Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080102a.jpg" width="353">
The Institute of Supply Management (ISM) reported that its Composite Index of Manufacturing Sector Activity fell in December to 47.7 from 50.8 in November. The decline contrasted with Consensus expectations for a slight m/m uptick to 51.0. Data points above 50 indicate growth in factory sector activity.
Last month&#39;s reading was the lowest since early 2003 and it was the first month below 50 since early last year.
During the last twenty years there has been a 64% correlation between the level of the Composite Index and the three month growth in factory sector industrial production.
It is appropriate to correlate the ISM index level with factory sector growth because the ISM index is a diffusion index. It measures growth by being constructed using all of the absolute positive changes in activity added to one half of the no change in activity measures.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080102b.jpg" width="353">
Sharp declines in the new orders and in the production components accounted for most of the decline in the composite index. The inventories index fell, but just slightly and the vendor deliveries index rose.
The index of new export orders fell out of bed with a six point m/m decline to its lowest level since last January. The index still, however, suggests that exports grew last month. The import index also remained low but nudged higher after great weakness last Fall. The index suggests declines in imports for the last three months.
The employment index recovered just slightly after a huge decline in November. That was its lowest level since 2003. During the last twenty years there has been a 67% correlation between the level of the ISM employment Index and the three month growth in factory sector employment.
The prices paid index again nudged higher to its highest level in six months. During the last twenty years there has been a 77% correlation between the price index and the three month change in the PPI for intermediate goods.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">December &#39;06</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">Composite Index</td>
<td>47.7</td>
<td>50.8</td>
<td>51.4</td>
<td>52.2</td>
<td>53.9</td>
<td>55.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>45.7</td>
<td>52.6</td>
<td>51.9</td>
<td>54.4</td>
<td>55.4</td>
<td>57.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>68.0</td>
<td>67.5</td>
<td>47.5</td>
<td>64.6</td>
<td>65.0</td>
<td>66.4</td>
</tr>
</tbody>
</table>
</body>
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The Institute of Supply Management (ISM) reported that its Composite Index of Manufacturing Sector Activity fell in December to 47.7 from 50.8 in November. The decline contrasted with Consensus expectations for a slight m/m uptick to [...]

ISM Index Below 50

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<div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080102d.jpg" width="353">
The value of construction put in lace rose a slight 0.1% during November following a 0.4% downtick during October. These, and other, small monthly changes this year have left the value of construction put in place down just 0.2% year to date.
Gains in nonresidential building activity have cushioned weakness in the residential area. Nonresidential building activity rose 2.1% in November and that pulled the year to date gain to 16.1%. Year to date, building in the lodging area is up a whopping 71.4%. Office construction is up 17.1% and commercial building rose 8.8%.
Residential building in November fell another 2.5% m/m and year to date activity is off 16.5%. Building of new single family units fell 5.0% during November. Year to date the decline totals 26.7%. Again to the upside was spending on improvements. It rose 0.7% in November and increased 3.9% ytd.
During the last twenty years there has been an 84% correlation between the q/q change in the value of residential building and its contribution to growth in real GDP.
Public construction spending also has been strong this year and rose 2.5% during November. That pulled to ytd gain to 12.5%. Construction on highways &amp; streets rose 1.9%, 12.8% ytd. The value of construction on highways &amp; streets is nearly one third of the value of total public construction spending. Construction spending on education also has been fir m and up 11.1% this year.
These more detailed categories represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for Automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed. </div>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.1%</td>
<td>-0.4%</td>
<td>-0.1%</td>
<td>5.6%</td>
<td>10.7%</td>
<td>11.0%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>-0.7%</td>
<td>-0.9%</td>
<td>-4.8%</td>
<td>4.7%</td>
<td>12.0%</td>
<td>13.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>-2.5%</td>
<td>-2.3%</td>
<td>-17.8%</td>
<td>0.5%</td>
<td>13.7%</td>
<td>18.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>1.7%</td>
<td>1.2%</td>
<td>19.5%</td>
<td>15.2%</td>
<td>7.8%</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>2.5%</td>
<td>0.9%</td>
<td>16.2%</td>
<td>9.2%</td>
<td>6.2%</td>
<td>1.7%</td>
</tr>
</tbody>
</table>
ISM Index Below 50 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 2, 2008


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080102a.jpg" width="353">
The Institute of Supply Management (ISM) reported that its Composite Index of Manufacturing Sector Activity fell in December to 47.7 from 50.8 in November. The decline contrasted with Consensus expectations for a slight m/m uptick to 51.0. Data points above 50 indicate growth in factory sector activity.
Last month&#39;s reading was the lowest since early 2003 and it was the first month below 50 since early last year.
During the last twenty years there has been a 64% correlation between the level of the Composite Index and the three month growth in factory sector industrial production.
It is appropriate to correlate the ISM index level with factory sector growth because the ISM index is a diffusion index. It measures growth by being constructed using all of the absolute positive changes in activity added to one half of the no change in activity measures.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080102b.jpg" width="353">
Sharp declines in the new orders and in the production components accounted for most of the decline in the composite index. The inventories index fell, but just slightly and the vendor deliveries index rose.
The index of new export orders fell out of bed with a six point m/m decline to its lowest level since last January. The index still, however, suggests that exports grew last month. The import index also remained low but nudged higher after great weakness last Fall. The index suggests declines in imports for the last three months.
The employment index recovered just slightly after a huge decline in November. That was its lowest level since 2003. During the last twenty years there has been a 67% correlation between the level of the ISM employment Index and the three month growth in factory sector employment.
The prices paid index again nudged higher to its highest level in six months. During the last twenty years there has been a 77% correlation between the price index and the three month change in the PPI for intermediate goods.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">December &#39;06</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">Composite Index</td>
<td>47.7</td>
<td>50.8</td>
<td>51.4</td>
<td>52.2</td>
<td>53.9</td>
<td>55.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>45.7</td>
<td>52.6</td>
<td>51.9</td>
<td>54.4</td>
<td>55.4</td>
<td>57.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>68.0</td>
<td>67.5</td>
<td>47.5</td>
<td>64.6</td>
<td>65.0</td>
<td>66.4</td>
</tr>
</tbody>
</table>
Existing Home Sales Up Slightly 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 2, 2008


