Robert Brusca

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070830b.jpg" width="353">
In early 1990 and again in early 2002, Italy scored its highest readings on this index. But since 2002 confidence has dropped. As the Euro area picked up, Italy&#146;s confidence also recovered but could barely get half-way back to its former peak at the end of 2006 and has since experienced back-sliding. The backsliding continues.
The confidence reading by consumers is only in the bottom third of its range of values since 1990. It has only been weaker in 1992-93, in the previous slowdown in late 2003-2004 and then in a short-lived bout of weakness in 1996. The weakening at this juncture is part of an established trend and so is more worrisome. 
The overall situation over the next 12 months assesses out as in the bottom 8 percentile of is range. Unemployment appears more likely to respondents, in the top quarter of its range. Households put their past 12-month and future 12-month household financial situation in the bottom 25 percentile of its range. They say past savings were in the top 10% of their range but see savings prospects ahead in the bottom 10%. The purchase environment is in the bottom 40% of its range but ahead consumers expect it to be in the bottom 16 percentile.
Clearly, Italian consumers are not happy campers. They see many challenges and are having a harder time of it than other large Euro economies such as Germany and France. Italy, it seems, has lot of work to do. There is no longer a lira to depreciate when things get tough.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
 Italy ISAE Consumer Confidence
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td colspan="6">Since January 1999</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td> Aug-07</td>
<td> Jul-07</td>
<td> Jun-07</td>
<td> May-07</td>
<td> Percentile</td>
<td> Rank</td>
<td> Max</td>
<td> Min</td>
<td> Range</td>
<td> Mean</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Confidence</td>
<td>106.5</td>
<td>107.4</td>
<td>107.2</td>
<td>109.4</td>
<td>31.6</td>
<td>68</td>
<td>127</td>
<td>97</td>
<td>30</td>
<td>111</td>
</tr>
<tr>
<td class="firstcol"> Last 12 months</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">OVERALL SITUATION</td>
<td>-57</td>
<td>-59</td>
<td>-60</td>
<td>-52</td>
<td>42.6</td>
<td>48</td>
<td>-22</td>
<td>-83</td>
<td>61</td>
<td>-54</td>
</tr>
<tr class="odd">
<td class="firstcol">PRICE TRENDS</td>
<td>-25</td>
<td>-26</td>
<td>-27.5</td>
<td>-24.5</td>
<td>24.0</td>
<td>75</td>
<td>4</td>
<td>-34</td>
<td>38</td>
<td>-16</td>
</tr>
<tr>
<td class="firstcol"> Next 12months</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">OVERALL SITUATION</td>
<td>-29</td>
<td>-25</td>
<td>-22</td>
<td>-18</td>
<td>8.6</td>
<td>93</td>
<td>24</td>
<td>-34</td>
<td>58</td>
<td>-12</td>
</tr>
<tr class="odd">
<td class="firstcol">PRICE TRENDS</td>
<td>22.5</td>
<td>18.5</td>
<td>19</td>
<td>17.5</td>
<td>36.9</td>
<td>46</td>
<td>49</td>
<td>7</td>
<td>42</td>
<td>23</td>
</tr>
<tr class="odd">
<td class="firstcol">UNEMPLOYMENT</td>
<td>0</td>
<td>-3</td>
<td>2</td>
<td>-5</td>
<td>76.9</td>
<td>21</td>
<td>9</td>
<td>-30</td>
<td>39</td>
<td>-6</td>
</tr>
<tr class="odd">
<td class="firstcol">HOUSEHOLD BUDGET</td>
<td>7</td>
<td>4</td>
<td>-1</td>
<td>3</td>
<td>23.5</td>
<td>79</td>
<td>33</td>
<td>-1</td>
<td>34</td>
<td>15</td>
</tr>
<tr>
<td class="firstcol"> HOUSEHOLD FIN SITUATION</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Last 12 months</td>
<td>-37</td>
<td>-34</td>
<td>-40</td>
<td>-35</td>
<td>25.0</td>
<td>65</td>
<td>-7</td>
<td>-47</td>
<td>40</td>
<td>-28</td>
</tr>
<tr class="odd">
<td class="firstcol">Next12 months</td>
<td>-10</td>
<td>-10</td>
<td>-9</td>
<td>-10</td>
<td>25.0</td>
<td>96</td>
<td>14</td>
<td>-18</td>
<td>32</td>
<td>-1</td>
</tr>
<tr>
<td class="firstcol"> HOUSEHOLD SAVINGS</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Current</td>
<td>55</td>
<td>54</td>
<td>59</td>
<td>58</td>
<td>89.7</td>
<td>6</td>
<td>59</td>
<td>20</td>
<td>39</td>
<td>38</td>
</tr>
<tr class="odd">
<td class="firstcol">Future</td>
<td>-35</td>
<td>-34</td>
<td>-33</td>
<td>-28</td>
<td>10.3</td>
<td>97</td>
<td>-9</td>
<td>-38</td>
<td>29</td>
<td>-23</td>
</tr>
<tr>
<td class="firstcol"> MAJOR Purchases</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Current</td>
<td>-41</td>
<td>-39</td>
<td>-40</td>
<td>-46</td>
<td>38.1</td>
<td>42</td>
<td>-15</td>
<td>-57</td>
<td>42</td>
<td>-40</td>
</tr>
<tr class="odd">
<td class="firstcol">Future</td>
<td>-68</td>
<td>-68</td>
<td>-63</td>
<td>-71</td>
<td>16.1</td>
<td>74</td>
<td>-42</td>
<td>-73</td>
<td>31</td>
<td>-62</td>
</tr>
<tr class="odd">
<td colspan="11">Total number of months: 100</td>
</tr>
</tbody>
</table>
</body>
</html>

In early 1990 and again in early 2002, Italy scored its highest readings on this index. But since 2002 confidence has dropped. As the Euro area picked up, Italys confidence also recovered but could barely get half-way back to its [...]

Consumer Confidence is Retreating in Italy

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070830a.jpg" width="353">
Japan retail sales are mostly lower across the board. 
Special factors have hit the Japanese consumer to be sure. There was a radiation leak at a nuclear plant that turned out to be worse that was first reported. And then a power shortage hit. Bad weather has interrupted the consumer. But through it all wages have remained stagnant and the consumer&#146;s fundamentals have also failed to improve. So the sharp drop in consumer spending is not simply something to dismiss as due to some of these rogue factors that have haunted the consumer. The consumer may be feeling real pressure. In addition Japan is closely linked to the US economy and next month it will be interesting to see if Japanese moods and spending patterns are affected by the financial turbulence we have seen. With such weak spending it is hard to see why the BOJ would still be considering a rate hike. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Japan Retail Sales Trends
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jul-07</td>
<td>Jun-07</td>
<td>May-07</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Yr-Ago</td>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>-2.6%</td>
<td>-0.4%</td>
<td>0.4%</td>
<td>-10.4%</td>
<td>-6.0%</td>
<td>-2.1%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Motor Vehicles</td>
<td>-0.4%</td>
<td>-2.5%</td>
<td>-0.1%</td>
<td>-11.3%</td>
<td>-6.9%</td>
<td>-4.8%</td>
<td>-11.1%</td>
</tr>
<tr>
<td class="firstcol">Food &amp; Beverage</td>
<td>-0.8%</td>
<td>-1.2%</td>
<td>0.1%</td>
<td>-7.3%</td>
<td>-2.5%</td>
<td>-0.7%</td>
<td>-0.4%</td>
</tr>
<tr>
<td class="firstcol">Fabric apparel &amp; access</td>
<td>-8.2%</td>
<td>0.4%</td>
<td>0.0%</td>
<td>-27.7%</td>
<td>-11.8%</td>
<td>-10.0%</td>
<td>-8.6%</td>
</tr>
<tr>
<td class="firstcol">Rest of Retail</td>
<td>-3.4%</td>
<td>0.4%</td>
<td>0.7%</td>
<td>-9.0%</td>
<td>-6.9%</td>
<td>-1.1%</td>
<td>4.5%</td>
</tr>
</tbody>
</table>
</body>
</html>

Japan retail sales are mostly lower across the board. Special factors have hit the Japanese consumer to be sure. There was a radiation leak at a nuclear plant that turned out to be worse that was first reported. And then a power [...]

