Tom Moeller

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 <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070801e.jpg" width="353">
The ADP Nat&#39;l Employment Report, reported by the payroll processor, indicated that private nonfarm payrolls rose just 48,000 last month. The increase was the smallest since 2003. The U.S. Bureau of Labor Statistics employment figure will be published this Friday.
Last month, ADP&#39;s measure of private nonfarm payrolls Juneindicated a 143,000 increase in jobs that was followed by a 92,000 increase in private nonfarm payrolls. 
According to ADP and Macro Advisers, the correlation between the monthly percentage change in the ADP estimate and that in the BLS data is 0.90.
ADP compiled the estimate from its database of individual companies&#39; payroll information. Macroeconomic Advisers, LLC, the St. Louis economic consulting firm, developed the methodology for transforming the raw data into an economic indicator.
The ADP National Employment Report data is maintained in Haver&#39;s USECON database; historical data go back to December 2000. The figures in this report cover only private sector jobs and exclude employment in the public sector, which rose an average 11,083 during the last twelve months.
The full ADP National Employment Report can be found <a href="http://www.adpemploymentreport.com/PDF/NER_December_Release_FINAL.pdf">here</a>, and the ADP methodology is explained <a href="http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf">here</a>. 

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB25/@EB25.HTM">LAXEPA@USECON</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Nonfarm Private Payroll Employment (m/m Chg.)</td>
<td>48,000</td>
<td>143,000</td>
<td>1.2%</td>
<td>1.7%</td>
<td>1.8%</td>
<td>1.3%</td>
</tr>
</tbody>
</table>


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The ADP Nat'l Employment Report, reported by the payroll processor, indicated that private nonfarm payrolls rose just 48,000 last month. The increase was the smallest since 2003. The U.S. Bureau of Labor Statistics employment figure [...]

ADP Report: Growth in Private Payrolls Eased

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<div align="left"> <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070801c.jpg" width="353">
The Institute of Supply Management (ISM) reported that the Composite Index of activity in the manufacturing sector fell sharply to 53.8 from 56.0 during June. Consensus expectations for a lesser dip to 55.5 and the decline reversed the moderate gains of the prior two months.</div><div align="left"> 
During the last twenty years there has been a 64% correlation between the level of the Composite Index and the three month growth in factory sector industrial production.</div><div align="left"> <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070801d.jpg" width="353">
Three of the index&#39;s five components fell last month, but the decline in the production index was a notable 7.3 points to the lowest level since March. The employment index also fell for the third month in a row to the lowest level since March. During the last twenty years there has been a 67% correlation between the level of the ISM employment Index and the three month growth in factory sector employment.</div><div align="left"> 
The new orders index fell 2.8 points to the lowest since April. The inventory index rose 3.2 points to 48.5 and the supplier deliveries index rose in July to 52.0.</div><div align="left"> 
Prices fell three points to 65.0. This third consecutive monthly decline lowered the price index eight points below the recent peak in March. During the last twenty years there has been a 77% correlation between the price index and the three month change in the PPI for intermediate goods.</div><div align="left"></div>

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF02/@EF02.HTM">ISM Manufacturing Survey</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">July &#39;06</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Index</td>
<td>53.8</td>
<td>56.0</td>
<td>54.4</td>
<td>53.9</td>
<td>55.5</td>
<td>60.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>57.5</td>
<td>60.3</td>
<td>55.6</td>
<td>55.4</td>
<td>57.4</td>
<td>63.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>65.0</td>
<td>68.0</td>
<td>78.5</td>
<td>65.0</td>
<td>66.4</td>
<td>79.8</td>
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The Institute of Supply Management (ISM) reported that the Composite Index of activity in the manufacturing sector fell sharply to 53.8 from 56.0 during June. Consensus expectations for a lesser dip to 55.5 and the decline reversed [...]