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080102e.jpg" width="353">
According to the National Association of Realtors, sales of existing homes ticked 0.4% higher during November. The rise, however, did little to recover declines during the prior eight months which totaled 25.4% Moreover, sales remained nearly one third lower than at the peak in late 2005
Sales of single family homes led November&#39;s rise with a 0.7% gain which was the first m/m gain since February. Sales in the West jumped 10.1% (-25.6% y/y) but that was the only region to post a gain. Sales in the Midwest fell 0.9% m/m (-16.7% y/y). Single family home sales in the Northeast fell 3.0% (-19.0% y/y) and sales in the South fell 1.1% (-18.9% y/y).
The median price of an existing single family home rose 1.9% (-3.7% y/y) and recouped all of the prior month&#39;s decline.
Perspectives on Housing and the Economic Outlook from the Federal Reserve Bank of Kansas City can be found <a href="http://www.kansascityfed.org/SpeechBio/HoenigPDF/SantaFe11-15-07.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Existing Single Family Home Sales</th>
<th scope="col">November</th>
<th scope="col">y/y %</th>
<th scope="col">October</th>
<th scope="col">November &#39;06</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total </td>
<td>5,000</td>
<td>-20.0</td>
<td>4,980</td>
<td>6,250</td>
<td>6,510</td>
<td>7,075</td>
<td>6,727</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>870</td>
<td>-19.4</td>
<td>1,080</td>
<td>1,030</td>
<td>1,088</td>
<td>1,169</td>
<td>1,113</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,180</td>
<td>-16.9</td>
<td>1,180</td>
<td>1,420</td>
<td>1,492</td>
<td>1,588</td>
<td>1,550</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>1,990</td>
<td>-19.4</td>
<td>2,030</td>
<td>2,470</td>
<td>2,578</td>
<td>2,704</td>
<td>2,540</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>960</td>
<td>-25.0</td>
<td>870</td>
<td>1,2800</td>
<td>1,353</td>
<td>1,616</td>
<td>1,575</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>4,400</td>
<td>-19.9</td>
<td>4,370</td>
<td>5,490</td>
<td>5,677</td>
<td>6,182</td>
<td>5,958</td>
</tr>
<tr class="odd">
<td class="firstcol">Median Price, Total, $</td>
<td>210,200</td>
<td>-3.3</td>
<td>206,9000</td>
<td>217,300</td>
<td>222,000</td>
<td>218,217</td>
<td>193,233</td>
</tr>
</tbody>
</table>
U.S. Chain Store Sales Surged at Yearend '07 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 2, 2008


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080102c.jpg" width="353">
Chain store sales at the end of last year surged. In the final week of 2007 sales dipped just 0.2% after gains of 2.8% and 1.4% during the prior two weeks according to the International Council of Shopping Centers (ICSC)-UBS.
For all of December sales recovered 1.0% following modest declines during the prior four months.
During the last ten years there has been a 45% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
Working the other way, the leading indicator of chain store sales from ICSC-UBS fell for the second week and was down for all of December for the third month in the last four.
Housing, credit and consumer expenditure from the Federal Reserve Bank of Kansas City can be found <a href="http://www.kansascityfed.org/publicat/sympos/2007/PDF/2007.09.17.Muellbauer.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/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">12/29/07</th>
<th scope="col">12/22/07</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>487.7</td>
<td>488.8</td>
<td>2.3%</td>
<td>3.3%</td>
<td>3.6%</td>
<td>4.7%</td>
</tr>
</tbody>
</table>


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The value of construction put in lace rose a slight 0.1% during November following a 0.4% downtick during October. These, and other, small monthly changes this year have left the value of construction put in place down just 0.2% year [...]

U.S. Construction Spending Rose Slightly

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<div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071130b.jpg" width="353">
Personal consumption expenditures surged 1.1% last month after an upwardly revised 0.4% rise. The November increase beat Consensus expectations for a 0.7% rise. Adjusted for inflation spending rose 0.5% after the upwardly revised 0.1% uptick. Three month growth in real spending rose to 3.4% (AR).
Spending on discretionary items was firm led by a 1.8% (9.6% y/y) jump in real spending on household furniture &amp; appliances. Spending on apparel also rose a firm 0.9% (5.6% y/y) but spending on motor vehicles fell 0.8% (+2.4% y/y). Spending on electricity surged 5.9% (6.9% y/y) but real spending on gasoline fell 0.3% (-0.6% y/y). Medical care spending rose 0.2% and spending on recreation fell 0.1%). Spending on food rose 0.7% (2.2% y/y). Real spending excluding food &amp; energy rose 0.4% (3.2% y/y). These detailed spending figures are available in Haver&#39;s USNA database.
The PCE chain price index surged 0.6%%, lifted by higher energy prices. The core PCE price index gained a steady 0.2% but y/y growth in core prices picked up further to 2.2%. Three month growth in core prices rose to 2.9% (AR) due to faster growth in services prices where the three month growth of 4.0% was the fastest since late 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071130b.jpg" width="353">
Personal income during November rose 0.4% and the gain fell just short of expectations for a 0.5% rise. The October increase was unrevised at 0.2%. Three month growth in income was 4.2% (AR), its worst since June.
Lower interest rates caused a shortfall in interest income of 0.4% (+6.2% y/y) which was the same decline as in October. Conversely, growth in dividend income held steady at 0.9% (12.6% y/y), the same as during the prior two months.
Growth in wages &amp; salaries picked back up to 0.6% (5.2% y/y) after an unchanged reading for October. Three month growth amounted to 5.3%. Factory sector wages rose 0.4% (2.2% y/y) after declining during the prior two months.Wage &amp; salary income in the private service-producing industries rose 0.7% (6.1% y/y) after no change in October. Wages in the government sector again increased 0.4% (4.6% y/y).
Personal current taxes rose a firm 0.7% (8.1% y/y) and that left disposable personal income to rise 0.3% (5.8% y/y). Adjusted for inflation disposable personal income fell 0.3% (+2.1% y/y) for the second month of decline. That left the three month growth in real DPI negative at -0.9%, its worst since June.</div>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a></th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.4%</td>
<td>0.3%</td>
<td>6.1%</td>
<td>6.6%</td>
<td>5.9%</td>
<td>6.2%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>1.1%</td>
<td>0.4%</td>
<td>6.7%</td>
<td>5.9%</td>
<td>6.2%</td>
<td>6.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Saving Rate</td>
<td>-0.5%</td>
<td>0.3%</td>
<td>0.5% (Nov. 06)</td>
<td>0.4%</td>
<td>0.5%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.6%</td>
<td>0.3%</td>
<td>3.6%</td>
<td>2.8%</td>
<td>2.9%</td>
<td>2.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.2%</td>
<td>2.2%</td>
<td>2.2%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
Michigan Consumer Sentiment Down in December 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 21, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071207d.jpg" width="353">
The University of Michigan&#39;s consumer sentiment index for all of this month fall 0.9% to 75.5.That was somewhat better than the reading at mid-month and it beat expectations for a December reading of 74.9. Nevertheless it left sentiment down 17.7% y/y.
Somewhat improved expectations caused the better December result. Expected business conditions during the next year fell only 6.8% (-35.2% y/y), an improvement from the -11.0% preliminary reading. Expectations for business conditions during the next five years also improved 6.6% (-16.5% y/y) from the November level and versus the initial read of a m/m decline. Down still is the result versus 3Q. Expectations for personal finances fell further by 2.6% (-9.7% y/y).
The current conditions index in fact was revised lower from the mid-month reading and fell 0.5% after a hefty 6.3% November decline. Current buying conditions for large household goods improved modestly m/m but remained down 13.0% from last December. The view of current personal finances, however, slid 3.0% for the second sharp monthly decline (-17.6% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071207d.jpg" width="353">
The rise in gasoline prices raised expectations for inflation during the next twelve months to 4.4% (slightly lower than the mid-month read) from 4.3% in November and from 3.5% one year ago. For the next five to ten years expectations were for a 3.6% rise in prices.
Opinions about government policy dropped 9.8% m/m which brought this opinion measure down 16.9% from one year ago.
The University of Michigan survey is not seasonally adjusted.The reading is based on telephone interviews with about 500 households at month-end; the mid-month results are based on about 300 interviews. The summary indexes are in Haver&#39;s USECON database, with details in the proprietary UMSCA database.
Consumer sentiment, the economy, and the news media is a 2004 paper from the Federal Reserve Bank of San Francisco and it can be found <a href="http://www.frbsf.org/publications/economics/papers/2004/wp04-09bk.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">Dec (Final)</th>
<th scope="col">Dec (Prelim)</th>
<th scope="col">Nov</th>
<th scope="col">Dec&nbsp; y/y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>75.5</td>
<td>74.5</td>
<td>76.1</td>
<td>-17.7% </td>
<td>87.3</td>
<td>88.5</td>
<td>95.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>91.0</td>
<td>92.1</td>
<td>91.5</td>
<td>-15.8%</td>
<td>105.1</td>
<td>105.9</td>
<td>105.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Expectations</td>
<td>65.6</td>
<td>63.2</td>
<td>66.2</td>
<td>-19.2%</td>
<td>75.9</td>
<td>77.4</td>
<td>88.5</td>
</tr>
</tbody>
</table>
</body>
</html>