Japan Retail Sales Drop Sharply

Carol Stone, CBE

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>

 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070830c.jpg" width="353">
U.S. real GDP growth during 2Q 2007 was revised higher to 4.0% (AR) from the advance report of 3.4% growth. The figure about matched consensus expectations for a 4.0 to 4.1% rise.
Reported for the first time, 2Q profits (so-called operating profits, with IVA and CCAdj) advanced 6.4%; weakness in the prior three quarters means the year/year growth was just 4.5%. Profits at U.S. nonfinancial corporations grew just 3.2% and they are below Q2 2006 by 1.4%. Financial companies saw good gains, 12.1% in the quarter, producing 5.4% from a year ago. Earnings from foreign operations posted a 5.4% increase, yielding 21.1% year/year.
Growth in final sales to domestic purchasers was revised to 2.2% from 1.7% initially reported.
Growth in business fixed investment was revised higher to an 11.1% (4.1% y/y) rate, from 8.1% reported last month. Spending both on structures and on equipment &amp; software was enlarged, structures to 27.2% from 22.1% and equipment to 4.3% from just 2.3% in last month&#39;s tally.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070830e.jpg" width="353">
Growth in real personal consumption expenditures was changed little at 1.4% versus 1.3%. Durables spending was cut to 0.4% growth from 1.6% last month, but nondurable goods showed only a 0.1% decline compared with 0.8% down reported before. Services were also reduced, to 0.6% growth from 2.2% showing earlier.
The decline in residential investment was deepened to 11.6% from 9.3%. The year/year change is now -16.4%, virtually the same size loss as in Q1.
Real consumption and investment spending by governments grew 4.1%, down marginally from 4.2% in the previous report.
Inventories added 0.2 percentage points to GDP growth, the same as shown before, while the contribution of net exports was raised to 1.4 percentage points from 1.2 percentage points indicated before and a nice turnaround from Q1&#39;s 0.5 percentage point drag. Exports grew 7.6% and imports decreased 3.2%. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070830d.jpg" width="353">
The rise in the GDP chain price index was unrevised at 2.7%, in line with the average over the last year. The domestic final sales price deflator grew 3.8% (2.5% y/y). Consumer prices less food &amp; energy rose just 1.3% (2.0% y/y), initially reported at 1.4%.

