Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061017a.jpg" width="353">
The overall producer price index dropped 1.3% last month and by far exceeded Consensus expectations for a 0.3% decline. Lower energy prices pulled down the total but excluding food &amp; energy prices rose 0.6%, an increase that fully reversed the declines during the prior two months. Expectations had been for a 0.2% increase in the core PPI.
Finished energy goods prices dropped 8.4% (-1.6% y/y), led lower by a 22.2% m/m plunge in gasoline prices (-13.3% y/y) and an 18.5% (-0.1% y/y) decline in fuel oil prices. Residential electric power prices also fell 0.1% (+7.1% y/y) but natural gas prices increased 1.8% (-1.2% y/y). 
Finished consumer goods prices less food &amp; energy reversed the prior month&#39;s decline and rose 0.5% (1.1% y/y). The gain very much reflected a 2.8% (-3.6% y/y) increase in passenger car prices that reversed an August drop. Household furniture prices fell 0.1% (+3.4% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061017b.jpg" width="353">
Capital equipment prices also were firm and rose 0.6% (1.5% y/y) for the first gain in three months. Light truck prices reversed the August drop and rose 3.5% (-4.8% y/y) while prices of pumps, compressors &amp; equipment were strong again, rising 1.2% (4.3% y/y). 
Intermediate goods prices dropped 1.4%, the first m/m decline since February, and prices less food &amp; energy were similarly tame. The 0.1% increase was the smallest since August of last year. 
The crude materials PPI dropped 3.4% due to a 13.3% (NSA, +0.8% y/y) drop in crude petroleum and a 5.5% skid in natural gas (NSA, -35.0% y/y). Less food &amp; energy crude goods prices were, however, quite strong and rose 1.0% due to higher iron &amp; steel scrap prices (4.4% y/y), higher prices for aluminum base scrap (29.2% y/y) and copper scrap prices which are up 70.9% y/y.
Why Are Yield Curves So Flat and Long Rates So Low Globally?, remarks by Federal Reserve Board Governor Randall S. Kroszner are available <a href="http://www.federalreserve.gov/boarddocs/speeches/2006/20060615/default.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
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<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">September</th>
<th scope="col">August</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>-1.3%&nbsp;</td>
<td>0.1%</td>
<td>&nbsp; 0.9%&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>0.6%</td>
<td>-0.4%</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>-1.4%</td>
<td>0.4%</td>
<td>4.7%</td>
<td>&nbsp;8.0%</td>
<td>6.6%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.1%</td>
<td>0.4%</td>
<td>7.4%</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>&nbsp;-3.4%&nbsp;</td>
<td>2.2%</td>
<td>&nbsp;-7.8%</td>
<td>14.6%</td>
<td>&nbsp;17.5%</td>
<td>25.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>1.0%</td>
<td>-2.8%</td>
<td>&nbsp;19.7%</td>
<td>4.8%</td>
<td>&nbsp;26.5%</td>
<td>12.4%</td>
</tr>
</tbody>
</table>
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The overall producer price index dropped 1.3% last month and by far exceeded Consensus expectations for a 0.3% decline. Lower energy prices pulled down the total but excluding food & energy prices rose 0.6%, an increase that fully [...]

PPI Fell, Core Prices Firm

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061017a.jpg" width="353">
The overall producer price index dropped 1.3% last month and by far exceeded Consensus expectations for a 0.3% decline. Lower energy prices pulled down the total but excluding food &amp; energy prices rose 0.6%, an increase that fully reversed the declines during the prior two months. Expectations had been for a 0.2% increase in the core PPI.
Finished energy goods prices dropped 8.4% (-1.6% y/y), led lower by a 22.2% m/m plunge in gasoline prices (-13.3% y/y) and an 18.5% (-0.1% y/y) decline in fuel oil prices. Residential electric power prices also fell 0.1% (+7.1% y/y) but natural gas prices increased 1.8% (-1.2% y/y). 
Finished consumer goods prices less food &amp; energy reversed the prior month&#39;s decline and rose 0.5% (1.1% y/y). The gain very much reflected a 2.8% (-3.6% y/y) increase in passenger car prices that reversed an August drop. Household furniture prices fell 0.1% (+3.4% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061017b.jpg" width="353">
Capital equipment prices also were firm and rose 0.6% (1.5% y/y) for the first gain in three months. Light truck prices reversed the August drop and rose 3.5% (-4.8% y/y) while prices of pumps, compressors &amp; equipment were strong again, rising 1.2% (4.3% y/y). 
Intermediate goods prices dropped 1.4%, the first m/m decline since February, and prices less food &amp; energy were similarly tame. The 0.1% increase was the smallest since August of last year. 
The crude materials PPI dropped 3.4% due to a 13.3% (NSA, +0.8% y/y) drop in crude petroleum and a 5.5% skid in natural gas (NSA, -35.0% y/y). Less food &amp; energy crude goods prices were, however, quite strong and rose 1.0% due to higher iron &amp; steel scrap prices (4.4% y/y), higher prices for aluminum base scrap (29.2% y/y) and copper scrap prices which are up 70.9% y/y.
Why Are Yield Curves So Flat and Long Rates So Low Globally?, remarks by Federal Reserve Board Governor Randall S. Kroszner are available <a href="http://www.federalreserve.gov/boarddocs/speeches/2006/20060615/default.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</a></th>
<th scope="col">September</th>
<th scope="col">August</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>-1.3%&nbsp;</td>
<td>0.1%</td>
<td>&nbsp; 0.9%&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>0.6%</td>
<td>-0.4%</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>-1.4%</td>
<td>0.4%</td>
<td>4.7%</td>
<td>&nbsp;8.0%</td>
<td>6.6%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.1%</td>
<td>0.4%</td>
<td>7.4%</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>&nbsp;-3.4%&nbsp;</td>
<td>2.2%</td>
<td>&nbsp;-7.8%</td>
<td>14.6%</td>
<td>&nbsp;17.5%</td>
<td>25.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>1.0%</td>
<td>-2.8%</td>
<td>&nbsp;19.7%</td>
<td>4.8%</td>
<td>&nbsp;26.5%</td>
<td>12.4%</td>
</tr>
</tbody>
</table>
Industrial Production Fell 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 17, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061017c.jpg" width="353">
Total U.S. industrial output fell 0.6% last month. Though the decline followed an upwardly revised no change in August output, it again disappointed Consensus expectations which had been for just a 0.1% dip.
Factory sector output fell 0.3% and reversed all of the prior month&#39;s gain which was upwardly revised from no change. During the third quarter, factory output rose at a 4.2% annual rate versus 2Q which rose 5.1%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061017d.jpg" width="353">
Production of durable consumer goods dropped 1.8% due to a 2.6% decline 9-7.7% y/y) in the output of automotive products. Output of appliances &amp; furniture also was weak and fell 2.4% (-5.0% y/y). Nondurable consumer goods output fell 0.6% (+2.2% y/y) but nonenergy nondurables output rose 0.1% (3.1% y/y), the increase solely due to higher output of foods &amp; tobacco (3.5% y/y).
Business equipment production slipped 0.2% after the upwardly revised 0.2% August gain. Output of information processing &amp; equipment jumped 0.8% (16.7% y/y).Factory output overall less the hi-tech industries fell 0.5% (+4.8% y/y).
Overall capacity utilization fell to 81.9%, the lowest level since May.

