Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071112b.jpg" align="left" border="0" height="265" width="353">
The OECD trend restored leading indicators are now indicating
an outright slowing rather than a moderating for growth. These signals
have been gradually shifting toward the more pessimistic. Japan&#8217;s
signal is now quite dour. The
US and Europe are showing almost the same degree of slowdown in the new
numbers. The table is arrayed with some six month calculations since
that is the OECD&#8217;s preferred way of assessing its data. No matter how
you slice this month the outlook is for weakening.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="5" scope="col">OECD
Trend-Restored Leading Indicators </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="5" class="firstcol">Growth
Progression-SAAR</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>3Mos</td>
<td>6Mos</td>
<td>12mos</td>
<td>Yr-Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD</td>
<td style="color: red;">-5.8%</td>
<td style="color: red;">-1.0%</td>
<td style="color: red;">0.4%</td>
<td>2.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD7</td>
<td style="color: red;">-7.8%</td>
<td style="color: red;">-1.8%</td>
<td style="color: red;">-0.4%</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD Europe</td>
<td style="color: red;">-4.5%</td>
<td style="color: red;">-1.6%</td>
<td style="color: red;">-0.3%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD Japan</td>
<td style="color: red;">-21.6%</td>
<td style="color: red;">-12.1%</td>
<td style="color: red;">-6.6%</td>
<td style="color: red;">1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD US</td>
<td style="color: red;">-5.3%</td>
<td style="color: red;">1.3%</td>
<td style="color: red;">1.4%</td>
<td>2.0%</td>
</tr>
<tr>
<td colspan="5" class="firstcol">Six-month
Readings at
6-Month Intervals:</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Recent six</td>
<td>6Mo Ago</td>
<td>12Mo Ago</td>
<td>18MO Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD</td>
<td style="color: red;">-1.0%</td>
<td>1.8%</td>
<td style="color: red;">0.5%</td>
<td>4.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD 7</td>
<td style="color: red;">-1.8%</td>
<td>1.0%</td>
<td style="color: red;">-0.5%</td>
<td>4.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD Europe</td>
<td style="color: red;">-1.6%</td>
<td style="color: red;">1.1%</td>
<td style="color: red;">1.8%</td>
<td>3.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD Japan</td>
<td style="color: red;">-12.1%</td>
<td style="color: red;">-0.7%</td>
<td style="color: red;">-0.1%</td>
<td>4.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD US</td>
<td style="color: red;">1.3%</td>
<td>1.6%</td>
<td style="color: red;">-0.9%</td>
<td>5.1%</td>
</tr>
<tr class="odd">
<td colspan="5" class="firstcol">Slowdowns
indicated by BOLD RED</td>
</tr>
</tbody>
</table>
</body></html>

The OECD trend restored leading indicators are now indicating an outright slowing rather than a moderating for growth. These signals have been gradually shifting toward the more pessimistic. Japan’s signal is now quite dour. The US [...]

OECD Shifts to Slowdown Signal

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071112e.jpg" width="353">
The headline commodity price worry is the rise in oil and energy prices: 57.2% for WTI and 28.7% for gasoline since the beginning of the year. And gasoline prices look to be headed higher while rubber prices have soared 62.8% this year. 
With any luck, however, that isn&#39;t the whole story. There seem to be other factors which will mitigate the effect that these gains will have on overall consumer price inflation.
The first is that factory sector pricing depends both on overall demand growth, which is easing, and the overall rise in costs of which commodity prices account for 25% or less. The other 75% is labor costs, and the employment cost index for factory workers is up 1.2% so far this year versus a 1.8% gain last year, a 3.4% rise in 2005 and a 4.8% rise during 2004.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071112f.jpg" width="353">
The second is that for the economy overall, the dependence on oil is roughly half what it was in the early 1970s due to conservation and improved efficiencies in production techniques. And, in total, U.S. demand growth has slowed as well as the growth in the Fed&#39;s monetization of that growth. Year to year growth in the monetary base through October was 2.5% versus a 3.9% rise last year and a 4.3% 2005 increase.
Finally, other commodity prices have topped or have been declining. The housing market&#39;s weakness has dropped lumber prices 5% so far this year after a 15% decline last year, and a 4% decline in 2004. In addition, steel scrap prices have been roughly flat this year after strong gains in years prior. Zinc prices are 31% lower so far this year and have retraced most of a strong gain at the end of 2006. Similarly, aluminum prices have fallen 12% this year and have retraced the strong gains during the latter part of 2006.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071112a.jpg" width="353"> 
In conclusion, inflation worries have affected the consumer&#39;s psychology greatly. The worries have been enough to drop consumer sentiment by nearly one quarter since the highs early this year. This would seem to guarantee some near term slowing in consumer spending. The mitigating factors sighted above, with that luck, will prevent a protracted decline.

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The headline commodity price worry is the rise in oil and energy prices: 57.2% for WTI and 28.7% for gasoline since the beginning of the year. And gasoline prices look to be headed higher while rubber prices have soared 62.8% this [...]

Commodity Prices: Oil Up, Most Other Inflation Forces Topped

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071112e.jpg" align="left" border="0" height="265" width="353">
The headline commodity price worry is the rise in oil and
energy prices: 57.2% for WTI and 28.7% for gasoline since the beginning
of the year. And gasoline prices look to be headed higher while rubber
prices have soared 62.8% this year. 
 

With any luck, however, that isn't the whole story. There seem
to be other factors which will mitigate the effect that these gains
will have on overall consumer price inflation.
The first is that factory sector pricing depends both on
overall demand growth, which is easing, and the overall rise in costs
of which commodity prices account for 25% or less. The other 75% is
labor costs, and the employment cost index for factory workers is up
1.2% so far this year versus a 1.8% gain last year, a 3.4% rise in 2005
and a 4.8% rise during 2004.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071112f.jpg" align="right" border="0" height="265" width="353">
The second is that for the economy overall, the dependence on
oil is roughly half what it was in the early 1970s due to conservation
and improved efficiencies in production techniques. And, in total, U.S.
demand growth has slowed as well as the growth in the Fed's
monetization of that growth. Year to year growth in the monetary base
through October was 2.5% versus a 3.9% rise last year and a 4.3% 2005
increase.
Finally, other commodity prices have topped or have been
declining. The housing market's weakness has dropped lumber prices 5%
so far this year after a 15% decline last year, and a 4% decline in
2004. In addition, steel scrap prices have been roughly flat this year
after strong gains in years prior. Zinc prices are 31% lower so far
this year and have retraced most of a strong gain at the end of 2006.
Similarly, aluminum prices have fallen 12% this year and have retraced
the strong gains during the latter part of 2006.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071112a.jpg" align="left" border="0" height="265" width="353"> 
 

In conclusion, inflation worries have affected the consumer's
psychology greatly. The worries have been enough to drop consumer
sentiment by nearly one quarter since the highs early this year. This
would seem to guarantee some near term slowing in consumer spending.
The mitigating factors sighted above, with that luck, will prevent a
protracted decline.

