Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060830a.jpg" width="353">
U.S. real GDP growth during 2Q &#39;06 was revised higher to 2.9% (AR) from the advance report of 2.5% growth. The figure about matched Consensus expectations for a 3.0% rise.
Reported for the first time, 2Q profits advanced 3.2% (20.5% y/y), far slower than the double digit increases during the prior two quarters. Profits at U.S. nonfinancial corporations grew just 0.6% (15.6% y/y), after an 11.6% surge during 1Q and financial corporate profits grew 7.8% (27.8% y/y). Earnings of overseas corporations posted a 4.0% (27.0% y/y) increase.
Growth in final sales to domestic purchasers was little revised at 1.7% (3.0% y/y) following four quarters of 3.7% growth.
Growth in business fixed investment was revised somewhat higher to a still-slowed 4.7% (7.3% y/y) rate. Spending on equipment &amp; software continued to show a decline of 1.6% (+6.8% y/y), much of it in spending on transportation equipment, but growth in structures spending ramped up to 22.1% (8.4% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060830b.jpg" width="353">
The advance in real personal consumption expenditures held at a little revised 2.6% versus 3.4% during the prior four quarters. Durables spending grew 0.4% (3.6% y/y) as motor vehicles &amp; parts fell 0.8%, less than initially estimated.
The decline in residential investment was deepened to 9.8% (-1.2% y/y) and that reduced 2Q GDP growth by 0.6 percentage points.
Real spending by the federal government fell 4.3% (+2.1% y/y), a decline which subtracted 0.3 percentage points from GDP growth.
A stronger contribution from inventories added 0.6 percentage points to GDP growth, revised from 0.4 points. Meanwhile, an improved net export deficit added a little-revised 0.4 percentage points to growth as exports grew 5.1% (7.9% y/y) and imports rose 0.6% (6.2% y/y).
The rise in the GDP chain price index was unrevised at 3.3%, the fourth straight quarter at that rate, though the domestic final sales price deflator grew 4.0% (3.7% y/y). Less food &amp; energy consumer prices rose 2.8% (2.3% y/y), initially reported at 2.9%.
The minutes of the latest FOMC meeting can be found <a href="http://www.federalreserve.gov/fomc/minutes/20060808.htm"> here</a>
Income, Poverty and Health Insurance in the United States: 2005 from the U.S. Census Bureau is available <a href="http://www.census.gov/prod/2006pubs/p60-231.pdf"> 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/@E7/@E701/@E701.HTM">Chained 2000$, % AR</a></th>
<th scope="col">2Q &#39;06 (Prelim.)</th>
<th scope="col">2Q &#39;06 (Advance)</th>
<th scope="col">1Q &#39;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">GDP</td>
<td>2.9%</td>
<td>2.5%</td>
<td>5.6%</td>
<td>3.5%</td>
<td>3.2%</td>
<td>3.9%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>--</td>
<td>0.4%</td>
<td>-0.0%</td>
<td>0.6%</td>
<td>-0.3%</td>
<td>0.4%</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>--</td>
<td>2.1%</td>
<td>5.6%</td>
<td>2.9%</td>
<td>3.5%</td>
<td>3.5%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Foreign Trade Effect</td>
<td>--</td>
<td>&nbsp;0.3%</td>
<td>-0.0%</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>-0.5%</td>
<td>-0.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>--</td>
<td>1.6%</td>
<td>5.4%</td>
<td>3.0%</td>
<td>3.6%</td>
<td>4.0%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>--</td>
<td>3.3%</td>
<td>3.3%</td>
<td>3.3%</td>
<td>3.0%</td>
<td>2.8%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
ADP Nat'l Employment Report: Growth Stable & Slower 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 30, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060830c.jpg" width="353">
The Nat&#39;l Employment Report, published by the payroll processor ADP, indicated that August private nonfarm payrolls rose 107,000. The August figure from BLS will be published this Friday.
The rise in ADP&#39;s measure of July private nonfarm payrolls of 99,000 was accompanied by a 113,000 rise in private nonfarm payrolls as published by the Bureau of Labor Statistics.
ADP has compiled the estimate from its database of individual companies&#39; payroll information. Macroeconomic Advisers, LLC, the St. Louis economic consulting firm, developed the methodology for transforming the raw data into an economic indicator.
According to ADP and Macro Advisers, the correlation between the monthly percentage change in the ADP estimate and that in the BLS data is 0.90.
The ADP National Employment Report data is maintained in Haver&#39;s USECON database; historical data go back to December 2000. The figures in this report cover only private sector jobs and exclude employment in the public sector, which grew an average of 11,333 per month over the last year.
The full ADP National Employment Report can be found <a href="http://www.investquest.com/iq/a/aud/ne/news/adp083006es.htm">here</a>, and the ADP methodology is explained <a href="http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf">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/@EB/@EB25/@EB25.HTM">LAXEPA@USECON</a></th>
<th scope="col">Aug</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>
<td class="firstcol">Nonfarm Private Payroll Employment (Chg.)</td>
<td>107,000</td>
<td>99,000</td>
<td>1.9%</td>
<td>1.7%</td>
<td>1.3%</td>
<td>-0.4%</td>
</tr>
</tbody>
</table>
Mortgage Applications Portend Further Weakness in Housing 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 30, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060830d.jpg" width="353">
The total number of mortgage applications slipped another 0.9% last week according to the Mortgage Bankers Association. The average level of applications in August rose 2.9% from July.
Last week&#39;s decline was led by a 1.6% drop in purchase applications and applications are down 17.8% from the weekly high in January. It was sixth decline in the last seven weeks and lowered purchase apps in August 3.5% below the July average. That was the fourth consecutive m/m decline.
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.
Applications to refinance were roughly unchanged w/w and rose 13.3% in August versus July.
The effective interest rate on a conventional 30-year mortgage was about unchanged at 6.60% versus 6.58% the prior week. The peak for 30 year financing was 7.08% late in June. The rate on 15-year financing also remained unchanged at 6.32% 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.
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>.