<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/output.htm">Production &amp; Capacity</a></th>
<th scope="col">September</th>
<th scope="col">August</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>-0.6%</td>
<td>0.0%</td>
<td>5.5%</td>
<td>3.2%</td>
<td>4.1%</td>
<td>0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Manufacturing (NAICS)</td>
<td>-0.3%</td>
<td>0.3%</td>
<td>6.2%</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>-0.9%</td>
<td>0.4%</td>
<td>0.5%</td>
<td>2.1%</td>
<td>2.1%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Business Equipment</td>
<td>-0.2%</td>
<td>0.2%</td>
<td>18.5%</td>
<td>9.1%</td>
<td>9.3%</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capacity Utilization</td>
<td>81.9%</td>
<td>82.5%</td>
<td>79.1% (9/05)</td>
<td>80.1%</td>
<td>78.6%</td>
<td>75.7%</td>
</tr>
</tbody>
</table>
NAHB Housing Market Index Ticked Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 17, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061017f.jpg" width="353">
The National Association of Home Builders&#39; (NAHB) October Composite Housing Market Index rose to 31 from 30 in September. It was the first m/m increase since last year. Regardless, the latest level remained down by more than one half from the levels of 2005. 
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 improvement was led a sharp gain in the sub-index covering prospective sales in the next six months (10.8% m/m, -43.8% y/y). The sub-index for current sales was unchanged m/m (-56.8% y/y). 
Traffic of prospective home buyers rose modestly from the extremely low levels of the prior two months. 
Only the housing market indexes for the Northeast (-50.7% y/y) and the Midwest (-55.6% y/y) improved m/m. In the South the index fell (-51.3%) as it did out West (-64.8% 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>.

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<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">October</th>
<th scope="col">September</th>
<th scope="col">Oct. &#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>31</td>
<td>30</td>
<td>68</td>
<td>67</td>
<td>68</td>
<td>64</td>
</tr>
</tbody>
</table>
Lower Gasoline Prices Helped Spending at Chain Stores, Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 17, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061017e.jpg" width="353">
The International Council of Shopping Centers (ICSC)-UBS reported that chain store sales increased 0.6% last week on the heels of the prior week&#39;s 0.5% rise. The gains limited the decline in sales so far in October to 0.2% versus the September average .
The retail price for a gallon of regular unleaded gasoline fell for the tenth consecutive week. The four cent decline last week to an average $2.23 (-18.3% y/y) and was to the lowest level since December.
Last week&#39;s decline in spot market gasoline prices paused yesterday. The NY harbor price for regular unleaded gasoline rose to $1.54 per gallon versus an average $1.50 last week.
During the last ten years there has been a 47% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
The leading indicator of chain store sales from ICSC-UBS rose for the fifth week in the last six, by 0.1% (0.8% y/y).
The latest Short-Term Energy Outlook from the U.S. Energy Information Administration is available <a href="http://www.eia.doe.gov/emeu/steo/pub/contents.html">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">10/14/06</th>
<th scope="col">10/07/06</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>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>468.1</td>
<td>465.4</td>
<td>3.9%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>
 The German Financial Community Is Growing More Cautious about Economic Conditions Six Month Ahead 
by <a href="/comment/Curley.html">Louise Curley</a>  October 17, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061017g.jpg" width="353">
The ZEW measure of economic sentiment among analysts and institutional investors regarding the economic outlook six months ahead fell from -22.2%in September to -27.4% in October, that is, the pessimists outweighed the optimists by 27.4%. This is the lowest value since March 1993. In October of last year, the optimists outweighed the pessimists by 39.4%.
At the same time, among the participants in the survey, those who appraised the current situation positively outweighed those who appraised it negatively by 42.9%, the highest value since October 2000. The October value was up from 38.9% in September and from -58.0% in October of 2005. The first chart compares the views of the ZEW participants on the current situation and the outlook six months ahead.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061017h.jpg" width="353">
The rapid and sustained rise in the appraisal of current conditions reflects the surprising strength of the German economy in the current year. The Economic Minister, Michael Glos, recently said that the ministry will raise its estimate of 2006 growth to 2.5% from 1.6% estimated last April. It is not surprising, therefore, that investors view the future with some caution. This is especially true given the inevitability of tax increases on January 1, 2007 that are likely to dampen consumer spending. The VAT (value added tax) is scheduled to rise from 16% to 19% and social security contributions will also increase.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061017i.jpg" width="353">
The other major indicator of sentiment in Germany is the IFO measure to be released October 25th. The ZEW measure is based on a small sample--some 300 participants--and represents the opinions of the financial community. The IFO measure is based on a much broader sample--some 7000 participants--and represents the opinions of businessmen engaged in manufacturing, construction, wholesale and retail trade. In the appraisal of the current situation, the two surveys reveal similar views, although the views of the financial community tend to be more volatile than those of the industrialists and trades people. The second chart compares the appraisal of the current situation by the two institutes. The correlation between the two series is fairly high .83.
In the appraisal of the outlook, there is less agreement in the views of the two sectors, represented by a lower correlation--.67--and again, the views of the financial community tend to be more volatile than those of the industrialists and trades people.The third chart compares the views on the outlook of both groups. 

<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/GERMANY/@D8/@D8.HTM">GERMANY ZEW&nbsp; (Balance of Opinion)</a></th>
<th scope="col">Oct&nbsp; 06</th>
<th scope="col">Sep 06</th>
<th scope="col">Oct 05</th>
<th scope="col">M/M Dif</th>
<th scope="col">Y/Y Dif</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Current&nbsp;Situation</td>
<td>42.9</td>
<td>38.9</td>
<td>-58.0</td>
<td>4.0</td>
<td>100.9</td>
<td>-61.8</td>
<td>-67.7</td>
<td>-92.6</td>
</tr>
<tr>
<td class="firstcol">Outlook Six Months Ahead</td>
<td>-27.4</td>
<td>-22.2</td>
<td>39.4</td>
<td>-5.2</td>
<td>-66.8</td>
<td>34.8</td>
<td>44.6</td>
<td>38.4</td>
</tr>
</tbody>
</table>


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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061016h.jpg" width="353">
Growth in productivity together growth in the labor force largely determines a country&#39;s potential growth rate. Recent trends in German productivity, especially in industry, suggest that the recent increase in Germany&#39;s growth rate has solid underpinnings. Productivity in German Industry, as measured by output per employee, increased by 2.4% in August from July and was 8.0% above August, 2005. The comparable figures for productivity as measured by output per working hour are 2.5% and 11.6% respectively. The two measures differ from month to month but show the same general trends, as can be seen in the first chart. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061016i.jpg" width="353">
Germany also reports productivity data in more detail on a quarterly basis. Data are currently available only through the second quarter. Productivity for the total economy in the quarterly series is much lower than that of the productivity in industry in the monthly series, as can be seen in the second chart. Part of the difference in the two series is due to the fact that agriculture and public and personal service, both with low productivity are included in the quarterly series but not in the monthly series.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061016g.jpg" width="353">
The growth in productivity in the manufacturing industry in Germany is now above that of the United States, as can be seen in the third chart. Moreover, when both indexes are compared on a common base year--2000--the current level of the German index is higher than that of the U. S.--meaning that the level of manufacturing productivity in Germany has now risen more than that of the U. S. since 2000. 