Personal consumption expenditures surged 1.1% last month after an upwardly revised 0.4% rise. The November increase beat Consensus expectations for a 0.7% rise. Adjusted for inflation spending rose 0.5% after the upwardly revised 0.1% [...]

U.S. Personal Consumption & Prices Firm, Income Light

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071221e.jpg" align="left" border="0" height="265" width="353">
The service sector is beginning to ease in France. The index
is down form its peak if 113 in October. As a percent of its range the
December reading is still in the top 17% of its range. The outlook
reading at +3 stands in the 80.6 percentile of its range and is still
in the top 20% of that range. Expected sales for the 3-months ahead are
in the 67th percentile of their range, the top third, roughly.
Employment expectations are still firm in their range. Over the past
three months observed employment is nearly in the top quarter of its
range whereas expected employment in the three months ahead slips to
the top third at a reading of 10 which is in the 68th percentile of its
range. 
 

These readings generally show that the outlook is a bit weaker
than the current or recent past readings have been. And while the
slowdown and drop off is clear on the chart it is also true that the
survey levels are still firm; what we must wait and see is how far this
expected softening may go. 
 

Insee released today a separate survey on industry in which
morale fared much better than for services. It is surprising with the
concerns over the strong euro that it is the service sector where
morale is fading faster. This could have something to do with the
financial turmoil that has been in train, of course. But industry is
holding up much better despite its competitiveness pressures. Even in
that survey, however, there are more concerns among executives about
the outlook for production in their own business sector. French
consumer spending on MFG goods in also November worked its way lower
showing an unexpected drop. This spending results may have been
affected by recent transits strikes. 
 

There is evidence of strain in the French economy. All of
these reports will bear watching as we turn the calendar sheet to a new
month and new a new year. We will come upon this new year with the
economy a bit more challenged than usual in France, across the Euro
Area, in the US and elsewhere. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="11" scope="col">France
INSEE Services Survey Jan 2000-date </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>Oct-07</td>
<td>Sep-07</td>
<td>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
</tr>
<tr class="grey1">
<td class="firstcol">Climate Indicator</td>
<td>108</td>
<td>111</td>
<td>113</td>
<td>112</td>
<td>83.3</td>
<td>18</td>
<td>113</td>
<td>83</td>
<td>30</td>
<td>102</td>
</tr>
<tr>
<td class="firstcol">Climate: 3-Mo Moving
avg</td>
<td>111</td>
<td>112</td>
<td>113</td>
<td>113</td>
<td>92.8</td>
<td>5</td>
<td>113</td>
<td>85</td>
<td>28</td>
<td>102</td>
</tr>
<tr class="grey1">
<td class="firstcol">Climate: 12-Mo Moving
avg</td>
<td>110</td>
<td>110</td>
<td>110</td>
<td>110</td>
<td>99.6</td>
<td>2</td>
<td>110</td>
<td>91</td>
<td>20</td>
<td>101</td>
</tr>
<tr>
<td class="firstcol">Outlook</td>
<td>3</td>
<td>5</td>
<td>7</td>
<td>8</td>
<td>80.6</td>
<td>23</td>
<td>9</td>
<td>-22</td>
<td>31</td>
<td>-1</td>
</tr>
<tr class="even">
<td class="firstcol" colspan="11">Sales</td>
</tr>
<tr class="grey1">
<td class="firstcol">Observed 3-mos</td>
<td>14</td>
<td>17</td>
<td>18</td>
<td>18</td>
<td>83.3</td>
<td>7</td>
<td>19</td>
<td>-11</td>
<td>30</td>
<td>6</td>
</tr>
<tr>
<td class="firstcol">Expected 3-mos</td>
<td>9</td>
<td>13</td>
<td>14</td>
<td>14</td>
<td>67.9</td>
<td>38</td>
<td>18</td>
<td>-10</td>
<td>28</td>
<td>7</td>
</tr>
<tr class="even">
<td class="firstcol" colspan="11">Sales
Price</td>
</tr>
<tr class="grey1">
<td class="firstcol">Observed over 3-Mos</td>
<td>0</td>
<td>-2</td>
<td>1</td>
<td>2</td>
<td>33.3</td>
<td>33</td>
<td>8</td>
<td>-4</td>
<td>12</td>
<td>0</td>
</tr>
<tr>
<td class="firstcol">Expected over 3-Mos</td>
<td>-2</td>
<td>2</td>
<td>-1</td>
<td>1</td>
<td>30.0</td>
<td>69</td>
<td>5</td>
<td>-5</td>
<td>10</td>
<td>1</td>
</tr>
<tr class="even">
<td class="firstcol" colspan="11">Employment</td>
</tr>
<tr class="grey1">
<td class="firstcol">Observed over 3-Mos</td>
<td>14</td>
<td>8</td>
<td>3</td>
<td>8</td>
<td>73.5</td>
<td>5</td>
<td>23</td>
<td>-11</td>
<td>34</td>
<td>5</td>
</tr>
<tr>
<td class="firstcol">Expected over 3-Mos</td>
<td>10</td>
<td>11</td>
<td>17</td>
<td>9</td>
<td>68.2</td>
<td>13</td>
<td>17</td>
<td>-5</td>
<td>22</td>
<td>5</td>
</tr>
</tbody>
</table>
</body></html>

The service sector is beginning to ease in France. The index is down form its peak if 113 in October. As a percent of its range the December reading is still in the top 17% of its range. The outlook reading at +3 stands in the 80.6 [...]

