Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060816a.jpg" width="353">
Consumer prices (CPI-U) during July rose an expected 0.4%, the average rate of monthly increase for the last five months. A somewhat more moderate increase, however, was posted by prices less food &amp; energy. The 0.2% increase compared to a 0.3% average of the last five months and was lower than expectations for a 0.3% gain.
The 2.9% m/m spike in energy prices reflected a 5.3% (29.6% y/y) surge in gasoline prices, although weekly gasoline prices have since stabilized in August somewhat at $3.00 per gallon. Natural gas &amp; electricity prices in July ticked up 0.1% (10.5% y/y) after five consecutive months of decline.
Core goods prices fell 0.1% after three months of 0.1% increase. Furniture &amp; bedding costs reversed the prior month&#39;s increase with a 0.3% decline (+1.4% y/y) while apparel prices dropped 1.2% (0.0% y/y). Appliance prices increased 0.3% (1.1% y/y) and new &amp; used motor vehicle prices rose 0.2% (0.5% y/y). Tobacco prices were unchanged in July (3.6% y/y) while medical care commodity prices rose 0.3% (3.9% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060816b.jpg" width="353">
Core services prices rose 0.4%, the same as during the prior two months. Shelter prices increased another 0.4% (3.6% y/y) as the rental equivalence measure of owners&#39; primary residences rose 0.4% (3.7% y/y) and rents also rose 0.4% (3.6% y/y). Public transportation costs moderated somewhat from prior months&#39; strength and increased 0.4% (5.0% y/y).Education cost inflation ticked up to 0.6% (6.0% y/y) but medical care services price inflation dipped to 0.2% (4.0% y/y).
Food &amp; beverage prices rose 0.2% though meat, fish &amp; poultry prices fell 0.6% (+0.2% y/y). Fruit &amp; vegetable prices jumped for the second consecutive month and rose 0.9% (3.7% y/y) while dairy prices ticked up another 0.1% (-0.5% y/y).
The chained CPI, which adjusts for shifts in the mix of consumer purchases, rose 0.1% while less food &amp; energy prices were unchanged last month.
The Effects of Rounding on the Consumer Price Index from the U.S. Bureau of Labor Statistics can be found <a href="http://www.bls.gov/ore/pdf/ec060090.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a> </th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total&nbsp;</td>
<td>0.4%</td>
<td>0.2%</td>
<td>4.2%</td>
<td>3.4%</td>
<td>2.7%</td>
<td>2.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.2%</td>
<td>0.3%</td>
<td>2.7%</td>
<td>2.2%</td>
<td>1.8%</td>
<td>1.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>0.5%</td>
<td>0.5%</td>
<td>-0.9%</td>
<td>-2.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.4%</td>
<td>0.4%</td>
<td>3.6%</td>
<td>2.8%</td>
<td>2.8%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>2.9%</td>
<td>-0.9%</td>
<td>20.5%</td>
<td>16.9%</td>
<td>10.8%</td>
<td>12.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food &amp; Beverages</td>
<td>0.2%</td>
<td>0.3%</td>
<td>2.2%</td>
<td>2.4%</td>
<td>3.4%</td>
<td>2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a> </td>
<td>0.1%</td>
<td>0.3%</td>
<td>3.5%</td>
<td>2.9%</td>
<td>2.5%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.0%</td>
<td>0.1%</td>
<td>2.5%</td>
<td>1.9%</td>
<td>1.7%</td>
<td>1.1%</td>
</tr>
</tbody>
</table>
Industrial Production Up With Temperatures 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 16, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060816d.jpg" width="353">
Total U.S. industrial output increased 0.4% last month. The gain was a bit light versus Consensus expectations for a 0.5% rise though it followed an unrevised 0.8% jump during June.
Hot temperatures throughout the country fueled a 2.0% (0.5% y/y) surge in utility output. In fact, cooling degree days during July set a new record high.
Factory sector output rose a more moderate 0.2% following the unrevised 0.8% June jump. The rise lifted the starting point for 3Q 2.5% (AR) above the prior quarter&#39;s average.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060816c.jpg" width="353">
Production of durable consumer goods fell a whopping 3.2% (+1.1% y/y) as output of automotive products dropped 6.2% (-0.5%) and output of appliances &amp; furniture fell for the fourth straight month, down 0.7% (-2.0% y/y. Nondurable consumer goods output increased 0.8% (2.0% y/y) as clothing output jumped 1.7% (8.4% y/y).
Business equipment production surged 1.1% due to a 1.9% (7.7% y/y) spike in output of industrial &amp; other equipment. Production of information processing &amp; equipment also rose a firm 0.9% (19.5% y/y).Factory output overall less the hi-tech industries ticked up just 0.1% (4.6% y/y).
Overall capacity utilization rose to 82.4% in July, its highest level in six years. Factory sector utilization was stable m/m at 80.7%.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/output.htm">Production &amp; Capacity</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Industrial Production</td>
<td>0.4%</td>
<td>0.8%</td>
<td>4.8%</td>
<td>3.2%</td>
<td>4.1%</td>
<td>0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Manufacturing (NAICS)</td>
<td>0.2%</td>
<td>0.8%</td>
<td>5.8%</td>
<td>3.9%</td>
<td>4.8%</td>
<td>0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Consumer Goods</td>
<td>-0.3%</td>
<td>1.1%</td>
<td>1.8%</td>
<td>2.1%</td>
<td>2.1%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Business Equipment</td>
<td>1.1%</td>
<td>0.8%</td>
<td>12.2%</td>
<td>9.1%</td>
<td>9.3%</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capacity Utilization</td>
<td>82.4%</td>
<td>82.3%</td>
<td>80.4% (7/05)</td>
<td>80.1%</td>
<td>78.6%</td>
<td>75.7%</td>
</tr>
</tbody>
</table>
July Housing Starts Down Further 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 16, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060816f.jpg" width="353">
Housing starts fell for the fourth straight month in July, by 2.5% to 1.795M units. The decline slightly outpaced Consensus expectations for drop to 1.81M starts.
Total housing starts in July were 20.8% below the peak this past January.
Single-family starts fell 2.3% last month to 1.453M, down 20.0% from the January peak. Multi family starts also fell another 3.4%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060816e.jpg" width="353">
By region, single family housing starts dropped 9.5% (-25.8% y/y) in the West. In the Midwest starts also fell by 2.3% (-18.9% y/y) and single family starts in the South slipped 0.5% (-9.1% y/y). In the Northeast stats rose 12.2% (-26.3% y/y).
Building permits fell for the sixth consecutive month, dropping another 6.5%.
The July 2006 Senior Loan Officer Opinion Survey on Bank Lending Practices from the Federal Reserve Board is available <a href="http://www.federalreserve.gov/BoardDocs/snloansurvey/200608/default.htm"> here</a>.