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<th scope="col" class="firstcol">PRODUCTIVITY&nbsp; (2000=100)</th>
<th scope="col">Q2 06</th>
<th scope="col">Q1 06</th>
<th scope="col">Q2 05</th>
<th scope="col">Q/Q %</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"> Manufacturing</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Germany&nbsp;</td>
<td>131.25</td>
<td>117.29</td>
<td>123.94</td>
<td>11.94</td>
<td>5.93</td>
<td>5.47</td>
<td>3.59</td>
<td>3.58</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; United States&nbsp;</td>
<td>126.35</td>
<td>125.53</td>
<td>121.86</td>
<td>0.65</td>
<td>3.69</td>
<td>4.10</td>
<td>18.5</td>
<td>6.21</td>
</tr>
<tr>
<td class="firstcol">Total Economy&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Quarterly Series</td>
<td>108.55</td>
<td>107.80</td>
<td>106.52</td>
<td>0.66</td>
<td>1.91</td>
<td>1.32</td>
<td>0.69</td>
<td>1.21</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Monthly Series &nbsp; (Aggregated on a qtrly basis)</td>
<td>119.7</td>
<td>119.6</td>
<td>114.3</td>
<td>0.11</td>
<td>4.78</td>
<td>4.68</td>
<td>4.72</td>
<td>1.83</td>
</tr>
<tr class="odd">
<td class="firstcol">Monthly Series Total Economy</td>
<td>Aug 06</td>
<td>Jul 06</td>
<td>Aug 05</td>
<td>M/M %</td>
<td>Y/Y %</td>
<td>2005 %</td>
<td>2004 %</td>
<td>2003 %</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Output per employee</td>
<td>125.0</td>
<td>122.1</td>
<td>115.7</td>
<td>2.38</td>
<td>8.04</td>
<td>5.05</td>
<td>5.13</td>
<td>2.78</td>
</tr>
<tr class="odd">
<td class="firstcol"> &nbsp; Output per working hour</td>
<td>124.0</td>
<td>121.0</td>
<td>118.5</td>
<td>2.48</td>
<td>4.64</td>
<td>4.68</td>
<td>4.72</td>
<td>1.83</td>
</tr>
</tbody>
</table>
</body>
</html>

Growth in productivity together growth in the labor force largely determines a country's potential growth rate. Recent trends in German productivity, especially in industry, suggest that the recent increase in Germany's growth rate [...]

German Productivity Growth in Manufacturing Tops That of the United States

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061016d.jpg" width="353">
The U.S. federal government&#39;s budget deficit for FY 2006 fell to $247.7B following deficits near $300B during 2005 and $400B during 2004. The full year figure compared favorably to the August estimate from the Congressional Budget Office of a $260B deficit. CBO expects the FY 2007 deficit to total $286B.
As a percentage of GDP, the U.S. budget deficit fell to 1.9% from 2.6% in FY2005 but may return to 2.5% during the current year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061016f.jpg" width="353">
Net revenues grew 11.8% during FY2006. Individual income tax receipts (44% of total receipts) registered 12.6% growth after a 14.6% surge the prior year. Withheld taxes rose 7.9% due to growth in employment, nearly double the 4.4% gain during the prior fiscal year, and that was up from 2.5% growth during FY2004. Non-withheld taxes (primarily on capital gains) surged 20.7%, slightly slower than the 31.9% gain during FY2005. Corporate income taxes (13% of total receipts) surged 27.2% as corporate profits grew. Estate &amp; gift taxes increased by 12.6% while higher employment levels raised social insurance &amp; retirement receipts by 5.5%.
As a percentage of GDP revenues rose to 18.1%, the highest level in five years.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061016e.jpg" width="353">
U.S. net outlays grew 7.4% last year versus 7.8% growth during FY2005. Defense spending (19% of total outlays) grew 6.8%, down from 8.6% growth during FY2005. Medicare expenditures (12% of outlays) advanced 10.5%, about stable with the prior year&#39;s growth, and social security spending (21% of outlays) rose a diminished 4.8%. Higher interest rates boosted the government&#39;s interest expense by 23.2% y/y.
As a percentage of GDP outlays rose to 19.9%, up more than one percentage point since 2000.
The Budget Results for Fiscal Year 2006 from the U.S. Treasury Department can be found <a href="http://www.treas.gov/press/releases/hp135.htm"> here</a>.
CBO&#39;s baseline projections of the U.S. budget are available <a href="http://www.cbo.gov/budget/08-17-budproj.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
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<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E106/@E10602/@E106021.HTM">US Government Finance</a> &nbsp;</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">FY 2006</th>
<th scope="col">FY 2005</th>
<th scope="col">FY 2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>$56.0B</td>
<td>-$64.9B</td>
<td>$35.2B (9/05)</td>
<td>-$247.7</td>
<td>-$318.7B</td>
<td>-$412.7B</td>
</tr>
<tr>
<td class="firstcol">Net Revenues</td>
<td>$283.3B</td>
<td>$153.9B</td>
<td>12.6%</td>
<td>11.8%</td>
<td>14.5%</td>
<td>5.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Net Outlays</td>
<td>$227.3B</td>
<td>$218.8B</td>
<td>5.0%</td>
<td>7.4%</td>
<td>7.8%</td>
<td>6.2%</td>
</tr>
</tbody>
</table>
</body>
</html>

The U.S. federal government's budget deficit for FY 2006 fell to $247.7B following deficits near $300B during 2005 and $400B during 2004. The full year figure compared favorably to the August estimate from the Congressional Budget [...]

Higher Receipts Lower U.S. Budget Deficit

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061016a.jpg" width="353">
Unexpectedly, the October index of manufacturing activity in New York State improved to its highest level since this past June. The Empire State Manufacturing Index of General Business Conditions rose 9.1 points to 22.92 versus Consensus expectations for a slight decline to 11.3. The figures are reported by the Federal Reserve Bank of New York.
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 employment, inventories and shipments led the improvement though new orders, unfilled orders and delivery times fell. The rise in the employment index was to the second highest level this year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061016b.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.
Pricing pressure continued to ease. The prices paid index fell ten points to its lowest level in over a year. 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.
Expectations, however, deteriorated. The Empire State index of expected business conditions in six months fell another five points to its lowest level since May reflecting declines in most sub-indexes, except employment. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061016c.jpg" width="353">
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>.
The U.S. Treasury Yield Curve: 1961 to the Present from the Federal Reserve Board is available <a href="http://www.federalreserve.gov/pubs/feds/2006/200628/200628pap.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">

</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">October</th>
<th scope="col">September</th>
<th scope="col">Oct. &#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>22.92</td>
<td>13.84</td>
<td>15.02</td>
<td>15.56</td>
<td>28.79</td>
<td>15.98</td>
</tr>
</tbody>
</table>
</body>
</html>

Unexpectedly, the October index of manufacturing activity in New York State improved to its highest level since this past June. The Empire State Manufacturing Index of General Business Conditions rose 9.1 points to 22.92 versus [...]