<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">08/25/06</th>
<th scope="col">08/18/06</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>556.5</td>
<td>561.5</td>
<td>-23.0%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>375.9</td>
<td>382.2</td>
<td>-20.1%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,609.2</td>
<td>1,608.5</td>
<td>-26.4%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
Summer Retail Sales Slow in Japan & Italy, Firmer in Norway & Slovenia 
by <a href="/comment/Stone.html">Carol Stone</a> August 30, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060830e.jpg" width="353">
Retail sales data were reported today for four very different economies. While &quot;globalization&quot; may be bringing many aspects of the world economy closer together, these reports indicate that people&#39;s shopping behavior varies widely from place to place.
In Japan, sales were off 1.7% in July from June, and remained marginally under the year-ago volume. As seen in the graph, the best we can say for Japan&#39;s retailing sector is that it is stabilizing after a protracted period of decline. We are all pleased with the growth that is developing in Japan overall, but consumers seem not yet to be participating. Louise Curley also made this point yesterday in her discussion of the monthly survey on households&#39; living expenditures. Among the retail sales segments, there is some slight growth in food, and clothing has been flat since late 2003. Downtrends are still evident at general merchandise stores and household furnishings. Motor vehicle dealers saw lower sales in July, after a basically trendless period since early 2004.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060830f.jpg" width="353">
Retail sales are also fairly slow in Italy, hovering in a narrow band the past three years. In June, total sales were up a mere 0.1% from May and 1.3% from the year before. We admit to being mildly amused that the greatest strength among Italian retailers is at supermarkets and other food stores. It&#39;s good to know Italians enjoy Italian food as much as the rest of us do. Non-food stores&#39; sales are lagging, however.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060830g.jpg" width="353">
Two smaller European countries are seeing good growth in retail sales. In Norway, they were up 0.6% in July, after falling 0.8% in June. But they are up 3.6% from July 2005 and the longer-term performance shows an annualized pace of 4.6% over the past five years. In Slovenia, the growth is stronger still: 8.7% from one year ago and a 5.6% average rate of change from five years ago. Available detail indicates that Slovenians are busy buying cars and other vehicles and fueling and servicing them; those sales ran a sizable 17% above a year ago in volume terms. Standard &quot;retail trade&quot; stores report growth from the year ago of 2%.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Indexes, 2000=100, Seas Adj</th>
<th scope="col">July 2006</th>
<th scope="col">June 2006</th>
<th scope="col">May 2006</th>
<th scope="col">Year Ago</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">Japan</td>
<td>92.1</td>
<td>93.7</td>
<td>93.8</td>
<td>92.2</td>
<td>93.0</td>
<td>91.7</td>
<td>92.5</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>--</td>
<td>108.3</td>
<td>108.2</td>
<td>107.0</td>
<td>107.3</td>
<td>106.9</td>
<td>107.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Norway</td>
<td>126.16</td>
<td>125.41</td>
<td>126.46</td>
<td>119.53</td>
<td>119.34</td>
<td>114.53</td>
<td>110.68</td>
</tr>
<tr>
<td class="firstcol">Slovenia (NSA)</td>
<td>147.4</td>
<td>149.7</td>
<td>148.6</td>
<td>135.6</td>
<td>135.2</td>
<td>123.3</td>
<td>117.4</td>
</tr>
</tbody>
</table>


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U.S. real GDP growth during 2Q '06 was revised higher to 2.9% (AR) from the advance report of 2.5% growth. The figure about matched Consensus expectations for a 3.0% rise. Reported for the first time, 2Q profits advanced 3.2% (20.5% [...]

US GDP Growth Revised Up, Profit Growth Slowed

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060829e.jpg" width="353">
The Japanese Ministry of Internal Affairs and Communication publishes a variety of data relating to household&#39;s living expenditures as part of their report on the Family Income and Expenditure Survey. There are data on the actual expenditures for all households and for workers&#39; household. In addition to total expenditures, there are a number of spending categories.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060829f.jpg" width="353"> Data are given for &quot;fundamental&quot; and &quot;selective&quot; expenditures, what we would call nondiscretionary and discretionary spending. There are indexes--seasonally adjusted and not seasonally adjusted-- of the actual expenditures based on 2005=100. . Nominal and Real Indexes on a seasonally adjusted basis are available for all households, including agricultural, forestry and fisheries households and for all households excluding those households. Similar data for workers&#39; households are also available. The data start in January 2000.
The monthly data have shown a slight downward trend over the past seven years as can be seen in the first chart that shows the year to year changes in the real and nominal indexes for workers&#39; households. If the monthly data of the real index for living expenditures for all households including agriculture, forestry and fisheries households are aggregated to a quarterly basis, the quarterly data appear to show the same general movement as that shown by household consumption in the national accounts as can be seen in the second chart. Thus the living expenditure data appear to be coincident rather than leading indicators of total household consumption.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060829g.jpg" width="353">
The data can be used to reveal spending patterns. For example, fundamental expenditures tend to take up between 52-58% of total spending while selected expenditures take up between 40-48% as shown in the third chart.

<table border="0" cellspacing="0" width="100%">
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<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/JAPAN/@J8/@J808/@J808.HTM">Japan</a></th>
<th scope="col">Jul&nbsp; 06</th>
<th scope="col">Jun 06</th>
<th scope="col">May 05</th>
<th scope="col">Apr 06&nbsp; &nbsp;&nbsp;</th>
<th scope="col">Mar 06 &nbsp;&nbsp;&nbsp;&nbsp;</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">Household Living Expenditures</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">All Household (000 Yen)</td>
<td>292.328</td>
<td>280.824</td>
<td>292.114</td>
<td>312.872</td>
<td>313.350</td>
<td>-0.81</td>
<td>0.38</td>
<td>-1.34</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Year/Year % Change</td>
<td>-0.83</td>
<td>-1.12</td>
<td>-1.24</td>
<td>-1.56</td>
<td>-1.87</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol"> Workers&#39; HHs&nbsp; (000 Yen) </td>
<td>320.677</td>
<td>301.978</td>
<td>310.482</td>
<td>346.086</td>
<td>340.010</td>
<td>-0.64</td>
<td>1.55</td>
<td>-1.40</td>
</tr>
<tr class="odd">
<td class="firstcol"> &nbsp; Year/Year % Change </td>
<td>-1.46</td>
<td>-2.29</td>
<td>-2.10</td>
<td>-3.88</td>
<td>-3.77</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Workers&#39;&nbsp; Households&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">Real (2005=100)</td>
<td>96.1</td>
<td>96.7</td>
<td>97.9</td>
<td>96.2</td>
<td>95.5</td>
<td>-0.34</td>
<td>1.61</td>
<td>-1.12</td>
</tr>
<tr>
<td class="firstcol"> &nbsp; Year/Year % Change </td>
<td>-1.74</td>
<td>-2.91</td>
<td>-2.30</td>
<td>-3.90</td>
<td>-3.34</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol"> Nominal (2005=100) </td>
<td>96.4</td>
<td>97.0</td>
<td>99.2</td>
<td>96.3</td>
<td>95.3</td>
<td>-0.70</td>
<td>1.61</td>
<td>-1.38</td>
</tr>
<tr>
<td class="firstcol"> &nbsp; Year/Year % Change </td>
<td>-1.23</td>
<td>-2.41</td>
<td>-2.19</td>
<td>-4.08</td>
<td>-3.74</td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>
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The Japanese Ministry of Internal Affairs and Communication publishes a variety of data relating to household's living expenditures as part of their report on the Family Income and Expenditure Survey. There are data on the actual [...]