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</table>
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<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a> </th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>1,795</td>
<td>1,841</td>
<td>-13.3%</td>
<td>2,073</td>
<td>1,950</td>
<td>1,854</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,452</td>
<td>1,486</td>
<td>-16.6%</td>
<td>1,719</td>
<td>1,604</td>
<td>1,505</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>343</td>
<td>355</td>
<td>3.9%</td>
<td>354</td>
<td>345</td>
<td>349</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>1,747</td>
<td>1,869</td>
<td>-20.8%</td>
<td>2,159</td>
<td>2,058</td>
<td>1,888</td>
</tr>
</tbody>
</table>
Mortgage Applications Up With More Refinancings 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 16, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060816g.jpg" width="353">
The total number of mortgage applications rose 1.4% last week following a 4.9% rise the week prior.
The gains were led by rebounding applications to refinance which rose 4.6% on top of a 7.1% increase during the first week of August. Refis are up 17.1% from the lows in June.
Conversely, purchase applications last week fell for the fourth week in the last five and posted a 0.8% dip which pulled purchase apps in August 2.5% below the July average.
During the last ten years there has been a 58% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060816h.jpg" width="353">
The effective interest rate on a conventional 30-year mortgage increased to 6.73%. The peak for 30 year financing was 7.08% late in June. The rate on 15-year financing also rose to 6.42% and the peak rate was 6.75%. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage.
In July, 35.4% of all loan applications were to refinance, down from 44.2% last July.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.
Property Debt Burdens from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2006/el2006-18.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">08/11/06</th>
<th scope="col">08/04/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>561.2</td>
<td>553.3</td>
<td>-26.3%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>385.9</td>
<td>388.9</td>
<td>-22.7%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,587.5</td>
<td>1,518.1</td>
<td>-30.5%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
Q2 GDP Eases in Greece & Falls in the Palestinian Territories But Gains in Israel 
by <a href="/comment/Stone.html">Carol Stone</a> August 16, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060816i.jpg" width="353">
Three Mediterranean regions reported Q2 GDP today. In Greece, total GDP eased 0.3% from Q1, Israel saw growth of 1.5% and the Palestinian Territories&#39; GDP fell 1.7%.
The Greek data featured a decline in domestic demand in Q2 after it rose sharply in Q1. The Q2 figures included a reduction in consumption and what might be termed a &quot;correction&quot; in fixed investment. This latter had been up strongly for three quarters running, so the latest period&#39;s decrease still left year-on-year growth of 14.0%, a nice recovery after a contraction in 2005. Consumption is somewhat steadier, maintaining four-quarter growth rates between 3% and 4%. Q2 total GDP was supported by an improvement in net exports. Country-source data for Greece are included in Haver&#39;s ALPMED database, with summary statistics in G10 and EUROSTAT. While the first two are updated by Haver soon after the data are released, the figures in EUROSTAT are available to us only after their staff have released them through their own channels and that database generally includes them some time later.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060816j.jpg" width="353">
Israel&#39;s total GDP growth has been fairly steady at about a 6% annual pace for the last year, reflecting moderate gains in consumption and investment and strong exports. Obviously, these are Q2 data and do not cover any of the Israel/Hezbollah conflict, which began July 12. While economic impact is hardly a high priority in analyzing this war right now, the even-tempered performance of Israel&#39;s economy going into it will provide for interesting comparisons when Q3 data are produced.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060816k.jpg" width="353">
The Palestinian Territories have a tiny economy, with GDP for 2005 totaling only $4.46 billion in fixed 1997 prices. The first two quarters of this year were weak, with a steep drop of 7.2% in Q1 followed by 1.7% in Q2. Recent data are available only for industrial sectors (not for expenditure categories), and these sectors are experiencing varied patterns. The latest declines came in industry and construction, while transportation is erratic but maintaining a modest growth trend. As with many of the world&#39;s organized economic areas, the service sector is expanding with some vigor, and Q2 was up 16.5% from a year ago. One hopes that has been maintained this quarter despite the tumult around them.
Data on Israel and the Palestinian Territories are contained in Haver&#39;s EMERGEMA database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
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<tr>
<th scope="col" class="firstcol">GDP: % Changes</th>
<th scope="col">Q2 2006</th>
<th scope="col">Q1 2006</th>
<th scope="col">Q4 2005</th>
<th scope="col">Yr/Yr</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"><a href="http://www.haverselect.com/dlx/ALPMED/@A2/@A22/@A22.HTM">Greece*</a></td>
<td>-0.3</td>
<td>2.8</td>
<td>-0.2</td>
<td>4.1</td>
<td>3.7</td>
<td>4.7</td>
<td>4.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumption</td>
<td>-1.1</td>
<td>1.5</td>
<td>0.5</td>
<td>3.5</td>
<td>3.6</td>
<td>4.4</td>
<td>3.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Fixed Investment</td>
<td>-4.7</td>
<td>7.4</td>
<td>4.5</td>
<td>14.0</td>
<td>-1.2</td>
<td>5.7</td>
<td>13.7</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/EMERGEMA/@M7/@M702/@M702.HTM">Israel*</a></td>
<td>1.5</td>
<td>1.4</td>
<td>1.4</td>
<td>6.2</td>
<td>5.2**</td>
<td>4.8**</td>
<td>1.5**</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Consumption</td>
<td>1.2</td>
<td>1.8</td>
<td>0.0</td>
<td>2.7</td>
<td>3.1**</td>
<td>2.8**</td>
<td>-0.3**</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Fixed Investment</td>
<td>-2.4</td>
<td>2.2</td>
<td>2.2</td>
<td>3.1</td>
<td>2.9**</td>
<td>0.3**</td>
<td>-5.5**</td>
</tr>
<tr class="odd">
<td class="firstcol">Palestinian Territories*</td>
<td>-1.7</td>
<td>-7.2</td>
<td>2.3</td>
<td>1.7</td>
<td>4.9</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
</body>
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Consumer prices (CPI-U) during July rose an expected 0.4%, the average rate of monthly increase for the last five months. A somewhat more moderate increase, however, was posted by prices less food & energy. The 0.2% increase compared [...]

Core CPI Moderate As Energy Costs Jumped, Again

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060815g.jpg" width="353">
The Composite Leading Indicator (MBONCUE-SUE) in Turkey is casting some doubt on the continuance of the period of good economic growth and relatively low inflation that the country has experience over the past few years. As can be seen in the first chart the year over year growth in industrial production has ranged between 5% and 9% while the year over year increase in consumer prices has declined from around 22% in 2003 to 8.6% in 2004 and 8.2% in 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060815h.jpg" width="353">
Turkey&#39;s composite leading indicator is expressed in three differ forms: (1) Trend Restored (2) Cycle and (3) a six month moving average. All three forms have declined in June and July and, except for Trend Restored, they are below July, 2005 and the Trend Restored form is only 0.51% above July, 2005. The second chart shows the Trend Restored and Cycle. The six-month rate of change shows a similar trend.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060815i.jpg" width="353">
The Business Tendency Survey increased in June but has declined in July from 104.4 to 102.4. This measure is so designed that values above 100 represent a preponderance of optimists, values below 100, a preponderance of pessimists and a value of 100, balance between optimists and pessimists. Although the current value is 2.4 points above 100, indicating a preponderance of optimists, it is well below the recent peak of 110.3 in February, 2004. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/EMERGEMA/@M3/@M308/@M308.HTM">Turkey</a></th>
<th scope="col">Jul&nbsp; 06</th>
<th scope="col">Jun 06</th>
<th scope="col">Jul 05</th>
<th scope="col">M/M %</th>
<th scope="col">Y/Y %</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Leading Indicator</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp;Trend Restored&nbsp;</td>
<td>146.25</td>
<td>148.02</td>
<td>145.51</td>
<td>-1.20</td>
<td>0.51</td>
<td>146.13</td>
<td>141.15</td>
<td>132.27</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Cycle</td>
<td>102.79</td>
<td>105.25</td>
<td>104.86</td>
<td>-1.40</td>
<td>-1.97</td>
<td>105.41</td>
<td>144.40</td>
<td>100.30</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Six-month Rate of Change</td>
<td>-2.43</td>
<td>0.09</td>
<td>2.49</td>
<td>-2.52*</td>
<td>-4.92*</td>
<td>3.52</td>
<td>5.14</td>
<td>6.81</td>
</tr>
<tr class="odd">
<td class="firstcol">Business Tendency Survey</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Confidence Index (100=Balance , &gt;100=Optimistic, &lt;100=Pessimistic</td>
<td>102.4</td>
<td>104.4</td>
<td>103.5</td>
<td>-2.20</td>
<td>2.10</td>
<td>122.8</td>
<td>106.8</td>
<td>104.1</td>
</tr>
</tbody>
</table>
</body>
</html>