OECD Shifts to Slowdown Signal 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 12, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071112b.jpg" align="left" border="0" height="265" width="353">
The OECD trend restored leading indicators are now indicating
an outright slowing rather than a moderating for growth. These signals
have been gradually shifting toward the more pessimistic. Japan&#8217;s
signal is now quite dour. The
US and Europe are showing almost the same degree of slowdown in the new
numbers. The table is arrayed with some six month calculations since
that is the OECD&#8217;s preferred way of assessing its data. No matter how
you slice this month the outlook is for weakening.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="5" scope="col">OECD
Trend-Restored Leading Indicators </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="5" class="firstcol">Growth
Progression-SAAR</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>3Mos</td>
<td>6Mos</td>
<td>12mos</td>
<td>Yr-Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD</td>
<td style="color: red;">-5.8%</td>
<td style="color: red;">-1.0%</td>
<td style="color: red;">0.4%</td>
<td>2.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD7</td>
<td style="color: red;">-7.8%</td>
<td style="color: red;">-1.8%</td>
<td style="color: red;">-0.4%</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD Europe</td>
<td style="color: red;">-4.5%</td>
<td style="color: red;">-1.6%</td>
<td style="color: red;">-0.3%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD Japan</td>
<td style="color: red;">-21.6%</td>
<td style="color: red;">-12.1%</td>
<td style="color: red;">-6.6%</td>
<td style="color: red;">1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD US</td>
<td style="color: red;">-5.3%</td>
<td style="color: red;">1.3%</td>
<td style="color: red;">1.4%</td>
<td>2.0%</td>
</tr>
<tr>
<td colspan="5" class="firstcol">Six-month
Readings at
6-Month Intervals:</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Recent six</td>
<td>6Mo Ago</td>
<td>12Mo Ago</td>
<td>18MO Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD</td>
<td style="color: red;">-1.0%</td>
<td>1.8%</td>
<td style="color: red;">0.5%</td>
<td>4.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD 7</td>
<td style="color: red;">-1.8%</td>
<td>1.0%</td>
<td style="color: red;">-0.5%</td>
<td>4.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD Europe</td>
<td style="color: red;">-1.6%</td>
<td style="color: red;">1.1%</td>
<td style="color: red;">1.8%</td>
<td>3.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD Japan</td>
<td style="color: red;">-12.1%</td>
<td style="color: red;">-0.7%</td>
<td style="color: red;">-0.1%</td>
<td>4.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD US</td>
<td style="color: red;">1.3%</td>
<td>1.6%</td>
<td style="color: red;">-0.9%</td>
<td>5.1%</td>
</tr>
<tr class="odd">
<td colspan="5" class="firstcol">Slowdowns
indicated by BOLD RED</td>
</tr>
</tbody>
</table>
Japanese Consumers Becoming More
Pessimistic 
by <a href="/comment/Curley.html">Louise
Curley</a> November 12, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071112c.jpg" align="left" border="0" height="265" width="353">
Another indicator that all is not well in Japan was released
today. The seasonally unadjusted diffusion index of consumer confidence
for a two or more person household was 42.8% in October, compared with
44.1% in September and 48.2% in October, 2006. A value below 50% means
that the majority of the participants in the survey have a negative
view of the outlook. While the decline in October is significant, it
should be noted that since June, 1982, when the series began, there
have been few times when the level
of the index was above 50% as can be seen in the first chart. Japanese
consumers have not been particularly optimistic over the past
twenty-five years. Monthly data for confidence are available only since
December 2004.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071112d.jpg" align="right" border="0" height="265" width="353">
The index is based on the average of four sentiment indexes:
Overall Livelihood, Income Growth, Employment and Willingness to Buy.
The year to year changes in each of these indexes are shown in the
second chart. As shown there, the year to year changes have been
declining from their early 2006 peak and, since early 2007, have become
negative. The declines in the Employment and Willingness to Buy indexes
have been particularly sharp.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;JAPAN:&nbsp;
CONSUMER CONFIDENCE (Diffusion Indexes)&nbsp;</th>
<th scope="col">Oct 07</th>
<th scope="col">Sep 07&nbsp;</th>
<th scope="col">Oct 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">Total: Two or More
Persons Households</td>
<td>42.8</td>
<td>44.1</td>
<td>48.2</td>
<td>-1.3</td>
<td>-5.4</td>
<td>48.3</td>
<td>47.3</td>
<td>45.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Overall
Livelihood</td>
<td>41.0</td>
<td>42.2</td>
<td>45.6</td>
<td>-1.2</td>
<td>-4.6</td>
<td>45.6</td>
<td>45.8</td>
<td>44.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Income
Growth</td>
<td>42.2</td>
<td>42.4</td>
<td>44.9</td>
<td>-0.3</td>
<td>-1.9</td>
<td>44.7</td>
<td>44.8</td>
<td>43.1</td>
</tr>
<tr>
<td class="firstcol"> &nbsp;&nbsp; Employment</td>
<td>45.3</td>
<td>46.4</td>
<td>52.4</td>
<td>-1.1</td>
<td>-7.1</td>
<td>52.8</td>
<td>48.9</td>
<td>45.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;
Willingness to Buy</td>
<td>42.5</td>
<td>45.5</td>
<td>49.8</td>
<td>-2.7</td>
<td>-7.0</td>
<td>50.0</td>
<td>49.5</td>
<td>48.9</td>
</tr>
</tbody>
</table>
</body></html>

Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071109h.jpg" width="353">
The University of Michigan&#39;s consumer sentiment index fell 5.9 points in early November to 75.0 from October&#39;s 80.9. This was a 7.3% drop, almost as large as August&#39;s 7.7%, and the fourth consecutive month without an increase. Consensus expectations in the Action Economics survey called for only a slight ease to 80.0.
Both major sub-indexes were down markedly as well. Current conditions declined from October&#39;s 97.6 to 91.0, the weakest since March 2003. Expectations fell from 70.1 to 64.7, lowest since October 2005.
All the summary line items fell by significant amounts, ranging from 5.6%, for current buying conditions, to 10.3%, for business conditions in the next 12 months. Current personal finances were down 8.1% and expected personal finances by 7.6%. Five-year business expectations fell 7.1%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071109j.jpg" width="353">
Among the survey details, those related to buying conditions for houses seem particularly relevant. The overall score for &quot;buying conditions for houses&quot; is 124, compared with 131 in October. This measure was 160 during the 2004 housing market peak. The overall &quot;good time&quot; rating eased to 61 in early November from 64 last month, while the &quot;bad time&quot; rating rose to 37 from 33. Readings of these respective magnitudes have prevailed for about the last 15 to 18 months, the most adverse combination since the Gulf War in late 1990/early 1991.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071109k.jpg" width="353">
The survey lists reasons why this is a &quot;good time&quot; or a &quot;bad time&quot; to buy. Respondents who told the poll-takers that &quot;times [in general] are bad&quot; numbered 15% of the total, the highest since 1982. The number feeling that &quot;times are good; there is prosperity&quot; was zero. This reading has never been very high, with a peak of 16 in early 2000, just as the stock market was reaching a peak. But readings of zero have also been rare: early 1992 and the double-digit inflation/interest rate/recession period from 1980 to 1982. One favorable note came in the item home &quot;prices are low; there are good deals&quot;; 52% of respondents believe this is true. Perhaps there&#39;s the seed of some recovery in that.
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.