ISM Index Down Sharply

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<div align="left"> <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070801a.jpg" width="353">
Consumer confidence rebounded in July, according to the Conference Board Survey. The 6.9% increase recovered the 2.9% June decline and brought the index to its highest level since 2001.</div><div align="left"> 
The present conditions reading rose 7.2% as the percentage of respondents who viewed business conditions as good rose slightly but the percentage who viewed jobs as plentiful rose to the highest since 2001.</div><div align="left"> <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070801b.jpg" width="353">
The expectations index also rose a sharp 6.8% to the highest level since the end of last year. Plans to by carpet and an automobile improved. Expectations about future income rose while expectations about the inflation rate fell. However, not many more respondents saw more employment opportunities.</div><div align="left"> 
The expected inflation rate in twelve months ticked lower to 5.1%, equal to expectations during all of last year for inflation in twelve months.</div>

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<colgroup><col><col><col><col><col><col></colgroup>
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<tr>
<th scope="col" class="firstcol">Conference Board &nbsp;(SA, 1985=100)</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
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</thead>
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<td class="firstcol">Consumer Confidence Index</td>
<td>112.6</td>
<td>105.3</td>
<td>5.2%</td>
<td>105.9</td>
<td>100.3</td>
<td>96.1</td>
</tr>
<tr>
<td class="firstcol">Present Conditions</td>
<td>139.2</td>
<td>129.9</td>
<td>3.7%</td>
<td>130.2</td>
<td>116.1</td>
<td>94.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Expectations</td>
<td>94.8</td>
<td>88.8</td>
<td>6.6%</td>
<td>89.7</td>
<td>89.7</td>
<td>96.9</td>
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Consumer confidence rebounded in July, according to the Conference Board Survey. The 6.9% increase recovered the 2.9% June decline and brought the index to its highest level since 2001. The present conditions reading rose 7.2% as the [...]

Consumer Confidence Rebounded

Robert Brusca

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070731h.jpg" width="353">
French household confidence stumbled by three points taking the aggregate reading to its lowest point since April of this year. The overall index resides near mid range among all values since 1990. Expected improvement in living standards and drops in unemployment are two of the factors boosting this index. Consumers say they have the ability to save over the next 12 months and that is an extremely strong response on their part, in the top 7 percent of this historic range. Consumers rate the times as slightly more favorable for spending than they did last month with a net response of -4 compared to -6, a value that ranks in about the top third of its range. Still, consumers rate their current financial situation as below average in only about the 42nd percentile of its range. That is a slippage from the 52nd percentile over the past 12 months; for the next 12 months, consumers expect an improvement putting their response in the 63rd percentile of its range near the upper third.
On balance, the responses by the French consumers are showing slippage. One of the main drivers holding things in place is the improvement that consumers have seen and continue to expect in unemployment. Consumers remain upbeat that their financial situation is going to improve despite this month&#146;s slippage in the overall index. 