The Composite Leading Indicator (MBONCUE-SUE) in Turkey is casting some doubt on the continuance of the period of good economic growth and relatively low inflation that the country has experience over the past few years. As can be [...]

Turkey's Leading Composite Indicators and Business Confidence: Harbingers of Lower Growth?

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060815e.jpg" width="353">
The National Association of Home Builders (NAHB) reported that the August Composite Housing Market Index at 32 fell another 18% from 39 in July to the lowest level since February, 1991. Consensus expectations were for only a small decline to 38. 
During the last twenty years there has been a 75% correlation between the y/y change in the Composite Index and the change in single family housing starts. 
The sub-indexes covering sales of single family homes (-50.7% y/y) and sales in the next six months (-48.1% y/y) were both down sharply again m/m. 
An index of the traffic of prospective home buyers fell further in August. At 21 (-58% y/y) it was the lowest since January, 1991 and the second lowest since the index began in 1985.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060815f.jpg" width="353"> 
Housing markets in all regions of the U.S. weakened this month. The index in the Northeast was off 8.1% (-51.4% y/y). In the Midwest the index dropped 25% (-66.7% y/y). The West was down 19.2% (-50.6% y/y) and the South declined 18% (-44.6% y/y). 
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions good than poor. 
Visit the <a href="http://www.nahb.org">National Association of Home Builders</a>.

<table border="0" cellspacing="0" width="100%">

</table>
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<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a> </th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">August &#39;05 </th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Housing Market Index</td>
<td>32</td>
<td>39</td>
<td>67</td>
<td>67</td>
<td>68</td>
<td>64</td>
</tr>
</tbody>
</table>


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060815c.jpg" width="353">
The producer price index for finished goods edged up 0.1% in July, in line with Consensus expectations. The index had increased by 0.5% in June. 
Prices for finished goods excluding food and energy unexpectedly fell 0.3% in July after rising 0.2% the previous month. Consensus estimates had been a 0.1% gain. Prices of light trucks dropped 3.1% compared with an increase of 0.4% in June. Prices in July were also lower for passenger cars (-0.8%) and civilian aircraft (-0.1%). 
The finished energy goods index rose 1.3% (+16.2% y/y) in July after a 0.7% rise in June. Residential electric power prices advanced 1.8% after a 2.8% drop in June. Residential natural gas also rose (+0.9%) compared with a 3.7% decline in June. Gasoline prices moderated somewhat in July (+0.7%) after huge increases in March through June. The gasoline price index in July was 33.7% higher than a year ago. 
The lack of inflationary pressure in finished goods was not shown in the intermediate and crude goods indexes. Intermediate goods prices rose 0.5% in July after a 0.7% increase in June. Excluding food and energy, the intermediate goods index was 0.7% higher compared with an 0.8% advance the prior month. Intermediate energy prices were down last month (-0.1%) led by diesel fuel which declined by 5.0% after rising 5.4% in June. The indexes for jet fuel, residential fuel and home heating oil were all lower in July as well. Industrial and commercial natural gas prices rose, as did liquefied petroleum gas prices. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060815d.jpg" width="353">
Materials prices for nondurable manufacturing increased 0.2% last month after a 1.0% advance in June. The index for materials for durable goods manufacturing climbed 2.3% in July compared with a 1.1% gain the previous month. Prices for materials for construction moved up 0.7% after a 0.3% rise in June. 
The PPI for crude materials soared 3.1% in July after declining 1.7% in June. Crude energy materials prices rose 4.8% led by natural gas (+1.2%) and crude petroleum (+9.4%). Crude energy prices had dropped by 6.8% in June. Prices of crude materials less food and energy increased 1.3% following a rise of 1.7% 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/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</a> </th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Finished Goods </td>
<td>0.1%&nbsp;</td>
<td>0.5%</td>
<td>4.1%&nbsp;</td>
<td>&nbsp;4.9%&nbsp;</td>
<td>3.6%&nbsp;</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol"> &nbsp; Core </td>
<td>-0.3%</td>
<td>0.2%</td>
<td>&nbsp;1.3%</td>
<td>2.4%</td>
<td>1.5%</td>
<td>0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods </td>
<td>0.5%</td>
<td>0.7%</td>
<td>8.8%</td>
<td>&nbsp;8.0%</td>
<td>6.6%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol"> &nbsp; Core </td>
<td>0.7%</td>
<td>0.8%</td>
<td>7.9%</td>
<td>&nbsp;5.5%</td>
<td>5.7%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods </td>
<td>3.1%&nbsp;</td>
<td>-1.7%</td>
<td>&nbsp;6.7%</td>
<td>14.6%</td>
<td>&nbsp;17.5%</td>
<td>25.1%</td>
</tr>
<tr>
<td class="firstcol"> &nbsp; Core </td>
<td>1.3%</td>
<td>1.7%</td>
<td>&nbsp;34.6%</td>
<td>4.8%</td>
<td>&nbsp;26.5%</td>
<td>12.4%</td>
</tr>
</tbody>
</table>


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060815a.jpg" width="353">
Manufacturing activity in New York State grew in August but at the slowest pace in 2006. The Empire State Manufacturing Index of General Business Conditions, reported by the Federal Reserve Bank of New York, fell 6.24 points to 10.34 in August. Consensus expectations had been for a lesser decline to 14.25.
Since the series&#39; inception in 2001 there has been a 75% correlation between the index level and the three month change in U.S. factory sector industrial production.
The indexes for new orders &amp; shipments remained positive and higher than previous month&#39;s indexes but unfilled orders went into negative territory. The index of inventories was negative for the third consecutive month. The index of employment was positive but remained at a low level, indicating a modest increase in employment.
Pricing pressure continued to ease. Since 2001 there has been an 88% correlation between the index of prices paid and the three month change in the core intermediate materials PPI.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060815b.jpg" width="353">
Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question; it is not a weighted combination of the components.
New York manufacturers were less optimistic in August. The Empire State index of expectations for business conditions in six months dropped 10 points to 35.20 with 48% of respondents expecting an improvement in conditions versus 57% during the previous month.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001.
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/research/regional_economy/empiresurvey_overview.html">here</a>.