<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/@E7/@E701/@E701.HTM">Chained 2000$, % AR</a></th>
<th scope="col">2Q &#39;07 (Prelim.)</th>
<th scope="col">2Q &#39;07 (Advance)</th>
<th scope="col">1Q &#39;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 class="odd">
<td class="firstcol">GDP</td>
<td>4.0</td>
<td>3.4</td>
<td>0.6</td>
<td>1.9</td>
<td>2.9</td>
<td>3.1</td>
<td>3.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>0.2</td>
<td>0.2</td>
<td>-0.7</td>
<td>-0.4</td>
<td>0.1</td>
<td>-0.2</td>
<td>0.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>3.7</td>
<td>3.2</td>
<td>1.3</td>
<td>2.4</td>
<td>2.8</td>
<td>3.3</td>
<td>3.3</td>
</tr>
<tr>
<td class="firstcol">Foreign Trade Effect</td>
<td>1.4</td>
<td>&nbsp;1.2</td>
<td>-0.5</td>
<td>0.5</td>
<td>-0.1</td>
<td>-0.2</td>
<td>-0.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>2.2</td>
<td>1.9</td>
<td>1.7</td>
<td>1.8</td>
<td>2.7</td>
<td>3.3</td>
<td>3.8</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>2.7</td>
<td>2.7</td>
<td>4.2</td>
<td>2.8</td>
<td>2.6</td>
<td>1.7</td>
<td>2.1</td>
</tr>
</tbody>
</table>
Consumer Confidence is Retreating in Italy 
by <a href="/comment/Brusca.html">Robert Brusca</a> August 30, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070830b.jpg" width="353">
In early 1990 and again in early 2002, Italy scored its highest readings on this index. But since 2002 confidence has dropped. As the Euro area picked up, Italy&#146;s confidence also recovered but could barely get half-way back to its former peak at the end of 2006 and has since experienced back-sliding. The backsliding continues.
The confidence reading by consumers is only in the bottom third of its range of values since 1990. It has only been weaker in 1992-93, in the previous slowdown in late 2003-2004 and then in a short-lived bout of weakness in 1996. The weakening at this juncture is part of an established trend and so is more worrisome. 
The overall situation over the next 12 months assesses out as in the bottom 8 percentile of is range. Unemployment appears more likely to respondents, in the top quarter of its range. Households put their past 12-month and future 12-month household financial situation in the bottom 25 percentile of its range. They say past savings were in the top 10% of their range but see savings prospects ahead in the bottom 10%. The purchase environment is in the bottom 40% of its range but ahead consumers expect it to be in the bottom 16 percentile.
Clearly, Italian consumers are not happy campers. They see many challenges and are having a harder time of it than other large Euro economies such as Germany and France. Italy, it seems, has lot of work to do. There is no longer a lira to depreciate when things get tough.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
 Italy ISAE Consumer Confidence
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td colspan="6">Since January 1999</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td> Aug-07</td>
<td> Jul-07</td>
<td> Jun-07</td>
<td> May-07</td>
<td> Percentile</td>
<td> Rank</td>
<td> Max</td>
<td> Min</td>
<td> Range</td>
<td> Mean</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Confidence</td>
<td>106.5</td>
<td>107.4</td>
<td>107.2</td>
<td>109.4</td>
<td>31.6</td>
<td>68</td>
<td>127</td>
<td>97</td>
<td>30</td>
<td>111</td>
</tr>
<tr>
<td class="firstcol"> Last 12 months</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">OVERALL SITUATION</td>
<td>-57</td>
<td>-59</td>
<td>-60</td>
<td>-52</td>
<td>42.6</td>
<td>48</td>
<td>-22</td>
<td>-83</td>
<td>61</td>
<td>-54</td>
</tr>
<tr class="odd">
<td class="firstcol">PRICE TRENDS</td>
<td>-25</td>
<td>-26</td>
<td>-27.5</td>
<td>-24.5</td>
<td>24.0</td>
<td>75</td>
<td>4</td>
<td>-34</td>
<td>38</td>
<td>-16</td>
</tr>
<tr>
<td class="firstcol"> Next 12months</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">OVERALL SITUATION</td>
<td>-29</td>
<td>-25</td>
<td>-22</td>
<td>-18</td>
<td>8.6</td>
<td>93</td>
<td>24</td>
<td>-34</td>
<td>58</td>
<td>-12</td>
</tr>
<tr class="odd">
<td class="firstcol">PRICE TRENDS</td>
<td>22.5</td>
<td>18.5</td>
<td>19</td>
<td>17.5</td>
<td>36.9</td>
<td>46</td>
<td>49</td>
<td>7</td>
<td>42</td>
<td>23</td>
</tr>
<tr class="odd">
<td class="firstcol">UNEMPLOYMENT</td>
<td>0</td>
<td>-3</td>
<td>2</td>
<td>-5</td>
<td>76.9</td>
<td>21</td>
<td>9</td>
<td>-30</td>
<td>39</td>
<td>-6</td>
</tr>
<tr class="odd">
<td class="firstcol">HOUSEHOLD BUDGET</td>
<td>7</td>
<td>4</td>
<td>-1</td>
<td>3</td>
<td>23.5</td>
<td>79</td>
<td>33</td>
<td>-1</td>
<td>34</td>
<td>15</td>
</tr>
<tr>
<td class="firstcol"> HOUSEHOLD FIN SITUATION</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Last 12 months</td>
<td>-37</td>
<td>-34</td>
<td>-40</td>
<td>-35</td>
<td>25.0</td>
<td>65</td>
<td>-7</td>
<td>-47</td>
<td>40</td>
<td>-28</td>
</tr>
<tr class="odd">
<td class="firstcol">Next12 months</td>
<td>-10</td>
<td>-10</td>
<td>-9</td>
<td>-10</td>
<td>25.0</td>
<td>96</td>
<td>14</td>
<td>-18</td>
<td>32</td>
<td>-1</td>
</tr>
<tr>
<td class="firstcol"> HOUSEHOLD SAVINGS</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Current</td>
<td>55</td>
<td>54</td>
<td>59</td>
<td>58</td>
<td>89.7</td>
<td>6</td>
<td>59</td>
<td>20</td>
<td>39</td>
<td>38</td>
</tr>
<tr class="odd">
<td class="firstcol">Future</td>
<td>-35</td>
<td>-34</td>
<td>-33</td>
<td>-28</td>
<td>10.3</td>
<td>97</td>
<td>-9</td>
<td>-38</td>
<td>29</td>
<td>-23</td>
</tr>
<tr>
<td class="firstcol"> MAJOR Purchases</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Current</td>
<td>-41</td>
<td>-39</td>
<td>-40</td>
<td>-46</td>
<td>38.1</td>
<td>42</td>
<td>-15</td>
<td>-57</td>
<td>42</td>
<td>-40</td>
</tr>
<tr class="odd">
<td class="firstcol">Future</td>
<td>-68</td>
<td>-68</td>
<td>-63</td>
<td>-71</td>
<td>16.1</td>
<td>74</td>
<td>-42</td>
<td>-73</td>
<td>31</td>
<td>-62</td>
</tr>
<tr class="odd">
<td colspan="11">Total number of months: 100</td>
</tr>
</tbody>
</table>
Japan Retail Sales Drop Sharply 
by <a href="/comment/Brusca.html">Robert Brusca</a> August 30, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070830a.jpg" width="353">
Japan retail sales are mostly lower across the board. 
Special factors have hit the Japanese consumer to be sure. There was a radiation leak at a nuclear plant that turned out to be worse that was first reported. And then a power shortage hit. Bad weather has interrupted the consumer. But through it all wages have remained stagnant and the consumer&#146;s fundamentals have also failed to improve. So the sharp drop in consumer spending is not simply something to dismiss as due to some of these rogue factors that have haunted the consumer. The consumer may be feeling real pressure. In addition Japan is closely linked to the US economy and next month it will be interesting to see if Japanese moods and spending patterns are affected by the financial turbulence we have seen. With such weak spending it is hard to see why the BOJ would still be considering a rate hike. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Japan Retail Sales Trends
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jul-07</td>
<td>Jun-07</td>
<td>May-07</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Yr-Ago</td>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>-2.6%</td>
<td>-0.4%</td>
<td>0.4%</td>
<td>-10.4%</td>
<td>-6.0%</td>
<td>-2.1%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Motor Vehicles</td>
<td>-0.4%</td>
<td>-2.5%</td>
<td>-0.1%</td>
<td>-11.3%</td>
<td>-6.9%</td>
<td>-4.8%</td>
<td>-11.1%</td>
</tr>
<tr>
<td class="firstcol">Food &amp; Beverage</td>
<td>-0.8%</td>
<td>-1.2%</td>
<td>0.1%</td>
<td>-7.3%</td>
<td>-2.5%</td>
<td>-0.7%</td>
<td>-0.4%</td>
</tr>
<tr>
<td class="firstcol">Fabric apparel &amp; access</td>
<td>-8.2%</td>
<td>0.4%</td>
<td>0.0%</td>
<td>-27.7%</td>
<td>-11.8%</td>
<td>-10.0%</td>
<td>-8.6%</td>
</tr>
<tr>
<td class="firstcol">Rest of Retail</td>
<td>-3.4%</td>
<td>0.4%</td>
<td>0.7%</td>
<td>-9.0%</td>
<td>-6.9%</td>
<td>-1.1%</td>
<td>4.5%</td>
</tr>
</tbody>
</table>


</html>

U.S. real GDP growth during 2Q 2007 was revised higher to 4.0% (AR) from the advance report of 3.4% growth. The figure about matched consensus expectations for a 4.0 to 4.1% rise. Reported for the first time, 2Q profits (so-called [...]

US GDP Growth Revised Up, Profit Growth Slowed

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070829b.jpg" width="353">
Swedish consumers and business leaders are maintaining extraordinary levels of confidence this summer, although the National Institute for Economic Research monthly survey results did ease a bit for August, reported today. The total &quot;economic tendency&quot; measure stands at 112.3, where the long-run average since 1996 equals 100. The August figure is 3.4 points less than July&#39;s 115.7. A recent high is 116.9 in April, and the all-time high was 118.2 in March 2000, at the peak of the tech boom.
Both the consumer and the business surveys have shared in the recent strength. Consumer confidence had a positive balance in August of 19.7%. It was 21.3% in July and its recent high was 23% in April. There are two divisions of this index, the &quot;macro&quot; and the &quot;micro&quot;. The questions in the macro set include opinions on the overall economy for the coming year and on the unemployment rate. The micro questions ask about the current condition and prospects for personal finances and about whether respondents believe this is a good time to make major purchases and if they plan to increase major purchases in coming months. As we see, people&#39;s views of the macro economy swing widely, but they see their personal situation in a pretty steady light. So the currently less buoyant readings on the &quot;micro&quot; indicator don&#39;t suggest a weak consumer outlook, but one instead that sees the wider economy as relatively strong.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070829c.jpg" width="353">
The industry survey also sees much of the economy doing well. Traditional manufacturing looks at first to be an exception with a mere +5 reading, but the industry detail shows strength in key products Sweden is known for: machinery, electrical equipment and transportation equipment. Other European producers of these items have also seen good demand recently. Swedish retailing and service industries have been steady at a high level. The real standout is construction. Its August reading of 47% ties with June as the all-time high. No individual industry gauge is a record, but all show favorable results simultaneously, producing the strength in the overall indicator: order books are expanding, the volume of construction produced and anticipated is large and the number of employees is increasing at almost the largest number of firms ever.
So participants in the Swedish economy appear optimistic presently. Its stock market reflects this, with stock prices up 30% in the last few weeks from a year ago. This is similar to German stocks, which have gains of 33%. Both stock markets are less ebullient than they were back in July, but given the upheaval in other nations&#39; stock markets, such backtracking is hardly surprising. What is impressive is the sustained and widespread favorable outlook for Sweden.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070829d.jpg" width="353">
Data on Sweden are in Haver&#39;s NORDIC database. The share prices come from the MSCI databases, which consist of the Morgan Stanley Capital International indexes. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">SWEDEN (% Bal, ex as noted)</th>
<th scope="col">Aug 2007</th>
<th scope="col">July 2007</th>
<th scope="col">June 2007</th>
<th scope="col">Year Ago</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">Economic Tendency (100=long run avg.)</td>
<td>112.3</td>
<td>115.7</td>
<td>114.7</td>
<td>109.3</td>
<td>109.4</td>
<td>101.8</td>
<td>102.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Confidence</td>
<td>19.7</td>
<td>21.3</td>
<td>21.0</td>
<td>16.0</td>
<td>17.1</td>
<td>10.5</td>
<td>8.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Micro Questions</td>
<td>14.7</td>
<td>17.2</td>
<td>15.9</td>
<td>15.9</td>
<td>14.9</td>
<td>14.5</td>
<td>12.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Macro Questions</td>
<td>24.9</td>
<td>26.4</td>
<td>27.0</td>
<td>8.0</td>
<td>11.5</td>
<td>-10.7</td>
<td>-12.5</td>
</tr>
<tr>
<td colspan="8">Business Tendency:</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>5</td>
<td>9</td>
<td>8</td>
<td>5</td>
<td>4</td>
<td>-6</td>
<td>2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Construction</td>
<td>47</td>
<td>45</td>
<td>47</td>
<td>20</td>
<td>22</td>
<td>9</td>
<td>-20</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Retail Trade</td>
<td>30</td>
<td>26</td>
<td>21</td>
<td>24</td>
<td>28</td>
<td>8</td>
<td>2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Services</td>
<td>42</td>
<td>44</td>
<td>40</td>
<td>38</td>
<td>37</td>
<td>33</td>
<td>23</td>
</tr>
</tbody>
</table>
</body>
</html>

