)</td>
<td>6053</td>
<td>7068</td>
<td>4095</td>
<td>-14.36</td>
<td>47.81</td>
<td>69861</td>
<td>59223</td>
<td>48735</td>
</tr>
<tr>
<td class="firstcol"> Balance
(NSA)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>9425</td>
<td>12094</td>
<td>12241</td>
<td>-22.07</td>
<td>-23.06</td>
<td>162900</td>
<td>144289</td>
<td>114202</td>
</tr>
<tr class="even">
<td class="firstcol">Exports to
US&nbsp;Domestic
(SA)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>20599</td>
<td>19780</td>
<td>19888</td>
<td>4.14</td>
<td>3.58</td>
<td>232761</td>
<td>203512</td>
<td>162937</td>
</tr>
<tr class="even">
<td class="firstcol">Imports from US
(SA)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>8185</td>
<td>7085</td>
<td>5113</td>
<td>15.55</td>
<td>60.09</td>
<td>69861</td>
<td>59223</td>
<td>48735</td>
</tr>
<tr>
<td class="firstcol"> Balance (SA)&nbsp;</td>
<td>12414</td>
<td>15695</td>
<td>14776</td>
<td>-20.90</td>
<td>-15.99</td>
<td>162900</td>
<td>144289</td>
<td>114202</td>
</tr>
</tbody>
</table>
</body></html>

China's balance on trade in goods declined substantially in February to $8.6 billion from $19.5 billion in January. Both exports and imports declined; the former by 20% and the latter by 13%. The unadjusted figures are shown in the [...]

China's Surplus on Total Trade in Goods Down Sharply in February But Less So With the U.S.

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080310c.jpg" width="353">
Credit market debt outstanding owed by all sectors of the economy grew 8.6% AR (8.9% y/y) during the fourth quarter of 2007. The gain was a marked slowdown from the strong 10.9% rise during 3Q.
Boosted by the growing budget deficit, the federal government&#39;s debt obligations grew 4.9% last year which was up from the 3.9% gain during 2006. Nevertheless, the y/y rise of 4.9% was about half the peak 10.9% rise during 2003.
Consumer credit debt growth slowed to a 5.7% quarterly rate of growth (6.8% y/y) from 7.0% during 3Q. For the year, the 6.8% rate of increase was nearly half the peak rate of 2003 and reflected the slowdown in consumer spending. Households&#39; obligations on home mortgages grew just 5.0% (6.6% y/y) which again was half the gain four years earlier as home purchases tumbled. Conversely, credit card debt growth during the year sped up slightly to 5.5% from 3.9% during 2006. Bank loans nearly doubled during the year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080310b.jpg" width="353">
Credit market debt owed by the nonfinancial corporate business sector also sped up to a 11.1% y/y rate of growth which was the strongest in ten years. The non corporate business sector also generated a slight speedup in debt accumulation to a 12.9% rate.
Credit market debt owed by the financial sector accelerated as well to an 11.1% rate of growth which was the strongest gain since 2001. Liabilities at commercial banks grew 26.0% y/y, savings institutions by 34.6% and credit unions by nearly three quarters. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080310a.jpg" width="353">
The net worth of the U.S. household sector last quarter deteriorated during 4Q to $57.2 trillion from the prior quarter&#39;s record level. The dollar level of household sector assets fell $307.6 billion pulled down by a $54.0 billion loss in tangible asset values (+2.8% y/y) and a $253.6 billion drop in financial values (+4.9% y/y). Liabilities grew $255.2 billion (6.8% y/y).
Assessing Employment Growth in 2007 from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2008/el2008-09.pdf"> here</a>.
Recent Trends in Economic Volatility: Conference Summary also from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2008/el2008-06.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/FFUNDS/@F2/@F201/@F201.HTM">Flow of Funds</a> (Y/Y % Chg.)</th>
<th scope="col">% of Total</th>
<th scope="col">4Q &#39;07</th>
<th scope="col">3Q&#39;07</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 Credit Market Debt Outstanding</td>
<td>--</td>
<td>8.9</td>
<td>9.2</td>
<td>8.9</td>
<td>9.4</td>
<td>8.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Federal Government</td>
<td>11%</td>
<td>4.9</td>
<td>4.3</td>
<td>4.9</td>
<td>3.9</td>
<td>7.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Households</td>
<td>28%</td>
<td>6.8</td>
<td>7.3</td>
<td>6.8</td>
<td>10.2</td>
<td>11.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Nonfinancial Corporate Business</td>
<td>13%</td>
<td>11.1</td>
<td>10.8</td>
<td>11.1</td>
<td>8.0</td>
<td>4.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Nonfarm, NonCorporate Business</td>
<td>7%</td>
<td>12.9</td>
<td>12.4</td>
<td>12.9</td>
<td>12.5</td>
<td>13.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Financial Sectors</td>
<td>32%</td>
<td>11.1</td>
<td>11.4</td>
<td>11.1</td>
<td>10.0</td>
<td>8.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Net Worth: Households &amp; Nonprofit Organizations (Trillions)</td>
<td>--</td>
<td>$57.718</td>
<td>$58.251</td>
<td>$57.718</td>
<td>$55.800</td>
<td>$51.580</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Tangible Assets: Households</td>
<td>--</td>
<td>$26.760</td>
<td>$26.813</td>
<td>$26.760</td>
<td>$26.037</td>
<td>$24.427</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Financial Assets: Households</td>
<td>--</td>
<td>$45.333</td>
<td>$45.587</td>
<td>$45.333</td>
<td>$43.218</td>
<td>$39.544</td>
</tr>
</tbody>
</table>
</body>
</html>

Credit market debt outstanding owed by all sectors of the economy grew 8.6% AR (8.9% y/y) during the fourth quarter of 2007. The gain was a marked slowdown from the strong 10.9% rise during 3Q. Boosted by the growing budget deficit, [...]