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INSEE Household Monthly Survey
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="4">&nbsp;</td>
<td colspan="2">Since Jan 1990</td>
<td colspan="4">Since Jan 1990</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jul-07</td>
<td>Jun-07</td>
<td>May-07</td>
<td>Apr-07</td>
<td>Percentile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
</tr>
<tr>
<td class="firstcol">Household Confidence</td>
<td>-15</td>
<td>-12</td>
<td>-13</td>
<td>-20</td>
<td>54.5</td>
<td>51</td>
<td>5</td>
<td>-39</td>
<td>44</td>
<td>-21</td>
</tr>
<tr>
<td colspan="11">Living Standards</td>
</tr>
<tr>
<td class="firstcol">past 12-Mos</td>
<td>-45</td>
<td>-45</td>
<td>-49</td>
<td>-55</td>
<td>39.5</td>
<td>60</td>
<td>1</td>
<td>-75</td>
<td>76</td>
<td>-50</td>
</tr>
<tr>
<td class="firstcol">Next 12-Mos</td>
<td>-9</td>
<td>-3</td>
<td>0</td>
<td>-16</td>
<td>71.4</td>
<td>33</td>
<td>7</td>
<td>-49</td>
<td>56</td>
<td>-25</td>
</tr>
<tr>
<td class="firstcol">Unemployment: Next 12</td>
<td>-9</td>
<td>-9</td>
<td>-12</td>
<td>4</td>
<td>16.2</td>
<td>193</td>
<td>84</td>
<td>-27</td>
<td>111</td>
<td>40</td>
</tr>
<tr>
<td colspan="11">Price Developments</td>
</tr>
<tr>
<td class="firstcol">Past 12-Mos</td>
<td>-2</td>
<td>-7</td>
<td>-4</td>
<td>0</td>
<td>69.3</td>
<td>58</td>
<td>29</td>
<td>-72</td>
<td>101</td>
<td>-32</td>
</tr>
<tr>
<td class="firstcol">Next 12-Mos</td>
<td>-28</td>
<td>-30</td>
<td>-43</td>
<td>-35</td>
<td>35.2</td>
<td>42</td>
<td>31</td>
<td>-60</td>
<td>91</td>
<td>-34</td>
</tr>
<tr>
<td colspan="11">Savings</td>
</tr>
<tr>
<td class="firstcol">Favorable to save</td>
<td>32</td>
<td>34</td>
<td>30</td>
<td>26</td>
<td>44.3</td>
<td>162</td>
<td>66</td>
<td>5</td>
<td>61</td>
<td>43</td>
</tr>
<tr>
<td class="firstcol">Ability to save Next 12</td>
<td>-4</td>
<td>-4</td>
<td>-2</td>
<td>-9</td>
<td>94.4</td>
<td>3</td>
<td>-2</td>
<td>-38</td>
<td>36</td>
<td>-20</td>
</tr>
<tr>
<td colspan="11">Spending</td>
</tr>
<tr>
<td class="firstcol">Favorable for major purchase</td>
<td>-4</td>
<td>-6</td>
<td>-9</td>
<td>-12</td>
<td>67.8</td>
<td>43</td>
<td>15</td>
<td>-44</td>
<td>59</td>
<td>-14</td>
</tr>
<tr>
<td colspan="11">Financial Situation</td>
</tr>
<tr>
<td class="firstcol">Current</td>
<td>14</td>
<td>14</td>
<td>16</td>
<td>12</td>
<td>42.9</td>
<td>79</td>
<td>26</td>
<td>5</td>
<td>21</td>
<td>14</td>
</tr>
<tr>
<td class="firstcol">Past 12-Mos</td>
<td>-14</td>
<td>-11</td>
<td>-15</td>
<td>-18</td>
<td>52.2</td>
<td>83</td>
<td>-3</td>
<td>-26</td>
<td>23</td>
<td>-14</td>
</tr>
<tr>
<td class="firstcol">Next 12-Mos</td>
<td>-1</td>
<td>3</td>
<td>7</td>
<td>-1</td>
<td>63.0</td>
<td>86</td>
<td>9</td>
<td>-18</td>
<td>27</td>
<td>-2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td colspan="4">Number of observations in the period</td>
<td>208</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
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French household confidence stumbled by three points taking the aggregate reading to its lowest point since April of this year. The overall index resides near mid range among all values since 1990. Expected improvement in living [...]