Swedish consumers and business leaders are maintaining extraordinary levels of confidence this summer, although the National Institute for Economic Research monthly survey results did ease a bit for August, reported today. The total [...]

Confidence Measures in Sweden Hover Near All-Time Highs

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>

 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070829a.jpg" width="353">
A look at global money and credit trends should be somewhat reassuring to those worried about the recent stock market downturn. Evidence shows that year/year money growth in countries/regions all around the globe had been quite plentiful coming into this period of financial market stress. 
 In the UK M4 growth has hovered at a 13% pace. 
 In the Euro area money supply has accelerated to over 11%. 
 In Japan money growth edged higher to 2.5%. 
 In the US growth had flattened at 6%. 
Among major countries only the US shows a clear pattern of sequential growth rates becoming weaker (significantly weaker at that) as the pace of growth stepped down in its rate steadily from 3 years to 2 years, and from that to one year, then to six months and then to three months - with the three-month pace at just 3.6%. That is too low to fuel what has been strong nominal GDP growth in Q2 in the US (these figures are all through July 2007). But money generally acts with a lag on the real sector so it&#146;s hard to blame the market problems on a slowing in money growth that occurs only in the US.
In the Euro area in particular, credit to residents and loan growth have remained strong and along with money (M2) have slightly accelerated through July despite some tepid steps by the ECB to hike rates.
On balance, there is no sense of there being deficient liquidity among this grouping of major global money centers. The liquidity problems markets now face are all of their own making, not due to the actions of the central banks.
The lesser ease of transactability is a function of the uncertainty over the value of some key assets in this system - that is far different from it being a quantity problem. There is no quantity problem. What there is, is a quality and an informational problem.
Until there is a way to clearly identify the troubled assets and to establish within reasonable grounds their true market value, markets and certain asset classes in particular &#150; as well those who own them - will continue to suffer this liquidity problem of their own making. It&#146;s a micro- not a macro-liquidity problem. Don&#146;t blame the central banks.
Central banks rightly worry about the other sort of liquidity problem right now - have they made too much? The levels of the growth rates in the table below sure argue for the answer &#145;yes&#146; to that question everywhere but in Japan &#150; there, of course, there are special things in play. Unfortunately this is the wrong time for central banks to be taking up this fight.
Only the Fed seems to have taken action to date to squeeze some of the excess liquidity from the market. And with that, markets now are begging for the Fed to re-inject what it has taken out (or, more correctly, slowed down its injecting).
It&#146;s a curious time for markets and central bankers alike.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Look at Global and Euro Liquidity Trends
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">SAARl</td>
<td colspan="3">Euro Measures (E13): Money &amp; Credit</td>
<td colspan="3">G-10 Major Markets: Money</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&#128;-Supply M2</td>
<td>Credit: Res</td>
<td>Loans</td>
<td>$US M2</td>
<td>&pound;UK M4</td>
<td>&yen;Japan M2+CDs</td>
</tr>
<tr>
<td class="firstcol">3-MO</td>
<td>11.4%</td>
<td>12.8%</td>
<td>11.6%</td>
<td>3.6%</td>
<td>13.1%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">6-MO</td>
<td>11.0%</td>
<td>12.7%</td>
<td>11.3%</td>
<td>5.6%</td>
<td>13.6%</td>
<td>2.0%</td>
</tr>
<tr>
<td class="firstcol">12-MO</td>
<td>10.6%</td>
<td>11.6%</td>
<td>10.7%</td>
<td>6.1%</td>
<td>13.0%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">2Yr</td>
<td>6.2%</td>
<td>11.5%</td>
<td>10.8%</td>
<td>5.4%</td>
<td>13.0%</td>
<td>1.4%</td>
</tr>
<tr>
<td class="firstcol">3Yr</td>
<td>13.9%</td>
<td>16.3%</td>
<td>15.4%</td>
<td>7.5%</td>
<td>19.0%</td>
<td>2.2%</td>
</tr>
</tbody>
</table>


</html>

A look at global money and credit trends should be somewhat reassuring to those worried about the recent stock market downturn. Evidence shows that year/year money growth in countries/regions all around the globe had been quite [...]