U.S. Flow of Funds: Debt Growth Slowed, Household Net Worth Down

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080310c.jpg" align="left" border="0" height="265" width="353">
Credit market debt outstanding owed by all sectors of the
economy grew 8.6% AR (8.9% y/y) during the fourth quarter of 2007. The
gain was a marked slowdown from the strong 10.9% rise during 3Q.
Boosted by the growing budget deficit, the federal
government's debt obligations grew 4.9% last year which was up from the
3.9% gain during 2006. Nevertheless, the y/y rise of 4.9% was about
half the peak 10.9% rise during 2003.
Consumer credit debt growth slowed to a 5.7% quarterly rate of
growth (6.8% y/y) from 7.0% during 3Q. For the year, the 6.8% rate of
increase was nearly half the peak rate of 2003 and reflected the
slowdown in consumer spending. Households' obligations on home
mortgages grew just 5.0% (6.6% y/y) which again was half the gain four
years earlier as home purchases tumbled. Conversely, credit card debt
growth during the year sped up slightly to 5.5% from 3.9% during 2006.
Bank loans nearly doubled during the year.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080310b.jpg" align="right" border="0" height="265" width="353">
Credit market debt owed by the nonfinancial corporate business
sector also sped up to a 11.1% y/y rate of growth which was the
strongest in ten years. The non corporate business sector also
generated a slight speedup in debt accumulation to a 12.9% rate.
Credit market debt owed by the financial sector accelerated as
well to an 11.1% rate of growth which was the strongest gain since
2001. Liabilities at commercial banks grew 26.0% y/y, savings
institutions by 34.6% and credit unions by nearly three quarters. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080310a.jpg" align="left" border="0" height="265" width="353">
The net worth of the U.S. household sector last quarter
deteriorated during 4Q to $57.2 trillion from the prior quarter's
record level. The dollar level of household sector assets fell $307.6
billion pulled down by a $54.0 billion loss in tangible asset values
(+2.8% y/y) and a $253.6 billion drop in financial values (+4.9% y/y).
Liabilities grew $255.2 billion (6.8% y/y).
Assessing Employment Growth in 2007 from
the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2008/el2008-09.pdf">
here</a>.
Recent Trends in Economic Volatility: Conference
Summary also from the Federal Reserve Bank of San
Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2008/el2008-06.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/FFUNDS/@F2/@F201/@F201.HTM">Flow
of Funds</a> (Y/Y % Chg.)</th>
<th scope="col">% of Total</th>
<th scope="col">4Q '07</th>
<th scope="col">3Q'07</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 Credit Market Debt
Outstanding</td>
<td>--</td>
<td>8.9</td>
<td>9.2</td>
<td>8.9</td>
<td>9.4</td>
<td>8.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Federal Government</td>
<td>11%</td>
<td>4.9</td>
<td>4.3</td>
<td>4.9</td>
<td>3.9</td>
<td>7.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Households</td>
<td>28%</td>
<td>6.8</td>
<td>7.3</td>
<td>6.8</td>
<td>10.2</td>
<td>11.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Nonfinancial Corporate Business</td>
<td>13%</td>
<td>11.1</td>
<td>10.8</td>
<td>11.1</td>
<td>8.0</td>
<td>4.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Nonfarm, NonCorporate Business</td>
<td>7%</td>
<td>12.9</td>
<td>12.4</td>
<td>12.9</td>
<td>12.5</td>
<td>13.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Financial Sectors</td>
<td>32%</td>
<td>11.1</td>
<td>11.4</td>
<td>11.1</td>
<td>10.0</td>
<td>8.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Net Worth: Households &amp;
Nonprofit Organizations (Trillions)</td>
<td>--</td>
<td>$57.718</td>
<td>$58.251</td>
<td>$57.718</td>
<td>$55.800</td>
<td>$51.580</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Tangible Assets:
Households</td>
<td>--</td>
<td>$26.760</td>
<td>$26.813</td>
<td>$26.760</td>
<td>$26.037</td>
<td>$24.427</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Financial
Assets: Households</td>
<td>--</td>
<td>$45.333</td>
<td>$45.587</td>
<td>$45.333</td>
<td>$43.218</td>
<td>$39.544</td>
</tr>
</tbody>
</table>
China's Surplus on TotalTrade in
Goods Down Sharply in February But Less So With the
U.S. 
by <a href="/comment/Curley.html">Louise
Curley</a> March 10, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080310d.jpg" align="left" border="0" height="265" width="353">
China's balance on trade in goods declined substantially in
February to $8.6 billion from $19.5 billion in January. Both exports
and imports declined; the former by 20% and the latter by 13%. The
unadjusted figures are shown in the first chart. Part of the declines
in exports and imports may have resulted from the extreme weather
conditions which disrupted transportation. In addition, the variable
occurrence of the Chinese New Year always introduces anomalies in
Chinese statistics at the beginning of the year.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080310e.jpg" align="right" border="0" height="265" width="353">
Haver Analytics adjusts the data for seasonal factors and the
occurrence of the Chinese New Year. These adjusted data are shown in
the second chart. Even with seasonal adjustment, the decline in the
balance of trade remains significant. The seasonally adjusted exports
show a decline, the seasonally adjusted imports show a substantial rise.
While the total trade balance shows a decline of over 50% for
both the seasonally adjusted and the non adjusted data for February,
the balance of trade with the U. S. showed a smaller decline of about
20% for the seasonally adjusted and unadjusted. On a seasonally
adjusted basis Chinese exports to the U.S. were still positive. The
third chart compares the Chinese balance of trade with the U.S. on a
seasonally adjusted and an unadjusted basis. Finally the fourth chart
compares the total Chinese surplus on trade with the surplus on trade
with the U. S.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080310f.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080310g.jpg" border="0" height="265" width="312">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">CHINA
TRADE DATA (Mil. US%)&nbsp;</th>
<th scope="col">Feb 08</th>
<th scope="col">Jan 08&nbsp;</th>
<th scope="col">Feb 07&nbsp;</th>
<th scope="col">M/M %Chg&nbsp;</th>
<th scope="col">Y/Y %Chg&nbsp;</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Total Exports (NSA)</td>
<td>87368</td>
<td>109655</td>
<td>82020</td>
<td>-20.32</td>
<td>6.52</td>
<td>1218020</td>
<td>968935</td>
<td>461953</td>
</tr>
<tr class="even">
<td class="firstcol">Imports
(NSA)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>78813</td>
<td>90174</td>
<td>58336</td>
<td>-12.60</td>
<td>35.02</td>
<td>955821</td>
<td>791461</td>
<td>659953</td>
</tr>
<tr class="odd">
<td class="firstcol">Balance (NSA)</td>
<td>8555</td>
<td>19480</td>
<td>23694</td>
<td>-56.07</td>
<td>63.89</td>
<td>262200</td>
<td>177474</td>
<td>102000</td>
</tr>
<tr class="even">
<td class="firstcol">Exports&nbsp;(SA)&nbsp;</td>
<td>113616</td>
<td>116995</td>
<td>101012</td>
<td>-289</td>
<td>12.48</td>
<td>1218020</td>
<td>968935</td>
<td>461953</td>
</tr>
<tr class="even">
<td class="firstcol">Imports&nbsp;(SA)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>101525</td>
<td>92259</td>
<td>73790</td>
<td>10.05</td>
<td>37.59</td>
<td>955821</td>
<td>791461</td>
<td>659953</td>
</tr>
<tr class="odd">
<td class="firstcol">Balance (SA)</td>
<td>12091</td>
<td>24741</td>
<td>27222</td>
<td>-51.03</td>
<td>-55.58</td>
<td>262200</td>
<td>177474</td>
<td>102000</td>
</tr>
<tr class="even">
<td class="firstcol">Exports to
US&nbsp;Domestic
(NSA)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>15478</td>
<td>19162</td>
<td>16336</td>
<td>-19.22</td>
<td>-5.25</td>
<td>232761</td>
<td>203512</td>
<td>162937</td>
</tr>
<tr class="even">
<td class="firstcol">Imports from US (NSA)</td>
<td>6053</td>
<td>7068</td>
<td>4095</td>
<td>-14.36</td>
<td>47.81</td>
<td>69861</td>
<td>59223</td>
<td>48735</td>
</tr>
<tr>
<td class="firstcol"> Balance
(NSA)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>9425</td>
<td>12094</td>
<td>12241</td>
<td>-22.07</td>
<td>-23.06</td>
<td>162900</td>
<td>144289</td>
<td>114202</td>
</tr>
<tr class="even">
<td class="firstcol">Exports to
US&nbsp;Domestic
(SA)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>20599</td>
<td>19780</td>
<td>19888</td>
<td>4.14</td>
<td>3.58</td>
<td>232761</td>
<td>203512</td>
<td>162937</td>
</tr>
<tr class="even">
<td class="firstcol">Imports from US
(SA)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>8185</td>
<td>7085</td>
<td>5113</td>
<td>15.55</td>
<td>60.09</td>
<td>69861</td>
<td>59223</td>
<td>48735</td>
</tr>
<tr>
<td class="firstcol"> Balance (SA)&nbsp;</td>
<td>12414</td>
<td>15695</td>
<td>14776</td>
<td>-20.90</td>
<td>-15.99</td>
<td>162900</td>
<td>144289</td>
<td>114202</td>
</tr>
</tbody>
</table>
 Economy Watchers Index Rebounds 
by <a href="/comment/Brusca.html">Robert
Brusca</a> March 10, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080310h.jpg" align="left" border="0" height="265" width="353">
Japan&#8217;s economy watcher&#8217;s index made a long awaited bounce in
February. The future conditions index rebounded most sharply. The current conditions and current
employment indices each made soft rebounds as well. The future index is
now &#8216;only in the bottom 17th percentile of its
five year range instead of at the bottom. The overall economy watchers
index is only up to the bottom 7.1% of its range from the bottom.
Typically when the future index has been weak and makes a significant
rebound that rebound is meaningful. The rise in the various economy
watcher indices this month is encouraging. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">Japan
Economy Watchers Surveys </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="4">Raw readings of each survey</td>
<td colspan="3">Percent of 5Yr range*</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>Dec-07</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan="8">Diffusion</td>
</tr>
<tr>
<td class="firstcol">Economy Watchers</td>
<td>33.6</td>
<td>31.8</td>
<td>36.6</td>
<td>38.8</td>
<td>7.1%</td>
<td>0.0%</td>
<td>5.0%</td>
</tr>
<tr>
<td class="firstcol">Employment</td>
<td>35.0</td>
<td>34.1</td>
<td>37.5</td>
<td>41.9</td>
<td>2.8%</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Future</td>
<td>39.5</td>
<td>35.8</td>
<td>37.0</td>
<td>38.8</td>
<td>17.8%</td>
<td>0.0%</td>
<td>1.5%</td>
</tr>
</tbody>
</table>
Japan Machinery Orders Show
Strength 
by <a href="/comment/Brusca.html">Robert
Brusca</a> March 10, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080310i.jpg" align="left" border="0" height="265" width="353">
Japan orders are showing signs of erratic rebound. Orders hit
their cycle low early in 2007. Since then they have been rebounding
irregularly. Foreign demand is showing the sharpest increase but the
domestic/foreign order breakdowns are for total orders not core orders
explaining why the two series are so volatile.
The table below shows that the core orders with the lesser
volatility are now in a clear trend and are recovering strongly over
the recent 3 months. The progression from two years ago forward shows
steady improvement in order growth rates.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">Japan
Machinery Orders </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">m/m %</td>
<td colspan="4">Saar %</td>
</tr>
<tr class="odd">
<td class="firstcol">SA</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>3-Mos</td>
<td>6-Mos</td>
<td>12-Mos</td>
<td>12-Mo Ago</td>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>26.5%</td>
<td>-6.8%</td>
<td>-5.9%</td>
<td>51.3%</td>
<td>45.1%</td>
<td>18.9%</td>
<td>11.4%</td>
</tr>
<tr>
<td class="firstcol">Core Orders*</td>
<td>19.6%</td>
<td>-3.2%</td>
<td>-2.8%</td>
<td>60.1%</td>
<td>17.0%</td>
<td>11.4%</td>
<td>2.6%</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="8">Total
Orders</td>
</tr>
<tr>
<td class="firstcol">Foreign Demand</td>
<td>43.1%</td>
<td>-4.9%</td>
<td>-18.4%</td>
<td>51.8%</td>
<td>113.2%</td>
<td>41.1%</td>
<td>19.5%</td>
</tr>
<tr>
<td class="firstcol">Domestic demand</td>
<td>15.5%</td>
<td>-8.3%</td>
<td>3.5%</td>
<td>44.6%</td>
<td>13.3%</td>
<td>5.0%</td>
<td>8.0%</td>
</tr>
<tr class="grey1">
<td colspan="5" class="firstcol">* Excl ships
and electric power</td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>
</body></html>