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</table>
<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/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a> </th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">August &#39;05 </th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions (diffusion index)</td>
<td>10.34</td>
<td>16.58</td>
<td>22.61</td>
<td>15.56</td>
<td>28.79</td>
<td>15.98</td>
</tr>
</tbody>
</table>


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060815g.jpg" width="353">
The Composite Leading Indicator (MBONCUE-SUE) in Turkey is casting some doubt on the continuance of the period of good economic growth and relatively low inflation that the country has experience over the past few years. As can be seen in the first chart the year over year growth in industrial production has ranged between 5% and 9% while the year over year increase in consumer prices has declined from around 22% in 2003 to 8.6% in 2004 and 8.2% in 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060815h.jpg" width="353">
Turkey&#39;s composite leading indicator is expressed in three differ forms: (1) Trend Restored (2) Cycle and (3) a six month moving average. All three forms have declined in June and July and, except for Trend Restored, they are below July, 2005 and the Trend Restored form is only 0.51% above July, 2005. The second chart shows the Trend Restored and Cycle. The six-month rate of change shows a similar trend.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060815i.jpg" width="353">
The Business Tendency Survey increased in June but has declined in July from 104.4 to 102.4. This measure is so designed that values above 100 represent a preponderance of optimists, values below 100, a preponderance of pessimists and a value of 100, balance between optimists and pessimists. Although the current value is 2.4 points above 100, indicating a preponderance of optimists, it is well below the recent peak of 110.3 in February, 2004. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/EMERGEMA/@M3/@M308/@M308.HTM">Turkey</a></th>
<th scope="col">Jul&nbsp; 06</th>
<th scope="col">Jun 06</th>
<th scope="col">Jul 05</th>
<th scope="col">M/M %</th>
<th scope="col">Y/Y %</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Leading Indicator</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp;Trend Restored&nbsp;</td>
<td>146.25</td>
<td>148.02</td>
<td>145.51</td>
<td>-1.20</td>
<td>0.51</td>
<td>146.13</td>
<td>141.15</td>
<td>132.27</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Cycle</td>
<td>102.79</td>
<td>105.25</td>
<td>104.86</td>
<td>-1.40</td>
<td>-1.97</td>
<td>105.41</td>
<td>144.40</td>
<td>100.30</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Six-month Rate of Change</td>
<td>-2.43</td>
<td>0.09</td>
<td>2.49</td>
<td>-2.52*</td>
<td>-4.92*</td>
<td>3.52</td>
<td>5.14</td>
<td>6.81</td>
</tr>
<tr class="odd">
<td class="firstcol">Business Tendency Survey</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Confidence Index (100=Balance , &gt;100=Optimistic, &lt;100=Pessimistic</td>
<td>102.4</td>
<td>104.4</td>
<td>103.5</td>
<td>-2.20</td>
<td>2.10</td>
<td>122.8</td>
<td>106.8</td>
<td>104.1</td>
</tr>
</tbody>
</table>
</body>
</html>

The National Association of Home Builders (NAHB) reported that the August Composite Housing Market Index at 32 fell another 18% from 39 in July to the lowest level since February, 1991. Consensus expectations were for only a small [...]

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060814a.jpg" width="353">
As noted by Randy Gernaat last Friday, reports of growth in several European nations confirm analyst&#39;s expectations of good growth in Europe in the second quarter. Today&#39;s reports for Spain and Germany reinforced this view. Both Spain and Germany reported growth of 0.9% for the second quarter.
By now Eurostat has enough data from the various countries to issue Flash Estimates for the Euro Zone, as a whole, and for the 25 members of the European Union. Flash Estimates of GDP growth have been available from the second quarter of 2002 to date for the Euro Zone and from the second quarter of 2003 for the Euro 25. The Flash Estimates of Growth for the two areas are shown in the first chart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060814b.jpg" width="353">
Growth for the entire Euro Zone is now estimated at 0.9% up from 0.6% in the first quarter. At an annual rate of increase, the measure used in the United States%, Euro Zone growth was 3.6% in the second quarter, compared with the seasonally adjusted annual rate of 2.5% for the U. S. Growth of GDP in the Euro Zone and in the U. S. are compared in the second chart.
The Euro 25 are also estimated to have grown 0.9% in the second quarter compared with 0.7% in the first quarter.. (In addition to the 12 countries of the Euro Zone, the Euro 25 includes, the U. K., Sweden, Denmark, Estonia, Latvia, Lithuania, Hungary, Poland, Czech Republic, Slovakia, Slovenia, Cyprus and Malta.)
Also published today were The European Commission&#39;s forecasts of the Euro Zone&#39;s rate of growth for the next three quarters. On the basis of their dynamic factor model for quarterly GDP growth the Commission forecasts a range of GDP growth in the third quarter of 0.5% to 0.9%, in the fourth quarter, 0.4% to 0.9% and in the first quarter of 2007, 0.2% to 0.8%.

<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/EUROSTAT/@U2/@U218/@U218.HTM">Quarter-to-Quarter Change in GDP</a></th>
<th scope="col">Q1&nbsp; 06</th>
<th scope="col">Q2 06</th>
<th scope="col">--</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Germany&nbsp;</td>
<td>0.7</td>
<td>0.9</td>
<td>--</td>
<td>1.16</td>
<td>1.10</td>
<td>-0.19</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>0.8</td>
<td>0.9</td>
<td>--</td>
<td>3.43</td>
<td>3.09</td>
<td>3.00</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro Zone</td>
<td>0.6</td>
<td>0.9</td>
<td>--</td>
<td>1.40</td>
<td>1.33</td>
<td>0.79</td>
</tr>
<tr>
<td class="firstcol">EU 25</td>
<td>0.7</td>
<td>0.9</td>
<td>--</td>
<td>1.69</td>
<td>2.26</td>
<td>1.27</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro Zone Forecast</td>
<td>Q3 06</td>
<td>Q4 06</td>
<td>Q1 07</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">High</td>
<td>0.9</td>
<td>0.9</td>
<td>0.8</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Low</td>
<td>0.5</td>
<td>0.4</td>
<td>0.2</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Average</td>
<td>0.7</td>
<td>0.65</td>
<td>0.5</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
</body>
</html>

As noted by Randy Gernaat last Friday, reports of growth in several European nations confirm analyst's expectations of good growth in Europe in the second quarter. Today's reports for Spain and Germany reinforced this view. Both Spain [...]