World Liquidity

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>

 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070829b.jpg" width="353">
Swedish consumers and business leaders are maintaining extraordinary levels of confidence this summer, although the National Institute for Economic Research monthly survey results did ease a bit for August, reported today. The total &quot;economic tendency&quot; measure stands at 112.3, where the long-run average since 1996 equals 100. The August figure is 3.4 points less than July&#39;s 115.7. A recent high is 116.9 in April, and the all-time high was 118.2 in March 2000, at the peak of the tech boom.
Both the consumer and the business surveys have shared in the recent strength. Consumer confidence had a positive balance in August of 19.7%. It was 21.3% in July and its recent high was 23% in April. There are two divisions of this index, the &quot;macro&quot; and the &quot;micro&quot;. The questions in the macro set include opinions on the overall economy for the coming year and on the unemployment rate. The micro questions ask about the current condition and prospects for personal finances and about whether respondents believe this is a good time to make major purchases and if they plan to increase major purchases in coming months. As we see, people&#39;s views of the macro economy swing widely, but they see their personal situation in a pretty steady light. So the currently less buoyant readings on the &quot;micro&quot; indicator don&#39;t suggest a weak consumer outlook, but one instead that sees the wider economy as relatively strong.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070829c.jpg" width="353">
The industry survey also sees much of the economy doing well. Traditional manufacturing looks at first to be an exception with a mere +5 reading, but the industry detail shows strength in key products Sweden is known for: machinery, electrical equipment and transportation equipment. Other European producers of these items have also seen good demand recently. Swedish retailing and service industries have been steady at a high level. The real standout is construction. Its August reading of 47% ties with June as the all-time high. No individual industry gauge is a record, but all show favorable results simultaneously, producing the strength in the overall indicator: order books are expanding, the volume of construction produced and anticipated is large and the number of employees is increasing at almost the largest number of firms ever.
So participants in the Swedish economy appear optimistic presently. Its stock market reflects this, with stock prices up 30% in the last few weeks from a year ago. This is similar to German stocks, which have gains of 33%. Both stock markets are less ebullient than they were back in July, but given the upheaval in other nations&#39; stock markets, such backtracking is hardly surprising. What is impressive is the sustained and widespread favorable outlook for Sweden.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070829d.jpg" width="353">
Data on Sweden are in Haver&#39;s NORDIC database. The share prices come from the MSCI databases, which consist of the Morgan Stanley Capital International indexes. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">SWEDEN (% Bal, ex as noted)</th>
<th scope="col">Aug 2007</th>
<th scope="col">July 2007</th>
<th scope="col">June 2007</th>
<th scope="col">Year Ago</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">Economic Tendency (100=long run avg.)</td>
<td>112.3</td>
<td>115.7</td>
<td>114.7</td>
<td>109.3</td>
<td>109.4</td>
<td>101.8</td>
<td>102.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Confidence</td>
<td>19.7</td>
<td>21.3</td>
<td>21.0</td>
<td>16.0</td>
<td>17.1</td>
<td>10.5</td>
<td>8.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Micro Questions</td>
<td>14.7</td>
<td>17.2</td>
<td>15.9</td>
<td>15.9</td>
<td>14.9</td>
<td>14.5</td>
<td>12.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Macro Questions</td>
<td>24.9</td>
<td>26.4</td>
<td>27.0</td>
<td>8.0</td>
<td>11.5</td>
<td>-10.7</td>
<td>-12.5</td>
</tr>
<tr>
<td colspan="8">Business Tendency:</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>5</td>
<td>9</td>
<td>8</td>
<td>5</td>
<td>4</td>
<td>-6</td>
<td>2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Construction</td>
<td>47</td>
<td>45</td>
<td>47</td>
<td>20</td>
<td>22</td>
<td>9</td>
<td>-20</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Retail Trade</td>
<td>30</td>
<td>26</td>
<td>21</td>
<td>24</td>
<td>28</td>
<td>8</td>
<td>2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Services</td>
<td>42</td>
<td>44</td>
<td>40</td>
<td>38</td>
<td>37</td>
<td>33</td>
<td>23</td>
</tr>
</tbody>
</table>
World Liquidity 
by <a href="/comment/Brusca.html">Robert Brusca</a> August 29, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070829a.jpg" width="353">
A look at global money and credit trends should be somewhat reassuring to those worried about the recent stock market downturn. Evidence shows that year/year money growth in countries/regions all around the globe had been quite plentiful coming into this period of financial market stress. 
 In the UK M4 growth has hovered at a 13% pace. 
 In the Euro area money supply has accelerated to over 11%. 
 In Japan money growth edged higher to 2.5%. 
 In the US growth had flattened at 6%. 
Among major countries only the US shows a clear pattern of sequential growth rates becoming weaker (significantly weaker at that) as the pace of growth stepped down in its rate steadily from 3 years to 2 years, and from that to one year, then to six months and then to three months - with the three-month pace at just 3.6%. That is too low to fuel what has been strong nominal GDP growth in Q2 in the US (these figures are all through July 2007). But money generally acts with a lag on the real sector so it&#146;s hard to blame the market problems on a slowing in money growth that occurs only in the US.
In the Euro area in particular, credit to residents and loan growth have remained strong and along with money (M2) have slightly accelerated through July despite some tepid steps by the ECB to hike rates.
On balance, there is no sense of there being deficient liquidity among this grouping of major global money centers. The liquidity problems markets now face are all of their own making, not due to the actions of the central banks.
The lesser ease of transactability is a function of the uncertainty over the value of some key assets in this system - that is far different from it being a quantity problem. There is no quantity problem. What there is, is a quality and an informational problem.
Until there is a way to clearly identify the troubled assets and to establish within reasonable grounds their true market value, markets and certain asset classes in particular &#150; as well those who own them - will continue to suffer this liquidity problem of their own making. It&#146;s a micro- not a macro-liquidity problem. Don&#146;t blame the central banks.
Central banks rightly worry about the other sort of liquidity problem right now - have they made too much? The levels of the growth rates in the table below sure argue for the answer &#145;yes&#146; to that question everywhere but in Japan &#150; there, of course, there are special things in play. Unfortunately this is the wrong time for central banks to be taking up this fight.
Only the Fed seems to have taken action to date to squeeze some of the excess liquidity from the market. And with that, markets now are begging for the Fed to re-inject what it has taken out (or, more correctly, slowed down its injecting).
It&#146;s a curious time for markets and central bankers alike.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Look at Global and Euro Liquidity Trends
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">SAARl</td>
<td colspan="3">Euro Measures (E13): Money &amp; Credit</td>
<td colspan="3">G-10 Major Markets: Money</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&#128;-Supply M2</td>
<td>Credit: Residential</td>
<td>Loans</td>
<td>$US M2</td>
<td>&pound;UK M4</td>
<td>&yen;Japan M2+CDs</td>
</tr>
<tr>
<td class="firstcol">3-MO</td>
<td>11.4%</td>
<td>12.8%</td>
<td>11.6%</td>
<td>3.6%</td>
<td>13.1%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">6-MO</td>
<td>11.0%</td>
<td>12.7%</td>
<td>11.3%</td>
<td>5.6%</td>
<td>13.6%</td>
<td>2.0%</td>
</tr>
<tr>
<td class="firstcol">12-MO</td>
<td>10.6%</td>
<td>11.6%</td>
<td>10.7%</td>
<td>6.1%</td>
<td>13.0%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">2Yr</td>
<td>6.2%</td>
<td>11.5%</td>
<td>10.8%</td>
<td>5.4%</td>
<td>13.0%</td>
<td>1.4%</td>
</tr>
<tr>
<td class="firstcol">3Yr</td>
<td>13.9%</td>
<td>16.3%</td>
<td>15.4%</td>
<td>7.5%</td>
<td>19.0%</td>
<td>2.2%</td>
</tr>
</tbody>
</table>


</html>

Louise Curley

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070828g.jpg" width="353">
The results of the IFO August survey of the opinions of industrialists, wholesalers and retail traders show that while business is slightly more confident about the current situation, it is somewhat less confident about the six month&#39;s outlook. Optimist on the outlook exceeded pessimist by 3.3%, down from 5.9% in July. The opinions of the business community, however, are much less pessimistic than those of the financial community, as revealed in last week&#39;s ZEW survey, that showed an excess of pessimists of 6.9% in August, down from an excess of optimists of 10.4% in July regarding the six month&#39;s outlook. The first chart compares the opinions of the business and financial communities. In general, the opinions of the financial community are much more volatile than those of the business community.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070828h.jpg" width="353">
The IFO presents business expectations in terms of an index with a base year of 2000 as well as the percent balances of optimists over pessimists. The index for the entire period of its existence from January 1991 to the present is shown in the second chart, compared with the 1991-2006 average of the series. Although the expectations index has declined from 101.7 in July to 100.4 in August it is still significantly above the average.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">GERMAN BUSINESS CONFIDENCE (IFO)&nbsp;</th>
<th scope="col">Aug 07</th>
<th scope="col">Jul 07&nbsp;</th>
<th scope="col">Aug 06&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="odd">
<td class="firstcol">Current Situation</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Index 2000=100</td>
<td>111.5</td>
<td>111.3</td>
<td>108.8</td>
<td>0.2</td>
<td>2.7</td>
<td>108.4</td>
<td>94.7</td>
<td>93.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Percent Balance</td>
<td>18.6</td>
<td>18.3</td>
<td>13.3</td>
<td>0.3</td>
<td>5.3</td>
<td>12.5</td>
<td>-14.2</td>
<td>-17.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Expectations</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Index 2000=100</td>
<td>100.4</td>
<td>101.7</td>
<td>101.6</td>
<td>-1.3</td>
<td>-1.2</td>
<td>102.7</td>
<td>96.3</td>
<td>97.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Percent Balance</td>
<td>3.3</td>
<td>5.9</td>
<td>5.5</td>
<td>-2.6</td>
<td>-2.2</td>
<td>7.9</td>
<td>-5.1</td>
<td>-2.0</td>
</tr>
</tbody>
</table>
</body>
</html>

The results of the IFO August survey of the opinions of industrialists, wholesalers and retail traders show that while business is slightly more confident about the current situation, it is somewhat less confident about the six [...]