Japanese Household's Living Expenditures

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060829a.jpg" width="353">
According to the International Council of Shopping Centers (ICSC)-UBS survey, chain store sales rose a moderate 0.6% last week, the first w/w gain since July.
The increase helped the average sales level in August rise 0.4% above July, the first m/m gain in four months.
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.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060829b.jpg" width="353">
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 a modest 0.1% (-2.4% y/y) in the latest week after several weeks of decline.
The retail price for a gallon of regular unleaded gasoline fell another eight cents to an average $2.85 (+9.0% y/y). The decline lowered the average this month to $2.95 versus a July average of $2.98. In spot market trading yesterday, regular unleaded gasoline prices fell sharply to $1.77 as Ernesto was downgraded to a tropical storm and moved out of the Gulf of Mexico. 
Oil prices similarly fell with the spot price of WTI crude down to $70.62 per bbl. (+5.1% y/y) and the price is lower today. Natural gas prices also fell to $6.52/mmbtu (-33.9% y/y) in spot trading. 
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%">
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<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">08/26/06</th>
<th scope="col">08/19/06</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>471.7</td>
<td>469.1</td>
<td>3.6%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>


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According to the International Council of Shopping Centers (ICSC)-UBS survey, chain store sales rose a moderate 0.6% last week, the first w/w gain since July. The increase helped the average sales level in August rise 0.4% above July, [...]

Weekly Chain Store Sales Up, Gasoline Prices Down

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060829d.jpg" width="353">
The Conference Board reported that consumer confidence in August fell a sharp 6.9% to 99.6, its lowest level since November. The July level was revised up slightly but Consensus expectations had been for a more moderate decline in August confidence to 102.9.
During the last twenty years there has been a 52% correlation between the level of consumer confidence and the y/y change in real consumer spending. The correlation rose to 66% during the last ten years.
Consumers&#39; assessment of the present situation reversed all of the prior month&#39;s modest uptick and fell 8.0% (-0.3% y/y) to the lowest level (123.4) this year. The percentage of respondents who viewed business conditions as good (26.1%) fell though the percentage that viewed jobs as hard to get (21.1%) rose to its highest level this year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060829c.jpg" width="353">
The index measuring consumers&#39; expectations fell 5.7% (-10.2% y/y). Expectations for better business conditions worsened to the lowest (15.9%) since October and fewer respondents expected more jobs.
Expectations for the inflation rate in twelve months jumped to 5.5%, the highest level since May.
The Conference Board&#146;s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond.
Wealth inequality is vast and growing from the Economic Policy Institute is available <a href="http://www.epi.org/content.cfm/webfeatures_snapshots_20060823"> 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/USECON/@EF/@EF14/@EF1401/@EF1401.HTM">Conference Board</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>
<td class="firstcol">Consumer Confidence</td>
<td>99.6</td>
<td>107.0</td>
<td>-5.6s%</td>
<td>100.3</td>
<td>96.1</td>
<td>79.8</td>
</tr>
</tbody>
</table>
</body>
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The Conference Board reported that consumer confidence in August fell a sharp 6.9% to 99.6, its lowest level since November. The July level was revised up slightly but Consensus expectations had been for a more moderate decline in [...]

Consumer Confidence Fell Sharply

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060829d.jpg" width="353">
The Conference Board reported that consumer confidence in August fell a sharp 6.9% to 99.6, its lowest level since November. The July level was revised up slightly but Consensus expectations had been for a more moderate decline in August confidence to 102.9.
During the last twenty years there has been a 52% correlation between the level of consumer confidence and the y/y change in real consumer spending. The correlation rose to 66% during the last ten years.
Consumers&#39; assessment of the present situation reversed all of the prior month&#39;s modest uptick and fell 8.0% (-0.3% y/y) to the lowest level (123.4) this year. The percentage of respondents who viewed business conditions as good (26.1%) fell though the percentage that viewed jobs as hard to get (21.1%) rose to its highest level this year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060829c.jpg" width="353">
The index measuring consumers&#39; expectations fell 5.7% (-10.2% y/y). Expectations for better business conditions worsened to the lowest (15.9%) since October and fewer respondents expected more jobs.
Expectations for the inflation rate in twelve months jumped to 5.5%, the highest level since May.
The Conference Board&#146;s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond.
Wealth inequality is vast and growing from the Economic Policy Institute is available <a href="http://www.epi.org/content.cfm/webfeatures_snapshots_20060823"> 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/@EF/@EF14/@EF1401/@EF1401.HTM">Conference Board</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>
<td class="firstcol">Consumer Confidence</td>
<td>99.6</td>
<td>107.0</td>
<td>-5.6s%</td>
<td>100.3</td>
<td>96.1</td>
<td>79.8</td>
</tr>
</tbody>
</table>
Weekly Chain Store Sales Up, Gasoline Prices Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 29, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060829a.jpg" width="353">
According to the International Council of Shopping Centers (ICSC)-UBS survey, chain store sales rose a moderate 0.6% last week, the first w/w gain since July.
The increase helped the average sales level in August rise 0.4% above July, the first m/m gain in four months.
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.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060829b.jpg" width="353">
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 a modest 0.1% (-2.4% y/y) in the latest week after several weeks of decline.
The retail price for a gallon of regular unleaded gasoline fell another eight cents to an average $2.85 (+9.0% y/y). The decline lowered the average this month to $2.95 versus a July average of $2.98. In spot market trading yesterday, regular unleaded gasoline prices fell sharply to $1.77 as Ernesto was downgraded to a tropical storm and moved out of the Gulf of Mexico. 
Oil prices similarly fell with the spot price of WTI crude down to $70.62 per bbl. (+5.1% y/y) and the price is lower today. Natural gas prices also fell to $6.52/mmbtu (-33.9% y/y) in spot trading. 
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>
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<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">08/26/06</th>
<th scope="col">08/19/06</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>471.7</td>
<td>469.1</td>
<td>3.6%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>
 Japanese Household's Living Expenditures  
by <a href="/comment/Curley.html">Louise Curley</a> August 29, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060829e.jpg" width="353">
The Japanese Ministry of Internal Affairs and Communication publishes a variety of data relating to household&#39;s living expenditures as part of their report on the Family Income and Expenditure Survey. There are data on the actual expenditures for all households and for workers&#39; household. In addition to total expenditures, there are a number of spending categories.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060829f.jpg" width="353"> Data are given for &quot;fundamental&quot; and &quot;selective&quot; expenditures, what we would call nondiscretionary and discretionary spending. There are indexes--seasonally adjusted and not seasonally adjusted-- of the actual expenditures based on 2005=100. . Nominal and Real Indexes on a seasonally adjusted basis are available for all households, including agricultural, forestry and fisheries households and for all households excluding those households. Similar data for workers&#39; households are also available. The data start in January 2000.
The monthly data have shown a slight downward trend over the past seven years as can be seen in the first chart that shows the year to year changes in the real and nominal indexes for workers&#39; households. If the monthly data of the real index for living expenditures for all households including agriculture, forestry and fisheries households are aggregated to a quarterly basis, the quarterly data appear to show the same general movement as that shown by household consumption in the national accounts as can be seen in the second chart. Thus the living expenditure data appear to be coincident rather than leading indicators of total household consumption.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060829g.jpg" width="353">
The data can be used to reveal spending patterns. For example, fundamental expenditures tend to take up between 52-58% of total spending while selected expenditures take up between 40-48% as shown in the third chart.