Service Sector Hits the Skids in France

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071221f.jpg" align="left" border="0" height="265" width="353">



The GFK consumer sentiment report for the UK continues to
plunge and it is one of the clearest signs of trouble in the UK
economy. The CBI survey on retailing earlier had signaled some weakness
and expectations of a softer January to boot. But actual sales data
(released today) showed a gain in November although food accounted for
all the volume increase. While the Bank of England struggles with
policy, consumers seem to have made up their minds about where the
balance of risk lies. 
 At a reading of -14 the GFK index is at its weakest point in
over 10 Years. Still, households rate their financial situation as the
best in 10 years currently. In this environment their plans for making
major purchases are the lowest they have been in 10 Years. Consumers
rate the general economic situation in the past 12-months as the worst
in the past two years and in the bottom four percent over ten years.
They assess inflation as the worst in 10 years. 
 While BOE is concerned about inflation too, a recent wage
survey finds that wages deals have been contained in their recent range
and in fact are not accelerating. Of course while that may be good news
to the BOE, it is another factor pressuring consumers as energy prices
rise. 
 The outlook for the next 12-months score very weak readings
for the household financial situation and the general economic
situation both in the bottom 15 percentile of their respective ranges
for two years and about the bottom quarter of the range over 10-years.
The major purchases index is at the 50% mark for the next 12 months
compared to the past two years&#8217; range, but that is a bottom 25% reading
over the past 10 years. Obviously the consumer sector has been weak and
is weakening again. Stratified by income, both high and low income
respondents see conditions as among their poorest in 10 years. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col"> GFK
Consumer Survey</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>% of 2Yr</td>
<td>% of 10Yr</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>Oct-07</td>
<td>Sep-07</td>
<td>Range</td>
<td>Range</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Confidence</td>
<td>-14</td>
<td>-10</td>
<td>-8</td>
<td>-7</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">Current</td>
</tr>
<tr class="odd">
<td class="firstcol">Household Financial Situation</td>
<td>25</td>
<td>25</td>
<td>25</td>
<td>25</td>
<td>100.0%</td>
<td>100.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Major Purchases</td>
<td>-14</td>
<td>-7</td>
<td>-5</td>
<td>-3</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">Last
12 Months</td>
</tr>
<tr class="odd">
<td class="firstcol">Household Financial Situation</td>
<td>-1</td>
<td>0</td>
<td>2</td>
<td>4</td>
<td>37.5%</td>
<td>40.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">General Economic Situation</td>
<td>-36</td>
<td>-32</td>
<td>-30</td>
<td>-29</td>
<td>0.0%</td>
<td>4.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">CPI</td>
<td>74</td>
<td>73</td>
<td>69</td>
<td>64</td>
<td>100.0%</td>
<td>100.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings</td>
<td>33</td>
<td>35</td>
<td>38</td>
<td>38</td>
<td>52.6%</td>
<td>84.5%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">Next
12-Months</td>
</tr>
<tr class="odd">
<td class="firstcol">Household Financial Situation</td>
<td>8</td>
<td>9</td>
<td>13</td>
<td>12</td>
<td>14.3%</td>
<td>14.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">General Economic Situation</td>
<td>-26</td>
<td>-21</td>
<td>-17</td>
<td>-19</td>
<td>0.0%</td>
<td>26.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment</td>
<td>30</td>
<td>31</td>
<td>29</td>
<td>27</td>
<td>35.7%</td>
<td>62.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Major Purchases</td>
<td>-19</td>
<td>-20</td>
<td>-18</td>
<td>-20</td>
<td>50.0%</td>
<td>25.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings</td>
<td>19</td>
<td>20</td>
<td>19</td>
<td>17</td>
<td>63.6%</td>
<td>85.2%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">By
Income</td>
</tr>
<tr class="odd">
<td class="firstcol">Lower</td>
<td>-19</td>
<td>-16</td>
<td>-14</td>
<td>-13</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Upper</td>
<td>-7</td>
<td>-6</td>
<td>-3</td>
<td>-1</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
</tbody>
</table>
</body></html>

The GFK consumer sentiment report for the UK continues to plunge and it is one of the clearest signs of trouble in the UK economy. The CBI survey on retailing earlier had signaled some weakness and expectations of a softer January to [...]

UK Consumer Confidence Continues to Plunge

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071221c.jpg" width="353">
The University of Michigan&#39;s consumer sentiment index for all of this month fall 0.9% to 75.5.That was somewhat better than the reading at mid-month and it beat expectations for a December reading of 74.9. Nevertheless it left sentiment down 17.7% y/y.
Somewhat improved expectations caused the better December result. Expected business conditions during the next year fell only 6.8% (-35.2% y/y), an improvement from the -11.0% preliminary reading. Expectations for business conditions during the next five years also improved 6.6% (-16.5% y/y) from the November level and versus the initial read of a m/m decline. Down still is the result versus 3Q. Expectations for personal finances fell further by 2.6% (-9.7% y/y).
The current conditions index in fact was revised lower from the mid-month reading and fell 0.5% after a hefty 6.3% November decline. Current buying conditions for large household goods improved modestly m/m but remained down 13.0% from last December. The view of current personal finances, however, slid 3.0% for the second sharp monthly decline (-17.6% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071221d.jpg" width="353">
The rise in gasoline prices raised expectations for inflation during the next twelve months to 4.4% (slightly lower than the mid-month read) from 4.3% in November and from 3.5% one year ago. For the next five to ten years expectations were for a 3.6% rise in prices.
Opinions about government policy dropped 9.8% m/m which brought this opinion measure down 16.9% from one year ago.
The University of Michigan survey is not seasonally adjusted.The reading is based on telephone interviews with about 500 households at month-end; the mid-month results are based on about 300 interviews. The summary indexes are in Haver&#39;s USECON database, with details in the proprietary UMSCA database.
Consumer sentiment, the economy, and the news media is a 2004 paper from the Federal Reserve Bank of San Francisco and it can be found <a href="http://www.frbsf.org/publications/economics/papers/2004/wp04-09bk.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">Dec (Final)</th>
<th scope="col">Dec (Prelim)</th>
<th scope="col">Nov</th>
<th scope="col">Dec&nbsp; y/y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>75.5</td>
<td>74.5</td>
<td>76.1</td>
<td>-17.7% </td>
<td>87.3</td>
<td>88.5</td>
<td>95.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>91.0</td>
<td>92.1</td>
<td>91.5</td>
<td>-15.8%</td>
<td>105.1</td>
<td>105.9</td>
<td>105.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Expectations</td>
<td>65.6</td>
<td>63.2</td>
<td>66.2</td>
<td>-19.2%</td>
<td>75.9</td>
<td>77.4</td>
<td>88.5</td>
</tr>
</tbody>
</table>
</body>
</html>

The University of Michigan's consumer sentiment index for all of this month fall 0.9% to 75.5.That was somewhat better than the reading at mid-month and it beat expectations for a December reading of 74.9. Nevertheless it left [...]