French Household Confidence Reverses its Upswing

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070731g.jpg" width="353">
The main IFO gauges show that while the current readings for IFO are still very strong, the current indices are trending lower. As index numbers the index for expectations hit a bit of a ceiling and has formed what is essentially a double top. Expectations rarely get much stronger than an index reading of 105. The accompanying chart shows these indexes as percent changes and the downward slide of momentum is apparent.
Now, as the IFO gauges began to poster lower numbers, we look to see what the detail of the IFO report tells us about that step-back.
In terms of Y/Y percentage changes the current situation index continued to rise. However MFG is now lower Y/Y as it has been for two months running. Not shown in the table below is the detail for wholesaling which has fallen for the second straight month or construction, now off for three months in a row. Retailing is up in July after being off Yr/Yr in June.
Expectations are off across most main sectors with the MFG index off by 0.5% Yr/Yr and off on that basis for five of the past six months. Wholesaling expectations are off for one month in a row; retail is off for three months in a row and for five of the past six months.
Within MFG the overall sector shows a decline in activity Yr/Yr and that decline is seen in intermediate goods and consumer goods but capital goods activity rebounded in July after having made its first Y/Y drop in June.
Assessments of demand for MFG sectors are dropping in most sectors and have been dropping for five months more or less. The exception is the consumer sector where demand is seen as up in July; it was also up in May.
Also in MFG, orders on hand are somewhat mixed. The total is lower Y/r (-2.7%). But that is mostly weakness in intermediate goods since capital goods orders and consumer goods are still growing.
Foreign orders continue to grow, by 1.9% in all of MFG but intermediate orders are off. Foreign capital goods orders are up strongly but are slowing their rate of ascent; consumer goods orders are flat.
The outlook for three months ahead (bottom panel of table) is still mostly positive, but with some mixed trends. MFG export expectations are flat, despite good orders responses above. Orders expectations for retailing are on a long string of declines although the pace of decline is withering. Wholesale orders are positive but their strength is withering. Export expectations for three months ahead have turned flat for manufacturing in July. Employment expectations over the next three months do continue to be upbeat.
The German economy still is emitting a lot of very positive signals. However do not get lost in the high level of the indexes since they are also losing momentum. While retailing seems to be one improving sector its ability to offset slippage elsewhere has not been established. 