Empire State Index Highest Since June

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061016a.jpg" width="353">
Unexpectedly, the October index of manufacturing activity in New York State improved to its highest level since this past June. The Empire State Manufacturing Index of General Business Conditions rose 9.1 points to 22.92 versus Consensus expectations for a slight decline to 11.3. The figures are reported by the Federal Reserve Bank of New York.
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 employment, inventories and shipments led the improvement though new orders, unfilled orders and delivery times fell. The rise in the employment index was to the second highest level this year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061016b.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.
Pricing pressure continued to ease. The prices paid index fell ten points to its lowest level in over a year. 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.
Expectations, however, deteriorated. The Empire State index of expected business conditions in six months fell another five points to its lowest level since May reflecting declines in most sub-indexes, except employment. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061016c.jpg" width="353">
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>.
The U.S. Treasury Yield Curve: 1961 to the Present from the Federal Reserve Board is available <a href="http://www.federalreserve.gov/pubs/feds/2006/200628/200628pap.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">

</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">October</th>
<th scope="col">September</th>
<th scope="col">Oct. &#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>22.92</td>
<td>13.84</td>
<td>15.02</td>
<td>15.56</td>
<td>28.79</td>
<td>15.98</td>
</tr>
</tbody>
</table>
Higher Receipts Lower U.S. Budget Deficit 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 16, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061016d.jpg" width="353">
The U.S. federal government&#39;s budget deficit for FY 2006 fell to $247.7B following deficits near $300B during 2005 and $400B during 2004. The full year figure compared favorably to the August estimate from the Congressional Budget Office of a $260B deficit. CBO expects the FY 2007 deficit to total $286B.
As a percentage of GDP, the U.S. budget deficit fell to 1.9% from 2.6% in FY2005 but may return to 2.5% during the current year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061016f.jpg" width="353">
Net revenues grew 11.8% during FY2006. Individual income tax receipts (44% of total receipts) registered 12.6% growth after a 14.6% surge the prior year. Withheld taxes rose 7.9% due to growth in employment, nearly double the 4.4% gain during the prior fiscal year, and that was up from 2.5% growth during FY2004. Non-withheld taxes (primarily on capital gains) surged 20.7%, slightly slower than the 31.9% gain during FY2005. Corporate income taxes (13% of total receipts) surged 27.2% as corporate profits grew. Estate &amp; gift taxes increased by 12.6% while higher employment levels raised social insurance &amp; retirement receipts by 5.5%.
As a percentage of GDP revenues rose to 18.1%, the highest level in five years.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061016e.jpg" width="353">
U.S. net outlays grew 7.4% last year versus 7.8% growth during FY2005. Defense spending (19% of total outlays) grew 6.8%, down from 8.6% growth during FY2005. Medicare expenditures (12% of outlays) advanced 10.5%, about stable with the prior year&#39;s growth, and social security spending (21% of outlays) rose a diminished 4.8%. Higher interest rates boosted the government&#39;s interest expense by 23.2% y/y.
As a percentage of GDP outlays rose to 19.9%, up more than one percentage point since 2000.
The Budget Results for Fiscal Year 2006 from the U.S. Treasury Department can be found <a href="http://www.treas.gov/press/releases/hp135.htm"> here</a>.
CBO&#39;s baseline projections of the U.S. budget are available <a href="http://www.cbo.gov/budget/08-17-budproj.pdf"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E106/@E10602/@E106021.HTM">US Government Finance</a> &nbsp;</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">FY 2006</th>
<th scope="col">FY 2005</th>
<th scope="col">FY 2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>$56.0B</td>
<td>-$64.9B</td>
<td>$35.2B (9/05)</td>
<td>-$247.7</td>
<td>-$318.7B</td>
<td>-$412.7B</td>
</tr>
<tr>
<td class="firstcol">Net Revenues</td>
<td>$283.3B</td>
<td>$153.9B</td>
<td>12.6%</td>
<td>11.8%</td>
<td>14.5%</td>
<td>5.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Net Outlays</td>
<td>$227.3B</td>
<td>$218.8B</td>
<td>5.0%</td>
<td>7.4%</td>
<td>7.8%</td>
<td>6.2%</td>
</tr>
</tbody>
</table>
German Productivity Growth in Manufacturing Tops That of the United States  
by <a href="/comment/Curley.html">Louise Curley</a> October 16, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061016h.jpg" width="353">
Growth in productivity together growth in the labor force largely determines a country&#39;s potential growth rate. Recent trends in German productivity, especially in industry, suggest that the recent increase in Germany&#39;s growth rate has solid underpinnings. Productivity in German Industry, as measured by output per employee, increased by 2.4% in August from July and was 8.0% above August, 2005. The comparable figures for productivity as measured by output per working hour are 2.5% and 11.6% respectively. The two measures differ from month to month but show the same general trends, as can be seen in the first chart. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061016i.jpg" width="353">
Germany also reports productivity data in more detail on a quarterly basis. Data are currently available only through the second quarter. Productivity for the total economy in the quarterly series is much lower than that of the productivity in industry in the monthly series, as can be seen in the second chart. Part of the difference in the two series is due to the fact that agriculture and public and personal service, both with low productivity are included in the quarterly series but not in the monthly series.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061016g.jpg" width="353">
The growth in productivity in the manufacturing industry in Germany is now above that of the United States, as can be seen in the third chart. Moreover, when both indexes are compared on a common base year--2000--the current level of the German index is higher than that of the U. S.--meaning that the level of manufacturing productivity in Germany has now risen more than that of the U. S. since 2000. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">PRODUCTIVITY&nbsp; (2000=100)</th>
<th scope="col">Q2 06</th>
<th scope="col">Q1 06</th>
<th scope="col">Q2 05</th>
<th scope="col">Q/Q %</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"> Manufacturing</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Germany&nbsp;</td>
<td>131.25</td>
<td>117.29</td>
<td>123.94</td>
<td>11.94</td>
<td>5.93</td>
<td>5.47</td>
<td>3.59</td>
<td>3.58</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; United States&nbsp;</td>
<td>126.35</td>
<td>125.53</td>
<td>121.86</td>
<td>0.65</td>
<td>3.69</td>
<td>4.10</td>
<td>18.5</td>
<td>6.21</td>
</tr>
<tr>
<td class="firstcol">Total Economy&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Quarterly Series</td>
<td>108.55</td>
<td>107.80</td>
<td>106.52</td>
<td>0.66</td>
<td>1.91</td>
<td>1.32</td>
<td>0.69</td>
<td>1.21</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Monthly Series &nbsp; (Aggregated on a qtrly basis)</td>
<td>119.7</td>
<td>119.6</td>
<td>114.3</td>
<td>0.11</td>
<td>4.78</td>
<td>4.68</td>
<td>4.72</td>
<td>1.83</td>
</tr>
<tr class="odd">
<td class="firstcol">Monthly Series Total Economy</td>
<td>Aug 06</td>
<td>Jul 06</td>
<td>Aug 05</td>
<td>M/M %</td>
<td>Y/Y %</td>
<td>2005 %</td>
<td>2004 %</td>
<td>2003 %</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Output per employee</td>
<td>125.0</td>
<td>122.1</td>
<td>115.7</td>
<td>2.38</td>
<td>8.04</td>
<td>5.05</td>
<td>5.13</td>
<td>2.78</td>
</tr>
<tr class="odd">
<td class="firstcol"> &nbsp; Output per working hour</td>
<td>124.0</td>
<td>121.0</td>
<td>118.5</td>
<td>2.48</td>
<td>4.64</td>
<td>4.68</td>
<td>4.72</td>
<td>1.83</td>
</tr>
</tbody>
</table>
</body>
</html>

Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061013i.jpg" width="353">
Last week, we discussed the CPIs of two small Eastern European countries, who were quick in reporting their September data; in both cases, Estonia and Slovenia, there was evidence that the recent fall in energy prices was already helping cut inflation, and nip a price problem in the bud. Today, we hear from a much larger European economy, France. Sure enough, lined out in some detail, is a clear statement about the fall in oil product prices.
France&#39;s CPI has been pretty well behaved all along, and we&#39;ve commented more than once about how reassuring it has been that so many countries have not suffered a major, sustained acceleration in overall consumer prices. So in one sense, there is little to tell. But that&#39;s a good thing. The total CPI did fall in September by 0.3%, seasonally adjusted, after a 0.3% increase in August. Over the last 12 months, the not seasonally adjusted index is up 1.2%, a noticeable slowing from August&#39;s 1.9%. Similarly, Germany&#39;s data, which came out yesterday, had a 0.1% decline in September and a 12-month increase of just 1.0% after 1.7% in August.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061013j.jpg" width="353">
We see from the table that in France the subset excluding energy is marginally firmer for the 12 months, up 1.3%, indicating that weaker energy lowered the total by 0.1% in September; that contribution in August was a +0.5%, so the latest is a significant turnaround. Energy prices themselves dropped 2.6% in the month alone and oil products, 4.3%.
This helped reduce other line items, of course. Transportation costs were up a mere 0.6% from a year earlier after a 3.5% advance in August, while housing -- which includes utilities in the French layout -- was up 3.8% in September from a year ago, much less than August&#39;s 4.7%.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061013k.jpg" width="353">
Prices of some things remain troublesome, most notably food. Food prices, in France and elsewhere, have been picking up. The 12-month rise was 2.7% in September, following 2.4% in August and just 0.8% across 2005. The same is true in Estonia, where the category was up 7.5% in September from a year ago and in Slovenia where it was up 3.8% in September and 4.7% in August compared with 0.8% over 2005. Among the larger economies, in Germany, food was up 3.1% in September; it had also risen just 0.8% during 2005.
So we seem to face a rolling-kind of inflation evolution. The total inflation rate in several countries is remaining remarkably calm, but relative prices are all over the board. This is healthy. Some sector is always &quot;troublesome&quot; and that keeps people, merchants and policymakers vigilant. But economies are increasingly flexible, so that the trouble in one area is met with adjustment elsewhere instead of just battering its way through everything. We hope this situation holds; it will be good for the general welfare if it does. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/FRANCE/@F04/@F04.HTM">France CPI</a><a href="http://www.haverselect.com/dlx/FRANCE/@F04/@F04.HTM">, % Changes,</a> NSA ex as Noted</th>
Month/Month
Year/Year
December/December
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Sept 2006</td>
<td>Aug 2006</td>
<td>Sept 2006</td>
<td>Aug 2006</td>
<td>2005</td>
<td>2004</td>
<td>2003</td>
</tr>
<tr>
<td class="firstcol">All Items, SA</td>
<td>-0.3</td>
<td>0.3</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">All Items</td>
<td>-0.2</td>
<td>0.3</td>
<td>1.2</td>
<td>1.9</td>
<td>1.5</td>
<td>2.1</td>
<td>2.2</td>
</tr>
<tr>
<td class="firstcol">Ex Energy</td>
<td>0.0</td>
<td>0.3</td>
<td>1.3</td>
<td>1.4</td>
<td>1.1</td>
<td>1.5</td>
<td>2.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Energy</td>
<td>-2.6</td>
<td>0.6</td>
<td>1.0</td>
<td>7.2</td>
<td>8.2</td>
<td>10.2</td>
<td>-0.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Oil Products</td>
<td>-4.3</td>
<td>0.6</td>
<td>-2.1</td>
<td>7.2</td>
<td>11.1</td>
<td>16.4</td>
<td>-0.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Transportation</td>
<td>-1.8</td>
<td>0.3</td>
<td>0.6</td>
<td>3.5</td>
<td>3.7</td>
<td>4.5</td>
<td>1.9</td>
</tr>
<tr>
<td class="firstcol">Housing</td>
<td>0.0</td>
<td>0.4</td>
<td>3.8</td>
<td>4.7</td>
<td>4.4</td>
<td>4.5</td>
<td>2.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Food</td>
<td>0.4</td>
<td>-0.5</td>
<td>2.7</td>
<td>2.4</td>
<td>0.8</td>
<td>0.0</td>
<td>2.4</td>
</tr>
</tbody>
</table>
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Last week, we discussed the CPIs of two small Eastern European countries, who were quick in reporting their September data; in both cases, Estonia and Slovenia, there was evidence that the recent fall in energy prices was already [...]

France CPI: Energy Brings Down Total Inflation, But Food Prices Have Been Picking Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061013g.jpg" width="353">
Total business inventories rose 0.6% in August following an upwardly revised 0.7% July gain. Consensus expectations had been for a 0.5% increase. The gain lifted the y/y rate of business inventory accumulation to its highest (7.7%) since early 2005.
During the last ten years there has been a 57% correlation between the y/y change in business inventories and the change in factory sector industrial production. Using quarterly figures, there has been an 84% correlation between the change in real private nonfarm inventories and production.
Business sales rose 0.8% (8.1% y/y) on the strength of higher wholesale sales (12.5% y/y) and higher factory shipments (6.1% y/y). The inventory to sales ratio was stable for the third month at 1.26, but was above the May low of 1.25. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061013h.jpg" width="353">
Retail inventories rose 0.5% and that&#39;s the same rate of increase excluding autos (4.4% y/y) which rose 0.5% (14.1% y/y). Higher building materials inventories led the rise with a 1.0% (9.4% y/y) gain. General merchandise inventories grew 0.7% (0.7% y/y) and clothing store inventories rose 0.4% (5.8 y/y). Furniture inventories fell 0.3% (+4.4% y/y).
Wholesale inventories surged another 1.1% (9.7% y/y) in August though petroleum inventories fell 6.5% (+9.7% y/y). Drug and chemical inventories surged while durables rose 0.9% (10.0% y/y). 
Factory inventories rose 0.4%, half the prior month&#39;s rate of accumulation.
Understanding How Employment Responds to Productivity Shocks in a Model with Inventories from the Federal Reserve Bank of Richmond can be found <a href="http://www.richmondfed.org/publications/economic_research/working_papers/pdfs/wp06-6.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED06/@ED0601/@ED0601.HTM">Business Inventories</a></th>
<th scope="col">August</th>
<th scope="col">July</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>0.6%</td>
<td>0.7%</td>
<td>7.7%</td>
<td>4.4%</td>
<td>7.6%</td>
<td>-1.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.5%</td>
<td>0.4%</td>
<td>7.5%</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>0.3%</td>
<td>4.4%</td>
<td>4.5%</td>
<td>7.1%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>1.1%</td>
<td>0.9%</td>
<td>9.7%</td>
<td>7.1%</td>
<td>9.8%</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.4%</td>
<td>0.8%</td>
<td>6.5%</td>
<td>4.0%</td>
<td>6.9%</td>
<td>-7.4%</td>
</tr>
</tbody>
</table>
</body>
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Total business inventories rose 0.6% in August following an upwardly revised 0.7% July gain. Consensus expectations had been for a 0.5% increase. The gain lifted the y/y rate of business inventory accumulation to its highest (7.7%) [...]