<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">Nov (Prelim)</th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Nov &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>75.0</td>
<td>80.9</td>
<td>83.4</td>
<td>-18.6% </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>97.6</td>
<td>97.9</td>
<td>-14.2%</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>64.7</td>
<td>70.1</td>
<td>74.1</td>
<td>-22.2%</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 fell 5.9 points in early November to 75.0 from October's 80.9. This was a 7.3% drop, almost as large as August's 7.7%, and the fourth consecutive month without an increase. [...]

Michigan Consumer Sentiment in Full Retreat

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071109c.jpg" width="353">
U.S. import prices during October surged 1.8%, the largest one month gain since May of last year, as petroleum prices jumped. Consensus expectations had been for a 1.1% increase.
Prices of petroleum products rose jumped 6.9% as Brent crude oil prices rose 7.4% to an average $82.70 per barrel.
Less petroleum, the 0.5% gain in import prices was the largest one month gain since May and the y/y gain in prices of 3.2% was the fastest since the end of 2005. 
 The lower dollar is having its effect in raising import prices. During the last ten years there has been a 66% (negative) correlation between the nominal trade-weighted exchange value of the US dollar vs. major currencies and the y/y change in non oil import prices. The correlation is a reduced 47% against a broader basket of currencies. 
So far, the dollar&#39;s effect has been moderate but it has led to a turnaround in pricing pressure. Capital goods prices less the high tech sector rose 0.2% in October (2.9% y/y) but that y/y gain is an acceleration from the 1.4% rise during all of 2006. Consumer goods prices rose 0.1% for the third straight month, but again, the y/y rise of 1.4% is up from the 0.4% 2006 increase. Imported motor vehicle &amp; parts prices rose 0.4% producing a y/y gain of 1.2%, double last year&#39;s gain.<img align="right" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071109d.jpg">
 Why a Dollar Depreciation May Not Close the U.S. Trade Deficit from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/current_issues/ci13-5/ci13-5.html">here</a>.
Prices for industrial supplies &amp; materials excluding petroleum surged 1.5% after three months of decline, lifting the y/y change to 8.9% and continuing the strength of the last several years. The detailed import price series can be found in the Haver USINT database. 
Overall export prices increased 0.9%. Prices for agricultural products jumped another 3.9% (26.8% y/y) and nonagricultural export prices rose 0.5% (3.9% y/y), roughly equal to the annual gains during the last three years.
A Falling Dollar: Good News or Bad News? from the Federal Reserve Bank of Atlanta can be found <a href="http://www.frbatlanta.org/invoke.cfm?objectid=8FBC5CFC-5056-9F12-12DEE2A422FA9E30&amp;method=display_body">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/USECON/@E8/@E807/@E807.HTM">Import/Export Prices (NSA)</a></th>
<th scope="col">October</th>
<th scope="col">September</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">Import - All Commodities</td>
<td>1.8%</td>
<td>0.8%</td>
<td>9.6%</td>
<td>4.9%</td>
<td>7.5%</td>
<td>5.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>6.9%</td>
<td>4.6%</td>
<td>41.4%</td>
<td>20.6%</td>
<td>37.6%</td>
<td>30.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>0.5%</td>
<td>-0.2%</td>
<td>3.2%</td>
<td>1.7%</td>
<td>2.7%</td>
<td>2.6%</td>
</tr>
<tr>
<td class="firstcol">Export- All Commodities</td>
<td>0.9%</td>
<td>0.3%</td>
<td>5.6%</td>
<td>3.6%</td>
<td>3.2%</td>
<td>3.9%</td>
</tr>
</tbody>
</table>


</html>

U.S. import prices during October surged 1.8%, the largest one month gain since May of last year, as petroleum prices jumped. Consensus expectations had been for a 1.1% increase. Prices of petroleum products rose jumped 6.9% as Brent [...]

U.S. Import Price Inflation Heated Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071109a.jpg" width="353">
The September U.S. foreign trade deficit fell to $56.5B, the smallest since May 2005. The deficit for August was revised shallower from the initial report and the latest figure was a surprise to Consensus expectations for a deeper deficit of $58.5B.
The deficit averaged $58.6B during the first nine months of this year compared to an average of $64.6B during the first nine months of 2006.
U.S. exports jumped 1.1% after the small 0.7% rise in August which was revised up slightly.
Exports of goods recovered 1.3% (14.1% y/y) after just a 0.4% up tick in August. Exports of nonauto consumer goods led the gain with a 2.6% surge (18.4% y/y). Exports of foods, feeds &amp; beverages also jumped 9.4% (42.4% y/y) after a 7.9% August surge.Exports of autos &amp; products rose 0.7% (18.5% y/y). Exports of capital goods fell 1.0% ( +7.8% y/y), for the second consecutive month of decline, led by a 7.5% drop in exports of civilian aircraft (+8.1% y/y. Exports of advanced technology goods also fell by 1.5% (+3.9% y/y).
U.S. exports of services rose 0.7% (12.5% y/y) after an upwardly revised 1.4% August gain.<img align="right" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071109b.jpg">
Overall imports rose 0.6% though imports of petroleum products fell 0.2% (+4.6% y/y) after a very much downwardly revised gain of 0.1% during August. Imports of nonauto consumer goods rose 0.5% (4.0% y/y) and capital goods imports jumped 2.0% (6.8% y/y). Imports of advanced technology products increased 0.4% (7.1% y/y).
The U.S. trade deficit in goods with China deteriorated m/m to $23.8B versus a deficit of $22.9B during September of &#39;06. During the first nine months of this year the deficit with China averaged $20.8B versus $18.5B in 2006. Exports rose 16.6% and imports rose 13.5%.
International Trade: Why We Don&#146;t Have More of It from the Federal Reserve Bank of Philadelphia is available <a href="http://www.philadelphiafed.org/files/br/2007/q3/ostapik-yi_international-trade.pdf">here</a>.
Is the United States Losing Its Productivity Advantage? from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/current_issues/ci13-8/ci13-8.html">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/USECON/@EE/@EE01/@EE01.HTM">Foreign Trade&nbsp;</a></th>
<th scope="col">September</th>
<th scope="col">August</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">U.S. Trade Deficit</td>
<td>$56.5B</td>
<td>$56.8B</td>
<td>$64.1B (9/06)</td>
<td>$758.5</td>
<td>$714.4B</td>
<td>$612.1B</td>
</tr>
<tr>
<td class="firstcol">Exports - Goods &amp; Services</td>
<td>1.1%</td>
<td>0.7%</td>
<td>13.6%</td>
<td>12.7%</td>
<td>10.9%</td>
<td>13.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports - Goods &amp; Services</td>
<td>0.6%</td>
<td>-0.7%</td>
<td>4.9%</td>
<td>10.4%</td>
<td>12.9%</td>
<td>16.8%</td>
</tr>
</tbody>
</table>
</body>
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The September U.S. foreign trade deficit fell to $56.5B, the smallest since May 2005. The deficit for August was revised shallower from the initial report and the latest figure was a surprise to Consensus expectations for a deeper [...]