European Commission Predicts Strong GDP Growth in the Euro Zone to Continue

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060814a.jpg" width="353">
As noted by Randy Gernaat last Friday, reports of growth in several European nations confirm analyst&#39;s expectations of good growth in Europe in the second quarter. Today&#39;s reports for Spain and Germany reinforced this view. Both Spain and Germany reported growth of 0.9% for the second quarter.
By now Eurostat has enough data from the various countries to issue Flash Estimates for the Euro Zone, as a whole, and for the 25 members of the European Union. Flash Estimates of GDP growth have been available from the second quarter of 2002 to date for the Euro Zone and from the second quarter of 2003 for the Euro 25. The Flash Estimates of Growth for the two areas are shown in the first chart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060814b.jpg" width="353">
Growth for the entire Euro Zone is now estimated at 0.9% up from 0.6% in the first quarter. At an annual rate of increase, the measure used in the United States%, Euro Zone growth was 3.6% in the second quarter, compared with the seasonally adjusted annual rate of 2.5% for the U. S. Growth of GDP in the Euro Zone and in the U. S. are compared in the second chart.
The Euro 25 are also estimated to have grown 0.9% in the second quarter compared with 0.7% in the first quarter.. (In addition to the 12 countries of the Euro Zone, the Euro 25 includes, the U. K., Sweden, Denmark, Estonia, Latvia, Lithuania, Hungary, Poland, Czech Republic, Slovakia, Slovenia, Cyprus and Malta.)
Also published today were The European Commission&#39;s forecasts of the Euro Zone&#39;s rate of growth for the next three quarters. On the basis of their dynamic factor model for quarterly GDP growth the Commission forecasts a range of GDP growth in the third quarter of 0.5% to 0.9%, in the fourth quarter, 0.4% to 0.9% and in the first quarter of 2007, 0.2% to 0.8%.

<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/EUROSTAT/@U2/@U218/@U218.HTM">Quarter-to-Quarter Change in GDP</a></th>
<th scope="col">Q1&nbsp; 06</th>
<th scope="col">Q2 06</th>
<th scope="col"></th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Germany&nbsp;</td>
<td>0.7</td>
<td>0.9</td>
<td></td>
<td>1.16</td>
<td>1.10</td>
<td>-0.19</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>0.8</td>
<td>0.9</td>
<td></td>
<td>3.43</td>
<td>3.09</td>
<td>3.00</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro Zone</td>
<td>0.6</td>
<td>0.9</td>
<td></td>
<td>1.40</td>
<td>1.33</td>
<td>0.79</td>
</tr>
<tr>
<td class="firstcol">EU 25</td>
<td>0.7</td>
<td>0.9</td>
<td></td>
<td>1.69</td>
<td>2.26</td>
<td>1.27</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro Zone Forecast</td>
<td>Q3 06</td>
<td>Q4 06</td>
<td>Q1 07</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">High</td>
<td>0.9</td>
<td>0.9</td>
<td>0.8</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Low</td>
<td>0.5</td>
<td>0.4</td>
<td>0.2</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Average</td>
<td>0.7</td>
<td>0.65</td>
<td>0.5</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
</body>
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Randy Gernaat

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060811g.jpg" width="353">
This past week has brought several additional preliminary releases of economic growth in Europe for the second quarter - mostly confirming analysts&#39; expectations that growth would remain strong in Q2. Preliminary Dutch GDP, released yesterday, showed an increase of 1% over Q1 2006, its strongest showing since Q1 2004. Growth in the Netherlands was helped by strong exports and household consumption, particularly of durable consumer goods. 
A flash estimate of French GDP, released today, showed the French economy booming in the second quarter. The French national statistical office (INSEE) estimated economic growth in France was up by between 1.1% and 1.2% over the first quarter of 2006 - much higher than many analysts were expecting. While the first release of expenditure components will not be released by INSEE until August 22nd, it seems clear that household consumption continues to be the clear driver of economic growth in France. INSEE&#39;s latest household consumption release for June showed French consumer spending up 1.7% over May and up 1.5% for the second quarter as a whole. With the strong pickup in growth in the German economy, French exports have also posted strong readings for the second quarter. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060811h.jpg" width="353"> 
Preliminary Italian GDP figures for Q2 released today by the Italian national statistical office (Istat) showed a drop in growth from Q1. Istat estimates that the Italian economy grew by just 0.5% over Q1 after growing by 0.7% in the first quarter of this year. 
The Office for National Statistic&#39;s (ONS) preliminary GDP release from 3 weeks ago showed UK economic growth up slightly in Q2 at 0.8%. The first estimate of economic growth in Germany will be released next Monday, the 14th of August. Analysts expect German growth to come in much higher than the 0.4% growth recorded in Q1 of this year - pushed in large part by stronger domestic demand related to the World Cup. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Gross Domestic Product (Period-to-Period % Change)</th>
<th scope="col">Q2 2006&nbsp;&nbsp;</th>
<th scope="col">Q1 2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Netherlands</td>
<td>1.0%</td>
<td>0.3%</td>
<td>1.53%</td>
<td>1.95%</td>
<td>0.34%</td>
<td>0.08%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>1.1-1.2%</td>
<td>0.5%</td>
<td>1.20%</td>
<td>2.03%</td>
<td>1.13%</td>
<td>1.11%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>0.5%</td>
<td>0.7%</td>
<td>0.11%</td>
<td>0.88%</td>
<td>0.11%</td>
<td>0.34%</td>
</tr>
<tr>
<td class="firstcol">United Kingdom</td>
<td>0.8%</td>
<td>0.7%</td>
<td>1.86%</td>
<td>3.26%</td>
<td>2.67%</td>
<td>2.06%</td>
</tr>
</tbody>
</table>
</body>
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This past week has brought several additional preliminary releases of economic growth in Europe for the second quarter - mostly confirming analysts' expectations that growth would remain strong in Q2. Preliminary Dutch GDP, released [...]

European Countries' GDP Posting Strong Q2 Gains as Expected

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060811e.jpg" width="353">
Total business inventories in June rose 0.8% in line with consensus expectations after a 1.1% upward revised gain in May. June business sales edged up only 0.2% from a 1.6% rate in the prior month. The inventory/sales ratio moved up to 1.26 from its low in May of 1.25. 
Retail inventories increased 0.9% (5.8% Y/Y) after an unrevised 1.6% jump in May. The stocks at motor vehicles and parts dealers surged by 1.7% (9.4% Y/Y) in June, while excluding autos, retail inventories rose 0.5% (4.1% Y/Y). Furniture inventories moved up by 0.6% (4.5% Y/Y), while building materials inventories grew by 0.5% (7.8% Y/Y). Inventories at food and beverage stores and at clothing stores each rose 0.4%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060811f.jpg" width="353"> 
Wholesale inventories increased 0.8% (8.1% Y/Y) in June after a 0.9% gain in May. June petroleum inventories leveled off (-0.1%) after jumping 6.8% in May, but were still 35.8% higher than a year ago. Durables rose 0.5% (8.4% Y/Y) while nondurables were up 1.1 % (7.4% Y/Y). 
Factory inventories rose 0.8% (5.5% Y/Y) in June. May inventories were revised up to a 0.7% gain from the earlier estimate of a slight dip.