U.S. Business Inventory Accumulation Highest Since 2005

Surging orders for computers and electronics propelling durable goods orders

Next year's inflation forecasts are on the rise and above target

Disrupted global supply chains placing upward pressure on US goods prices

Construction of data centers has overtaken transportation construction in US

Elevated energy prices putting intense upward pressure on input prices around the globe

US is big leader in global surge in private AI investment

Larger-than-usual income tax refunds this year are supporting consumer spending

Sharply rising share of AI-related jobs

Inflationary impact of surge in oil prices larger in Europe than in the US

Futures market thinks the price of oil will recede significantly over the next six months

Recent pickup in US defense orders could help support overall growth ahead

Cost of transporting crude oil has soared to series high

Market-based inflation expectations have not yet reflected recent surge in oil prices

Global equity markets are fearing a major economic disruption from soaring oil prices

Is recent drop in sentiment signaling softer growth ahead?

With the Iran conflict, geopolitical risk has soared to alarming levels

Soaring AI-related investment in US underpinning strong contribution of business spending to overall growth

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

Global freight costs are on the rise while supply chain pressures are contained

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Winnie Tapasanun

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The U.S. international trade deficit in goods ballooned to a larger-than-expected $105.75 billion in May after narrowing to $83.01 billion in April, according to the advance estimate from the U.S. Census Bureau. The May reading marked the third widening in the goods trade deficit in four months, exceeding a $91.55 billion shortfall in May 2025. A deficit of $84.0 billion for May had been expected by the Action Economics Forecast Survey. The deficit reached a low of $61.44 billion in October 2025 (the smallest since February 2020) and a record high of $158.73 billion in March 2025. On a quarterly basis, the deficit averaged $94.38 billion so far in Q2'26 versus $81.96 billion in Q1'26.

Total goods exports fell 5.4% m/m (+14.7% y/y) to $207.67 billion in May, the first monthly fall since December and a three-month low, following a 3.8% rise to a record-high $219.52 billion in April. Exports were up 27.7% from a June 2023 low. The m/m fall in exports in May reflected declines of 9.2% (-5.0% y/y) in nonfood consumer goods excluding autos, 7.0% (+23.2% y/y) in industrial supplies & materials, 6.8% (+19.5% y/y) in other goods, and 5.0% (+14.8% y/y) in capital goods excluding autos. To the upside, exports of foods, feeds & beverages (+3.9%; +19.1% y/y) and automotive vehicles & parts (+0.5%; -3.6% y/y) rebounded m/m in May.

Total goods imports, up for the fourth consecutive month, rose 3.6% m/m (15.0% y/y) to $313.43 billion in May, after a 2.0% increase to $302.53 billion in April, marking the highest level since the March 2025 record high of $340.11 billion. Imports were up 25.0% from a March 2023 low. The m/m rise in imports in May was broad-based across all end-use categories, led by an 11.5% gain (22.0% y/y) in other goods, followed by increases of 6.3% (1.4% y/y) in automotive vehicles & parts, 5.7% (-9.1% y/y) in nonfood consumer goods excluding autos, 4.8% (11.7% y/y) in industrial supplies & materials, 4.3% (-0.2% y/y) in foods, feeds & beverages, and 0.4% (41.9% y/y) in capital goods excluding autos. 

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

- Deficit: $105.75 bil. in May, up $22.75 bil. (+27.4%) from April’s $83.01 bil.
- Exports -5.4%, first m/m decline since Dec., led by a 9.2% drop in nonauto consumer goods exports.
- Imports +3.6%, fourth straight m/m rise to highest level since Mar. ’25, driven by an 11.5% gain in imports of other goods.

U.S. Goods Trade Deficit Balloons in May, Largest Since March ’25

Robert Brusca

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In June, there's a slight divergence in the performance of industry climate and service sector climate, although broadly the two sectors have seen their composite indexes moving in more or less the same direction. Since 2024, the industry survey has moved up slightly after falling faster than the services gauge. The services survey has been locked in a slow trend of deterioration, largely since it reached a peak in 2021 in the wake of COVID.

The industry climate gauge has a 30.8 percentile standing, but the recent production trend, while declining, logs a more substantial 42.8 percentile standing. Contributing survey members find their own industry ‘likely trend’ much weaker, at a 21.2 percentile standing. Demand overall, however, has standings above the 50th percentile, putting overall and foreign orders & demand each above their respective medians for this period of ranking back to 2001. Inventories have a strong 81-percentile ranking. Prices are extremely strong, with 87-percentile and 86-percentile standings for respondents for their personal industry trend for prices as well as for the overarching manufacturing sector estimate of prices. Higher prices seem to be the one thing that everyone can agree on by a large margin.

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As for services, the service climate index improved slightly to 93.4 in June from 92.6 in May. The three-month moving average was weaker in June than in May as well; the 12-month moving average has been stuck at its current level for a number of months. The outlook in June improved slightly to a reading of -12 from -15 in May, but the outlook ranking is still a weak 26.8 percentile standing. The three-month expectations and observations of past sales trends haven't changed much in the last two months, but there has been a slight improvement for sales expectations. However, both sales metrics have low 20th percentile standings. Sales prices have deteriorated slightly in June compared to May for both the observed and the expected trends, but prices have standings above their 50th percentiles, logging above-median performance. Employment over the last three months has weakened noticeably, and expected employment is weaker by a small amount.

In terms of rankings, all of the sector rankings are below the 50th percentile on all of these observations, including the climate headline except for sales prices where both the past three-month observed trend and the expected trend have readings above their respective 50th percentiles, indicating past and expected price pressures in excess of normal.

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**Assessment**
On balance, the readings for the French industry, manufacturing sector and services are not encouraging. In addition, concerns about prices linger. The services sector, those concerns seem moderate compared to the concerns in manufacturing.

The hot war continues between Ukraine and Russia, while in the Middle East there was talk of some improvement and a potential peace deal between the United States and Iran, but every time there is some talk of a breakthrough, there appears to be a breakdown. In the most recent development, Iran has asserted its right to control traffic through the Strait of Hormuz, and it's not clear how that demand would ever be consistent with the U.S. allowing a ceasefire. It appears that Iran may have traded its irreconcilable demand for nuclear weapons for a more pragmatic and real-world argument—that it will control the traffic through the Strait of Hormuz simply because it can—and it still is doing exactly that, even after all the destruction it suffered.

Stopping Iran from controlling the Strait would take a commitment to restart the war. All this makes me personally more pessimistic. I think Iran sees the need for Trump to cut a deal and stop the war before the U.S. mid-term elections, and it is pressing that need to its advantage. Trading its nuclear ambitions for real world control of the Strait would elevate Iran’s power from being dangerous but ethereal to a real world event with constant consequences.