U.S. September Trade Deficit Smallest Since 2005

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071109a.jpg" width="353">
The September U.S. foreign trade deficit fell to $56.5B, the smallest since May 2005. The deficit for August was revised shallower from the initial report and the latest figure was a surprise to Consensus expectations for a deeper deficit of $58.5B.
The deficit averaged $58.6B during the first nine months of this year compared to an average of $64.6B during the first nine months of 2006.
U.S. exports jumped 1.1% after the small 0.7% rise in August which was revised up slightly.
Exports of goods recovered 1.3% (14.1% y/y) after just a 0.4% up tick in August. Exports of nonauto consumer goods led the gain with a 2.6% surge (18.4% y/y). Exports of foods, feeds &amp; beverages also jumped 9.4% (42.4% y/y) after a 7.9% August surge.Exports of autos &amp; products rose 0.7% (18.5% y/y). Exports of capital goods fell 1.0% ( +7.8% y/y), for the second consecutive month of decline, led by a 7.5% drop in exports of civilian aircraft (+8.1% y/y. Exports of advanced technology goods also fell by 1.5% (+3.9% y/y).
U.S. exports of services rose 0.7% (12.5% y/y) after an upwardly revised 1.4% August gain.<img align="right" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071109b.jpg">
Overall imports rose 0.6% though imports of petroleum products fell 0.2% (+4.6% y/y) after a very much downwardly revised gain of 0.1% during August. Imports of nonauto consumer goods rose 0.5% (4.0% y/y) and capital goods imports jumped 2.0% (6.8% y/y). Imports of advanced technology products increased 0.4% (7.1% y/y).
The U.S. trade deficit in goods with China deteriorated m/m to $23.8B versus a deficit of $22.9B during September of &#39;06. During the first nine months of this year the deficit with China averaged $20.8B versus $18.5B in 2006. Exports rose 16.6% and imports rose 13.5%.
International Trade: Why We Don&#146;t Have More of It from the Federal Reserve Bank of Philadelphia is available <a href="http://www.philadelphiafed.org/files/br/2007/q3/ostapik-yi_international-trade.pdf">here</a>.
Is the United States Losing Its Productivity Advantage? from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/current_issues/ci13-8/ci13-8.html">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/USECON/@EE/@EE01/@EE01.HTM">Foreign Trade&nbsp;</a></th>
<th scope="col">September</th>
<th scope="col">August</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">U.S. Trade Deficit</td>
<td>$56.5B</td>
<td>$56.8B</td>
<td>$64.1B (9/06)</td>
<td>$758.5</td>
<td>$714.4B</td>
<td>$612.1B</td>
</tr>
<tr>
<td class="firstcol">Exports - Goods &amp; Services</td>
<td>1.1%</td>
<td>0.7%</td>
<td>13.6%</td>
<td>12.7%</td>
<td>10.9%</td>
<td>13.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports - Goods &amp; Services</td>
<td>0.6%</td>
<td>-0.7%</td>
<td>4.9%</td>
<td>10.4%</td>
<td>12.9%</td>
<td>16.8%</td>
</tr>
</tbody>
</table>
U.S. Import Price Inflation Heated Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 9, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071109c.jpg" width="353">
U.S. import prices during October surged 1.8%, the largest one month gain since May of last year, as petroleum prices jumped. Consensus expectations had been for a 1.1% increase.
Prices of petroleum products rose jumped 6.9% as Brent crude oil prices rose 7.4% to an average $82.70 per barrel.
Less petroleum, the 0.5% gain in import prices was the largest one month gain since May and the y/y gain in prices of 3.2% was the fastest since the end of 2005. 
 The lower dollar is having its effect in raising import prices. During the last ten years there has been a 66% (negative) correlation between the nominal trade-weighted exchange value of the US dollar vs. major currencies and the y/y change in non oil import prices. The correlation is a reduced 47% against a broader basket of currencies. 
So far, the dollar&#39;s effect has been moderate but it has led to a turnaround in pricing pressure. Capital goods prices less the high tech sector rose 0.2% in October (2.9% y/y) but that y/y gain is an acceleration from the 1.4% rise during all of 2006. Consumer goods prices rose 0.1% for the third straight month, but again, the y/y rise of 1.4% is up from the 0.4% 2006 increase. Imported motor vehicle &amp; parts prices rose 0.4% producing a y/y gain of 1.2%, double last year&#39;s gain.<img align="right" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071109d.jpg">
 Why a Dollar Depreciation May Not Close the U.S. Trade Deficit from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/current_issues/ci13-5/ci13-5.html">here</a>.
Prices for industrial supplies &amp; materials excluding petroleum surged 1.5% after three months of decline, lifting the y/y change to 8.9% and continuing the strength of the last several years. The detailed import price series can be found in the Haver USINT database. 
Overall export prices increased 0.9%. Prices for agricultural products jumped another 3.9% (26.8% y/y) and nonagricultural export prices rose 0.5% (3.9% y/y), roughly equal to the annual gains during the last three years.
A Falling Dollar: Good News or Bad News? from the Federal Reserve Bank of Atlanta can be found <a href="http://www.frbatlanta.org/invoke.cfm?objectid=8FBC5CFC-5056-9F12-12DEE2A422FA9E30&amp;method=display_body">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/USECON/@E8/@E807/@E807.HTM">Import/Export Prices (NSA)</a></th>
<th scope="col">October</th>
<th scope="col">September</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">Import - All Commodities</td>
<td>1.8%</td>
<td>0.8%</td>
<td>9.6%</td>
<td>4.9%</td>
<td>7.5%</td>
<td>5.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>6.9%</td>
<td>4.6%</td>
<td>41.4%</td>
<td>20.6%</td>
<td>37.6%</td>
<td>30.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>0.5%</td>
<td>-0.2%</td>
<td>3.2%</td>
<td>1.7%</td>
<td>2.7%</td>
<td>2.6%</td>
</tr>
<tr>
<td class="firstcol">Export- All Commodities</td>
<td>0.9%</td>
<td>0.3%</td>
<td>5.6%</td>
<td>3.6%</td>
<td>3.2%</td>
<td>3.9%</td>
</tr>
</tbody>
</table>
Michigan Consumer Sentiment in Full Retreat 
by <a href="/comment/Stone.html">Carol Stone</a> November 9, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071109h.jpg" width="353">
The University of Michigan&#39;s consumer sentiment index fell 5.9 points in early November to 75.0 from October&#39;s 80.9. This was a 7.3% drop, almost as large as August&#39;s 7.7%, and the fourth consecutive month without an increase. Consensus expectations in the Action Economics survey called for only a slight ease to 80.0.
Both major sub-indexes were down markedly as well. Current conditions declined from October&#39;s 97.6 to 91.0, the weakest since March 2003. Expectations fell from 70.1 to 64.7, lowest since October 2005.
All the summary line items fell by significant amounts, ranging from 5.6%, for current buying conditions, to 10.3%, for business conditions in the next 12 months. Current personal finances were down 8.1% and expected personal finances by 7.6%. Five-year business expectations fell 7.1%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071109j.jpg" width="353">
Among the survey details, those related to buying conditions for houses seem particularly relevant. The overall score for &quot;buying conditions for houses&quot; is 124, compared with 131 in October. This measure was 160 during the 2004 housing market peak. The overall &quot;good time&quot; rating eased to 61 in early November from 64 last month, while the &quot;bad time&quot; rating rose to 37 from 33. Readings of these respective magnitudes have prevailed for about the last 15 to 18 months, the most adverse combination since the Gulf War in late 1990/early 1991.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071109k.jpg" width="353">
The survey lists reasons why this is a &quot;good time&quot; or a &quot;bad time&quot; to buy. Respondents who told the poll-takers that &quot;times [in general] are bad&quot; numbered 15% of the total, the highest since 1982. The number feeling that &quot;times are good; there is prosperity&quot; was zero. This reading has never been very high, with a peak of 16 in early 2000, just as the stock market was reaching a peak. But readings of zero have also been rare: early 1992 and the double-digit inflation/interest rate/recession period from 1980 to 1982. One favorable note came in the item home &quot;prices are low; there are good deals&quot;; 52% of respondents believe this is true. Perhaps there&#39;s the seed of some recovery in that.
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.