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080307f.jpg" align="left" border="0" height="265" width="353">
German IP was a breath of fresh air in January. But it may not
have been made in the best of circumstances. Capital goods output
surged by 6.2% m/m possibly a result of special rules favoring
investment that are phasing out. Construction
output skyrocketed by 11.7% m/m on what obviously was a beneficial
weather effect that will not just go away but will unwind in the months
ahead and suck growth out of IP. As a result, in the new quarter
construction is advancing at 111% pace and capital goods output at a
40.2% annual rate - eye popping numbers. These are two special cases.
Meanwhile, consumer goods output tailed in the month falling by 0.6%
m/m. and intermediate goods output fell by 1% m/m. Still MFG IP rose by
1.9% in January and is up at a 19.6% pace in the new quarter. The IP
numbers are in sharp contrast to the 1.5% drop in January orders and
the 7.6% drop in orders in Q1.
So Germany has some cross-currents. Currently the strength is
lodged in areas that look be temporary or related to expiring stimulus.
The more important, lasting, force of consumer spending continues to
lag. Germans looking for better times in 2008 were uniformly pinning
hopes on the consumer. Consumer is now a clear laggard. The IP figure
tells us the same thing other retail reports have been saying about the
consumer. Moreover, the weakness in orders tell us that the surge in
output is not likely to last.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col"> Total German IP Quarter</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">SAAR except m/m</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Quarter-to-Date</td>
</tr>
<tr class="odd">
<td class="firstcol">IP total</td>
<td>1.8%</td>
<td>1.5%</td>
<td>-0.3%</td>
<td>13.2%</td>
<td>10.1%</td>
<td>7.0%</td>
<td>18.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer</td>
<td>-0.6%</td>
<td>2.7%</td>
<td>-1.2%</td>
<td>3.5%</td>
<td>8.5%</td>
<td>2.7%</td>
<td>4.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital</td>
<td>6.2%</td>
<td>-0.8%</td>
<td>0.2%</td>
<td>24.7%</td>
<td>17.5%</td>
<td>11.4%</td>
<td>40.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate</td>
<td>-1.0%</td>
<td>3.8%</td>
<td>-0.2%</td>
<td>10.6%</td>
<td>7.1%</td>
<td>6.0%</td>
<td>8.7%</td>
</tr>
<tr>
<td class="firstcol">Memo</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Construction</td>
<td>11.7%</td>
<td>2.2%</td>
<td>-0.2%</td>
<td>68.5%</td>
<td>30.8%</td>
<td>4.5%</td>
<td>111.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG IP</td>
<td>1.9%</td>
<td>1.7%</td>
<td>-0.2%</td>
<td>14.8%</td>
<td>11.4%</td>
<td>7.5%</td>
<td>19.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG Orders</td>
<td>-1.5%</td>
<td>-1.1%</td>
<td>3.0%</td>
<td>1.2%</td>
<td>9.3%</td>
<td>9.6%</td>
<td>-7.6%</td>
</tr>
</tbody>
</table>
</body></html>