<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/JAPAN/@J8/@J808/@J808.HTM">Japan</a></th>
<th scope="col">Jul&nbsp; 06</th>
<th scope="col">Jun 06</th>
<th scope="col">May 05</th>
<th scope="col">Apr 06&nbsp; &nbsp;&nbsp;</th>
<th scope="col">Mar 06 &nbsp;&nbsp;&nbsp;&nbsp;</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">Household Living Expenditures</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">All Household (000 Yen)</td>
<td>292.328</td>
<td>280.824</td>
<td>292.114</td>
<td>312.872</td>
<td>313.350</td>
<td>-0.81</td>
<td>0.38</td>
<td>-1.34</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Year/Year % Change</td>
<td>-0.83</td>
<td>-1.12</td>
<td>-1.24</td>
<td>-1.56</td>
<td>-1.87</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol"> Workers&#39; HHs&nbsp; (000 Yen) </td>
<td>320.677</td>
<td>301.978</td>
<td>310.482</td>
<td>346.086</td>
<td>340.010</td>
<td>-0.64</td>
<td>1.55</td>
<td>-1.40</td>
</tr>
<tr class="odd">
<td class="firstcol"> &nbsp; Year/Year % Change </td>
<td>-1.46</td>
<td>-2.29</td>
<td>-2.10</td>
<td>-3.88</td>
<td>-3.77</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Workers&#39;&nbsp; Households&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">Real (2005=100)</td>
<td>96.1</td>
<td>96.7</td>
<td>97.9</td>
<td>96.2</td>
<td>95.5</td>
<td>-0.34</td>
<td>1.61</td>
<td>-1.12</td>
</tr>
<tr>
<td class="firstcol"> &nbsp; Year/Year % Change </td>
<td>-1.74</td>
<td>-2.91</td>
<td>-2.30</td>
<td>-3.90</td>
<td>-3.34</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol"> Nominal (2005=100) </td>
<td>96.4</td>
<td>97.0</td>
<td>99.2</td>
<td>96.3</td>
<td>95.3</td>
<td>-0.70</td>
<td>1.61</td>
<td>-1.38</td>
</tr>
<tr>
<td class="firstcol"> &nbsp; Year/Year % Change </td>
<td>-1.23</td>
<td>-2.41</td>
<td>-2.19</td>
<td>-4.08</td>
<td>-3.74</td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>


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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060828d.jpg" width="353">
Estonia and Lithuania reported that average monthly wages in the second quarter were 14.96% and 14.12%, respectively, above the second quarter of 2005. Wage growth in Lithuania has been accelerating and this was the highest year-to-year increase to date.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060828f.jpg" width="353"> Wage growth in Estonia, on the other hand, had decelerated from 14.63% in the second quarter of 2001 to 7.26% in the second quarter of 2004, since then it has accelerated. The trends of wage growth in the two countries are shown in the first chart. To get some idea of the relative level of wages in the two countries we converted the wages in local currency into wages in euros. There are 15.646 Estonian Kroon in one Euro and 3.452 Lithuanian Litas in one Euro. In terms of euros the average monthly wage level in the second quarter of this year was 440 euros for Lithuania and 609.euros for Estonia.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060828e.jpg" width="353">
Two other emerging countries of Europe, Slovenia and Slovakia reported the results of recent business surveys. The results are the excess of those who believe conditions will improve over those who believe conditions will worsen. Those participating in Slovakia&#39;s Industry Confidence Survey have generally shown an excess of optimists over pessimists, while those participating in Slovenia&#39;s Combined Confidence Indicator have had an excess of pessimists until November, 2005. Since then there has been an increasing excess of optimists as can be seen in the second chart. The disparity between the two surveys may be due to the fact that the Combined Confidence Indicator includes the opinions of consumers who until recently have been pessimistic whereas Slovakia&#39;s Industry Confidence Survey does not. In the third chart, we have plotted the Slovenia&#39;s Combined Confidence Indicator with the Consumer Component. It is clear that the consumer has had a negative effect on the combined index until recently. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"></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&nbsp;%</th>
<th scope="col">2004 %</th>
<th scope="col">2003 %</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;Monthly Wage NAS</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Estonia (Kroon)</td>
<td>9531</td>
<td>8591</td>
<td>8291</td>
<td>2.96</td>
<td>14.96</td>
<td>11.94</td>
<td>7.71</td>
<td>9.64</td>
</tr>
<tr class="odd">
<td class="firstcol">Estonia (Euro</td>
<td>609</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Lithuania (Litas)</td>
<td>1519.7</td>
<td>14370</td>
<td>1331.5</td>
<td>5.76</td>
<td>14.13</td>
<td>10.02</td>
<td>5.71</td>
<td>4.41</td>
</tr>
<tr class="odd">
<td class="firstcol">Lithuania&nbsp; (Euro)</td>
<td>440</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol"></td>
<td>Aug 06</td>
<td>Jul 06</td>
<td>Aug 05</td>
<td>Q/Q Dif</td>
<td>Y/Y Dif</td>
<td>2005 Dif</td>
<td>2004 Dif</td>
<td>2003 Dif</td>
</tr>
<tr class="odd">
<td class="firstcol">Measures of Confidence</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Slovakia Business Survey % Bal</td>
<td>10.7</td>
<td>9.7</td>
<td>-1.3</td>
<td>1.0</td>
<td>12.0</td>
<td>4.6</td>
<td>6.5</td>
<td>4.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Slovenia Combined Sentiment Indicator % Bal</td>
<td>6</td>
<td>7</td>
<td>-1</td>
<td>-1</td>
<td>7</td>
<td>-1</td>
<td>-1</td>
<td>-5</td>
</tr>
<tr>
<td class="firstcol">Slovenia Consumer</td>
<td>-14</td>
<td>-13</td>
<td>-20</td>
<td>-1</td>
<td>6</td>
<td>-19</td>
<td>-19</td>
<td>-20</td>
</tr>
</tbody>
</table>
</body>
</html>

Estonia and Lithuania reported that average monthly wages in the second quarter were 14.96% and 14.12%, respectively, above the second quarter of 2005. Wage growth in Lithuania has been accelerating and this was the highest year-to- [...]