<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">Nov (Prelim)</th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Nov &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>75.0</td>
<td>80.9</td>
<td>83.4</td>
<td>-18.6% </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>97.6</td>
<td>97.9</td>
<td>-14.2%</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>64.7</td>
<td>70.1</td>
<td>74.1</td>
<td>-22.2%</td>
<td>75.9</td>
<td>77.4</td>
<td>88.5</td>
</tr>
</tbody>
</table>


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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071108e.jpg" align="left" border="0" height="265" width="353">
Imports fell by a sharp 2.6% as exports headed higher by 0.7%
expanding the German trade surplus. Trends show that exports are still
up strongly while imports are lagging with a 12.3% 3-month export
growth rate matched against a 0.5% pace for imports for that same
period. Over 6 and 12 months export growth continues to outdo imports.
Note that the detailed growth rates in the table are executed from one
month older data due to lagging observation availability. Germany
may seem to be escaping an adverse impact on GDP by seeing its trade
surplus widen but since the escape is due to weak imports, which may
themselves reflect a weakening economy, it is too soon to make that
judgment. 


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th colspan="6" scope="col">German
Trade in Goods Trends </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="2">m/m%</td>
<td colspan="3">% Saar</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Sep-07</td>
<td>Aug-07</td>
<td>3M</td>
<td>6M</td>
<td>12M</td>
</tr>
<tr class="odd">
<td class="firstcol">Balance*</td>
<td>&#8364;&#8364; 17.86</td>
<td>&#8364;&#8364; 15.57</td>
<td>&#8364;&#8364; 16.66</td>
<td>&#8364;&#8364; 16.40</td>
<td>&#8364;&#8364; 16.16</td>
</tr>
<tr class="grey3">
<td colspan="6" rowspan="1" class="firstcol">EXPORTS</td>
</tr>
<tr class="odd">
<td class="firstcol">All Exports</td>
<td>0.7%</td>
<td>2.4%</td>
<td>12.3%</td>
<td>10.8%</td>
<td>5.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital Goods</td>
<td>--</td>
<td>2.1%</td>
<td>16.6%</td>
<td>7.5%</td>
<td>10.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Motor Vehicles</td>
<td>--</td>
<td>-0.5%</td>
<td>16.4%</td>
<td>8.9%</td>
<td>12.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Goods</td>
<td>--</td>
<td>4.7%</td>
<td>36.1%</td>
<td>17.4%</td>
<td>14.3%</td>
</tr>
<tr class="grey3">
<td colspan="6" rowspan="1" class="firstcol">IMPORTS</td>
</tr>
<tr class="odd">
<td class="firstcol">All Imports</td>
<td>-2.6%</td>
<td>4.5%</td>
<td>-0.5%</td>
<td>5.7%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital Goods</td>
<td>--</td>
<td>9.2%</td>
<td>39.2%</td>
<td>1.6%</td>
<td>0.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Motor Vehicles</td>
<td>--</td>
<td>16.7%</td>
<td>50.6%</td>
<td>34.5%</td>
<td>18.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Goods</td>
<td>--</td>
<td>5.0%</td>
<td>68.4%</td>
<td>9.4%</td>
<td>11.7%</td>
</tr>
<tr class="grey1">
<td colspan="6" class="firstcol">*Billions of
Euros; mo or period
average; shaded area trends lag one month</td>
</tr>
</tbody>
</table>
</body></html>

Imports fell by a sharp 2.6% as exports headed higher by 0.7% expanding the German trade surplus. Trends show that exports are still up strongly while imports are lagging with a 12.3% 3-month export growth rate matched against a 0.5% [...]