Michigan Consumer Sentiment Down in December

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<div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071221a.jpg" width="353">
Personal consumption expenditures surged 1.1% last month after an upwardly revised 0.4% rise. The November increase beat Consensus expectations for a 0.7% rise. Adjusted for inflation spending rose 0.5% after the upwardly revised 0.1% uptick. Three month growth in real spending rose to 3.4% (AR).
Spending on discretionary items was firm led by a 1.8% (9.6% y/y) jump in real spending on household furniture &amp; appliances. Spending on apparel also rose a firm 0.9% (5.6% y/y) but spending on motor vehicles fell 0.8% (+2.4% y/y). Spending on electricity surged 5.9% (6.9% y/y) but real spending on gasoline fell 0.3% (-0.6% y/y). Medical care spending rose 0.2% and spending on recreation fell 0.1%). Spending on food rose 0.7% (2.2% y/y). Real spending excluding food &amp; energy rose 0.4% (3.2% y/y). These detailed spending figures are available in Haver&#39;s USNA database.
The PCE chain price index surged 0.6%%, lifted by higher energy prices. The core PCE price index gained a steady 0.2% but y/y growth in core prices picked up further to 2.2%. Three month growth in core prices rose to 2.9% (AR) due to faster growth in services prices where the three month growth of 4.0% was the fastest since late 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071221b.jpg" width="353">
Personal income during November rose 0.4% and the gain fell just short of expectations for a 0.5% rise. The October increase was unrevised at 0.2%. Three month growth in income was 4.2% (AR), its worst since June.
Lower interest rates caused a shortfall in interest income of 0.4% (+6.2% y/y) which was the same decline as in October. Conversely, growth in dividend income held steady at 0.9% (12.6% y/y), the same as during the prior two months.
Growth in wages &amp; salaries picked back up to 0.6% (5.2% y/y) after an unchanged reading for October. Three month growth amounted to 5.3%. Factory sector wages rose 0.4% (2.2% y/y) after declining during the prior two months.Wage &amp; salary income in the private service-producing industries rose 0.7% (6.1% y/y) after no change in October. Wages in the government sector again increased 0.4% (4.6% y/y).
Personal current taxes rose a firm 0.7% (8.1% y/y) and that left disposable personal income to rise 0.3% (5.8% y/y). Adjusted for inflation disposable personal income fell 0.3% (+2.1% y/y) for the second month of decline. That left the three month growth in real DPI negative at -0.9%, its worst since June.</div>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a></th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.4%</td>
<td>0.3%</td>
<td>6.1%</td>
<td>6.6%</td>
<td>5.9%</td>
<td>6.2%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>1.1%</td>
<td>0.4%</td>
<td>6.7%</td>
<td>5.9%</td>
<td>6.2%</td>
<td>6.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Saving Rate</td>
<td>-0.5%</td>
<td>0.3%</td>
<td>0.5% (Nov. 06)</td>
<td>0.4%</td>
<td>0.5%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.6%</td>
<td>0.3%</td>
<td>3.6%</td>
<td>2.8%</td>
<td>2.9%</td>
<td>2.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.2%</td>
<td>2.2%</td>
<td>2.2%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
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<div align="left"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071221a.jpg" align="left" border="0" height="265" width="353">

Personal consumption expenditures surged
1.1% last month after an upwardly revised 0.4% rise. The November
increase beat Consensus expectations for a 0.7% rise. Adjusted for
inflation spending rose 0.5% after the upwardly revised 0.1% uptick.
Three month growth in real spending rose to 3.4% (AR).
Spending on discretionary items was firm led by a 1.8% (9.6%
y/y) jump in real spending on household furniture &amp; appliances.
Spending on apparel also rose a firm 0.9% (5.6% y/y) but spending on
motor vehicles fell 0.8% (+2.4% y/y). Spending on electricity surged
5.9% (6.9% y/y) but real spending on gasoline fell 0.3% (-0.6% y/y).
Medical care spending rose 0.2% and spending on recreation fell 0.1%).
Spending on food rose 0.7% (2.2% y/y). Real spending excluding food
&amp; energy rose 0.4% (3.2% y/y). These detailed spending figures
are available in Haver's USNA database.
The PCE chain price index surged 0.6%%,
lifted by higher energy prices. The core PCE price index gained a
steady 0.2% but y/y growth in core prices picked up further
to 2.2%. Three month growth in core prices rose to 2.9% (AR) due to
faster growth in services prices where the three month growth of 4.0%
was the fastest since late 2005.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071221b.jpg" align="right" border="0" height="265" width="353">
Personal income during November rose 0.4%
and the gain fell just short of expectations for a 0.5% rise. The
October increase was unrevised at 0.2%. Three month growth in income
was 4.2% (AR), its worst since June.
Lower interest rates caused a shortfall in interest income of
0.4% (+6.2% y/y) which was the same decline as in October. Conversely,
growth in dividend income held steady at 0.9% (12.6% y/y), the same as
during the prior two months.
Growth in wages &amp; salaries picked back up to 0.6%
(5.2% y/y) after an unchanged reading for October. Three month growth
amounted to 5.3%. Factory sector wages rose 0.4% (2.2% y/y) after
declining during the prior two months.Wage &amp; salary income in
the private service-producing industries rose 0.7% (6.1% y/y) after no
change in October. Wages in the government sector again increased 0.4%
(4.6% y/y).
Personal current taxes rose a firm 0.7% (8.1% y/y) and that
left disposable personal income to rise 0.3% (5.8%
y/y). Adjusted for inflation disposable personal income fell 0.3%
(+2.1% y/y) for the second month of decline. That left the three month
growth in real DPI negative at -0.9%, its worst since June.
</div>