Strong Increases in Wages in Estonia and Lithuania: Improved Confidence in Slovenia and Slovakia

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060828a.jpg" width="353">
Railcar loadings through July grew 2.7% y/y, according to Atlantic Systems. Though y/y growth has been firm, the six month growth in loadings eased to 1.4% though some pickup may be evident in the weekly data for August.
Intermodal loadings (containers &amp; trailers on flat cars) grew 5.4%. That rate of growth is roughly half the rate during 2004 and is down from 7.0% last year. Carload tonnage (which includes bulk shipping of materials) grew 0.8% y/y after a slight decline last year and 1.8% growth in 2004.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060828b.jpg" width="353">
During the last ten years there has been a 37% correlation between the y/y growth in total freight car loadings and the change in factory production.
The truck tonnage index from the American Trucking Association fell 1.6% y/y during July. The index level improved some 3.0% from a low in March, but forward momentum has been constrained since last year&#39;s highs.
During the last ten years there has been a 44% correlation between the y/y growth in the truck tonnage index and the change in factory production.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060828c.jpg" width="353">
Air Freight Revenue Ton-Miles generated within the U.S. grew 5.0% y/y through June, according to the Air Transport Association. That growth is quite respectable but much of its strength owes to a favorable comparison to a weak period last year. The six-month growth rate of U.S. air-freight dropped to a negative 7.5%.
During the last ten years there has been a 38% correlation between the y/y growth in Air Freight and the change in factory production.
Chairman Ben S. Bernanke remarks at the Kansas City Fed&#39;s Annual Economic Symposium in Jackson Hole, Wyoming can be found <a href="http://www.federalreserve.gov/boarddocs/speeches/2006/20060825/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">U.S. Industry Statistics</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">May</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/RAILSHAR/RAILSHAR.HTM">Railcar Loadings</a></td>
<td>2.7%</td>
<td>5.9%</td>
<td>5.4%</td>
<td>2.5%</td>
<td>4.8%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED11/@ED11.HTM">Truck Tonnage Index</a></td>
<td>-1.6%</td>
<td>-1.1%</td>
<td>-1.2%</td>
<td>2.3%</td>
<td>5.9%</td>
<td>3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol"><a href="http://www.haverselect.com/dlx/INDUSTRY/@I01/@I0124/@I0124.HTM">ATA Domestic Freight Revenue Ton-Miles</a></td>
<td>--</td>
<td>5.0%</td>
<td>8.0%</td>
<td>-0.4%</td>
<td>5.2%</td>
<td>1.2%</td>
</tr>
</tbody>
</table>
</body>
</html>

Railcar loadings through July grew 2.7% y/y, according to Atlantic Systems. Though y/y growth has been firm, the six month growth in loadings eased to 1.4% though some pickup may be evident in the weekly data for August. Intermodal [...]

Railcar Loadings, Truck Tonnage & Air Freight

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060828a.jpg" width="353">
Railcar loadings through July grew 2.7% y/y, according to Atlantic Systems. Though y/y growth has been firm, the six month growth in loadings eased to 1.4% though some pickup may be evident in the weekly data for August.
Intermodal loadings (containers &amp; trailers on flat cars) grew 5.4%. That rate of growth is roughly half the rate during 2004 and is down from 7.0% last year. Carload tonnage (which includes bulk shipping of materials) grew 0.8% y/y after a slight decline last year and 1.8% growth in 2004.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060828b.jpg" width="353">
During the last ten years there has been a 37% correlation between the y/y growth in total freight car loadings and the change in factory production.
The truck tonnage index from the American Trucking Association fell 1.6% y/y during July. The index level improved some 3.0% from a low in March, but forward momentum has been constrained since last year&#39;s highs.
During the last ten years there has been a 44% correlation between the y/y growth in the truck tonnage index and the change in factory production.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060828c.jpg" width="353">
Air Freight Revenue Ton-Miles generated within the U.S. grew 5.0% y/y through June, according to the Air Transport Association. That growth is quite respectable but much of its strength owes to a favorable comparison to a weak period last year. The six-month growth rate of U.S. air-freight dropped to a negative 7.5%.
During the last ten years there has been a 38% correlation between the y/y growth in Air Freight and the change in factory production.
Chairman Ben S. Bernanke remarks at the Kansas City Fed&#39;s Annual Economic Symposium in Jackson Hole, Wyoming can be found <a href="http://www.federalreserve.gov/boarddocs/speeches/2006/20060825/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">U.S. Industry Statistics (Y/Y % Change)</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">May</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/RAILSHAR/RAILSHAR.HTM">Railcar Loadings</a></td>
<td>2.7%</td>
<td>5.9%</td>
<td>5.4%</td>
<td>2.5%</td>
<td>4.8%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED11/@ED11.HTM">Truck Tonnage Index</a></td>
<td>-1.6%</td>
<td>-1.1%</td>
<td>-1.2%</td>
<td>2.3%</td>
<td>5.9%</td>
<td>3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol"><a href="http://www.haverselect.com/dlx/INDUSTRY/@I01/@I0124/@I0124.HTM">ATA Domestic Freight Revenue Ton-Miles</a></td>
<td>--</td>
<td>5.0%</td>
<td>8.0%</td>
<td>-0.4%</td>
<td>5.2%</td>
<td>1.2%</td>
</tr>
</tbody>
</table>
Strong Increases in Wages in Estonia and Lithuania: Improved Confidence in Slovenia and Slovakia 
by <a href="/comment/Curley.html">Louise Curley</a> August 28, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060828d.jpg" width="353">
Estonia and Lithuania reported that average monthly wages in the second quarter were 14.96% and 14.12%, respectively, above the second quarter of 2005. Wage growth in Lithuania has been accelerating and this was the highest year-to-year increase to date.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060828f.jpg" width="353"> Wage growth in Estonia, on the other hand, had decelerated from 14.63% in the second quarter of 2001 to 7.26% in the second quarter of 2004, since then it has accelerated. The trends of wage growth in the two countries are shown in the first chart. To get some idea of the relative level of wages in the two countries we converted the wages in local currency into wages in euros. There are 15.646 Estonian Kroon in one Euro and 3.452 Lithuanian Litas in one Euro. In terms of euros the average monthly wage level in the second quarter of this year was 440 euros for Lithuania and 609.euros for Estonia.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060828e.jpg" width="353">
Two other emerging countries of Europe, Slovenia and Slovakia reported the results of recent business surveys. The results are the excess of those who believe conditions will improve over those who believe conditions will worsen. Those participating in Slovakia&#39;s Industry Confidence Survey have generally shown an excess of optimists over pessimists, while those participating in Slovenia&#39;s Combined Confidence Indicator have had an excess of pessimists until November, 2005. Since then there has been an increasing excess of optimists as can be seen in the second chart. The disparity between the two surveys may be due to the fact that the Combined Confidence Indicator includes the opinions of consumers who until recently have been pessimistic whereas Slovakia&#39;s Industry Confidence Survey does not. In the third chart, we have plotted the Slovenia&#39;s Combined Confidence Indicator with the Consumer Component. It is clear that the consumer has had a negative effect on the combined index until recently. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"></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&nbsp;%</th>
<th scope="col">2004 %</th>
<th scope="col">2003 %</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;Monthly Wage NAS</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Estonia (Kroon)</td>
<td>9531</td>
<td>8591</td>
<td>8291</td>
<td>2.96</td>
<td>14.96</td>
<td>11.94</td>
<td>7.71</td>
<td>9.64</td>
</tr>
<tr class="odd">
<td class="firstcol">Estonia (Euro</td>
<td>609</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Lithuania (Litas)</td>
<td>1519.7</td>
<td>14370</td>
<td>1331.5</td>
<td>5.76</td>
<td>14.13</td>
<td>10.02</td>
<td>5.71</td>
<td>4.41</td>
</tr>
<tr class="odd">
<td class="firstcol">Lithuania&nbsp; (Euro)</td>
<td>440</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol"></td>
<td>Aug 06</td>
<td>Jul 06</td>
<td>Aug 05</td>
<td>Q/Q Dif</td>
<td>Y/Y Dif</td>
<td>2005 Dif</td>
<td>2004 Dif</td>
<td>2003 Dif</td>
</tr>
<tr class="odd">
<td class="firstcol">Measures of Confidence</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Slovakia Business Survey % Bal</td>
<td>10.7</td>
<td>9.7</td>
<td>-1.3</td>
<td>1.0</td>
<td>12.0</td>
<td>4.6</td>
<td>6.5</td>
<td>4.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Slovenia Combined Sentiment Indicator % Bal</td>
<td>6</td>
<td>7</td>
<td>-1</td>
<td>-1</td>
<td>7</td>
<td>-1</td>
<td>-1</td>
<td>-5</td>
</tr>
<tr>
<td class="firstcol">Slovenia Consumer</td>
<td>-14</td>
<td>-13</td>
<td>-20</td>
<td>-1</td>
<td>6</td>
<td>-19</td>
<td>-19</td>
<td>-20</td>
</tr>
</tbody>
</table>
</body>
</html>