German Trade Surplus Rises Strongly on Weak Imports

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

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

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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The **PCE chain price index** increased 0.2% (2.6% y/y) after rising an unrevised 0.3% in June and an unrevised 0.2% in May. The y/y gain steadied at 2.6%. It was increased from 2.2% y/y in April. Energy prices fell 1.1% (-2.7% y/y) after rising 0.9%, while food & beverage prices eased 0.1% (+1.9% y/y) following a 0.3% rise. The price index excluding food & energy rose a steady 0.3%, after two straight 0.2% increases. The y/y gain edged up to 2.9% last month from 2.8% in June. It was increased from a low of 2.6% in April.

Durable goods prices eased 0.1% (+1.1% y/y) in July, after rising 0.5% in June. Home furnishings & appliance prices edged 0.1% higher (2.5% y/y), after increasing 1.3%. Recreational goods & vehicle costs declined 0.9% (-0.3% y/y) and reversed the 0.9% June strengthening. Motor vehicle & parts prices rose 0.2% (1.6% y/y), after a 0.4% June decline.

Prices of nondurable goods eased 0.1% (+0.2% y/y) last month after rising 0.4% in June. Clothing prices held steady both m/m and y/y after rising 0.3% in June. Food & beverage prices eased 0.1% (+1.9% y/y), following a 0.4% June increase. Gasoline & other energy prices fell 1.7% (-9.6% y/y), after rising 0.9% in June.

Services prices in July rose 0.3% (3.6% y/y), after four straight 0.2% increases. Housing & utility prices rose 0.2% (4.3% y/y), after two consecutive 0.3% increases, and services prices excluding energy & healthcare gained 0.4% (3.7% y/y) after two 0.2% gains. Healthcare prices rose 0.2% (2.7% y/y), after rising 0.4%. The cost of financial services & insurance jumped 1.2% (5.5% y/y) after rising 0.4% in June. Recreation services costs rose 0.3% (3.2% y/y) after rising 0.1%. Transportation prices gained 0.2% (4.4% y/y), following a 0.1% rise, while hotel & restaurant prices improved 0.1% (2.8% y/y) after a slight June decline.

**Personal consumption expenditures (PCE)** rose 0.5% (4.7% y/y) last month after increasing 0.4% in June, revised from 0.3%, after holding steady in May. The July rise matched expectations in the Action Economics Forecast Survey. When adjusted for price changes, PCE improved 0.3% in July (2.1% y/y) after rising 0.1% in June.

Real spending on durable goods increased 2.0% (3.2% y/y) in July, after falling for three straight months. Real spending on motor vehicles jumped 4.5% (3.5% y/y), after falling sharply in both June and May. Real outlays on furnishings & appliances improved 0.2% (0.9% y/y), after falling in each of the prior month. Real spending on recreational goods & vehicles increased 1.5% (4.9% y/y) last month, after falling 0.4% in June. Spending on “other” durable goods improved 0.4% (2.6% y/y) after rising 0.2% in June.

Nondurable goods spending in real terms rose 0.3% (2.7% y/y) in July after gaining 0.6% in June. Real clothing & footwear purchases rose 0.6% (4.9% y/y) last month, following a 0.5% rise during June. Real food & beverage purchases strengthened 0.7% (1.7% y/y) after rising 0.4%. Real outlays on gasoline & other energy products fell 1.3% (-1.5% y/y), after rising 1.5%. Real spending on “other” nondurable goods edged 0.1% higher (4.1% y/y) last month, following a 0.6% rise in June.

Real spending on services improved 0.1% (1.7% y/y) in July for the second straight month. Real spending on housing & utilities rose 0.1% (1.1% y/y) in July, for a second consecutive month, while real health care spending also rose 0.1% (3.9% y/y) after rising 0.2%. Real spending on food services & accommodations eased 0.2% (+1.7% y/y), after rising 0.4% in June. Real spending on financial services & insurance rose 0.2% (2.4% y/y) after increasing 0.4% in June. Real spending on transportation services rose 0.3% (-0.0% y/y) in July, after falling 0.6% in June. Recreation spending slipped 0.1% (+1.0% y/y), the same as in June. Spending on “other” services rose 0.3% (2.7% y/y) for the second straight month.

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**Personal income** rose 0.4% last month (5.0% y/y) after increasing 0.3% in June. A 0.5% gain was expected. Wages & salaries moved 0.6% higher (5.3% y/y), following a 0.1% increase during June. Rental income increased 0.5% (4.0% y/y) in July, after falling for three straight months. Proprietors’ income improved 0.7% (2.3% y/y), after a minimal 0.1% increase. Income from assets rose 0.1% (1.4% y/y), after holding steady in June, and current transfer receipts were unchanged (8.3% y/y) following a 1.1% June increase.

Disposable personal income increased 0.4% (4.6% y/y) during July following a 0.3% June rise. After adjusting for price changes, disposable income improved 0.2% (2.0% y/y) after holding steady in June.

The personal saving rate held steady in July at 4.4%, after falling from 5.0% in April. It still stands well above low of 3.5% in December of last year. Personal saving fell 1.7% (+5.8% y/y) in July, after declining 0.9% in June.

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**.

**Let’s Get On with It** from Fed Governor Christopher J. Waller is available [here](https://www.federalreserve.gov/newsevents/speech/waller20250828a.htm).

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- Core price increase y/y matches highest since February.
- Real spending moderation centers on services.
- Real disposable income improves; personal savings rate steadies.

U.S. Core PCE Price Inflation Up in July; Real Spending Slows Y/Y 

Winnie Tapasanun

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The advance estimate of the U.S. international trade deficit in goods widened to a larger-than-expected $103.57 billion in July after narrowing to $84.85 billion in June, data from the U.S. Census Bureau showed. The July reading, the second widening in the goods trade deficit in three months, was slightly smaller than a $103.92 billion shortfall in July 2024. A deficit of $90.2 billion for July had been expected by the Action Economics Forecast Survey. The deficit reached a record $161.95 billion in March. In Q2'25, the goods trade deficit narrowed to $266.96 billion, the smallest since Q4'23, after ballooning to a record $465.035 billion in Q1'25; the monthly deficit averaged $88.99 billion in Q2'25, down from a record $155.01 billion in Q1'25.

Total goods exports dipped 0.1% m/m (+3.0% y/y), the third consecutive monthly decline, to $177.97 billion in July, the lowest level since January, after a 0.7% decrease to $178.08 billion in June. April registered a record high of $190.08 billion. Exports were up 9.6% from a June 2023 low but down 2.1% from a July 2022 high. The m/m decline in exports in July reflected exports m/m drops of 2.4% (+16.3% y/y) in other goods, 0.9% (+5.1% y/y) in nonfood consumer goods excluding autos, and 0.8% (-1.2% y/y) in industrial supplies & materials. To the upside, exports for the following end-use categories rose m/m in July: automotive vehicles & parts (2.2%; -4.0% y/y), capital goods excluding autos (0.7%; 7.0% y/y), and foods, feeds & beverages (0.5%; 1.4% y/y).