German IP was a breath of fresh air in January. But it may not have been made in the best of circumstances. Capital goods output surged by 6.2% m/m possibly a result of special rules favoring investment that are phasing out. [...]

German IP Sees Huge Lift From Capital Goods

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080307e.jpg" align="left" border="0" height="265" width="353">
The OECD CLIs are largely still falling over the most recent
three months, but generally the three-month drops are at a slower pace
than the pace of the declines over six months. That is not the best
news but it is good news of sorts. Of course the US is an exception to
this observation since the three-month US decline is accelerating.
Japan is the other sort of exception with an actual rise over three
months and rise over six months. Japan had hit the skids in CLI terms
ahead of the pack. In real time Japan&#8217;s economy is still slipping.
We can hope that Japan&#8217;s resurgent indicator implies that it
has shrugged off a brush with recession. But the fact that key US
economy is sinking faster than anyone else should give us pause about
rosy scenarios. For the most
part the OECD characterizes these results as consistent with a moderate
slowdown. But with some of the recent weak data in the US, recent
financial market turmoil that has reappeared, and the CLI trend there
is clear downside risk. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="5" scope="col">OECD
Trend-restored leading Indicators </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="5" class="firstcol">Growth
progression-SAAR</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>3Mos</td>
<td>6Mos</td>
<td>12mos</td>
<td>Yr-Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD</td>
<td>-1.0%</td>
<td>-2.4%</td>
<td>-0.4%</td>
<td>1.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD 7</td>
<td>-3.3%</td>
<td>-4.2%</td>
<td>-1.4%</td>
<td>0.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD.Europe</td>
<td>-0.9%</td>
<td>-2.0%</td>
<td>-0.8%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD.Japan</td>
<td>8.9%</td>
<td>0.5%</td>
<td>-1.8%</td>
<td>1.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD US</td>
<td>-6.8%</td>
<td>-6.0%</td>
<td>-1.2%</td>
<td>0.2%</td>
</tr>
<tr class="grey2">
<td colspan="5" class="firstcol">Six
month readings at 6-Mo
Intervals:</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Recent six</td>
<td>6Mo Ago</td>
<td>12Mo Ago</td>
<td>18MO Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD</td>
<td>-2.4%</td>
<td>1.7%</td>
<td>2.1%</td>
<td>1.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD 7</td>
<td>-4.2%</td>
<td>1.5%</td>
<td>1.1%</td>
<td>0.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD.Europe</td>
<td>-2.0%</td>
<td>0.4%</td>
<td>1.3%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD.Japan</td>
<td>0.5%</td>
<td>-4.1%</td>
<td>1.3%</td>
<td>0.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD US</td>
<td>-6.0%</td>
<td>3.8%</td>
<td>1.5%</td>
<td>-1.1%</td>
</tr>
<tr class="grey1">
<td colspan="5" class="firstcol">Slowdowns
indicated by BOLD
RED</td>
</tr>
</tbody>
</table>
</body></html>

The OECD CLIs are largely still falling over the most recent three months, but generally the three-month drops are at a slower pace than the pace of the declines over six months. That is not the best news but it is good news of sorts. [...]

OECD Composite Leading Indicators: Moderate Slowing

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080307a.jpg" width="353">
The Bureau of Labor Statistics reported that for the second consecutive month, nonfarm payrolls fell. A 63,000 decline last month followed a downwardly revised 22,000 drop during January. The December job gain also was revised weaker. Expectations had been for a modest 25,000 increase in February payrolls.
The decline in payrolls was the first consecutive two-month drop since 2003.
To the upside was job creation in the government sector where February employment rose 38,000 (1.1% y/y). Strength in hiring by state governments (1.2% y/y) and localities (1.3% y/y) has offset weakness in job creation by the Federal government (-0.1% y/y). This strength in government sector job creation only highlights weakness in the February labor report. Private sector employment fell 101,000 (+0.5% y/y), the largest decline of three during the last three months.
Weakness in factory sector hiring intensified as indicated by a 52,000 drop in payrolls. That was the deepest since 2003 and compared to an average monthly decline of 22,000 last year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080307c.jpg" width="353">
The rate of decline in construction employment also picked up steam. Employment here fell 39,000, twice the average monthly job loss last year.
The news out of the private service sector was perhaps more distressing. A 12,000 loss of jobs was the first since 2003. It dropped the two month change to a meager 8,000 and it compared to an average monthly gain of 109,000 last year. Professional &amp; business services jobs fell by 20,000 (+1.3% y/y) while temporary help services jobs cratered 27,600 (-3.9% y/y). They have been declining for more than a year. Jobs in retail trade also fell a hard 34,100 (-0.0% y/y) and a January increase was revised away. Employment in finance dropped as well by 12,000 and it fell 1.5% from the late 2006 peak. Weakness in the real estate sector continued to lead the softening with a 7,000 job loss last month. Since the 2006 peak jobs are down 2.2%
Jobs in education continued to grow. A firm 30,000 February increase was only slightly off last year&#39;s pace of 45,000 per month (3.0% y/y) while job gains in the health care sector rose 37,000 (2.9% y/y), right on last year&#39;s pace. Jobs in the leisure &amp; hospitality sector also rose a steady 21,000 (2.5% y/y) last month.
Continuing to portend further weakness in overall job creation was another decline in the one month diffusion index to 45.6%. This measure of the breadth of job creation amongst industries was its lowest level since 2003. The three month index also was a weak 46.9%.
What the employment numbers say about overall economic growth this quarter is not good. When the job figures are combined with what was a stable level of hours worked, the level of aggregate hours (employment times hours) fell both last month and in January. Those declines pulled the average for 1Q so far down 1.3% (AR) from 4Q07. During the last thirty years there has been a 76% correlation between the q/q change in aggregate hours worked and the change in real GDP. That correlation has fallen in recent years, however, as productivity has picked up. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080307b.jpg" width="353">
Average hourly earnings rose a very steady 0.3%. Weakness in job creation, however, has lowered the y/y gain to 3.7% which is down slightly from the peak 4.0% rise during all of last year. Factory sector earnings rose 0.1% (3.0% y/y) and private service-providing earnings rose 0.3% (3.8% y/y).
The unemployment rate slipped again, last month to 4.8%. Household employment declined 255,000 (0.1% y/y) and that points up the deterioration in y/y job growth to 0.1% from a 1.1% gain during all of last year and of 1.9% in 2006. A decline in the labor force of 450,000 (+0.4% y/y) is what kept the February unemployment rate from rising.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080307d.jpg" width="353">
The average duration of unemployment fell slightly to 16.8 weeks from 17.5 in January and from 16.9 weeks last year. 
Today&#39;s announcement that the Fed addressed heightened liquidity pressures can be found <a href="http://www.federalreserve.gov/newsevents/press/monetary/20080307a.htm">here</a>. 
Exchange Rate Pass-Through and Monetary Policy is today&#39;s speech by Federal Reserve Board Governor Frederic S. Mishkin and it is available <a href="http://www.federalreserve.gov/newsevents/speech/mishkin20080307a.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB01/@EB01.HTM">Employment: 000s</a></th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>-63</td>
<td>-22</td>
<td>41</td>
<td>0.6%</td>
<td>1.1%</td>
<td>1.8%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Previous</td>
<td>--</td>
<td>-17</td>
<td>82</td>
<td>--</td>
<td>1.3%</td>
<td>1.9%</td>
<td>1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-52</td>
<td>-31</td>
<td>-22</td>
<td>-2.1%</td>
<td>-1.9%</td>
<td>-0.5%</td>
<td>-0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>-39</td>
<td>-25</td>
<td>-55</td>
<td>-2.9%</td>
<td>-1.0%</td>
<td>4.9%</td>
<td>5.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.7</td>
<td>33.7</td>
<td>33.8</td>
<td>33.7 (Feb. &#39;07)</td>
<td>33.8</td>
<td>33.9</td>
<td>33.8</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.3%</td>
<td>0.3%</td>
<td>0.3%</td>
<td>3.7%</td>
<td>4.0%</td>
<td>3.9%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>4.8%</td>
<td>4.9%</td>
<td>5.0%</td>
<td>4.5% (Feb &#39;07)</td>
<td>4.6%</td>
<td>4.6%</td>
<td>5.1%</td>
</tr>
</tbody>
</table>