German Business Types less Pessimistic about the Outlook than Financial Types

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070828f.jpg" width="353">
In France home construction is being stimulated by new tax rules. The new fiscal incentives allow home-buyers to deduct 40% of their mortgage interest payments from taxable income during the first year of contracts signed after May 6 and 20% during the four following years. This accounts for the jump in starts in May (up by 34.2% over April) and for April&#39;s nearly 30% drop from March as demand was depressed until after the new rule took effect. This incentive should allow developers to reduce stocks of unsold units built up in 1Q. The incentives will offset rising short- and long-term interest rates. Developers surveyed in July said buyers&#39; financing had improved recently and expected this trend to continue in the near term, according to the national statistics institute Insee. The outlook for housing starts, based on permits on hand, has stabilized after a marked erosion since the start of the year. The new rule seems to play a large role in the timing of activity in French housing so far this year. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
French Housing Starts
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jul-07</td>
<td>Jun-07</td>
<td>May-07</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
</tr>
<tr>
<td class="firstcol">Starts</td>
<td>2.7%</td>
<td>4.6%</td>
<td>34.3%</td>
<td>333.2%</td>
<td>66.4%</td>
<td>30.1%</td>
</tr>
<tr>
<td class="firstcol">Permits</td>
<td>1.9%</td>
<td>-3.8%</td>
<td>11.6%</td>
<td>43.0%</td>
<td>6.0%</td>
<td>-1.3%</td>
</tr>
<tr class="odd">
<td colspan="7">3-Mo average</td>
</tr>
<tr>
<td class="firstcol">Starts</td>
<td>11.8%</td>
<td>-0.3%</td>
<td>8.3%</td>
<td>112.7%</td>
<td>45.5%</td>
<td>15.0%</td>
</tr>
<tr>
<td class="firstcol">Permits</td>
<td>2.9%</td>
<td>-6.2%</td>
<td>1.9%</td>
<td>-6.4%</td>
<td>11.5%</td>
<td>0.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

In France home construction is being stimulated by new tax rules. The new fiscal incentives allow home-buyers to deduct 40% of their mortgage interest payments from taxable income during the first year of contracts signed after May 6 [...]

French Housing Starts Jump

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

Our global data offering is unparalleled in terms of coverage, quality, and organization. We offer 290+ databases from 2500 government and private sources, a wealth of key survey and forecast data covering the world’s economies, and a robust offering of archive databases that drive machine learning for big data applications.

Optimized for precision analytics, our data is seamlessly integrated with Microsoft Office and all leading statistical packages through our DLX® software and platform independent HaverView™ website. We further offer direct database feeds, client server or cloud-based delivery, and RESTful API.


Privacy Policy

Disclaimer

Contact us

Service Health

A premier time series data platform for the global strategy, research, and quant communities. 

London

Singapore

Tokyo

New York

Economy in Brief

Viewpoints

Contact Us

Our Data

Our Products

What We Do

Our Authors

About Us

Data News

Featured Data Additions

Resources

Release Calendars

Training Center

Webinars

Newsletters

Download Software

For Clients

Live Updates

Andrew Cates

**Front-End Yields Reflect Policy Reassessment**
Against a backdrop of key central bank meetings either having just taken place or imminent, short-dated government bond yields have moved decisively higher across most major economies since the escalation of the Middle East conflict, with the sharpest increase seen in the UK. The rise in 2-year yields reflects a repricing of near-term monetary policy expectations, as markets respond to the inflationary implications of higher energy prices and the growing likelihood that central banks will delay easing cycles. Moves have been most pronounced in economies where inflation is expected to be more persistent—most notably the UK—while increases have been more modest in the US and particularly Japan, where policy normalisation remains gradual. In effect, the front end of the curve is signalling a shift away from the “rate cuts soon” narrative that prevailed earlier in the year toward a more cautious, higher-for-longer policy outlook.

260430Z1.jpg

**US Recession Risks Remain Contained—For Now**
Despite the recent deterioration in the macro backdrop, real-time recession risk indicators for the US remain relatively subdued. This is notable given the combination of softer growth momentum, higher bond yields and heightened geopolitical risk. The nowcast—derived from a blend of high-frequency activity data and financial stress measures—has historically tended to move sharply when conditions turn, rather than drift higher gradually. That asymmetry is important in the current environment. While recession risks are not yet flashing red, past cycles suggest they can reprice abruptly, and arguably at present if energy-driven inflation were to feed much more forcefully into financial conditions or begin to weigh more materially on demand.

260430Z2.jpg

**Consumer Confidence Diverges: Europe and UK Slide, US Stabilises**
Consumer confidence has weakened across the major economies, but the deterioration has been more pronounced in the euro area and the UK than in the US. While sentiment in the US has recently edged up, it remains at relatively subdued levels. By contrast, confidence in Europe and the UK has fallen more sharply, reflecting greater exposure to higher energy costs and a more direct squeeze on real household incomes. This divergence is consistent with broader macro trends, suggesting that demand in Europe may prove more sensitive to the current shock, with weaker sentiment feeding more quickly into consumption.

260430Z3.jpg

**Euro area Credit Conditions Turn More Restrictive**
The latest ECB lending survey points to a clear tightening in credit conditions across the euro area, with banks raising lending standards for both firms and households while loan demand weakens. This combination—more restrictive supply alongside softer demand—is typically associated with a cooling in activity, particularly in interest-sensitive sectors. Recent evidence suggests that higher perceived risks, rising funding costs and geopolitical uncertainty are all weighing on banks’ willingness to lend, while weaker confidence and reduced investment appetite are dampening borrowing needs. The result is a tightening in financial conditions that is likely to amplify the broader slowdown already evident in survey data, reinforcing the more fragile growth dynamics now emerging across the region.

260430Z4.jpg

**An Intensifying AI Boom with Supply-Side Undercurrents**
Against the backdrop of surging AI-related investment, semiconductor prices are not just high—they are rising at an increasingly rapid pace. This chart shows a clear acceleration in both prices and export values, pointing to an intensifying boom in global chip demand. While this is in part a reflection of strong, structural demand, supply-side factors may also be playing a growing role. Although the Middle East is not a direct source of key chip-making minerals, it is central to the energy and petrochemical inputs that underpin semiconductor production. Ongoing geopolitical tensions are therefore likely feeding into higher costs and renewed frictions across supply chains. The combination of accelerating demand and tightening supply conditions suggests that semiconductor inflation could prove more persistent—and more globally consequential—than currently assumed.

260430Z5.jpg

**Labour Markets Reflect the AI Acceleration**
Our final chart this week highlights the extent to which the current AI boom is now feeding through into labour markets. This high-frequency indicator—based on the share of job listings containing AI-related keywords—shows a sharp and sustained increase since the widespread adoption of generative AI tools in late 2022. What began as a more traditional build-out in machine learning roles has evolved into a broader and more intense wave of hiring tied to generative AI capabilities, with demand accelerating markedly across multiple economies. The scale and persistence of this trend point to a structural shift rather than a cyclical upswing, reinforcing the view that AI is becoming an increasingly important driver of investment, productivity expectations and, potentially, broader macroeconomic dynamics.