<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/@ED/@ED06/@ED0601/@ED0601.HTM">Business Inventories</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.8%</td>
<td>1.1%</td>
<td>6.3%</td>
<td>4.4%</td>
<td>7.6%</td>
<td>-1.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.9%</td>
<td>1.6%</td>
<td>5.8%</td>
<td>2.7%</td>
<td>6.7%</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Autos</td>
<td>0.5%</td>
<td>0.7%</td>
<td>4.1%</td>
<td>4.5%</td>
<td>7.1%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>0.8%</td>
<td>0.9%</td>
<td>8.1%</td>
<td>7.1%</td>
<td>9.8%</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.8%</td>
<td>0.7%</td>
<td>5.5%</td>
<td>4.0%</td>
<td>6.9%</td>
<td>-7.4%</td>
</tr>
</tbody>
</table>
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Total business inventories in June rose 0.8% in line with consensus expectations after a 1.1% upward revised gain in May. June business sales edged up only 0.2% from a 1.6% rate in the prior month. The inventory/sales ratio moved up [...]

U.S. Business Inventories Gain

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060811d.jpg" width="353">
Total import prices were up 0.9% in July about matching consensus expectations for an increase of 0.8%.
Less petroleum, import prices were down 0.10% from the previous month led by a 0.9% drop in import prices of nonoil industrial supplies and materials after three consecutive months of increases. Lower import prices of nonferrous metals, natural gas and building materials contributed to the decline in prices of nonoil industrial supplies and materials although higher import prices of chemicals and finished metals offset some of the decline.
Capital goods prices rose 0.1% (-0.44% y/y) while prices for nonauto consumer goods were down 0.1% from the previous month and unchanged from the previous year. 
Prices of petroleum imports increased 4.7% in July following a 1.4% decline in June. Brent crude oil prices jumped to $73.77 per barrel in July from a June average of $68.56.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060811c.jpg" width="353">
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 lower 47% against a broader basket of currencies and a lower 57% against the real value of the dollar.
Export prices were up 0.4% in July led by increases in export prices of both agricultural and nonagricultural commodities.

<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">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>0.9%</td>
<td>0.0%</td>
<td>7.0%</td>
<td>7.5%</td>
<td>5.6%</td>
<td>2.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>4.7%</td>
<td>-1.4%</td>
<td>29.6%</td>
<td>37.6%</td>
<td>30.5%</td>
<td>21.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>-0.1%</td>
<td>0.4%</td>
<td>2.3%</td>
<td>2.7%</td>
<td>2.6%</td>
<td>1.1%</td>
</tr>
<tr>
<td class="firstcol">Export - All Commodities</td>
<td>0.4%</td>
<td>0.7%</td>
<td>4.4%</td>
<td>3.2%</td>
<td>3.9%</td>
</tr>
</tbody>
</table>
</body>
</html>

Total import prices were up 0.9% in July about matching consensus expectations for an increase of 0.8%. Less petroleum, import prices were down 0.10% from the previous month led by a 0.9% drop in import prices of nonoil industrial [...]

U.S. Import Prices Up 0.9%

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

AI boosting US investment in data centers

US productivity growth has been significantly faster than in other major economies

Consumers' short-term US inflation expectations still elevated while longer-term expectations of financial markets are steady

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

Job openings less than the number unemployed in July for first time since 2021

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

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Sandy Batten

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The Bureau of Labor Statistics released establishment survey data for both October and November today. With the government shutdown during the month of October, there was no household survey for that month. Today’s release contained only November data for households. Nonfarm payrolls (from the establishment survey) increased 64,000 in November but fell 105,000 in October. The 119,000 increase previously reported for September was revised down to a 108,000 rise. The Action Economics Forecast Survey had expected an 80,000 decrease in October and a 35,000 increase in November. The three-month average change in payrolls rebounded to 22,000 in November from -8,000 in October. However, this figure has trended down since early this year, pointing to a modest softening of labor-market conditions. 

This softening was reinforced by a 0.2%-point jump in the unemployment rate, measured in the household survey, to 4.6% in November from 4.4% in September. (As already noted, there was no household survey in October.) The unemployment rate, including employees working part-time for economic reasons plus all marginally attached workers, surged to 8.7% in November from 8.0% in September. For both series, these were the highest readings since September 2021.

Average hourly earnings (AHE), a key variable for the Federal Reserve, showed a further slowing in wage growth. AHE edged up 0.1% m/m in November after a 0.4% monthly jump in October. Importantly, the y/y rate slowed to 3.5%, the slowest since May 2021, from 3.7% in both September and October. The annual pace of the rise in service-producing wages slowed to 3.4% in November from 3.7% in both September and October while the annual growth of goods-producing wages was unchanged at 4.0%. Depending on your estimate of productivity growth, the current pace of total AHE growth is likely still a little too fast to be consistent with the Fed’s 2% inflation target. But clearly, it is moving in the desired direction.

In the **establishment survey**, much of the recent softening reflects declines in federal government employment. Federal government employment fell again in November (-6,000). This follows a sharp decline of 162,000 in October, as some federal employees who accepted a deferred resignation offer came off federal payrolls. Federal government employment is down by 271,000 since reaching a peak in January. (Note however that federal employees on furlough during the government shutdown were counted as employed in the establishment survey because they received pay, even if later than usual, for the pay period that included the 12th of the month. Employees on paid leave or receiving ongoing severance pay are counted as employed in the establishment survey.)

Private-sector employment rose 69,000 in November and 52,000 in October following an upwardly revised 104,000 increase in September (previously 97,000). Goods sector employment rebounded in November, rising 19,000 after a 9,000 fall in October. Construction jobs increased 28,000 in November, their largest monthly gain in more than a year, but slipped 1,000 in October. Manufacturing jobs continued to decline, falling 5,000 in November and 9,000 in October. They have now declined for seven consecutive months, not the result that the Trump Administration new tariff policy had intended.

Private-sector service-producing jobs gained 50,000 in November on top of a 61,000 increase in October and an 87,000 rise in September. A 46,000 increase in healthcare jobs on top of a 44,000 increase in October and an 18,000 gain in social assistance jobs in November after a 21,000 increase in October led the overall increases in the past two months. Other major sectors mostly experienced either job declines or minimal gains in October and November.

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The length of the workweek increased to 34.3 hours in November from 34.2 hours in August, September and October. The goods-producing workweek edged up to 39.8 hours in November from 39.6 hours in October while the private service-producing workweek was unchanged at 33.2 hours in November.

In the **household survey**, the unemployment rate jumped to 4.6% in November, the highest since September 2021 and up from a recent low of 3.4% in April 2023, from 4.4% in September (again, no data for October). The labor force increased 323,000 in November from September after a 470,000 monthly gain in September. The gain in employment slowed in November with the number of employed rising only 96,000 from September following a 251,000 monthly increase in September. The number of unemployed increased 228,000 in November from September following a 219,000 monthly increase in September. The labor force participation rate rose to 62.5% in November, its highest since April, from 62.4% in September. On a slightly brighter note, the average duration of unemployment slipped to 23.0 weeks in November from 24.1 weeks in September while the median duration of unemployment fell to 9.5 weeks, the lowest since May, from 10.0 weeks in September.

The employment/population ratio for all workers slipped to 59.6% in November from 59.7% in September. It remained below the recent peak reading of 61.1% in February 2020 just prior to the pandemic. For men, the rate slipped to 64.6% in November from 64.8% in September and 65.0% in August, and for women, the rate was unchanged at 54.8% in November.

