Tom Moeller

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030808a.jpg" width="353">
The Federal Reserve indicated that consumer credit outstanding (which excludes mortgages) fell $0.4B (-0.2% AR) in June. Consensus expectations had been for a $6.5B rise. The gain in May was revised up due to raised usage of revolving credit. 
During the first six months of this year, consumer credit usage rose at a 4.1% annual rate.
Nonrevolving credit (which includes auto loans) fell at a 2.2% annual rate in June following a 6.7% gain in May. Year to date, nonrevolving credit usage is up at a 3.8% rate. 
Revolving credit rose at a modest 1.1% annual rate in June. That followed a 4.8% May gain.
The more comprehensive flow of funds figures published by the Federal Reserve indicated that through 1Q03, credit market debt owed by the household sector soared 10.3% y/y. That gain was led by a 13.0% y/y gain in outstanding liabilities on homes.
Analysis from the Federal Reserve Bank of San Francisco titled &quot;Financial Development, Productivity, and Economic Growth&quot; can be found <a href="http://www.frbsf.org/publications/economics/letter/2003/el2003-18.html">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E103/@E10308/@E10308.HTM">Consumer Credit Outstanding</a></th>
<th scope="col">June m/m</th>
<th scope="col">May m/m</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>$-0.4B</td>
<td>$8.2B</td>
<td>3.0%</td>
<td>3.6%</td>
<td>6.9%</td>
<td>10.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revolving</td>
<td>$-1.3B</td>
<td>$4.0B</td>
<td>1.8%</td>
<td>1.5%</td>
<td>5.1%</td>
<td>11.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonrevolving</td>
<td>$0.9B</td>
<td>$4.1B</td>
<td>3.8%</td>
<td>5.0%</td>
<td>8.2%</td>
<td>9.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

The Federal Reserve indicated that consumer credit outstanding (which excludes mortgages) fell $0.4B (-0.2% AR) in June. Consensus expectations had been for a $6.5B rise. The gain in May was revised up due to raised usage of revolving [...]

Consumer Credit Usage Fell

Carol Stone, CBE

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030807c.jpg" width="353">
The inflation performance among the &quot;transitional&quot; economies of Central and Eastern Europe varies greatly, as indicated by July CPI data released Thursday for Estonia and Slovakia. Year-on-year inflation in Estonia appears at least comparably low to major industrial countries, showing a mere 0.8% rise over July 2002, the third month in a row below 1%. This looks very much like the recent trend in Germany, which had a 0.9% rise in the same period.
The Slovak Republic, however, continues with an erratic pattern, with an 8.7% year-on-year CPI advance in July. This is evidently significantly accounted for by utility cost increases last January. More market-oriented price categories, such as clothing and furniture, have been experiencing lower inflation, lately in a range of 2%-3%. Thus, the varying inflation performance among these countries, at least this year, may reflect differing economic policies. In fact, business operating costs appear to be more similar; unit labor costs in both Estonia and Slovakia have run at a 2% - 3% pace over the last several quarters.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">CPI</th>
<th scope="col">&nbsp;July 2003</th>
<th scope="col">June 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">(2000=100)</td>
<td colspan="2">Y/Y% Changes</td>
<td colspan="3">Dec/Dec % Changes</td>
</tr>
<tr>
<td class="firstcol">Estonia</td>
<td>0.81</td>
<td>0.33</td>
<td>2.68</td>
<td>4.20</td>
<td>5.05</td>
</tr>
<tr class="odd">
<td class="firstcol">Slovakia</td>
<td>8.68</td>
<td>8.47</td>
<td>3.38</td>
<td>6.40</td>
<td>8.34</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Housing, Water, Electricity, Etc.</td>
<td>17.88</td>
<td>17.63</td>
<td>2.56</td>
<td>13.10</td>
<td>N.A.</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Clothing</td>
<td>2.50</td>
<td>2.88</td>
<td>3.10</td>
<td>3.30</td>
<td>N.A.</td>
</tr>
</tbody>
</table>
</body>
</html>

The inflation performance among the "transitional" economies of Central and Eastern Europe varies greatly, as indicated by July CPI data released Thursday for Estonia and Slovakia. Year-on-year inflation in Estonia appears at least [...]