260430Z6.jpg

Against a backdrop of persistent geopolitical tensions, firmer energy prices and a busy week of central bank meetings—including the Fed, ECB, BoE and BoJ—financial markets have remained notably resilient, even as the macro narrative has softened at the margin. The message from this week’s charts is one of growing tension beneath that surface calm. Front-end bond yields have moved higher, signalling a shift toward a more cautious, “higher-for-longer” policy outlook (chart 1). At the same time, real-time recession indicators for the United States suggest risks remain contained for now (chart 2). Consumer confidence data paint a more uneven picture, with sharper declines in the euro area and UK than in the US, highlighting regional vulnerabilities to the current energy shock (chart 3). The ECB’s latest bank lending survey reinforces this, pointing to tighter credit conditions and weaker demand—factors that are likely to weigh further on European growth (chart 4). By contrast, developments in the semiconductor sector underline a different dynamic: an intensifying global boom, with accelerating price pressures reflecting both strong AI-driven demand and emerging supply-side constraints linked indirectly to energy and logistics disruptions (chart 5). Finally, labour market data confirm that the AI surge is not merely a market narrative but a tangible structural shift, with hiring for AI-related roles accelerating across economies (chart 6). Taken together, these signals point to a more complex macro environment—one in which resilient markets coexist with softening growth, more persistent inflation risks and increasingly delicate policy trade-offs.

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/20j2LcPyLFkPvV7NrquXuj?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: Tension Beneath the Surface

Michael J. Moran

260430N.jpg

260430O.jpg

Real GDP grew at an annual rate of 2.0% in the first quarter of 2026, almost identical to the expected advance of 2.1%. The latest change was comfortably within the range of recent observations and close to the economy’s potential rate of growth. The year-over-year change totaled 2.7%, but that shift reflected what might be viewed as a special factor (robust growth in the second and third quarters that offset a trade-tariff-induced drop in 2025-Q1 GDP).

Business fixed investment was the star of the show in the first quarter, registering growth of 10.4%. Outlays for information processing equipment and software were especially strong, while outlays for industrial equipment and Research & Development contributed positively as well. Outlays for structures remained decidedly soft, dropping for the ninth consecutive quarter. Building of data centers have been vigorous, but softness in offices and manufacturing facilities has dwarfed the strength in this new area.

Federal spending surged 9.4% in Q1, but the rise reflected the reopening of most federal agencies after their closure during much of the fourth quarter. Excluding this noise, support from the federal government has been softening. Nondefense outlays peaked in the fourth quarter of 2024, and they were 6.9% shy of that total in the first quarter. Defense spending also peaked in 2024-Q4 and has eased 2.4% since then. Defense spending most likely will grow in coming quarters because of the efforts in the Middle East. Orders for defense goods have already started to rise.

Consumer spending rose 1.5% in the first quarter, a bit shy of the 2.1% pace over the four quarters of last year and less than half the rates in 2023 and 2024. Consumer spending showed signs of softening in late 2025 and January of this year, but activity picked up in February and March. Firm tax refunds might have provided a boost to household spending in the latest months. Some of the tax cuts from the One Big Beautiful Bill were applied retroactively to 2025, but withholding schedules were not adjusted last year. Thus, many households are receiving larger-than-normal tax refunds.

International trade acted as a drag on economic growth in Q1, with net exports subtracting 1.3 percentage points from the GDP increase. Exports did well in the first quarter with growth of 12.9%, but imports were even stronger with a jump of 21.4%. The real trade deficit of $1.1 trillion was noticeably smaller than the shortfall of $1.4 trillion in 2025-Q1 when importers were rushing to get goods into the US before the imposition of tariffs. Still, the trade shortfall was sizeable and its effect on growth noticeable.

The GDP data can be found in Haver’s **USECON** and **USNA** databases. **USNA** contains virtually all of the Bureau of Economic Analysis detail in the national accounts. The Action Economics consensus estimates can be found in **AS1REPNA**.

260430P.jpg

260430Q.jpg

- Robust business investment led the advance; moderate support from consumers.
- Government spending jumped with the reopening of most federal agencies.
- The trade sector remained volatile, making a sizeable negative contribution in Q1.

Q1 GDP: Weathering the Challenges; Trend-Like Growth

Sandy Batten

260430A.jpg

260430B.jpg

This monthly report contains a wealth of information concerning the state of the consumer. The anticipation ahead of today’s report centered on how much the surge in energy prices since the escalation of the US-Iran conflict in early March would push up overall PCE inflation. Prices of energy goods and services jumped 11.6% m/m not annualized in March. This was the largest monthly increase since September 2005. As a result, the headline PCE price index increased 0.7% m/m (3.5% y/y versus 2.8% y/y in February), the largest monthly gain since July 2022 but in line with expectations of the Action Economics Forecast Survey.

The core index (that is, excluding food and energy prices) rose by a more modest 0.3% m/m in March, down from a 0.4% monthly increase in February and in line with expectations. However, the yearly rate rose further to 3.2% y/y in March from 3.0% in February, well above and moving away from the Fed’s 2% target. The FOMC left its fed funds rate target unchanged at yesterday’s meeting, but some committee members dissented, opposing the implied easing bias contained in the statement. Chair Powell, in his press conference, noted that a number of members have become more concerned over the inflation outlook and the possible need for a Fed response.

Nominal personal income posted a solid 0.6% m/m (3.7% y/y) increase in March following an upwardly revised unchanged reading in February (previously -0.1% m/m). The March increase was twice the 0.3% monthly gain expected by the Action Economics Forecast Survey. However, after adjusting for inflation, real personal income slipped 0.1% m/m in March on top of a 0.4% m/m decline in February.

Employee compensation continued to be a major driver of personal income in March. It rose 0.4% m/m (4.1% y/y) in March after a 0.2% monthly increase in February. In March, proprietors’ income jumped 2.8%. This outsized increase reflected payments to farmers from the federal government’s Farmer Bridge Assistance Program. Rental income rose a solid 0.7% m/m, the same gain as in February. Income from financial assets increased 0.4% m/m following a 0.9% m/m decline in February. Personal current transfer payments edged up 0.1% m/m versus a 0.3% m/m decline in February.

Nominal consumption expenditures jumped 0.9% m/m (5.7% y/y) in March following an upwardly revised 0.6% monthly gain in February (previously +0.5% m/m). Spending on goods rose 2.0% m/m (4.5% y/y) while spending on services increased 0.4% m/m (6.3% y/y). As for overall inflation, the surge in energy prices also accounted for a large portion of the March gain in nominal spending. After adjusting for overall inflation, real PCE rose a more modest 0.2% m/m following an upwardly revised 0.3% m/m increase in February (previously +0.1% m/m). Still, the solid gains in February and March provide a strong starting point for Q2. The March level is 1.5% at an annual rate above the Q1 average. For all of Q1, real PCE rose 1.6% q/q saar.

The personal income and consumption figures are available in Haver’s **USECON** database with detail in the **USNA** database. The Action Economics forecasts are in **AS1REPNA**.

260430C.jpg

260430D.jpg

- The PCE price index jumped 0.7%, reflecting an 11.6% m/m surge in energy prices.
- The core index was up 0.3%, in line with expectations but still well above the Fed’s target.
- Personal income increased 0.6% m/m, led by a 0.4% m/m rise in compensation.
- Personal consumption jumped 0.9% m/m with a slight upward revision to February.
- However, much of the March gain in nominal consumption also reflected the jump in energy prices.
- Real consumption rose by a more modest 0.2% m/m.