Total goods imports rebounded 7.1% m/m (1.7% y/y), the first monthly increase since March, to a four-month-high $281.54 billion in July following a 4.6% drop to $262.94 billion in June. March registered a record high of $344.59 billion. Imports were up 11.9% from a June 2023 low but down 2.6% from a March 2022 high. The m/m rebound in imports in July reflected m/m rises in most imports end-use categories. These included a 25.4% surge (the first m/m increase and the largest since January; 4.9% y/y) in industrial supplies & materials as well as rises of 11.5% (23.5% y/y) in other goods, 4.8% (14.7% y/y) in capital goods excluding autos, 2.4% (4.9% y/y) in foods, feeds & beverages, and 2.1% (-12.2% y/y) in nonfood consumer goods excluding autos. In contrast, imports of automotive vehicles & parts, the only end-use category with a monthly decline in July, fell 3.2% (-14.1% y/y), the third m/m fall in four months, on top of a 3.6% June decrease.

The advance international trade data can be found in Haver's **USECON** database. The expectation figure is from the Action Economics Forecast Survey, which is in **AS1REPNA**.

- Deficit: $103.57 bil. in July, jumping 22.1% from June’s $84.85 bil.
- Exports -0.1%, down for the third straight month, led by a 2.4% decline in exports of other goods.
- Imports +7.1%, up for the first time since March, led by a 25.4% surge in imports of industrial supplies & materials.

U.S. Goods Trade Deficit Balloons in July; Largest Since March’s Record High

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Inflation in the monetary union was tepid across the large, early-reporting, economies in August. The HICP rose by 0.2% on the month in Germany, rose by 0.1% in France, while it was flat in both Italy and Spain. However, these outstanding readings followed several months of stronger inflation; in particular in July German prices rose by 0.2%, in Italy the gauge rose by 0.3%, in France by 0.4%, and in Spain by 0.5%.

As a result, over three months, inflation is running hot on the headline gauge, over 2% in France, Italy, and Spain, and just below it, at a 1.8% annual rate in Germany. Over 12 months, inflation is well behaved, but that headline is up 0.8% in France, rises by 1.7% over 12 months in Italy, by 2.1% in Germany, and at a 2.6% pace in Spain. That is a bit more mixed but still quite solid set of results. The EMU-wide HICP for July – on a one-month lag- rises by 2.1% over 12 months with a core at 2.3%.

Core inflation is not well reported on an early basis. The Italian core rate rose 0.2% in August with Spain at 0.3%; both Italy and Spain logged increases of 0.3% in July and in June and as a result the 3-month inflation rate on the core for Italy and Spain runs at 2.7% in Italy and at 3.8% for Spain. These, of course, are much higher and more disturbing numbers for inflation. The 6-month inflation rate for core Italy and Spain runs at 2.9% and 3.1%, respectively, while over 12 months the Italian core is up by only 2.1% and the Spanish core is up by only 2.4%. The kick up and inflation for the core is a relatively recent phenomenon.

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These statistics give the ECB some room and some time to maneuver, since headline inflation is in pretty good shape and the inflation issues are scattered and have emerged more recently from the core and with growth still weak and with rising unemployment in Germany where it just topped 3 million for the first time in a decade. There may not be any impetus to have to raise rates to cool inflation. The European Central Bank, like the Federal Reserve, is likely playing a watch and wait game with the economic statistics, and this month the watch and wait game turned pretty much in its favor with very good headline figures although still having some difficult core figures. It will take a little time before we get the core numbers for the rest of the monetary union members to fill in to understand exactly where those trends sit.

However, based on the early returns, the ECB is probably relatively happy with how inflation is sitting even with the core rates slightly excessive and varied. There doesn't appear to be any burgeoning inflation problem; there's some kind of a modest core inflation issue building in Italy and Spain and we'll have to watch that in the coming months. For now, the ECB should be relatively content.

Europe

EMU Large Country Inflation Runs Cold – Over Tepid Cores

Andrew Cates

**The US labour market**
The latest data highlight a growing sense of fragility in the US labour market. The unemployment rate, while still relatively low by historical standards, has been edging higher through the course of this year. More telling, however, is the signal from this week’s consumer confidence survey from Conference Board and specifically the labour market differential — the gap between the share of consumers saying jobs are plentiful versus those saying jobs are hard to get. That balance has narrowed sharply, moving back toward levels historically associated with softer labour demand and rising unemployment.

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**Goods and services inflation** 
Haver’s breakdown of goods and services CPI inflation in the advanced economies highlights where fresh risks are emerging. Goods inflation, which had been receding sharply after the pandemic supply shocks, has recently shown signs of firming again. Some of this probably reflects the impact of US tariff policies, which are raising import costs and putting renewed upward pressure on traded goods prices. While services inflation remains the more stubborn component in most advanced economies, the risk is that tariffs could reintroduce stickiness into goods prices, slowing the overall disinflation process.

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**China, Europe and US trade policy**
A consequence of US tariff policies has been a sharp contraction in Chinese exports to the US market, with much of the surplus redirected elsewhere. Europe in particular has recorded near double-digit import growth in recent months, raising concerns that Beijing is deflecting its industrial overcapacity problem rather than resolving it, effectively transferring the pressure onto trading partners. China’s authorities, however, have begun to push back, introducing measures to curb excess supply and rein in so-called “involution,” including clampdowns on price wars across several industries.

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**China’s excess capacity and Europe**
A closer look at Europe–China trade shows that electric vehicles remain a key flashpoint. Import volumes from China have continued to rise even as per-unit prices fall sharply from a year ago —evidence suggesting that industrial overcapacity persists, with low-cost Chinese EVs increasingly challenging European automakers. The surge has carried on despite EU tariffs of up to 45% on battery EVs, as Chinese producers have adapted by pushing plug-in hybrids and expanding onshore production in Europe to bypass duties and defend market share.

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**Wage growth in the US and Europe** 
Turning back to inflation dynamics, the UK stands out for its persistent wage pressures. While posted wage growth has cooled across the US and euro area, the UK measure has remained elevated at around 6% year-on-year, well above pre-pandemic norms. This stickiness reflects a still-tight labour market in key service sectors, even as broader activity has slowed and unemployment has edged higher. For the Bank of England, it underscores the dilemma: headline inflation is easing, but underlying pay growth risks keeping services inflation uncomfortably high, complicating the timing and scale of policy easing.