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

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

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

Cost of transporting crude oil has soared to series high

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

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

Is recent drop in sentiment signaling softer growth ahead?

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

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

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

Accelerating positive economic surprises in the G10 are boosting the global economy

Considerably more monetary ease expected from US and UK as Japan tightens

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

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Andrew Cates

**Energy shock lifts inflation, trims growth**
The IMF’s latest WEO revisions for 2026 broadly reflect the classic stagflationary impact of the recent Middle East energy shock, with growth downgraded and inflation revised higher across most major economies. Higher energy prices act as a tax on real incomes while simultaneously pushing up costs. That said, the picture is not uniform: a number of economies—notably the US, China and India—have seen growth upgrades, reflecting stronger-than-expected momentum so far in 2026. By contrast, the UK stands out at the stagflationary extreme, combining one of the largest growth downgrades with a relatively strong inflation uplift—consistent with its weaker underlying momentum, greater energy sensitivity and more persistent domestic inflation dynamics. More broadly, while the global revisions remain modest—pointing to resilience in activity—the message is that disinflation is no longer a smooth glide back to target but increasingly contingent on energy prices and geopolitical developments.

260423Z1.jpg

**Markets largely shrug off rising economic pessimism**
Notwithstanding a more downbeat assessment from economists—including the IMF’s stagflationary tilt to the outlook—there has been remarkably little follow-through into financial markets. Measures of systemic stress in both the US and UK remain low by historical standards, suggesting that investors are, for now, largely looking through the Middle East conflict. There are several possible explanations: corporate profits remain resilient, the AI-driven investment narrative continues to dominate market thinking, and markets may be assuming that any energy shock will be temporary and contained. In effect, investors appear to be pricing a benign baseline in which geopolitical risks do not materially disrupt growth, inflation expectations or policy. The UK is a partial exception, with a somewhat more visible uptick in stress, which aligns more closely with the IMF’s more challenging growth-inflation trade-off and the economy’s greater sensitivity to energy prices.

260423Z2.jpg

**Volatility falls despite deteriorating growth surprises**
Market optimism is also increasingly at odds with the incoming data flow. Typically, equity volatility declines when growth surprises are positive and inflation surprises are benign. However, the recent pattern has broken that relationship. Growth surprises across the G10 have turned increasingly negative (our series is inverted in the chart below), yet volatility has continued to fall. In other words, markets are becoming less sensitive to weakening macro data, continuing to price a benign outlook even as the data deteriorate. This divergence reinforces the broader theme: investors are, for now, looking through both geopolitical risks and softer economic momentum, placing greater weight on resilience in earnings, the AI-driven narrative and the assumption that policy will remain supportive.

260423Z3.jpg

**Inflation Nowcasts Have Jumped**
Incoming data suggest that headline inflation has moved higher in recent weeks, broadly in line with expectations given the rise in energy prices following the Middle East shock. Nowcasts for CPI across the major economies show a clear rebound in March and April from the lows seen at the start of 2026, with the move occurring in a relatively synchronised fashion. This reinforces the view that the recent pickup in inflation is being driven primarily by a common external factor—energy.

260423Z4.jpg

**Energy shock not yet feeding into underlying inflation**
However, the detailed breakdown of March inflation outcomes suggests that this remains, for now, a largely headline-driven phenomenon. While headline CPI prints were firm across most economies, core inflation—stripping out energy and food—was more subdued and in some cases weaker. This indicates that there has been very limited pass-through from higher energy prices into broader goods and services inflation at this early stage. In other words, the shock is still being absorbed rather than propagated. That distinction is critical for policy and markets alike: as long as second-round effects remain contained, central banks may be able to look through the near-term rise in inflation, even as headline rates move higher.