</html>

The Bureau of Labor Statistics reported that for the second consecutive month, nonfarm payrolls fell. A 63,000 decline last month followed a downwardly revised 22,000 drop during January. The December job gain also was revised weaker. [...]

U.S. Payrolls Again Fell Unexpectedly

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080307a.jpg" align="left" border="0" height="265" width="353">
The Bureau of Labor Statistics reported that for the second
consecutive month, nonfarm payrolls fell. A 63,000 decline last month
followed a downwardly revised 22,000 drop during January. The December
job gain also was revised weaker. Expectations had been for a modest
25,000 increase in February payrolls.
The decline in payrolls was the first consecutive two-month
drop since 2003.
To the upside was job creation in the government sector where
February employment rose 38,000 (1.1% y/y). Strength in hiring by state
governments (1.2% y/y) and localities (1.3% y/y) has offset weakness in
job creation by the Federal government (-0.1% y/y). This strength in
government sector job creation only highlights weakness in
the February labor report. Private sector employment fell
101,000 (+0.5% y/y), the largest decline of three during the last three
months.
Weakness in factory sector hiring intensified as indicated by
a 52,000 drop in payrolls. That was the deepest since 2003 and compared
to an average monthly decline of 22,000 last year.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080307c.jpg" align="right" border="0" height="265" width="353">
The rate of decline in construction employment also picked up
steam. Employment here fell 39,000, twice the average monthly job loss
last year.
The news out of the private service sector was perhaps more
distressing. A 12,000 loss of jobs was the first since 2003. It dropped
the two month change to a meager 8,000 and it compared to an average
monthly gain of 109,000 last year. Professional &amp; business
services jobs fell by 20,000 (+1.3% y/y) while temporary help services
jobs cratered 27,600 (-3.9% y/y). They have been declining for more
than a year. Jobs in retail trade also fell a hard 34,100 (-0.0% y/y)
and a January increase was revised away. Employment in finance dropped
as well by 12,000 and it fell 1.5% from the late 2006 peak. Weakness in
the real estate sector continued to lead the softening with a 7,000 job
loss last month. Since the 2006 peak jobs are down 2.2%
Jobs in education continued to grow. A firm 30,000 February
increase was only slightly off last year's pace of 45,000 per month
(3.0% y/y) while job gains in the health care sector rose 37,000 (2.9%
y/y), right on last year's pace. Jobs in the leisure &amp;
hospitality sector also rose a steady 21,000 (2.5% y/y) last month.
Continuing to portend further weakness in overall job creation
was another decline in the one month diffusion index to 45.6%. This
measure of the breadth of job creation amongst industries was its
lowest level since 2003. The three month index also was a weak 46.9%.
What the employment numbers say about overall economic growth
this quarter is not good. When the job figures are combined with what
was a stable level of hours worked, the level of aggregate hours
(employment times hours) fell both last month and in January. Those
declines pulled the average for 1Q so far down 1.3% (AR) from 4Q07.
During the last thirty years there has been a 76% correlation between
the q/q change in aggregate hours worked and the change in real GDP.
That correlation has fallen in recent years, however, as productivity
has picked up. 
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080307b.jpg" align="left" border="0" height="265" width="353">
Average hourly earnings rose a very steady
0.3%. Weakness in job creation, however, has lowered the y/y gain to
3.7% which is down slightly from the peak 4.0% rise during all of last
year. Factory sector earnings rose 0.1% (3.0% y/y) and private
service-providing earnings rose 0.3% (3.8% y/y).
The unemployment rate slipped again, last
month to 4.8%. Household employment declined 255,000 (0.1% y/y) and
that points up the deterioration in y/y job growth to 0.1% from a 1.1%
gain during all of last year and of 1.9% in 2006. A decline in the
labor force of 450,000 (+0.4% y/y) is what kept the February
unemployment rate from rising.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080307d.jpg" align="right" border="0" height="265" width="353">
The average duration of unemployment fell slightly to 16.8
weeks from 17.5 in January and from 16.9 weeks last year. 
 

Today's announcement that the Fed addressed
heightened liquidity pressures can be found <a href="http://www.federalreserve.gov/newsevents/press/monetary/20080307a.htm">here</a>. 
 