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**The UK economy**
The UK’s net international investment position has deteriorated noticeably in recent years, with both direct investment and portfolio flows showing persistent weakness. The latest data underline how net FDI has turned increasingly negative, while the portfolio investment balance has also eroded, leaving the UK more reliant on volatile short-term funding sources. This deterioration comes against a backdrop of heightened investor unease about the riskiness of UK debt markets, where elevated gilt yields and rising debt-servicing costs have amplified concerns over fiscal sustainability. Taken together, these trends underscore the vulnerability of the UK’s external position at a time when global capital is arguably proving more selective and risk sensitive.

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Global markets have continued to rally into late summer, buoyed by AI optimism, dovish signals from central bankers at Jackson Hole, and expectations of easier policy ahead. Yet beneath the surface, risks to the world economy are accumulating. In the US, labour market indicators point to softening conditions (chart 1), while tariff-driven pressures are beginning to push goods prices higher (chart 2). Global trade flows are being reshaped by US policy, with China’s excess capacity increasingly diverted toward Europe, most visibly through surging exports of electric vehicles (EVs) (charts 3 and 4). At the same time, wage growth remains stubbornly elevated in the UK, complicating disinflation (chart 5), while concerns are mounting over the country’s external vulnerabilities as net FDI and portfolio positions weaken against the backdrop of jittery debt markets (chart 6). Together, these dynamics highlight the tension between buoyant market performance and a global economy still grappling with structural fragilities.

Charts of the Week: Riskbusters

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Real GDP grew 3.3% (SAAR) during the second quarter of 2025, revised from a 3.0% gain reported initially. The increase followed an unrevised 0.5% decline in Q1. A 3.1% rise had been expected in the Action Economics Forecast Survey. Growth during the last four quarters of 2.1% compared to 2.0% y/y in Q1, and remained below its most recent high of 3.2% in Q4 2023.

After-tax corporate profits without IVA & CCA adjustment increased 1.4% (7.0% y/y) last quarter after easing 0.8% in Q1. Before-tax earnings with IVA & CCA rose 1.7% (4.3% y/y) after falling 2.3% in Q1. Financial sector earnings rose 1.4% (15.3% y/y) after rising 2.3% in Q1. Nonfinancial corporate profits rose 2.2% (2.5% y/y) after falling 2.5% in Q1. Earnings from abroad eased 0.7% (-0.4% y/y) following a 7.3% Q1 decline.

Foreign trade balance improvement added 4.95 percentage points to growth last quarter after subtracting 4.61 percentage points in Q1. Imports fell 29.8% (+1.3% y/y) after surging 38.0% in Q1. Exports declined 1.3% (+2.0% y/y) after improving 0.4% in Q1. Inventories subtracted 3.29 percentage points from growth after adding 2.59 percentage point to Q1 growth.

Real final sales to domestic purchasers grew 1.6% (2.4% y/y), revised from 1.1%, in Q2 after rising 1.5% in Q1. Personal consumption expenditures rose 1.6% (2.4% y/y), revised from 1.4%, following a 0.5% gain. Durable goods spending rose 2.6% (4.6% y/y) after falling 3.7% in Q1. Motor vehicle purchases strengthened 11.7% (6.7% y/y) after declining 11.2% in Q1. Spending on home furnishings & appliances weakened 2.1% (+3.5% y/y) following a 1.5% rise. Recreational goods & vehicle outlays fell 3.5% (+4.3% y/y) last quarter after a 0.4% Q1 gain.

Nondurable goods outlays in constant dollars rose 2.3% (3.0% y/y) following 2.1% growth in Q1. Apparel spending increased 5.4% (4.8% y/y) following a 7.0% rise. Food & beverage buying gained 0.3% (1.5% y/y) after a 1.0% increase. Gasoline & fuel oil purchases weakened 1.4% (+0.9% y/y) after gaining 3.6% in Q1.

Real spending on services increased 1.2% (1.9% y/y) after a 0.6% gain. Outlays on housing & utilities eased 0.4% (+1.1% y/y) after rising 2.9% in Q1. Health care expenditures rose 4.2% (4.8% y/y) after a 3.1% increase. Transportation outlays declined 2.9% (-0.6% y/y) after a 1.4% rise, while recreation spending rose 3.6% (0.7% y/y) following a 5.1% decline. Restaurant & hotel expenditures increased 5.1% (1.9% y/y) after falling 1.8%. Financial services expenditures rose 1.9% (2.3% y/y) following a 0.1% Q1 increase.

Business fixed investment in constant dollars increased 5.7% last quarter (4.2% y/y), revised from 1.9%, following a 10.3% surge in Q1. Expenditures on structures declined 8.9% (-3.4% y/y), after falling 2.4% in Q1. Expenditures on producers’ durable equipment increased 7.4% (7.7% y/y), revised from 4.8%, after surging 23.7% in Q1. Outlays on information processing equipment rose 10.1% (20.1% y/y), revised from 5.5%, after soaring 72.8% during Q1. Industrial equipment investment rose 6.7% (4.0% y/y) after a 4.7% rise. Transportation equipment investment surged 20.4% (6.8% y/y) after a 6.9% gain. Intellectual property product spending rose 12.8% last quarter (5.2% y/y) following a 6.0% rise.

Residential structures investment in real terms declined a little-revised 4.7% (-1.3% y/y), the fourth decline in the last five quarters.

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Government spending eased 0.2%, revised from up 0.5% in Q2 (+1.8% y/y) after a 0.6% decline. Federal government expenditures declined 4.7% (+0.7% y/y) after falling 4.6% in Q1. National defense expenditures increased 1.4% (3.0% y/y) after declining 7.1% in Q1. State & local government spending rose 2.6% (2.5% y/y) following a 2.0% rise.

The GDP chain price index rose an unrevised and expected 2.0% last quarter (2.5% y/y) after increasing 3.8% in Q1. The PCE chain price index increased 2.0% (2.4% y/y) following a 3.7% rise. The PCE price index excluding food and energy rose 2.5% (2.7% y/y) after increasing 3.5% in Q1. The business fixed investment price index edged 0.5% lower (+1.1% y/y) after a 0.4% rise. The residential price index rose 1.1% (2.6% y/y) after a 4.1% rise while the government price index increased 3.3% (3.1% y/y) following a 4.6% rise.

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**.

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- Business investment strengthens & consumer spending firms.
- U.S. business earnings reverse Q1 decline.
- Increase in price index is unrevised, remaining roughly half of Q1’s gain.

Economy in Brief: 2007

Jump to:

OECD Shifts to Slowdown Signal

Commodity Prices: Oil Up, Most Other Inflation Forces Topped

Commodity Prices: Oil Up, Most Other Inflation Forces Topped

Michigan Consumer Sentiment in Full Retreat

U.S. Import Price Inflation Heated Up

U.S. September Trade Deficit Smallest Since 2005

U.S. September Trade Deficit Smallest Since 2005

German Trade Surplus Rises Strongly on Weak Imports