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<colgroup></colgroup>
<thead>
<tr>
IFO Survey: Germany
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="5">Percent: Yr/Yr</td>
<td colspan="4">INDEX NUMBERS</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Jul-07</td>
<td>Jun-07</td>
<td>May-07</td>
<td>Apr-07</td>
<td>Mar-07</td>
<td>CURRENT</td>
<td>Average</td>
<td>Curr/Avg</td>
<td>Percentile</td>
</tr>
<tr class="grey2">
<td class="firstcol">Biz Climate</td>
<td>0.7%</td>
<td>0.2%</td>
<td>2.8%</td>
<td>2.6%</td>
<td>2.1%</td>
<td>106.4</td>
<td>95.7</td>
<td>111.2%</td>
<td>90.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Current Situation</td>
<td>2.4%</td>
<td>1.7%</td>
<td>4.7%</td>
<td>6.3%</td>
<td>6.7%</td>
<td>111.3</td>
<td>94.7</td>
<td>117.5%</td>
<td>87.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Biz Expectations: Next 6-Mos</td>
<td>-0.9%</td>
<td>-1.2%</td>
<td>0.9%</td>
<td>-0.9%</td>
<td>-2.3%</td>
<td>101.8</td>
<td>96.7</td>
<td>105.3%</td>
<td>82.9%</td>
</tr>
<tr class="grey4">
<td class="firstcol">&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="grey3">
<td class="firstcol">&nbsp;</td>
<td>Jul-07</td>
<td>Jun-07</td>
<td>May-07</td>
<td>Apr-07</td>
<td>Mar-07</td>
<td>CURRENT</td>
<td>Average</td>
<td>Curr/Avg</td>
<td>Percentile</td>
</tr>
<tr class="grey2">
<td colspan="10">Current Situation</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; MFG</td>
<td>4.5%</td>
<td>4.4%</td>
<td>6.6%</td>
<td>7.6%</td>
<td>9.4%</td>
<td>111.3</td>
<td>92.2</td>
<td>120.8%</td>
<td>95.3%</td>
</tr>
<tr class="grey2">
<td colspan="10">Biz Expectations: Next 6-Mos</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; MFG</td>
<td>-0.5%</td>
<td>-2.8%</td>
<td>0.9%</td>
<td>-1.4%</td>
<td>-3.0%</td>
<td>100.9</td>
<td>96.4</td>
<td>104.7%</td>
<td>79.1%</td>
</tr>
<tr class="grey2">
<td colspan="10">Activity (m/m)</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; MFG</td>
<td>-1.8%</td>
<td>-3.7%</td>
<td>2.0%</td>
<td>-0.5%</td>
<td>0.4%</td>
<td>102.9</td>
<td>96.9</td>
<td>106.2%</td>
<td>77.8%</td>
</tr>
<tr class="grey2">
<td colspan="10">Demand M/M</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; MFG</td>
<td>-3.3%</td>
<td>-7.1%</td>
<td>0.4%</td>
<td>-3.6%</td>
<td>-1.7%</td>
<td>101.2</td>
<td>97.0</td>
<td>104.3%</td>
<td>68.5%</td>
</tr>
<tr class="grey2">
<td colspan="10">Orders on hand</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; MFG</td>
<td>-2.7%</td>
<td>-3.6%</td>
<td>-0.9%</td>
<td>-3.0%</td>
<td>-2.7%</td>
<td>104.0</td>
<td>96.4</td>
<td>107.9%</td>
<td>79.0%</td>
</tr>
<tr class="grey2">
<td colspan="10">Foreign orders on hand</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; MFG</td>
<td>1.9%</td>
<td>2.0%</td>
<td>2.5%</td>
<td>1.9%</td>
<td>5.4%</td>
<td>111.5</td>
<td>94.2</td>
<td>118.3%</td>
<td>96.5%</td>
</tr>
<tr class="grey2">
<td colspan="10">Yr/Yr percentage changes in underlying Indices</td>
</tr>
<tr class="grey1">
<td colspan="10">IFO outlook for 3-Months ahead</td>
</tr>
<tr class="grey4">
<td class="firstcol">3-Mos ahead</td>
<td colspan="5">Percent: Yr/Yr</td>
<td colspan="4">INDEX NUMBERS</td>
</tr>
<tr class="grey3">
<td class="firstcol">Expected Activity</td>
<td>Jul-07</td>
<td>Jun-07</td>
<td>May-07</td>
<td>Apr-07</td>
<td>Mar-07</td>
<td>CURRENT</td>
<td>Average</td>
<td>Curr/Avg</td>
<td>Percentile</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; MFG</td>
<td>1.0%</td>
<td>3.4%</td>
<td>0.5%</td>
<td>0.7%</td>
<td>-1.6%</td>
<td>103.0</td>
<td>96.7</td>
<td>106.5%</td>
<td>94.0%</td>
</tr>
<tr class="grey2">
<td colspan="10">Orders expectations</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Retail Order Expectations</td>
<td>-1.2%</td>
<td>-10.8%</td>
<td>-4.6%</td>
<td>-10.9%</td>
<td>-10.0%</td>
<td>-11.6</td>
<td>-17.5</td>
<td>66.5%</td>
<td>70.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Wholesale</td>
<td>0.7%</td>
<td>5.7%</td>
<td>15.7%</td>
<td>15.0%</td>
<td>10.7%</td>
<td>7.1</td>
<td>-14.0</td>
<td>-50.7%</td>
<td>83.1%</td>
</tr>
<tr class="grey2">
<td colspan="10">EXPORT Biz Expectations</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; MFG</td>
<td>0.0%</td>
<td>0.4%</td>
<td>-0.5%</td>
<td>-1.1%</td>
<td>-1.9%</td>
<td>103.5</td>
<td>98.3</td>
<td>105.3%</td>
<td>89.4%</td>
</tr>
<tr class="grey2">
<td colspan="10">Employment Expectations</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; MFG</td>
<td>7.4%</td>
<td>8.4%</td>
<td>7.5%</td>
<td>6.4%</td>
<td>8.2%</td>
<td>105.9</td>
<td>95.9</td>
<td>110.4%</td>
<td>100.0%</td>
</tr>
</tbody>
</table>
</body>
</html>

The main IFO gauges show that while the current readings for IFO are still very strong, the current indices are trending lower. As index numbers the index for expectations hit a bit of a ceiling and has formed what is essentially a [...]