Exchange Rate Pass-Through and Monetary Policy is
today's speech by Federal Reserve Board Governor Frederic S. Mishkin
and it is available <a href="http://www.federalreserve.gov/newsevents/speech/mishkin20080307a.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB01/@EB01.HTM">Employment:
000s</a></th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>-63</td>
<td>-22</td>
<td>41</td>
<td>0.6%</td>
<td>1.1%</td>
<td>1.8%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Previous</td>
<td>--</td>
<td>-17</td>
<td>82</td>
<td>--</td>
<td>1.3%</td>
<td>1.9%</td>
<td>1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-52</td>
<td>-31</td>
<td>-22</td>
<td>-2.1%</td>
<td>-1.9%</td>
<td>-0.5%</td>
<td>-0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>-39</td>
<td>-25</td>
<td>-55</td>
<td>-2.9%</td>
<td>-1.0%</td>
<td>4.9%</td>
<td>5.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.7</td>
<td>33.7</td>
<td>33.8</td>
<td>33.7 (Feb. '07)</td>
<td>33.8</td>
<td>33.9</td>
<td>33.8</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.3%</td>
<td>0.3%</td>
<td>0.3%</td>
<td>3.7%</td>
<td>4.0%</td>
<td>3.9%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>4.8%</td>
<td>4.9%</td>
<td>5.0%</td>
<td>4.5% (Feb '07)</td>
<td>4.6%</td>
<td>4.6%</td>
<td>5.1%</td>
</tr>
</tbody>
</table>
OECD Composite Leading
Indicators:Moderate Slowing 
by <a href="/comment/Brusca.html">Robert
Brusca</a> March 7, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080307e.jpg" align="left" border="0" height="265" width="353">
The OECD CLIs are largely still falling over the most recent
three months, but generally the three-month drops are at a slower pace
than the pace of the declines over six months. That is not the best
news but it is good news of sorts. Of course the US is an exception to
this observation since the three-month US decline is accelerating.
Japan is the other sort of exception with an actual rise over three
months and rise over six months. Japan had hit the skids in CLI terms
ahead of the pack. In real time Japan&#8217;s economy is still slipping.
We can hope that Japan&#8217;s resurgent indicator implies that it
has shrugged off a brush with recession. But the fact that key US
economy is sinking faster than anyone else should give us pause about
rosy scenarios. For the most
part the OECD characterizes these results as consistent with a moderate
slowdown. But with some of the recent weak data in the US, recent
financial market turmoil that has reappeared, and the CLI trend there
is clear downside risk. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="5" scope="col">OECD
Trend-restored leading Indicators </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="5" class="firstcol">Growth
progression-SAAR</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>3Mos</td>
<td>6Mos</td>
<td>12mos</td>
<td>Yr-Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD</td>
<td>-1.0%</td>
<td>-2.4%</td>
<td>-0.4%</td>
<td>1.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD 7</td>
<td>-3.3%</td>
<td>-4.2%</td>
<td>-1.4%</td>
<td>0.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD.Europe</td>
<td>-0.9%</td>
<td>-2.0%</td>
<td>-0.8%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD.Japan</td>
<td>8.9%</td>
<td>0.5%</td>
<td>-1.8%</td>
<td>1.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD US</td>
<td>-6.8%</td>
<td>-6.0%</td>
<td>-1.2%</td>
<td>0.2%</td>
</tr>
<tr class="grey2">
<td colspan="5" class="firstcol">Six
month readings at 6-Mo
Intervals:</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Recent six</td>
<td>6Mo Ago</td>
<td>12Mo Ago</td>
<td>18MO Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD</td>
<td>-2.4%</td>
<td>1.7%</td>
<td>2.1%</td>
<td>1.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD 7</td>
<td>-4.2%</td>
<td>1.5%</td>
<td>1.1%</td>
<td>0.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD.Europe</td>
<td>-2.0%</td>
<td>0.4%</td>
<td>1.3%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD.Japan</td>
<td>0.5%</td>
<td>-4.1%</td>
<td>1.3%</td>
<td>0.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD US</td>
<td>-6.0%</td>
<td>3.8%</td>
<td>1.5%</td>
<td>-1.1%</td>
</tr>
<tr class="grey1">
<td colspan="5" class="firstcol">Slowdowns
indicated by BOLD
RED</td>
</tr>
</tbody>
</table>
German IP Sees Huge Lift From
Capital Goods 
by <a href="/comment/Brusca.html">Robert
Brusca</a> March 7, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080307f.jpg" align="left" border="0" height="265" width="353">
German IP was a breath of fresh air in January. But it may not
have been made in the best of circumstances. Capital goods output
surged by 6.2% m/m possibly a result of special rules favoring
investment that are phasing out. Construction
output skyrocketed by 11.7% m/m on what obviously was a beneficial
weather effect that will not just go away but will unwind in the months
ahead and suck growth out of IP. As a result, in the new quarter
construction is advancing at 111% pace and capital goods output at a
40.2% annual rate - eye popping numbers. These are two special cases.
Meanwhile, consumer goods output tailed in the month falling by 0.6%
m/m. and intermediate goods output fell by 1% m/m. Still MFG IP rose by
1.9% in January and is up at a 19.6% pace in the new quarter. The IP
numbers are in sharp contrast to the 1.5% drop in January orders and
the 7.6% drop in orders in Q1.
So Germany has some cross-currents. Currently the strength is
lodged in areas that look be temporary or related to expiring stimulus.
The more important, lasting, force of consumer spending continues to
lag. Germans looking for better times in 2008 were uniformly pinning
hopes on the consumer. Consumer is now a clear laggard. The IP figure
tells us the same thing other retail reports have been saying about the
consumer. Moreover, the weakness in orders tell us that the surge in
output is not likely to last.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Total
German IP Quarter</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">SAAR except m/m</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Quarter-to-Date</td>
</tr>
<tr class="odd">
<td class="firstcol">IP total</td>
<td>1.8%</td>
<td>1.5%</td>
<td>-0.3%</td>
<td>13.2%</td>
<td>10.1%</td>
<td>7.0%</td>
<td>18.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer</td>
<td>-0.6%</td>
<td>2.7%</td>
<td>-1.2%</td>
<td>3.5%</td>
<td>8.5%</td>
<td>2.7%</td>
<td>4.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital</td>
<td>6.2%</td>
<td>-0.8%</td>
<td>0.2%</td>
<td>24.7%</td>
<td>17.5%</td>
<td>11.4%</td>
<td>40.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate</td>
<td>-1.0%</td>
<td>3.8%</td>
<td>-0.2%</td>
<td>10.6%</td>
<td>7.1%</td>
<td>6.0%</td>
<td>8.7%</td>
</tr>
<tr>
<td class="firstcol">Memo</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Construction</td>
<td>11.7%</td>
<td>2.2%</td>
<td>-0.2%</td>
<td>68.5%</td>
<td>30.8%</td>
<td>4.5%</td>
<td>111.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG IP</td>
<td>1.9%</td>
<td>1.7%</td>
<td>-0.2%</td>
<td>14.8%</td>
<td>11.4%</td>
<td>7.5%</td>
<td>19.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG Orders</td>
<td>-1.5%</td>
<td>-1.1%</td>
<td>3.0%</td>
<td>1.2%</td>
<td>9.3%</td>
<td>9.6%</td>
<td>-7.6%</td>
</tr>
</tbody>
</table>
</body></html>

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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Sandy Batten

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Total retail sales rose a much larger-than-expected 0.9% m/m (6.9%y/y) in May following a slightly downwardly revised 0.4% monthly gain in April (previously 0.5% m/m), according to data released by the U.S. Census Bureau. The Action Economics Forecast Survey looked for a 0.5% m/m gain. Excluding autos, other sales increased 0.8% m/m (7.5% y/y) after an unrevised 0.7% m/m increase in April. Expectations were for a 0.5% monthly rise.