260423Z5.jpg

**Inflation Expectations Rising as Growth Sentiment Falters**
It remains early days, and much will hinge on how inflation expectations evolve from here. The latest ZEW survey for Germany already conveys the hallmarks of a classic stagflationary shock, with macroeconomic expectations weakening even as inflation expectations have ratcheted sharply higher. This shift is important: while the recent rise in headline inflation has so far shown limited pass-through into core, a sustained increase in expectations would raise the risk of second-round effects and make the inflation process more persistent. In that sense, the ZEW data highlight the key fault line in the current environment—whether the energy-driven shock remains contained, or begins to embed itself more broadly through expectations and pricing behaviour.

260423Z6.jpg

Financial markets have remained notably calm in recent weeks despite rising geopolitical tensions in the Middle East, a more downbeat macroeconomic narrative and elevated uncertainty. Measures of financial stress and volatility remain low, and equity markets continue to look through both the conflict and softer data. That resilience sits alongside a more nuanced macro backdrop. The IMF’s latest WEO revisions point to a classic stagflationary energy shock—growth downgraded and inflation revised higher—although the global impact remains modest and uneven, with some economies still benefiting from stronger momentum (chart 1). At the same time, market pricing appears increasingly detached from the data flow, with volatility declining even as growth surprises have turned more negative relative to inflation (charts 2 and 3). Incoming inflation data reinforce the idea of a largely headline-driven shock, with nowcasts rising in line with higher energy prices but only limited pass-through into core inflation so far (charts 4 and 5). However, it remains early days. Survey evidence, such as the latest ZEW release, suggests that inflation expectations may already be responding in a more concerning way, with a marked rise alongside weakening growth sentiment (chart 6). Taken together, the key question for markets is whether this remains a contained, energy-driven shock that can be looked through—or whether it begins to embed more persistently via expectations, forcing a reassessment of the currently benign outlook.

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/44A12ktUaoJGHZG7pEVcul?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: Risks Build, Markets Shrug

Robert Brusca

260424E.jpg

The onset of the war in Iran appears to have hit the German economy extremely hard as the Ifo survey shows very substantial and broad-based decline across its survey in April. The Ifo survey features readings for five sectors as well as an aggregate reading, and it surveys them for climate, current conditions, and expectations. The decline in the Ifo survey is present for all three concepts and across all five sectors, marking the weakening in April as a highly significant and extremely disturbing development. Only manufacturing in the current conditions survey escapes a month-to-month decline.

**The Ifo sequences**: The **climate** reading fell both overall and across each of the five sectors. **Current conditions** declined for the overall and for four of the five sectors, with manufacturing the sole exception. **Expectations** declined for the overall and for all sectors. Several of the sector declines were for a very substantial magnitude, especially when compared to historic changes in these indexes.

**Monthly changes in readings—severe broad deterioration**
The month-to-month change in the climate reading has weakened more month-to-month 19% of the time. That overall result, however, is boosted by manufacturing where the monthly change has been weaker 35% of the time (on data back to 2011). However, all other sectors have seen climate weaker m/m only 2.3% to 6.3% of the time! The current situation readings weakened, with the headline weakening more m/m 11% of the time. This was boosted by manufacturing, the only sector that improved on the month; its ranking on change was in its 85th percentile—quite good and truly stand-alone good news. The other current changes by sector ranged from construction being weaker 1.7% of the time, to retailing that has been weaker about 30% of the time in terms of m/m changes. Expectation changes were uniformly terrible, with the headline drop weaker only 6.3% of the time and sector change month-to-month weaker between 9% and 1.7% of the time. The monthly weakening was uniform and substantial. I document it with these calculations, but you can also see it on the chart above.

**Climate**: The bottom line is that the all-sector index for climate fell to -20.3 in April from -18 in March, placing it at a 10.5 percentile standing on data since 1993. The sector ranking is the highest for construction with a 42.2 percentile standing and the weakness for services at a 1.1 percentile standing—weaker than the table reading nearly 99% of the time. In terms of percentile standing levels or monthly changes, conditions are closing in on grim.

**Current conditions**: Current conditions saw the all-sector index slip to -5.3 in April from -2.4 in March. The headline ranking stands at a 9.8 percentile mark, making it—like the climate reading—weaker than its current reading only about 10% of the time. The strongest reading under current conditions is for construction which has a 60.6 percentile standing; it is the only ranking in the table above its historic median. Manufacturing, the only sector in the survey that improved month-to-month, has a 22.5 percentile standing, while services record the weakest percentile standing under current conditions, at an 8.4 percentile standing.

**Expectations:** The all-sector index for expectations fell to -25.3 in April from -19.9 in March, placing it at a 6.3 percentile standing. The percentile standings across sectors range from a high of 9.5% for manufacturing to a low of 1.5% for retailing. Up until earlier this year, the Ifo was showing signs of improvement; however, all of that has simply collapsed in the last month. Weakness is across economic concepts and sectors, as documented above. For reference, the table also gives a separate set of rankings on where the various indexes stand since the invasion of Ukraine, since that was another marked event that drove the index, that had been improving after Covid, down to lower levels.  Ranked even on this reduced scale looking at conditions only since the invasion of Ukraine, when conditions have generally been weaker, the current rankings across the Ifo survey remained extremely weak. This is a very disturbing survey for the German economy.

260424.jpg

Germany

German Ifo Plunges Everywhere

Sandy Batten

260423F8.jpg

260423G8.jpg

The National Activity Index published by the Federal Reserve Bank of Chicago (CFNAI) slipped to -0.20 in March from an upwardly revised +0.03 in February (previously (-0.11). This is the lowest monthly reading since last November. Smoothing out the monthly volatility, the index's three-month moving average (CFNAI-MA3) declined to -0.03 in March from an upwardly revised +0.03 in February (previously -0.01).

This index is expressed in standard deviation units from zero (with a value of zero defined as trend real GDP growth). Research at the FRB Chicago indicates that readings on the 3-month average of -0.70 or below are consistent with the economy being in a recession. Therefore, even though the March reading on the 3-month average was negative, it indicates that the US economy is still growing, just slightly slower than trend, and is well away from recessionary conditions. The 3-month average would be much deeper in negative territory if the economy was at risk of contracting.

The National Activity Index is a composite of 85 economic indicators, grouped into four major categories: production and income; employment, unemployment, and hours worked; personal consumption and housing; sales, orders, and inventories. Three of the four broad categories of indicators used to construct the index decreased from February, and three categories made negative contributions in March. Production-related indicators contributed –0.20 to the CFNAI in March, down from +0.13 in February. The sales, orders, and inventories category's contribution to the CFNAI was –0.01 in March, down from +0.05 in February. Employment-related indicators contributed +0.02 to the CFNAI in March, up from –0.15 in February. The personal consumption and housing category's contribution to the CFNAI was –0.01 in March, down from a neutral value in February.