IFO Detail Fills in the Missing Pieces for Germany’s Trends…Strong but Slowing

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070731d.jpg" width="353">
For private industry workers, the employment cost index rose an expected 0.9% last quarter. The gain followed a more modest 0.6% 1Q increase that was held back by a 0.3% decline in benefits costs.
Benefit costs rebounded 1.1% from the prior quarter&#146;s move down. The cost of health benefits increased 4.8% y/y, continuing the slowdown of the last four years.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070731e.jpg" width="353">
Wage and salary growth at 0.8% was lower than the 1.1% the prior quarter but the y/y growth of 3.4% was near the strongest of the last five years. Wages account for roughly 70% of the compensation index. 

<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/@EB/@EB08/@EB08.HTM">ECI- Private Industry Workers</a></th>
<th scope="col">2Q</th>
<th scope="col">1Q</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">Compensation</td>
<td>0.9%</td>
<td>0.6%</td>
<td>3.1%</td>
<td>2.9%</td>
<td>3.1%</td>
<td>3.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wages &amp; Salaries</td>
<td>0.8%</td>
<td>1.1%</td>
<td>3.4%</td>
<td>2.9%</td>
<td>2.5%</td>
<td>4.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Benefit Costs</td>
<td>1.1%</td>
<td>-0.3%</td>
<td>2.7%</td>
<td>2.9%</td>
<td>4.6%</td>
<td>6.8%</td>
</tr>
</tbody>
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For private industry workers, the employment cost index rose an expected 0.9% last quarter. The gain followed a more modest 0.6% 1Q increase that was held back by a 0.3% decline in benefits costs. Benefit costs rebounded 1.1% from the [...]

U.S. Employment Cost Index Up an Expected 0.9%

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070731a.jpg" width="353">
Personal income rose 0.4% last month, the same as during May. The June increase about matched Consensus expectations for a 0.5% gain. The June increase at 6.1% y/y left income growing near the rate of increase during the last three years.
The report of a 0.1% increase in the PCE chain price index during June brought with it a 0.1% rise in the core PCE price measure, the fourth 0.1% increase in a row. It was slightly below expectations for a 0.2% gain. annualized, the gain in core prices came in at 1.6% over the last three months. The increase in the total PCE price index was 3.8% during the same three months (AR): down from the 5.0% three month gain during May. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070731c.jpg" width="353">
Wages &amp; salaries increased 0.5% (6.7% y/y) and factory sector wages rose the same 0.5% (5.6% y/y) after a 0.1% May rise.Wage &amp; salary income in service producing industries rose 0.6% (7.4% y/y) after a 0.5% increase in May while pay in the government sector rose 0.4% (5.0% y/y).
Interest income ticked up 0.1% (1.1% y/y) for the third consecutive month while dividend income rose 1.0% (14.2% y/y), about the same as during the prior six months.
Personal current taxes increased 0.7% (10.7% y/y). That left disposable personal income to grow 0.4% (5.5% y/y) after a 0.4% May gain. Real disposable personal income thus rose 0.3% (3.1% y/y) last month after a 0.1% decline during May. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070731b.jpg" width="353">
Personal consumption expenditures increased just 0.1% in June following a little revised 0.6% gain during May. Expectations were for 0.2% rise. Durable goods purchases reversed all of the prior month&#146;s increase with a 1.6% (+2.6% y/y) decline as spending on motor vehicles fell 2.1% (+2.0% y/y) and spending on furniture &amp; other household equipment fell 1.0% (+2.5 y/y. Lower gasoline prices dropped spending on gasoline by 0.4% (+4.4% y/y) and spending on apparel fell 0.8% (+3.5% y/y). One of the few increases in spending last month was on medical care by 0.5% (6.3% y/y).
The personal saving rate was back in positive territory as earlier upward revisions brought it to 0.6% in June.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.4%</td>
<td>0.4%</td>
<td>6.1%</td>
<td>6.6%</td>
<td>5.9%</td>
<td>6.2%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.1%</td>
<td>0.6%</td>
<td>5.2%</td>
<td>5.9%</td>
<td>6.2%</td>
<td>6.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Saving Rate</td>
<td>0.6%</td>
<td>0.4%</td>
<td>0.5% (June 06)</td>
<td>-1.1%</td>
<td>-0.4%</td>
<td>2.0%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.1%</td>
<td>0.5%</td>
<td>2.3%</td>
<td>2.8%</td>
<td>2.9%</td>
<td>2.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.1%</td>
<td>0.1%</td>
<td>1.9%</td>
<td>2.2%</td>
<td>2.2%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>


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Personal income rose 0.4% last month, the same as during May. The June increase about matched Consensus expectations for a 0.5% gain. The June increase at 6.1% y/y left income growing near the rate of increase during the last three [...]