Elevated retail gasoline prices continued to boost the value of gasoline sales in May. Gasoline sales increased 3.4% m/m (26.5% y/y) in May on top of a 2.8% m/m increase in April. However, both monthly increases were slower than the 14.2% monthly jump reported in March. Gasoline sales accounted for 31% of total sales in May. However, sales were solid even without gasoline sales. Total sales excluding gasoline rose 0.7% m/m in April, up from 0.2% m/m in April. Sales excluding both autos and gasoline increased 0.5% m/m in May, the same monthly gain as in April.

The control group of sales (total sales excluding food services, autos, gasoline and building materials that the BEA uses to construct PCE in the national accounts) posted another solid increase in May, rising 0.7% m/m (6.3% y/y) following an unrevised 0.5% monthly increase in April. The strong performance at the end of Q1 followed by solid gains in April and May put the April-May level of control group sales up 8.6% at an annual rate from the Q1 average, pointing to another solid contribution by consumption to overall GDP growth in Q2. Consumer spending remains surprisingly resilient notwithstanding the recent hit to disposable income from the marked increase in energy prices.

Sales generally increased across major sectors in May. Auto sales rebounded, rising 1.2% m/m in May and more than reversing the 0.9% monthly decline in April. This was the third gain in auto sales in the past four months. Furniture sales rose 1.0% m/m but sales at electronics and appliance stores slipped 0.5% m/m. Building material sales gained 1.0% m/m on top of a 1.1% monthly increase in April. Clothing sales rose 0.3% m/m. Sales at general merchandise stores gained 0.4% m/m in May. Miscellaneous sales jumped 2.3% m/m in May, their first monthly gain in three months. Sales by nonstore retailers continued their strong performance, increasing 1.5% m/m in May on top of a 1.1% monthly rise in April. Over the first five months of this year, nonstore retail sales have risen 7.2%, not annualized. By contrast, food sales were unchanged in May from April while sales at restaurants edged down 0.1% m/m in May, their first monthly decline in four months.

Retail sales data can be found in Haver’s **USECON** database. The expectations figures are from the Action Economics Forecast Survey in **AS1REPNA**.

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- Total sales increased 0.9% m/m in May, nearly twice expectations.
- Auto sales rebounded, rising 1.2% m/m in May, more than reversing a 0.9% monthly decline in April. 
- Gasoline sales rose 3.4% m/m in May.
- Excluding auto and gasoline sales, remaining sales increased by a solid 0.5% m/m in May, the same monthly increase as in April.
- Sales of the retail control group that is used to construct PCE rose 0.7% m/m in May and are 8.6% annualized above the Q1 average.

U.S. Retail Sales Jumped More than Expected in May

Winnie Tapasanun

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Mortgage applications fell 3.8% w/w (+8.6% y/y) in the week ending June 12 following a 10.8% rebound in the week ending June 5, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. The latest reading was the fourth w/w fall in five weeks, lowering the index to 269.5. Applications for loans to purchase a house slid 3.4% (+3.0% y/y) in the June 12 week, down for the fourth time in five weeks, after a 7.3% rise in the previous week. Applications for loan refinancing dropped 4.5% (+17.0% y/y) in the June 12 week, the seventh w/w decline in eight weeks, following a 15.3% jump in the June 5 week.

The effective interest rate on a 30-year fixed-rate loan was unchanged at 6.78% in the week ending June 12; it was above a low of 6.24% in the February 27 week but below a peak of 8.12% in the week of October 20, 2023. The rate on 15-year fixed-rate mortgages edged up 2bps to 6.18% in the June 12 week, the highest in three weeks, from 6.16% in the previous week; it was up from a low of 5.60% in the week of September 20, 2024 but down from a high of 7.44% in the week of October 27, 2023. Meanwhile, the rate on 30-year jumbo loans declined 4bps to 6.78% in the June 12 week from 6.82% in the prior week; it was above a low of 6.25% in the February 27 week but below a high of 7.99% in the week of October 27, 2023. The rate on a 5-year ARM fell 7bps to 6.16% in the June 12 week, the first w/w decline in six weeks, from 6.23% in the previous week (the highest since the week of August 15, 2025); it was above a low of 5.38% in the February 20 week but below a high of 7.31% in the week of October 27, 2023.

The share of applications for refinancing an existing loan edged up to 40.3% of total applications in the week ending June 12—the fourth w/w increase in five weeks and the highest level since the May 15 week—after rising to 40.2% in the week ending June 5; it remained below a peak of 61.9% in the January 16 week but above a low of 34.6% in the week of May 23, 2025. The adjustable-rate mortgage (ARM) share of activity slipped to 8.5% in the June 12 week from 8.6% in the prior week; it was below a peak of 12.9% in the week of September 12, 2025 but above a low of 4.7% in the week of January 3, 2025.

The average size of a mortgage loan fell 1.5% w/w (+3.7% y/y) to $394,100 in the June 12 week, the lowest level since the April 3 week, after a 0.4% rebound to $399,900 in the June 5 week. The average size of a purchase loan dropped 1.9% (+4.0% y/y) to $456,600 in the June 12 week following a 2.8% recovery to $465,300 in the prior week. The average size of a loan to refinance a mortgage fell 0.4% (+7.0% y/y) to $301,400 in the June 12 week on top of a 2.3% decline to $302,500 in the previous week, marking the third consecutive w/w fall, the sixth decline in seven weeks, and the lowest level since the week of July 25, 2025.

The Mortgage Bankers Association Survey covers 75% 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 **SURVEYS** database.

- Purchase applications -3.4% w/w, down for fourth time in five weeks; refinance applications -4.5% w/w, seventh fall in eight weeks.
- Effective interest rate on 30-year fixed loans unchanged at 6.78%, up from a late-February low of 6.24%.
- Average loan size down for the second time in three weeks, lowest since the April 3 week.

U.S. Mortgage Applications Down 3.8% in the June 12 Week, Fourth Drop in Five Weeks

Michael J. Moran

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The headline index on import prices rose 1.9% in May, close to the blistering pace in April and the fourth consecutive high-side reading. This recent pressure has pulled the year-over-year change to 6.7%, a distinct shift from last year when import prices showed no change over the 12 months of 2025.