France

French Industry and Services Confidence Diverge in June

Andrew Cates

**Equity Momentum and Global Surprises — Still Moving Together**
One of the more telling features of global equity markets in 2026 has been the persistence of the correlation between non-US equity momentum and global growth and inflation surprise indices. Equity markets outside the United States have generally prospered when economic data have beaten consensus expectations and when inflation surprises have been negative  — a combination that has historically been associated with stronger corporate earnings and a more benign policy backdrop in economies other than the US. That correlation has held reasonably well through the turbulence of the past few months, even as the Middle East conflict introduced significant noise into both the economic data and the financial market signal. What the chart reveals this week is a picture of moderate but not alarming deterioration: global growth surprises have softened at the margin, consistent with the energy cost headwinds that have weighed on European and Asian activity, but the relationship between equity momentum and the broader data pulse remains intact. It is a signal that market participants continue to track economic fundamentals rather than purely geopolitical newsflow — a modestly reassuring sign that the underlying framework for assessing the global cycle has not broken down.

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**The Fed Decouples: Why Oil and US Two-Year Yields Have Parted Ways**
For much of 2026, oil prices and US two-year Treasury yields moved in close alignment. The logic was straightforward: higher oil prices raised inflation expectations, which in turn pushed market participants to anticipate a more hawkish Federal Reserve, lifting short-dated yields in the process. That relationship held with notable consistency through the March escalation and the months that followed, as energy market shocks and monetary policy expectations fed off each other. What this week’s chart captures is a striking breakdown in that correlation. As oil prices have fallen on the back of the US-Iran memorandum of understanding and the associated unwinding of the geopolitical risk premium, US two-year yields have not followed them lower. The reason is last week’s Federal Reserve meeting. Under new chair Kevin Warsh, the Fed delivered a hawkish dot plot that shifted the median year-end projection to a hike, making clear that the easing cycle previously priced by some market participants is no longer the central scenario. The message is important: the deflationary impulse from lower oil prices is being offset — at least in the Fed’s framing — by persistent underlying inflation pressures and a commitment to keeping policy tight.

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**Flash PMIs Signal Easing Supply Chain Stress and Softer Price Pressures**
June’s flash PMI surveys, released this week across the major advanced economies, provide a timely read on how the global manufacturing and services sectors are absorbing the shifting macro backdrop. Two findings stand out. First, supplier delivery times have improved (or not lengthened as much as they had in the prior two months). This finding coheres naturally with the broader narrative: lower oil prices reduce transport and energy input costs, while the resumption of Strait of Hormuz shipping flows — examined in more detail in chart 4 — is beginning to reduce the freight disruption and re-routing costs that had been building since the conflict escalated. Second, output price inflation in manufacturing has softened, suggesting that some of the pipeline pressure from earlier energy cost spikes is beginning to fade.

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**Hormuz Traffic and Oil: A Coherent Story of Tentative Normalisation**
The recent US-Iran memorandum of understanding to work towards a final deal, though not without subsequent flare-ups, has already brought relief to markets, most visibly in crude oil prices. This should go a long way towards unwinding the inflation-related concerns that previously elevated oil prices had stoked. While the pullback has owed much to anticipation of the glut of pent-up supply expected to follow, certain trackers of shipping volume through the Strait of Hormuz, such as the IMF’s, already point to a marked pickup in traffic, even if it remains well below pre-conflict levels. Should this normalisation of shipping flows persist, it would lend continued justification to a corresponding easing in oil prices, energy-related inflation and, by extension, headline inflation — a welcome development for central banks grappling with the delicate balancing act of reining in price pressures without dampening growth too sharply.

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**South Korea’s Trade Data Flag a Modest Softening in Global Demand**
South Korea’s trade data serve as one of the global economy’s most useful early warning systems. As one of the world’s most open economies, with exports spanning semiconductors, petrochemicals, steel, automobiles and consumer electronics, South Korea’s monthly trade figures provide a timely and broad-based read on the state of global demand. This week’s data show a slightly softer picture than the strong prints that characterised much of the first quarter. Headline export growth has moderated at the margin, and crucially, semiconductor exports — which had been the most dynamic component of the trade data, propelled by AI-related chip demand — have also come in a touch below the exceptional run rates seen earlier in the year. This is not, in itself, alarming: some moderation from peak rates was always to be expected, and the semiconductor cycle remains structurally supported by the scale of AI infrastructure investment globally.

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**A Super El Niño on the Horizon — The Next Inflation Risk**
With that said, while one driver of price pressures seems to be ebbing for now — albeit not without the risk of future flare-ups — another potential inflationary risk looms on the horizon. The chart illustrates the transmission mechanism. It plots Thailand’s milled rice production (left axis) against Australia’s Southern Oscillation Index (right axis), a well-established barometer of El Niño and La Niña conditions. The convention is straightforward: SOI readings persistently above +8 indicate La Niña, associated with above-average rainfall across Southeast Asia and broadly supportive crop conditions; readings persistently below -8 signal El Niño, which brings drought stress and reduced water availability across the region. The historical relationship is striking. The sharp negative SOI troughs around 2002–03, 2009–10 and most dramatically around 2015 all coincide with visible falls in Thai milled rice output. The severe El Niño of 2014–16 produced both the deepest SOI trough in the series and the sharpest single drop in rice production, to below 24,000 thousand tonnes. As meteorological authorities have been warning for some time, the world appears to be facing an imminent Super El Niño event, with the SOI already drifting back towards negative territory in recent months. Were a significant El Niño to materialise in the second half of this year, the implications for Thai rice output — and by extension for Asian food price inflation — could be substantial. Central bankers, in other words, may find themselves having to wrestle with a new inflationary impulse just as they had begun to hope the worst was behind them.

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The mood in global financial markets this week is more settled, though “settled” should not be confused with resolved. The US-Iran memorandum of understanding, signed last week, has continued to do its work: oil prices have fallen further, Strait of Hormuz shipping traffic has picked up measurably, and the risk premium that had been embedded in energy markets since the conflict escalated in March is now visibly unwinding. That is a material development for the inflation outlook, and central bankers will be watching carefully. Yet the picture is not without its complications. Technology stocks — the most conspicuous beneficiary of the prevailing low-rate, high-growth narrative — have been subject to renewed jitters this week, as investors grow more attentive to stretched valuations and the implications of a Federal Reserve that, under new chair Kevin Warsh, is no longer signalling the easing cycle previously priced into markets. Against this backdrop, this week’s charts draw on the latest data to assess where the global economic cycle stands. Equity momentum outside the United States has tracked closely with global growth and inflation surprises, a correlation that tells us something important about how activity is being perceived (chart 1). Meanwhile, the breakdown of the previously tight relationship between oil prices and US two-year yields is arguably one of the more telling market signals of recent weeks (chart 2). June’s flash PMI surveys point to easing supply chain stress and softer output price inflation in manufacturing — a finding that chimes naturally with lower crude prices and the resumption of Hormuz flows (chart 3). The Strait of Hormuz itself deserves a closer look: traffic data and the mechanics of the oil price pullback are telling a coherent story that supports the PMI picture (chart 4). South Korea’s trade data, including semiconductors, offer a slightly softer read on global demand momentum at the margin (chart 5). And looming on the horizon, one new risk is drawing the attention of meteorological authorities: a Super El Niño event whose probability has been rising, with potentially significant implications for food commodity prices and Asian agriculture (chart 6).