U.S. Personal Income About On Forecast, Core Prices Again Up 0.1%

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

PMIs show still-elevated but slowing US inflation

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Sandy Batten

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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**.

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- 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

Michael J. Moran

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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**.

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- 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

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.

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**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.

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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.

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Charts of the Week: Tension Beneath the Surface

Kathleen Stephansen, CBE

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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.

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- 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

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Housing starts and permits data were released for both February and March today. Release of these data has been delayed by the federal government shutdown in October 2025. Total starts fell 3.0% m/m in February to 1.356 million units from a downwardly revised 1.398 million in January (previously 1.487 million) but then rebounded to 1.502 million (+10.8% m/m) in March. The March level was the highest since December 2024 and 10.8% higher than a year earlier. The Action Economics Forecast Survey expected a 5.9% decline in March from January to a level of 1.4 million units. The 7.2% q/q increase in starts in Q1 is the first quarterly increase since Q1 2025. Residential investment has been a drag on overall GDP growth over the past year. The sharp Q1 increase raises hope that residential investment could make a small contribution to Q1 GDP growth in tomorrow’s report.

Single-family starts rose 4.8% m/m in February and 9.7% m/m in March to be 8.9% higher than a year ago. Multi-family starts plunged 17.0% m/m in February following an 18.2% monthly surge in January. They rebounded in March, rising 13.2% m/m to be up 15.5% y/y. The strong performance of starts in March following weakness earlier this year most likely reflects some catch-up as building conditions improved in March after having been very challenging in January and February.

Across the four major geographic regions, starts in the Northeast increased 24.8% m/m in March but fell 21.2% m/m in February. They were up 18.9% y/y. In the Midwest, starts increased 12.2% m/m in Mach on top of a 20.9% monthly gain in February. The March figure was down 0.9% from a year ago. In the South, starts rose 9.1% m/m in March but fell 3.6% m/m in February. In March they were up 14.1% from a year ago. In the West, starts rose 7.2% m/m in March after monthly declines of 7.7% in January and 3.7% in February. Compared with a year ago, they were up 8.0%.

The performance of building permits in February and March mirrored that of starts. Total permits rose 11.0% m/m in February but fell 10.8% m/m in March to be down 7.4% from a year ago. Single-family permits rose 6.2% m/m in February and then fell 3.8% m/m in March. They were 7.9% lower than a year ago. Multi-family permits rebounded 19.2% m/m in February after an 11.1% m/m fall in January. In March, they plunged 21.5% m/m and were down 6.3% from a year earlier.

In March, permits fell in each of the four major regions. In the Northeast, permits plunged 29.0% m/m in March following a 5.9% monthly gain in February. In the Midwest, permits declined 3.1% m/m in February and another 2.3% m/m in March. In the South, permits slumped 7.7% m/m in March but this following a 11.8% monthly jump in February. The March decline was the third in the past four months. In the West, permits fell 14.2% m/m in March following a 21.8% monthly surge in February and a 13.8% m/m slump in January.

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

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- Data for both February and March were included in today’s report to catch up from delays due to the federal government shutdown last October.
- Starts fell 3.0% m/m in February but rebounded 10.8% m/m in March.
- The 7.2% q/q increase in Q1 was the largest quarterly gain since the economy reopened after the pandemic shutdown in 2020.
- In contrast, permits jumped 11.0% m/m in February but fell 10.8% m/m in March and were up only 1.0% q/q in Q1.

Economy in Brief

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