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's **USECON** database. Detailed figures are in the **EMPL** and **LABOR** databases. The expectations figures are in the **AS1REPNA** database.

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- Total payrolls rose 64k in November but fell 105k in October
- The October decline was more than accounted for by a 157k decline in government employment
- The unemployment rate jumped to 4.6% in November from 4.4% in September.
- There were no household survey data collected for October.

U.S. Employment and the Unemployment Rate Rose in November

Winnie Tapasanun

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Total retail sales were virtually unchanged m/m in October after downwardly revised increases of 0.1% in September (+0.2% initially) and 0.5% in August (+0.6% previously), data from the U.S. Census Bureau showed. The October flat reading followed four consecutive m/m rises and declines in May and April. A 0.1% m/m October increase had been expected in the Action Economics Forecast Survey. The year-on-year growth rate decelerated to 3.5% in October, the lowest since May, from 4.2% in September; this compared with 3.2% in October 2024 and remained far below a high of 17.1% in February 2022 and a peak of 51.8% in April 2021.

Excluding motor vehicles & parts, retail sales rose 0.4% (4.0% y/y) in October, the fifth straight m/m rise, after a 0.1% uptick in September (+0.3% initially). A 0.2% m/m October increase had been expected. Sales of motor vehicles & parts fell 1.6% (+1.2% y/y) following a 0.1% September downtick and three successive m/m increases; this compared to a 6.9% drop (-4.6% y/y) in unit light vehicle sales following no change in September.

Sales in the retail control group, which excludes autos, building materials, gasoline stations, and food services, rose 0.8% (5.1% y/y) in October, the fifth m/m rise in six months, following a 0.1% dip in September. These sales are used in the construction of personal consumption expenditures in NIPA accounts. Nonauto sales excluding gasoline & building materials advanced 0.6% (4.9% y/y), also up for the fifth time in six months, following a flat September reading.

Sales by category were mixed in October. To the upside, general merchandise store sales rose 0.5% (2.0% y/y), the fifth consecutive m/m rise, after a 0.1% uptick in September; within this grouping, department store sales surged 4.9% (4.6% y/y)—the third m/m increase in four months and the largest since February 2022—following a 0.3% September decline. Furniture & home furnishing store sales rebounded 2.3% (0.5% y/y), the first m/m gain since July, after a 2.4% September decrease. Sporting goods, hobby, book & music store sales climbed 1.9% (4.6% y/y), up for the third time in four months, reversing a 1.7% September decrease. Nonstore retail sales recovered 1.8% (9.0% y/y), the eighth m/m gain in nine months, after falling 0.4% in September. Miscellaneous store sales rose 1.5% (9.5% y/y) following a 2.2% September increase and two successive m/m decreases. Clothing & accessory store sales grew 0.9% (5.7% y/y), the seventh m/m rise in eight months, reversing a 0.9% September drop. Electronics & appliance store sales increased 0.7% (4.9% y/y) after holding steady in September.

To the downside, building materials & garden equipment store sales slid 0.9% (-4.5% y/y) in October, the third m/m slide in four months, after a 0.1% downtick in September. Gasoline station sales fell 0.8% (+1.9% y/y), the first m/m fall since May, after a 1.9% September advance.

In the nondiscretionary sales categories, health & personal care store sales fell 0.6% (+5.7% y/y) in October, down for the second month in three, following a 1.3% gain in September. Food & beverage store sales, however, rose 0.3% (2.2% y/y), the fourth m/m rise in five months, following a 0.1% September easing.

Consumers appeared to dine out less frequently in October amid still-high inflation (September CPI +0.3% m/m, +3.0% y/y; core CPI +0.2% m/m, +3.0% y/y). Restaurant & drinking place sales fell 0.4% (+4.1% y/y) in October, the first m/m fall since May, following a downwardly revised 0.2% increase in September (+0.7% initially).

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

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- October total retail sales +0.03% (+3.5% y/y), w/ mixed results across categories.
- Ex-auto sales +0.4% (+4.0% y/y); auto sales -1.6% (+1.2% y/y).
- Sales rebound m/m in department stores (+4.9%) and furniture stores (+2.3%).
- Sales drop m/m in bldg. materials & garden equipt. stores (-0.9%) and gasoline stations (-0.8%).

U.S. Retail Sales Hold Steady in October Following Four Straight M/M Gains

Robert Brusca

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The Standard & Poor’s PMI data seem to have taken a fork in the road in December as the previous strong trend toward improving has been reversed in December. Out of 24 sector changes across eight different countries (or economic regions), there are only 6 sectors that show improvement month-to-month in December. This is a sharp contrast to November when 10 sectors showed improvement and to October when 20 of 24 sectors showed improvement. The worm has turned, but is it a lasting turn or not?

The sequential data look at changes in the hard data (that's data through November) over three months, six months, and 12 months. They show a strongly weighted preponderance of sectors that are better, getting stronger, rather than getting weaker. Over three months, 9 of 24 sector readings get weaker compared to six-months. Over six months, every single sector gets stronger compared to 12-months. Over 12 months, 19 sectors get stronger compared to 12-months ago. Monthly data show that this impressive string of improving sectors shows that progress began to slow down in November and kicked into reverse in December.

As of December, the United Kingdom, which is a struggling economy, is the only reporting unit to show a stronger composite, stronger manufacturing, and stronger services. Apart from the U.K.’s strength, there's stronger manufacturing month-to-month reported in France, Japan, and Australia. And that's the end of month-to-month improvements in December. In November, there is a triple improvement in Japan with manufacturing, services, and the composite strengthening month-to-month. There are isolated sector improvements in manufacturing in Australia and in the U.K. There were also improvements for services in India as well as in services and in the composite index for France and in the European monetary union. Still, these are only 10 of 24 sectors in November.

The previous strong trend movement higher has left most of the readings as of December above their medians on data back to January 2021. Among the 24 headline and sector calculations, only six of them show standings below their 50th percentile since January 2021, which puts them below their historic median for that period. The service sector is below the 50% mark in the United Kingdom, Japan, and the United States, while the overall composite is below the 50% mark in the U.S. and in India, with India showing a below median manufacturing rating as well and the U.S. showing below 50% in services. The weaker U.S. data is a new and interesting feature with U.S. job data for November just reported and looking a bit stronger, despite a rise in the unemployment rate. The December S&P survey data, on the other hand, hint that such an improving trend may not last.

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Europe

S&P Flash PMIs Weaken in December

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The Empire State Manufacturing Index of General Business Conditions dropped more than expected to -3.9 in December, down from 18.7 in November and 10.7 in October, according to the Empire State Manufacturing Survey released by the Federal Reserve Bank of New York. A reading of 10.7 for December had been expected in the Action Economics Forecast Survey. The December negative reading indicated that the business activity in New York State contracted for the first time since September; it was also down from 2.1 in December 2024 and a high of 20.2 in November 2024. The percentage of respondents reporting an increase in general business conditions was 31.8% in December, down from 38.7% in November; the percentage reporting a decrease was 35.7%, up from November’s 20.0%. The latest survey was conducted between December 2 and December 9.