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition
of Personal Income</a></th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.4%</td>
<td>0.3%</td>
<td>6.1%</td>
<td>6.6%</td>
<td>5.9%</td>
<td>6.2%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>1.1%</td>
<td>0.4%</td>
<td>6.7%</td>
<td>5.9%</td>
<td>6.2%</td>
<td>6.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Saving Rate</td>
<td>-0.5%</td>
<td>0.3%</td>
<td>0.5% (Nov. 06)</td>
<td>0.4%</td>
<td>0.5%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.6%</td>
<td>0.3%</td>
<td>3.6%</td>
<td>2.8%</td>
<td>2.9%</td>
<td>2.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food
&amp; energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.2%</td>
<td>2.2%</td>
<td>2.2%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
Michigan Consumer Sentiment Down
in December 
by <a href="/comment/Moeller.html">Tom
Moeller</a> December 21, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071221c.jpg" align="left" border="0" height="265" width="353">
The University of Michigan's consumer sentiment index for all
of this month fall 0.9% to 75.5.That was somewhat better than the
reading at mid-month and it beat expectations for a December reading of
74.9. Nevertheless it left sentiment down 17.7% y/y.
Somewhat improved expectations caused the better December
result. Expected business conditions during the next year fell only
6.8% (-35.2% y/y), an improvement from the -11.0% preliminary reading.
Expectations for business conditions during the next five years also
improved 6.6% (-16.5% y/y) from the November level and versus the
initial read of a m/m decline. Down still is the result versus 3Q.
Expectations for personal finances fell further by 2.6% (-9.7% y/y).
The current conditions index in fact was revised lower from
the mid-month reading and fell 0.5% after a hefty 6.3% November
decline. Current buying conditions for large household goods improved
modestly m/m but remained down 13.0% from last December. The view of
current personal finances, however, slid 3.0% for the second sharp
monthly decline (-17.6% y/y).<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071221d.jpg" align="right" border="0" height="265" width="353">
The rise in gasoline prices raised expectations for inflation
during the next twelve months to 4.4% (slightly lower than the
mid-month read) from 4.3% in November and from 3.5% one year ago. For
the next five to ten years expectations were for a 3.6% rise in prices.
Opinions about government policy dropped 9.8% m/m which
brought this opinion measure down 16.9% from one year ago.
The University of Michigan survey is not seasonally
adjusted.The reading is based on telephone interviews with about 500
households at month-end; the mid-month results are based on about 300
interviews. The summary indexes are in Haver's USECON database,
with details in the proprietary UMSCA database.
Consumer sentiment, the economy, and the news media
is a 2004 paper from the Federal Reserve Bank of San
Francisco and it can be found <a href="http://www.frbsf.org/publications/economics/papers/2004/wp04-09bk.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University
of Michigan</a></th>
<th scope="col">Dec (Final)</th>
<th scope="col">Dec (Prelim)</th>
<th scope="col">Nov</th>
<th scope="col">Dec&nbsp; y/y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>75.5</td>
<td>74.5</td>
<td>76.1</td>
<td>-17.7% </td>
<td>87.3</td>
<td>88.5</td>
<td>95.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current
Conditions</td>
<td>91.0</td>
<td>92.1</td>
<td>91.5</td>
<td>-15.8%</td>
<td>105.1</td>
<td>105.9</td>
<td>105.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;
Expectations</td>
<td>65.6</td>
<td>63.2</td>
<td>66.2</td>
<td>-19.2%</td>
<td>75.9</td>
<td>77.4</td>
<td>88.5</td>
</tr>
</tbody>
</table>
UK Consumer Confidence Continuesto
Plunge
 
by <a href="/comment/Brusca.html">Robert
Brusca</a> December 21, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071221f.jpg" align="left" border="0" height="265" width="353">
The GFK consumer sentiment report for the UK continues to
plunge and it is one of the clearest signs of trouble in the UK
economy. The CBI survey on retailing earlier had signaled some weakness
and expectations of a softer January to boot. But actual sales data
(released today) showed a gain in November although food accounted for
all the volume increase. While the Bank of England struggles with
policy, consumers seem to have made up their minds about where the
balance of risk lies. 
 
At a reading of -14 the GFK index is at its weakest point in
over 10 Years. Still, households rate their financial situation as the
best in 10 years currently. In this environment their plans for making
major purchases are the lowest they have been in 10 Years. Consumers
rate the general economic situation in the past 12-months as the worst
in the past two years and in the bottom four percent over ten years.
They assess inflation as the worst in 10 years. 
 
While BOE is concerned about inflation too, a recent wage
survey finds that wages deals have been contained in their recent range
and in fact are not accelerating. Of course while that may be good news
to the BOE, it is another factor pressuring consumers as energy prices
rise. 
 
The outlook for the next 12-months score very weak readings
for the household financial situation and the general economic
situation both in the bottom 15 percentile of their respective ranges
for two years and about the bottom quarter of the range over 10-years.
The major purchases index is at the 50% mark for the next 12 months
compared to the past two years&#8217; range, but that is a bottom 25% reading
over the past 10 years. Obviously the consumer sector has been weak and
is weakening again. Stratified by income, both high and low income
respondents see conditions as among their poorest in 10 years. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col"> GFK
Consumer Survey</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>% of 2Yr</td>
<td>% of 10Yr</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>Oct-07</td>
<td>Sep-07</td>
<td>Range</td>
<td>Range</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Confidence</td>
<td>-14</td>
<td>-10</td>
<td>-8</td>
<td>-7</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">Current</td>
</tr>
<tr class="odd">
<td class="firstcol">Household Financial Situation</td>
<td>25</td>
<td>25</td>
<td>25</td>
<td>25</td>
<td>100.0%</td>
<td>100.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Major Purchases</td>
<td>-14</td>
<td>-7</td>
<td>-5</td>
<td>-3</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">Last
12 Months</td>
</tr>
<tr class="odd">
<td class="firstcol">Household Financial Situation</td>
<td>-1</td>
<td>0</td>
<td>2</td>
<td>4</td>
<td>37.5%</td>
<td>40.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">General Economic Situation</td>
<td>-36</td>
<td>-32</td>
<td>-30</td>
<td>-29</td>
<td>0.0%</td>
<td>4.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">CPI</td>
<td>74</td>
<td>73</td>
<td>69</td>
<td>64</td>
<td>100.0%</td>
<td>100.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings</td>
<td>33</td>
<td>35</td>
<td>38</td>
<td>38</td>
<td>52.6%</td>
<td>84.5%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">Next
12-Months</td>
</tr>
<tr class="odd">
<td class="firstcol">Household Financial Situation</td>
<td>8</td>
<td>9</td>
<td>13</td>
<td>12</td>
<td>14.3%</td>
<td>14.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">General Economic Situation</td>
<td>-26</td>
<td>-21</td>
<td>-17</td>
<td>-19</td>
<td>0.0%</td>
<td>26.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment</td>
<td>30</td>
<td>31</td>
<td>29</td>
<td>27</td>
<td>35.7%</td>
<td>62.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Major Purchases</td>
<td>-19</td>
<td>-20</td>
<td>-18</td>
<td>-20</td>
<td>50.0%</td>
<td>25.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings</td>
<td>19</td>
<td>20</td>
<td>19</td>
<td>17</td>
<td>63.6%</td>
<td>85.2%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">By
Income</td>
</tr>
<tr class="odd">
<td class="firstcol">Lower</td>
<td>-19</td>
<td>-16</td>
<td>-14</td>
<td>-13</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Upper</td>
<td>-7</td>
<td>-6</td>
<td>-3</td>
<td>-1</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
</tbody>
</table>
Service Sector Hits the Skids in
France 
by <a href="/comment/Brusca.html">Robert
Brusca</a> December 21, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071221e.jpg" align="left" border="0" height="265" width="353">
The service sector is beginning to ease in France. The index
is down form its peak if 113 in October. As a percent of its range the
December reading is still in the top 17% of its range. The outlook
reading at +3 stands in the 80.6 percentile of its range and is still
in the top 20% of that range. Expected sales for the 3-months ahead are
in the 67th percentile of their range, the top third, roughly.
Employment expectations are still firm in their range. Over the past
three months observed employment is nearly in the top quarter of its
range whereas expected employment in the three months ahead slips to
the top third at a reading of 10 which is in the 68th percentile of its
range. 
 