The CFNAI Diffusion Index, which measures the breadth of the change in the component series and is also a three-month moving average, increased to –0.04 in March from –0.08 in February. This is the highest reading since February 2025. A reading of zero indicates that all of the indicators are growing at their long-term average. If all of the underlying indicators in a given month are below their long-run averages, the diffusion index will equal -1. If all of the indicators are above their long-run averages, it will equal +1. Thirty-four of the 85 individual indicators made positive contributions to the CFNAI in March, while 51 made negative contributions. Forty-three indicators improved from February to March, while 40 indicators deteriorated and two were unchanged. Of the indicators that improved, 16 made negative contributions.

These figures are available in Haver's **SURVEYS** database.

- The monthly reading fell to -0.20 in March from an upwardly revised +0.03 in February.
- The three-month average slipped from +0.03 to -0.03.
- Despite the slip in March, the index points to near-trend economic growth and is well above recession territory.

Chicago Fed National Activity Index Slipped in March

Kathleen Stephansen, CBE

260423A1.jpg

260423B1.jpg

Initial claims for unemployment insurance rose by 6,000 to 214,000 in the week ending April 18, from 208,000 in the week ending April 11, revised from 207,000. The four-week average rose 750 to 210,750 in the week ending April 18, from 210,000 the April 11 week, revised from 209,750. The Action Economics/Haver Analytics Survey looked for 210,000 claims to have been filed.

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—rose by 12,000 to 1.821 million in the week ending April 11, from 1.809 million in the week ending April 4. The four-week moving average rose to 1.812 million in the latest week from 1.811 million in the March 28 week. The insured unemployment rate remained at 1.2% in the week of April 11. It has remained at that level since the week of November 29, 2025.

The insured unemployment rate varied greatly across individual states and territories. In the week ending April 4, the highest unemployment rates were in New Jersey (2.51%), Massachusetts (2.37%), Rhode Island (2.31%), Washington (2.25%), Minnesota (2.11%), and California (2.02%). The lowest rates were in Florida (0.30%), Louisiana (0.31%), Arkansas (0.35%), Alabama (0.36%), North Carolina (0.39%), Tennessee (0.46%), South Dakota (0.47%), Kansas and Virginia (both 0.49%). Rates in other notable states include New York (1.92%), Illinois (1.82%), Pennsylvania (1.52%), and Texas (1.04%). These state data are not seasonally adjusted.

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

260423C1.jpg

260423D1.jpg

- New claims rose by 6,000 to 214,000.
- Continuing claims rose by 12,000 to 1.821 million.
- The insured unemployment rate remained at 1.2%.


U.S. Initial Unemployment Claims Rose in the Week of April 18

260423E.jpg

**Manufacturing looks strong while service sectors weaken**
S&P's April flash PMI readings show some very mixed results. For the United States, India, Australia, and the United Kingdom, there is a strengthening in the readings month-to-month for services, manufacturing, and the composite.

For Japan, France, and the European Monetary Union as a whole, there is improvement in the manufacturing sector on the month but a weaker services reading and a weaker composite overall.

Germany is the only responding area in the table showing weakness all around—in all three sectors—a weaker composite, a weaker manufacturing sector, and a weaker services sector in April. For Germany, this follows a weaker composite and service sector in March as well.

Most reporters—France, the United Kingdom, Japan, Australia, and India—had weaker readings for all three metrics in March: the composite, services, and manufacturing. The March exceptions were the United States, Germany, and the European Monetary Union; in each case, the exception was that the manufacturing sector improved month-to-month, while the composite and services both weakened.

This has been a period of weakening—in March and April—since the war in Iran began. The 48 separate sector readings produced 30 readings that were weaker month-to-month in March and April. Among the 16 composite readings, 12 reported weaker conditions month-to-month. In March, the immediate aftermath of the outbreak of war brought instantaneous step backs across the PMI readings, while April, responding to at least a military success in the area, has shown a significant bounce back that is now more common than further weakness.

The sequential data over three months, six months, and 12 months are based only on completed data; therefore, they're up to date through March. On that basis, we have triple sector weakness in the U.S., India, and Australia, with only Japan and the United Kingdom showing triple-sector improvement over three months. However, if we look at six months compared to 12 months, we have triple sector strength in the Monetary Union, Germany, France, the United Kingdom, Japan, and Australia. India and the U.S. each show only one stronger sector over that comparison—services in India’s case and manufacturing in the U.S. case.

**Ranking Peculiarity**
The ranking data take the current flash data and compare them to the history of observations back to January 2022. What is quite surprising is that, on that timeline, the manufacturing sectors of all the countries in the table—except for Australia and India—show manufacturing standings in their respective 80th to 90th percentiles. Meanwhile, services standings are typically in the 30th percentile or lower.

**Odd Impact of War**
If the war in Iran has an impact on something, we would expect that to fall on the goods trade sector. We would expect this to have an impact on manufacturing although it's the opposite thing that's happening. Manufacturing is showing a revival, while services sectors are showing weaker performance across these countries generally. India is an interesting case, with manufacturing only in its 32nd percentile; however, India’s raw diffusion reading for manufacturing is the strongest raw diffusion reading in the table. What India's ranking is telling us is that India had been extremely strong over the period since 2022, and now compared to that past standard, it's relatively weaker. However, it's still strong in absolute terms, showing a great deal of strength based on its pure diffusion value, just not in comparison to historic performance.

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**Next?**
At this point, it's not clear to me at least what these PMI data are telling us since the strength in manufacturing is a curiosity as is the weakness in the services sector. You see these two phenomena displayed in the chart above, in the case of the European Monetary Union’s flash readings as well.

**War breeds negative effects**
It's not a surprise that war would take some toll on consumer confidence or that it would be reflected in the services sector. However, seeing the kind of weakness being portrayed now in services against the strength in manufacturing is simply a bit hard to rationalize and understand. So, I think we're going to have to keep an eye on these readings as well as other readings in the months ahead to try to discern how global events, the war, conditions in the Strait of Hormuz, inflation currency shifts, and central bank policy are playing out across these various countries. None of what is happening is obvious to me. Japan clearly continues to benefit from a weak yen as its manufacturing sector is flying high, at its best reading since January 2022.

Economy in Brief

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US GDP Growth Revised Up, Profit Growth Slowed

Japanese Household's Living Expenditures

Weekly Chain Store Sales Up, Gasoline Prices Down

Consumer Confidence Fell Sharply

Consumer Confidence Fell Sharply

Strong Increases in Wages in Estonia and Lithuania: Improved Confidence in Slovenia and Slovakia

Railcar Loadings, Truck Tonnage & Air Freight

Railcar Loadings, Truck Tonnage & Air Freight