The headline index reflects the answer to a single question concerning the state of economic activity and is not calculated from the components. Haver Analytics calculates a composite index from the five major components, which is comparable to the ISM manufacturing index. This calculated index fell to the neutral-level 50.0 in December—the lowest level since September—down from 55.4 in November, 52.7 in October, and 51.0 in December 2024 but up from a low of 42.5 in January 2024. The index is the average of five diffusion indexes: new orders, shipments, employment, supplier deliveries and inventories with equal weights (20% each).

In the latest survey, the new orders index fell to 0.0 in December after a 12.2-point gain to 15.9 in November, signaling steady orders this month and a marked improvement from a low of -35.0 in January 2024. The shipments index decreased to -5.7 in December, the lowest level in three months, following a 2.4-point increase to 16.8 in November, but it was up from a low of -22.7 in April 2024. The unfilled orders index dropped to -14.9 in December on top of a 1.9-point decrease to -5.8 in November, indicating unfilled orders contracted for the seventh straight month and to the weakest level since January 2024; the index reached a low of -24.2 in January 2024. The inventories index fell to 4.0 in December after a 7.7-point rise to 6.7 in November, suggesting that inventories expanded for two months following three consecutive months of contraction. Meanwhile, the delivery times index fell to -5.9 in December, the lowest reading since December 2024, from 7.7 in November, with 9.9% of respondents reporting higher delivery times and 15.8% reporting lower delivery times.

On the labor front, the number of employees index advanced to 7.3 in December after a 0.4-point increase to 6.6 in November, showing employment expanded for the sixth time in seven months and at the highest level since July. The index remained above a low of -9.7 in December 2023. A higher 16.2% of respondents reported an increase in employment in December while 8.9% reported a decline. The average workweek index slipped to 3.5 in December from 7.7 in November, remaining positive for a second month after two months in negative territory.

Inflation indicators eased this month but remained elevated. The prices paid index dropped to 37.6 in December, the lowest level since January, following a 3.4-point decrease to 49.0 in November. The index was up from a low of 21.1 in December 2024 and a low of 16.7 in December 2023 but significantly down from a high of 86.4 in April 2022. A 39.6% of respondents reported higher prices paid in December while only 2.0% reported lower prices paid. The prices received index fell to 19.8 in December, the lowest reading since February, following a 3.2-point decline to 24.0 in November. The index was up from a low of 4.2 in December 2024 and a low of 3.9 in July 2023 but well below a peak of 56.1 in March 2022. A 21.8% of respondents reported higher prices received in December while 2.0% reported lower prices received.

Firms grew more optimistic about the future business outlook in the latest survey. The index for future business conditions jumped to 35.7 in December, the strongest level since January, from 19.1 in November, with an increased 52.9% of respondents expecting business conditions to improve in the next six months. Future new orders rose to 38.0 in December, the highest figure since March 2022, from 23.3 in November and shipments rose to 33.3, the highest level since November 2024, from November’s 23.3. Growth in employment eased slightly to 8.8 in December from 11.9 in November but still showed continued employment expansion. Capital spending plans remained positive for the second successive month, with the future capital expenditures index at 6.9 in December compared with 11.5 in November. Expected prices paid fell to 55.4 in December, the lowest level since January, from 62.5 in November, while expected prices received rose to 46.5, the highest reading since April 2022, from November’s 41.3.

The indexes in this report are diffusion indexes and measure the percentage of respondents indicating an increase minus the percentage indicating a decrease with zero separating expansion from contraction.

The New York Fed survey data are contained in Haver’s **SURVEYS** database. The expectations series is in Haver’s **AS1REPNA** database.

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- December General Business Conditions Index down 22.6 pts. to -3.9.
- Unfilled orders (-14.9) and shipments (-5.7) negative; employment (7.3, highest since July) and inventories (4.0) positive; new orders flat (0.0).
- Prices paid at an 11-month-low 37.6 and prices received at a 10-month-low 19.8, still elevated.
- Firms optimistic: Future Business Conditions Index at an 11-month-high 35.7 and future prices paid at an 11-month-low 55.4.

U.S. Empire State Manufacturing Index Plunges in December to a Three-Month Low

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**Tankan overview:** Japan's Tankan report is an important quarterly assessment and outlook of the Japanese economy. Historically, the performance of manufacturers is considered to be the bellwether in this survey for performance of the economy. In the fourth quarter of 2025, the manufacturing index moved up to 15 from 14 in the third quarter. This compares to a value of 12 in the first quarter and a four-quarter average of 13.5. Since late-2006, the manufacturing index has averaged 5.3, marking the performance in 2025 as a substantial improvement from the long period where Japan struggled with deflation. On dated back to 2003, the manufacturing index has a standing in the queue of data in its 70.8 percentile, a reasonably firm reading. 

**Nonmanufacturers:** The index for nonmanufacturers logged a reading of 34 in the fourth quarter compared to 34 in the third quarter and a reading of 35 in the first quarter of 2025; the one-year average for nonmanufacturers is 34.3, marking that sector as little changed over the course of the year. Nonmanufacturing in the fourth quarter has an index standing at its 97.8 percentile, marking it as an extremely high standing on data back to late-2003. 

**Nonmanufacturing details:** Readings across the nonmanufacturing sector are above their respective one-year averages for all subsectors except transportation where the fourth quarter index backs down to 27 from an average of 30.5 and for restaurants & hotels that back down to a reading of 25 from an average of 39.3. The queue percentile standings for the subsectors show a good deal of strength with construction at a 98.9 percentile standing, services for businesses also at a 98.9 percentile standing, transportation - despite the back off from the average - is at a 94.4 percentile standing, and real estate and wholesaling are at 93.3 percentile standings on data back to 2003.  

**The Tankan outlook-** The survey also produces an outlook. For large manufacturers for the first quarter of 2026, the outlook metric moves up to 15 from what had been 12 for the fourth quarter of 2025. The outlook for nonmanufacturers is flat month-to-month at 28, the same as in the fourth quarter. The outlook for manufacturing has a queue standing in its 78.7 percentile on data back to 2003, while nonmanufacturing has a standing for the outlook reading at its 98.9 percentile marking these outlooks as quite good. 

**The BOJ is watching-** This is a survey the Bank of Japan will be looking at and assessing what policy should do and how strong the economy appears to be. On these data, the economy would appear to be firm, the outlook would appear to be solid, and if the Bank of Japan were to decide to pay more attention to inflation, the economy would seem to be in a position to absorb a rate hike without much difficulty.

**Other-sized enterprises-**
**Manufacturing:** The survey also produces results for medium-sized and small-sized firms, as well as outlooks for medium-sized and small-sized firms (that are not presented in the table). The fourth quarter assessments of performance, however, show improvements for manufacturing in both medium- and small-sized enterprises; they also show rankings of medium-sized firms in manufacturing in their 85th percentile, the same as for small sized enterprises. 

**Nonmanufacturing:** Nonmanufacturing for medium- and small-sized enterprises show improvements in the fourth quarter results and also demonstrates high rankings of those readings for those respective sectors.

**Summing up:**
On balance, it's a solid Tankan report for Japan's economy and should provide reassurance to the Bank of Japan and to the current government that the economy is on solid footing as each looks at the situation and tries to assess the best policy options. 

Economy in Brief

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