These readings generally show that the outlook is a bit weaker
than the current or recent past readings have been. And while the
slowdown and drop off is clear on the chart it is also true that the
survey levels are still firm; what we must wait and see is how far this
expected softening may go. 
 

Insee released today a separate survey on industry in which
morale fared much better than for services. It is surprising with the
concerns over the strong euro that it is the service sector where
morale is fading faster. This could have something to do with the
financial turmoil that has been in train, of course. But industry is
holding up much better despite its competitiveness pressures. Even in
that survey, however, there are more concerns among executives about
the outlook for production in their own business sector. French
consumer spending on MFG goods in also November worked its way lower
showing an unexpected drop. This spending results may have been
affected by recent transits strikes. 
 

There is evidence of strain in the French economy. All of
these reports will bear watching as we turn the calendar sheet to a new
month and new a new year. We will come upon this new year with the
economy a bit more challenged than usual in France, across the Euro
Area, in the US and elsewhere. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="11" scope="col">France
INSEE Services Survey Jan 2000-date </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>Oct-07</td>
<td>Sep-07</td>
<td>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
</tr>
<tr class="grey1">
<td class="firstcol">Climate Indicator</td>
<td>108</td>
<td>111</td>
<td>113</td>
<td>112</td>
<td>83.3</td>
<td>18</td>
<td>113</td>
<td>83</td>
<td>30</td>
<td>102</td>
</tr>
<tr>
<td class="firstcol">Climate: 3-Mo Moving
avg</td>
<td>111</td>
<td>112</td>
<td>113</td>
<td>113</td>
<td>92.8</td>
<td>5</td>
<td>113</td>
<td>85</td>
<td>28</td>
<td>102</td>
</tr>
<tr class="grey1">
<td class="firstcol">Climate: 12-Mo Moving
avg</td>
<td>110</td>
<td>110</td>
<td>110</td>
<td>110</td>
<td>99.6</td>
<td>2</td>
<td>110</td>
<td>91</td>
<td>20</td>
<td>101</td>
</tr>
<tr>
<td class="firstcol">Outlook</td>
<td>3</td>
<td>5</td>
<td>7</td>
<td>8</td>
<td>80.6</td>
<td>23</td>
<td>9</td>
<td>-22</td>
<td>31</td>
<td>-1</td>
</tr>
<tr class="even">
<td class="firstcol" colspan="11">Sales</td>
</tr>
<tr class="grey1">
<td class="firstcol">Observed 3-mos</td>
<td>14</td>
<td>17</td>
<td>18</td>
<td>18</td>
<td>83.3</td>
<td>7</td>
<td>19</td>
<td>-11</td>
<td>30</td>
<td>6</td>
</tr>
<tr>
<td class="firstcol">Expected 3-mos</td>
<td>9</td>
<td>13</td>
<td>14</td>
<td>14</td>
<td>67.9</td>
<td>38</td>
<td>18</td>
<td>-10</td>
<td>28</td>
<td>7</td>
</tr>
<tr class="even">
<td class="firstcol" colspan="11">Sales
Price</td>
</tr>
<tr class="grey1">
<td class="firstcol">Observed over 3-Mos</td>
<td>0</td>
<td>-2</td>
<td>1</td>
<td>2</td>
<td>33.3</td>
<td>33</td>
<td>8</td>
<td>-4</td>
<td>12</td>
<td>0</td>
</tr>
<tr>
<td class="firstcol">Expected over 3-Mos</td>
<td>-2</td>
<td>2</td>
<td>-1</td>
<td>1</td>
<td>30.0</td>
<td>69</td>
<td>5</td>
<td>-5</td>
<td>10</td>
<td>1</td>
</tr>
<tr class="even">
<td class="firstcol" colspan="11">Employment</td>
</tr>
<tr class="grey1">
<td class="firstcol">Observed over 3-Mos</td>
<td>14</td>
<td>8</td>
<td>3</td>
<td>8</td>
<td>73.5</td>
<td>5</td>
<td>23</td>
<td>-11</td>
<td>34</td>
<td>5</td>
</tr>
<tr>
<td class="firstcol">Expected over 3-Mos</td>
<td>10</td>
<td>11</td>
<td>17</td>
<td>9</td>
<td>68.2</td>
<td>13</td>
<td>17</td>
<td>-5</td>
<td>22</td>
<td>5</td>
</tr>
</tbody>
</table>
</body></html>

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

Considerably more monetary ease expected from US and UK as Japan tightens

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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

Sandy Batten

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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.

ZEW Shows Mixed Conditions and an Expectations Rebound

Winnie Tapasanun

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Industrial production (IP) increased a less-than-expected 0.1% m/m in May, the third monthly gain in four months, following an upwardly revised 0.9% rise in April (+0.7% initially) and a 0.3% decline in March (unrevised), according to data from the Federal Reserve Board. A 0.3% m/m May increase had been expected in the Action Economics Forecast Survey. The year-on-year rate accelerated to 1.7% in May, the highest since January, from 1.4% in April (0.3% in May 2025). The May IP index at 102.6 was 3.3% above a low of 99.3 in November 2024 and 3.4% above a low of 99.2 in January 2024.

By **industry groups**, manufacturing production was essentially unchanged m/m (+1.4% y/y) in May after upwardly revised gains of 0.7% in April (+0.6% initially) and 0.2% in March (+0.1% previously). Durable goods production rose 0.8% (3.2% y/y) in May, the fourth m/m rise in five months, after a 1.1% increase in April. Within durables, almost all categories rose m/m in May, led by a 2.3% gain (-2.0% y/y) in wood products, followed by increases of 1.8% (3.1% y/y) in nonmetallic mineral products, 1.3% (4.4% y/y) in primary metals, 1.2% (-1.7% y/y) in motor vehicles & parts, 1.0% (-4.5% y/y) in furniture & related products, 0.9% (10.3% y/y) in computer & electronic products, 0.8% (2.5% y/y) in fabricated metal products, 0.5% (6.9% y/y) in aerospace & miscellaneous transportation equipment, 0.5% (2.7% y/y) in electrical equipment, appliances & components, and 0.2% (4.3% y/y) in machinery. Notably, aircraft & parts production climbed 1.1% (11.7% y/y), the fourth consecutive m/m rise, after a 2.6% April gain. Meanwhile, miscellaneous durable goods were virtually unchanged m/m (+0.9% y/y) in May following a 0.8% decline in April.