Prices of petroleum products have been the most important factor behind the recent surge, increasing 13.0% in May after an average of 17.8% in the prior two months. However, prices excluding petroleum products also have stirred this year, as they have increased more than 0.6% in each of the past five months. May posted the firmest increase in this string of brisk readings (1.3%). Prices of consumer goods had been increasing moderately in early 2026, but they jumped 0.5% in May. The changes in capital and consumer goods led to an increase of 0.8% in nonpetroleum prices in May and an average of 0.6% in the first five months of the year.

Some observers might seek to look for the effects of tariffs on import prices, but these figures would not be especially helpful in this regard, as prices are recorded before the imposition of tariffs. However, if foreign producers wished to absorb the tariff burden to remain competitive in the US market, they could reduce invoiced prices to keep post-tariff prices steady. Indeed, nonpetroleum prices softened after April of last year following the announcement of President Trump’s Liberation Day tariffs. The subsequent easing of some of the draconian tariffs and the nullification of tariffs imposed under the International Emergency Economic Powers Act might be factors leading importers to return to original prices this year. Given that the pressure on import prices ex-petroleum has been concentrated in the capital goods area, there does not seem to be a rush to return to pre-tariff pricing.

On the export side, prices rose 1.3% in May, continuing the firm pace seen in the preceding four months. Petroleum prices have played a role in this pressure, as shown by an increase of 2.4% in the industrial supply category (petroleum prices alone are not available on the export side). Food prices also have jumped this year, increasing 0.8% in May after an average of 1.2% in the prior three months. Prices of capital goods were tame in the early months of the year, but they have firmed in the past two months (0.5% in April and 0.7% in May).

These import and export price series are not seasonally adjusted; they can be found in Haver’s **USECON** database. Detailed figures are available in the **USINT** database. The expectations figure from the Action Economics Forecast Survey is in the **AS1REPNA** database.

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- Petroleum products led import prices higher, but capital goods also had an influence.
- Petroleum was also a factor on the export side; some stirring in food and capital goods.

Import and Export Prices: Firm in May

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Weighed down by further rises in longer-term interest rates, housing construction continued to languish in May. Housing starts plunged 15.4% m/m (-8.7% y/y) in May on top of a downwardly revised 8.5% monthly decline in April (previously -2.8% m/m). The level of starts plummeted to 1.177 million, the lowest since May 2020 when the economy was locked down during the COVID pandemic. The Action Economics Forecast Survey expected a 2.4% m/m decline to a level of 1.432 million units. The April/May average for starts was 1.285 million, 9.4% below the Q1 average. Residential investment has been a persistent drag on real GDP growth recently, subtracting from overall growth in each of the previous five quarters. Today’s report points to another subtraction in Q2.

Single-family starts fell 1.9% m/m (-6.7% y/y) in May on top of a downwardly revised 11.6% monthly plunge in April (previously -9.0% m/m). Multi-family starts, which had generally been trending up over the past year or so, albeit with quite a bit of volatility, plummeted 40.2% m/m (-14.2% y/y) in May following a downwardly revised 2.4% m/m decline in April (previously +10.3% m/m).

Starts fell in three of the four major geographic regions. Starts rose 3.7% m/m in the Midwest with gains in both single-family and multi-family starts. By contrast, starts fell in each of the other three regions, plunging 26.8% m/m in the Northeast, the third monthly decline in the past four months, falling 17.0% m/m in the South, also the third monthly decline in the past four months, and declining 17.2% m/m in the West, the fourth monthly decline in the past five months.

The performance of building permits is typically less volatile than that of starts. Total permits edged down 0.7% m/m (-0.2% y/y) to 1.413 million units in May following a 4.4% monthly gain in April and an 11.5% m/m fall in March. Expectations were for a 0.3% monthly increase in May. Single-family permits edged up 0.6% m/m (-1.8% y/y) in May versus a 1.6% monthly decline in April and a 3.7% m/m drop in March. By contrast, multi-family permits fell 2.8% m/m (+2.5 y/y) in May but this was after a 15.8% monthly surge in April.

In contrast to the regional performance of starts, permits fell in the Midwest (-18.7% m/m) but rose in each of the other three major geographic regions. Permits increased 3.1% m/m in the Northeast in May on top of a 18.1% monthly jump in April. They edged up 1.6% m/m in the South and rose 5.5% m/m in the West, the first monthly gain in three months.

The housing starts and permits figures can be found in Haver’s **USECON** database. The expectations figure is contained in the **AS1REPNA** database.

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- Housing starts plunged 15.4% m/m in May to the lowest level since May 2020 with a significant downward revision to the previously reported April decline.
- Single family starts fell 1.9% m/m while multi-family starts plummeted 40.2% m/m to their lowest level since November 2024.
- Less volatile permits slid 0.7% m/m in May with a slight rise (+0.6% m/m) in single-family permits and a 2.8% monthly drop in multi-family permits.

U.S. Housing Starts Plunged in May

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The ZEW diffusion survey (an up-minus-down survey) showed mixed improvements in the economic situation and improvements for macroeconomic expectations in June. The report shows the economic situation improving in the United States and China, with the euro area taking a small step back (to -43.4 in June from -41.4 in May), while Germany also saw a step back in the economic situation (to -81.0 from -77.8). The ranking metrics show the German reading as lower only 13.8% of the time—the weakest showing among the four. The EMU ranking is at a 36.7 percentile, with the U.S. ranking close to that at a 42.5 percentile. China has a 76.2 percentile ranking over a shorter timeline.

Macro expectations show solid improvements reported in Germany, the U.S., and China. Macroeconomic rankings all are muted, with the U.S. at a 39.9 percentile standing as the strongest, followed by Germany at a 35.2 percentile standing and China at a 22.2 percentile standing.

Inflation expectations are still high across the board, ranging from a low percentile standing for the EMU, Germany, and China—from a euro area low of 78.6 to a high standing for this group at 85.7 for China. In contrast, the U.S. ranking is still high, but only at its 61.8 percentile. And all the inflation expectations readings fell in June as optimism on opening the Strait of Hormuz has been growing. 

Nonetheless, expectations for short-term rates have been rising. They rose solidly in the EMU and China, and strongly in the U.S., from 10.5 in May to 38.5 in June.

In contrast, long-term rate expectations rose across the board as well but by modest amounts. The rankings for short-term expectations are stronger for all three countries compared to the ranking on long-term rate expectations. I suppose we can understand that as expectations of anti-inflation medicine.

Stock markets are assessed as higher month-to-month in the EMU and in all three countries. China has a strong ranking for its stock market assessment at its 81st percentile. The U.S. standing is above its median at its 51.5 percentile; the euro area expectation is at its 34.2 percentile, with German stock market expectations still weak at its 23.6 percentile.

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The pending conflict-ending deal in the Middle East should be a catalyst for further improvement. While the U.S.-Iran deal is not yet announced in detail—or even signed—market reactions are clear-cut across the board; there is no sign that this deal is expected to wither so soon. But it still has issues and contentious elements, such as Iran’s nuclear ambitions and the fact that the Israel is not on board with what it regards as a too-early exit from hostilities. Israel wants regime change and warns of a more difficult future without one.

Economy in Brief

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