Surging Energy Prices Push Up PCE Prices and Consumption in March

Kathleen Stephansen, CBE

260430A2.jpg

260430B2.jpg

Initial claims for unemployment insurance dropped by 26,000 to 189,000 in the week ending April 25, from 215,000 in the week ending April 18, revised from 214,000. The four-week average declined by 3,500 to 207,500 in the week ending April 25, from 211,000 the April 18 week, revised from 210,750. The Action Economics/Haver Analytics Survey looked for 214,000 claims to have been filed.

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—dropped by 23,000 to 1.785 million in the week ending April 18, from 1.808 million in the week ending April 11, revised from 1.821 million. The four-week moving average declined to 1.797 million in the latest week from 1.809 million in the April 11 week. The insured unemployment rate remained at 1.2% in the week of April 11. It has remained at that level since the week of November 29, 2025.

The insured unemployment rate varied greatly across individual states and territories. In the week ending April 11, the highest unemployment rates were in New Jersey (2.51%), Washington (2.25%), Massachusetts (2.21%), Rhode Island (2.10%), and California (2.06%). The lowest rates were in Florida (0.31%), Louisiana (0.32%), Arkansas, North Carolina and Mississippi (all 0.35%), Alabama (0.36%), South Dakota (0.41%) and Tennessee (0.43%). Rates in other notable states include New York (1.96%), Illinois (1.77%), Pennsylvania (1.40%), and Texas (1.04%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986.

260430C2.jpg

260430D2.jpg

- New claims dropped by 26,000 to 189,000.
- Continuing claims declined by 23,000 to 1.785 million.
- The insured unemployment rate remained at 1.2%.

U.S. Initial Unemployment Claims dropped in the Week of April 25

260430E.jpg

**Unemployment rates are stable near all-time lows for EMU**
Unemployment rates in the European Monetary Union (EMU) continued to hover at the lowest level. The EMU all-time low unemployment rate is 6.2%, and that’s the number reported for March. There have been five of these 6.2% unemployment rates monthly in the history of the monetary union.

Unemployment rates in March saw declines in five of the 12 early reporting countries: the Netherlands, Italy, Finland, Belgium, and Austria. Over the last three months, there were net declines in the unemployment rates in four countries, while year-over-year once again four countries—though a different four—showed declines in the unemployment rate.

Unemployment rates, evaluated relative to their historic standings, have a median rank standing in their 33.6 percentile. That is the median unemployment rank among these 12 countries; it shows that the unemployment rate is in the lower one-third of its historic rank. Among the 12 early reporting countries, only three failed to have unemployment rate rankings below their 30th percentile; those three are Austria with a 71.3 percentile ranking, Finland with an 80th percentile ranking, and Luxembourg with a 98.8 percentile ranking. So, there are three countries among these 12 that have relatively high unemployment rates compared to their histories, whereas the rest of the reporters have unemployment rates below their respective 30th percentiles.

260430.jpg

**Good, but not great, labor markets**
Clearly, the labor situation is in good hands; however, at the same time, inflation runs over the top of the ECB target, and with war in the Middle East and flurrying oil prices, inflation is going to climb higher. The ECB, like the Federal Reserve, finds itself in the awkward position of not wanting to raise rates because the economy is generating growth; on the other hand, growth seems somewhat fragile. The unemployment rate is low, and inflation has been overshooting, so the central bank is in a difficult position.

**Are central banks awakening from their slumber?**
Despite the good news on the unemployment front, central banks have been wary not to raise interest rates to fend off inflation. Inflation can really be described as having been moved around by financial crises and shocks going back to the great financial crisis. That shock, coupled with the losses that it created, left a legacy of inflation discipline for a very long run, basically, right into the COVID-created recession. COVID weakened economies globally as they were shut down by government policies and then inflation spurted as result of stimulative monetary action and fiscal excess. After that experience, central banks kept stimulative policies on the books and tried to coax growth out of a wounded economy and maintain low unemployment rates, while tolerating inflation that was excessive relative to their targets, but that did not accelerate and did decline slowly—at least for a while. As a result, there's now a legacy of overshooting inflation and more question marks about central banks and their backbone than central bankers want to admit as inflation rises, and as they continue to watch and postpone acting.

**ECB met and declared watchful waiting—not policy action**
At the recent meeting, the ECB policy statement admitted that “Longer-term inflation expectations remain well anchored, although inflation expectations over shorter horizons have moved up significantly.” They are following the model used in the U.S. to contend that long-term inflation expectations are still firmly anchored while they are only slipping away for the short term—a year ahead or so. However, to its credit, the ECB does refer to expectations having moved up significantly in the near term. This is something policy must be wary of, and it also must be wary that long-term expectations may have been damaged as well.

In her press conference, Christine Lagarde noted that the forward guidance from the ECB has several different elements: “There are sort of three anchors of what our reaction function is. So first of all, to remind you: target is 2% medium term, number one. Number two: symmetry. We discussed that today and we reaffirmed it. Number three: our reaction will depend on the type of deviation from target that we observe. Is it large and sustainable?”

"The increase in energy prices will keep inflation well above 2% in the near term. ⁠As the period of high energy prices extends, the likely impact on broader inflation through indirect and second-round effects intensifies. We will therefore closely monitor the size and persistence of the energy price surge, and how it feeds through to price and wage setting, inflation expectations and overall economic dynamics." (Source [here](https://www.reuters.com/business/finance/lagarde-comments-ecb-press-conference-2026-04-30/)).

**The road they kick the can down is getting narrower**
So, we are in store for more watchful waiting. Central bankers can feel that the flexibility is closing in on them. There's been a long period in which post financial crisis and post-COVID events helped to keep inflation under control, but now we're getting into a situation where it may be harder to keep control of inflation, especially since central bank credibility has been eroded by a long period of target misses. Two wars are in progress, and fiscal excess is the order of the day. So why not wait longer?

**No eager-beaver rate hikers**
No central bank seems eager to undertake this new challenge; however, they seem to be circling around the policy change and preparing to do something they haven't done in a long time, which would be to raise interest rates. Last time, in the wake of COVID, the central banks raised interest rates they waited too long to hike them, calling the situation of inflation temporary or transitory. Once again, the central banks see the oil price shock as something that is temporary; however, it's also severe, and while it's temporary, it could turn out to be ‘temporary’ but fairly long-lasting, making it harder to ignore or for a central bank that plans to ‘look through.’

**Some act, some talk, some just look...**
As I noted in the [report on money supplies](https://www.haver.com/articles/globally-money-supplies-accelerate-no-problemo) yesterday, the current practice of trying to look through this supply shock is creating an overshoot of money supply as we have money supply accelerations brewing in the U.S., the U.K., and the European Monetary Union. However, one of the rules from the 1970s was to not accommodate an oil price shock. Unfortunately, the practice of ‘looking through’ a supply shock—which means holding interest rates steady—is at the same time encouraging acceleration in the money supply, which looks accommodative to me. I don't see any evidence that central bankers have recognized the contradiction implied by these policies; it's something we should keep an eye on.

Economy in Brief

Jump to:

Consumer Confidence is Retreating in Italy

Japan Retail Sales Drop Sharply

US GDP Growth Revised Up, Profit Growth Slowed

Confidence Measures in Sweden Hover Near All-Time Highs

World Liquidity

Confidence Measures in Sweden Hover Near All-Time Highs

German Business Types less Pessimistic about the Outlook than Financial Types

French Housing Starts Jump