Nondurable goods production slid 0.9% (-0.6% y/y) in May, the first m/m slide since January, after a 0.3% increase in April. The May output decline was led by a 3.0% drop (-1.1% y/y) in petroleum & coal products, followed by decreases of 2.4% (-4.1% y/y) in textiles & product mills, 1.6% (-2.3% y/y) in printing & related support activities, 0.8% (0.0% y/y) in chemicals, 0.8% (-3.0% y/y) in paper, 0.5% (-0.4% y/y) in food, beverages & tobacco, and 0.3% (-0.2% y/y) in plastics & rubber products. In contrast, apparel & leather goods—the only rising category—recovered 2.4% (-0.1% y/y) in May following two successive m/m declines.

Mining activity advanced 1.3% (2.0% y/y) in May, the fourth m/m gain in five months, after a 0.2% increase in April (-0.1% initially). Utilities output, however, fell 0.4% (+3.1% y/y) following a 2.2% April rebound (+1.9% initially), reflecting a 1.7% drop (+1.8% y/y) in electric utilities output and an 8.5% rise (12.5% y/y) in natural gas utilities output.

By **market groups**, construction supplies production increased 1.1% (2.3% y/y) in May, up for the second time in three months, reversing a 0.3% decline in April. Business equipment output rose 0.6% (5.7% y/y), the fifth m/m rise in six months, following a 1.8% April gain. Materials production grew 0.3% (1.9% y/y), the third m/m increase in four months, after a 0.7% April rise. In contrast, consumer goods output fell 0.5% (-0.6% y/y) after a 1.2% April rebound, reflecting a 0.5% increase (-3.0% y/y) in durable consumer goods and a 0.8% decrease (+0.1% y/y) in nondurable consumer goods.

In **special classifications**, factory output of selected high-tech industries rose 1.8% (12.6% y/y) in May on top of an upwardly revised 2.2% rise in April (+1.0% initially)—marking the third straight m/m gain and the seventh in eight months. Manufacturing production excluding selected high-tech industries held steady m/m (+1.1% y/y) in May after a 0.7% increase in April, while manufacturing production excluding selected high-tech and motor vehicles & parts dipped 0.1% (+1.3% y/y) following a 0.5% April rise.

Capacity utilization inched up to 76.2% in May, the highest since July 2025, from 76.1% in April (unrevised). The result matched the forecast by the Action Economics Forecast Survey. The May reading was 3.2 percentage points below its long-run (1972–2025) average. Manufacturing capacity utilization held at 75.7% in May and April (75.8% previously), the highest since September 2025; the May rate was 2.5 percentage points below its long-run average.

Industrial production and capacity data are in Haver’s **USECON** database. Additional detail on production and capacity utilization can be found in the **IP** database. The expectations figures come from the **AS1REPNA** database.

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- May IP +0.1% (+1.7% y/y), third m/m increase in four months, led by a 1.3% gain in mining.
- Manufacturing unchanged (+1.4% y/y), w/ durables +0.8% and nondurables -0.9%.
- Selected high-tech +1.8%, third straight m/m rise; motor vehicles +1.2%, fifth gain in six mths.
- Utilities -0.4%, led by a 1.7% drop in electric utilities output.
- Key categories in market groups mostly up.
- Capacity utilization up to a 10-month-high 76.2%; mfg. capacity utilization steady at 75.7%.

U.S. Industrial Production Up Marginally in May; Manufacturing Flat

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The economy watchers survey, along with other surveys, was doing fine until about March in the wake of the Iran war and the closing of the Strait of Hormuz. With that action, the economy watchers index dove sharply from a level of 48.9 in February to 42.2 in March and slipped further to 40.8 in April. The various sector gauges for the retail sector, eating & drinking places, the service sector, and employment are all lower. The only improvement in April came from the future index, where there was some minor optimism about the potential for conditions to improve ahead. And, of course, over the weekend, there is the announcement of a U.S.-Iran deal to end the hostilities between the two countries. That is expected to be signed on Friday and then will put the war into a pause phase for the next 60 days, with the hope that the two sides can come to agreement on some of the stickier elements, including Iran's access to nuclear materials, which has yet to be hammered out.

That omission makes the announcement of this arrangement as a conflict ending deal hugely speculative. Another sticking point is that Israel is not on board and is still engaged in fighting with Hezbollah.

The Teikoku survey, another survey using diffusion indexes that describes Japanese sectors, weakened sharply in March and weakened across the board again in April. Manufacturing, retailing, wholesaling, services, and construction sectors all are posting weaker numbers in April than in March.

The percentile rankings for the economy watchers survey and the Teikoku surveys are both very weak, with the economy watchers standings in the 10th percentile range or lower; the Teikoku rankings are generally higher, around the 30th percentile or perhaps as low as the 20th percentile, as seen in construction. These are still very weak readings. All the raw diffusion readings are below 50, indicating contraction.

The sector indexes from METI on manufacturing and services, which both weakened in March, rebounded in April; in both cases, the April readings were above the February readings. Standings of these indexes based on growth rates are around the 80th percentile; at the 79th percentile for industry and at the 82.5 percentile for the tertiary or services index. Based on the value of the index itself, the tertiary index has a standing at its 98.9 percentile, which we would expect over time for an index that simply grows, as is the case for the METI indexes that are not diffusion indexes. However, the industrial index for Japan has only a 19.9 percentile standing, indicating the stress that Japan's industrial sector has been through, although the current ranking based on the growth rate shows that there is some recovery in progress. The industry level index is 6.3% below its January 2020 level, while the tertiary index is 3.1% above its January 2020 level.

The leading economic index has continued to rise during all these times. It rose in February compared to January, and it rose again in March compared to February; now in April compared to March, it was up again to 115.9, from the March reading of 115.4. Based on year-over-year growth, the leading economic index has a 95.1 percentile standing, which is relatively strong. Based on the index level, we get another strong reading at the 93.2 percentile mark. The leading index is also up 12.9% from its January 2020 level.

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The report of a deal to end the U.S. embargo of Iran and open the Strait of Hormuz without tolls is potentially a real gamechanger for the economic outlook. However, the deal still had pieces to be negotiated, and I, for one, am very wary since we know Iran wants to have nuclear access and the U.S. wants to block it. I just don’t see what a 60-day cooling period for negotiation will do. It will push the U.S. closer to midterm elections and make Trump less willing to engage in conflict with Iran, which is likely to remain intransigent on this issue of nuclear access. I view this as the eye of a hurricane, a period in which there will be calm, with the potential for a reset of confrontation down the road, say 60 days on.

Economy in Brief

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ISM Index Below 50

U.S. Construction Spending Rose Slightly

U.S. Personal Consumption & Prices Firm, Income Light

Service Sector Hits the Skids in France

UK Consumer Confidence Continues to Plunge

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U.S. Personal Consumption & Prices Firm, Income Light

U.S. Personal Consumption & Prices Firm, Income Light