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Charts of the Week: Calmer Waters, New Currents

Michael J. Moran

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The price index for personal consumption expenditures rose 0.4% in May, although the measure almost rounded up to 0.5% (0.4498%). May marked the sixth consecutive month with headline prices increasing 0.3% or more. This series of changes has pulled the year-over-year inflation rate to 4.1%, up from 2.3% just over one year ago (April 2025). Energy prices, of course, have been the most important factor behind the acceleration in inflation, and they remained an issue in May, increasing 4.0% after advances of 3.9% and 11.6% in the prior two months. Food prices have moved erratically in the past year, with jumps and lulls leaving an average monthly increase of 0.2%. The noise was evident in recent months, with food prices increasing only 0.1% in May after a jump of 0.5% in April.

Core prices also have contributed to the pickup in inflation. After averaging monthly increases of 0.24% during 2025, core prices have increased at an average rate of 0.34% so far this year. The year-over-year increase in core inflation totaled 3.4% in May, up from a recent low of 2.6% in April of last year. Both the headline and core inflation rates are uncomfortably above the Federal Reserve’s target of 2.0%.

Total personal income rose briskly in May (0.7%). A surge in farm income played an important role (up 125% month-to-month, most likely reflecting government support payments), but nominal results also were firm elsewhere (up 0.5% ex farm income). Inflation reduced the purchasing power of this income gain, but aggregate income still advanced slightly in real terms (0.2%).

Given the recent surge in energy-driven inflation, May marked only the second monthly increase in real income so far this year. Tight budgets have dampened consumer spending, but individuals have not pulled to the sidelines. Real consumption expenditures rose 0.5% (annual rate) in the first quarter, and results for April and May suggest that real PCE is on track to increase 1.5% to 2.0% in the second quarter.

Households have managed to remain moderately active in their spending by limiting their saving. The saving rate has drifted lower since early 2024 moving to 3.0% in May (chart, below right). The erosion in saving perhaps seems reckless, but some of the reduction could be a response to the strength in the equity market, where wealth gains have possibly limited the incentive to save. Also, larger-than-normal tax refunds this year because of tax cuts in the One Big Beautiful Budget Act have allowed many households to spend actively despite modest increases in real income.

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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- Energy prices rose sharply for the third consecutive month; core prices were unsettling as well.
- A jump in nominal income translated to a modest advance in real terms, allowing consumers to remain reasonably active.

Personal Income, Consumption, and Prices in May

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New orders for durable goods fell 4.5% m/m in May, the first monthly fall in three months, following an upwardly revised 8.5% gain in April (+7.9% initially reported on May 28) and a 1.3% increase in March (unrevised), according to today’s advance report by the U.S. Census Bureau. The Action Economics Forecast Survey had expected a 4.4% m/m May decrease. The year-on-year rate decelerated to -3.5% in May from +17.7% in April (+20.0% in May 2025), marking the first negative reading since December 2024 (-4.5%). Excluding transportation, durable goods orders rose 1.3% (10.2% y/y) in May, the 13th consecutive m/m rise, after a 1.4% increase in April. Meanwhile, durable goods orders excluding defense dropped 4.6% (-5.0% y/y), down for the third time in four months, following an 8.4% April rebound.

The m/m fall in May durable goods orders was driven by a 51.8% m/m plunge in orders for nondefense aircraft & parts, following a 167.4% surge in April and a 23.0% slump in March. Orders for defense aircraft & parts rose 7.9% (63.5% y/y), the fourth successive m/m increase, after gains of 2.5% in April and 23.7% in March. Orders excluding aircraft climbed 1.0% (9.8% y/y), the six straight m/m rise and the 10th in 11 months, after a 1.3% April increase.

Durable goods orders for transportation dropped 14.0% (-22.1% y/y) in May, the first m/m decline since February, following a 22.4% gain in April. In addition to May’s m/m plunge in nondefense aircraft orders and increase in defense aircraft orders, motor vehicles & parts orders rose 1.1% (12.4% y/y), the sixth straight m/m rise, after a 0.7% April increase. Orders for primary metals advanced 3.0% (15.9% y/y), the largest of six successive m/m gains, after a 2.6% April rise. Machinery orders climbed 1.9% (14.0% y/y), up for the 13th straight month, on top of a 1.3% April rise. Orders for fabricated metal products grew 1.5% (11.2% y/y), the third m/m increase in four months, following a 4.1% April gain. Orders for all other durable goods rose 0.8% (3.2% y/y), the strongest of nine consecutive m/m increases, after a 0.1% April uptick. Orders for computers & electronic products rebounded 0.3% (13.3% y/y), the eighth m/m gain in nine months, following a 0.4% April decrease. Orders for electrical equipment, appliances & components recovered 0.3% (5.8% y/y), the second increase in three months, after a 0.2% April decline.

Capital goods orders fell 13.6% (-21.1% y/y) in May, the first m/m fall in three months and the deepest since June 2025, following a 22.2% jump in April. Nondefense capital goods orders dropped 15.7% (-26.4% y/y), the fifth m/m decrease in six months, after a 24.9% April rebound. Core capital goods orders (i.e., nondefense capital goods orders excluding aircraft) rose 1.6% (10.5% y/y), the third m/m gain in four months, reversing a 0.7% April decline. Defense capital goods orders slid 3.4% (+14.4% y/y), the first m/m slide since January, after a 10.4% April gain. Notably, core capital goods shipments (core capex shipments)—a reliable coincident indicator of business spending on equipment in the national accounts—rose 0.3% (7.6% y/y), the eighth m/m rise in nine months, after a 0.5% April increase.

Shipments of all manufactured goods climbed 1.6% (8.9% y/y) in May following a 1.3% gain in April. Durable goods shipments rose 1.0% (8.9% y/y) after a 0.7% April increase. Nondurable goods shipments advanced 2.2% (9.0% y/y), building on a 1.9% April gain. All three series posted the sixth consecutive m/m increase.

Unfilled orders of durable goods rose 0.6% (8.5% y/y) in May, the 10th straight m/m rise, after a 1.8% gain in April. Excluding transportation, unfilled orders increased 0.9% (4.3% y/y), also up for the 10th consecutive month, following a 0.7% April rise.

Manufacturing inventories edged up 0.2% (1.9% y/y) in May, the seventh successive m/m gain, after a 0.3% rise in April. Durable goods inventories grew 0.2% (2.1% y/y), the eighth straight m/m increase, after rising 0.3% in April and March. Nondurable goods inventories, up for the fourth consecutive month, rose 0.3% (1.6% y/y), matching April's pace.

Manufacturers’ orders and shipments of durable and nondurable goods, along with unfilled orders and inventories, are compiled by the U.S. Census Bureau. They are available in Haver’s **USECON** database. The Action Economics forecast data are in the **AS1REPNA** database.

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- May headline orders -4.5% m/m, first fall in three mths.; -3.5% y/y, first negative reading since Dec. ’24.
- Nondefense aircraft & parts -51.8% m/m vs. April’s +167.4%.
- Transportation orders -14.0%, first m/m drop since Feb.; orders ex transp. +1.3%, 13th straight m/m rise.
- Core capital goods shipments +0.3%, eighth gain in nine mths., pointing to a moderate contribution to Q2’26 GDP from business equipt. spending.
- Durable goods shipments +1.0%; unfilled orders +0.6%; inventories +0.2%.

Economy in Brief

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