CPI Trends Differ in Emerging European Nations

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030807a.jpg" width="353">
Nonfarm labor productivity growth last quarter surged 5.7%, nearly equaling the barn-burner 5.9% growth in 2Q 2002. Consensus expectations had been for 5.0% growth. Prior years&#39; figures were revised up.
The surge in productivity dropped unit labor costs at a 2.1% rate. It was the sixth decline in unit labor costs over the last eight quarters. During that period unit labor costs fell 3.3%. Compensation rose at a moderate 3.5% rate.
Productivity surged as a 3.4% gain in output was accompanied by a 2.2% decline in hours of all persons (employment times hours). Since peaking in three years ago, hours worked have fallen 5.5%.
Manufacturing sector productivity growth in 2Q surged 4.2% (4.8% y/y). That growth was accompanied by a 1.2% (0.7% y/y) gain in unit labor costs as compensation rose a strong 5.4% (5.6% y/y).
Research from the Federal Reserve Bank of San Francisco titled &quot;Productivity Shocks and the Unemployment Rate&quot; can be found <a href="http://www.frbsf.org/publications/economics/review/2003/article2.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/@EC/@EC02/@EC02.HTM">Nonfarm Business Sector</a> (SAAR)</th>
<th scope="col">2Q &#39;03 Prelim</th>
<th scope="col">1Q &#39;03</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Output per Hour</td>
<td>5.7%</td>
<td>2.1%</td>
<td>3.8%</td>
<td>5.4%</td>
<td>1.9%</td>
<td>3.0%</td>
</tr>
<tr>
<td class="firstcol">Compensation</td>
<td>3.5%</td>
<td>4.1%</td>
<td>2.8%</td>
<td>2.8%</td>
<td>3.6%</td>
<td>7.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor Costs</td>
<td>-2.1%</td>
<td>2.0%</td>
<td>-1.0%</td>
<td>-2.4%</td>
<td>1.7%</td>
<td>3.9%</td>
</tr>
</tbody>
</table>
Initial Claims for Jobless Insurance Remained Below 400,000 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 7, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030807b.jpg" width="353">
Initial claims for unemployment insurance remained below 400,000 for the third consecutive period. Claims fell last week by 3,000 to 390,000 but prior weeks&#39; were revised up slightly. Consensus expectations had been for claims of 395,000.
The four-week moving average of initial claims dropped below 400,000 for the first time since late-February to 397,250 (+3.5% y/y).
Continuing claims for unemployment insurance rose 72,000 (2.0%). The gain followed a similar moderate gain the prior week but nevertheless left the claimant level down 2.4% from the late-June peak.
The insured rate of unemployment was stable at 2.9%.
Research from the Federal Reserve Bank of Kansas City titled &quot;A Closer Look at Jobless Recoveries&quot; can be found <a href="http://www.kc.frb.org/Publicat/econrev/Pdf/2q03schr.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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">8/02/03</th>
<th scope="col">7/26/03</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>390.0</td>
<td>393.0</td>
<td>1.0%</td>
<td>404.3</td>
<td>406.0</td>
<td>299.7</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,691</td>
<td>5.2%</td>
<td>3,575</td>
<td>3,022</td>
<td>2,114</td>
</tr>
</tbody>
</table>
</body>
</html>

Nonfarm labor productivity growth last quarter surged 5.7%, nearly equaling the barn-burner 5.9% growth in 2Q 2002. Consensus expectations had been for 5.0% growth. Prior years' figures were revised up. The surge in productivity [...]

U.S. Productivity Surged in 2nd Quarter

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030806b.jpg" width="353">
Two important measures of economic activity in Germany showed improvement in their latest reports.
Factory orders rose 2.1% in June, reversing May&#146;s 2.6% decline. Weakness in the domestic economy persists as local orders continued to decline, but foreign orders, particularly for capital goods, rose markedly in June. All these orders are too erratic to make much of one month&#146;s gain, but the year-on-year pattern at least suggests some stabilization; that rate of decline has held at -3.5 for three straight months. That&#146;s still not healthy, but the situation appears to have stopped worsening.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">2000=100&nbsp;(% Change)</th>
<th scope="col">&nbsp;June 2003</th>
<th scope="col">May 2003</th>
<th scope="col">June 2003&nbsp;</th>
Dec/Dec
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>(M/M)</td>
<td>(M/M)</td>
<td>(Y/Y)</td>
<td>2002</td>
<td>2001</td>
<td>2000</td>
</tr>
<tr>
<td class="firstcol">Total Factory Orders</td>
<td>2.1</td>
<td>-2.6</td>
<td>-3.5</td>
<td>-0.5</td>
<td>-9.8</td>
<td>9.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Domestic</td>
<td>-0.9</td>
<td>-0.2</td>
<td>-4.3</td>
<td>0.8</td>
<td>-8.5</td>
<td>2.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Foreign</td>
<td>5.5</td>
<td>-5.4</td>
<td>-2.6</td>
<td>0.1</td>
<td>-11.6</td>
<td>17.8</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>


<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030806c.jpg" width="353">
Similarly, employment in Germany appears to have stopped falling, although no recovery appears to be under way yet. In May (latest available), the number of people employed edged down just 34,000, the smallest monthly decrease since July 2002. The average decline in the most recent 12 months has been 55,000. Data on unemployment, published on a more current schedule, show stability in the unemployment rate at 10.6% for the three months to July after a recent peak of 10.7% in April. The number of people unemployed was 4.41 million in July, down almost 50,000 from the April high. Labor market conditions appear to be staging a gradual recovery. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Seasonally Adjusted</th>
<th scope="col">July 2003</th>
<th scope="col">June 2003</th>
<th scope="col"> May 2003</th>
<th scope="col">April 2003</th>
Monthly Average &nbsp;Change
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td>&nbsp;</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr>
<td class="firstcol">Employment (000s)</td>
<td>N.A.</td>
<td>N.A.</td>
<td>-34</td>
<td>-38</td>
<td>-42</td>
<td>-6</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployed (000s)</td>
<td>4,408</td>
<td>4,401</td>
<td>4,437</td>
<td>4,449</td>
<td>4,073</td>
<td>3,860</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>10.6</td>
<td>10.6</td>
<td>10.6</td>
<td>10.7</td>
<td>9.8</td>
<td>9.4</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td>&nbsp;</td>
<td></td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body>
</html>

Two important measures of economic activity in Germany showed improvement in their latest reports. Factory orders rose 2.1% in June, reversing Mays 2.6% decline. Weakness in the domestic economy persists as local orders continued to [...]

Germany Factory Orders, Employment Stabilize After Declines

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030806a.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association ticked up a slight 1.1% last week following steep declines in five of the prior eight weeks. Those declines pulled applications down 47% from the peak reached in late May.
The slight rise in total mortgage applications reflected a 6.9% w/w rise in purchase applications. Applications for purchase were off just slightly from the record high set late in May.
During the last ten years there has been a 54% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
Applications to refinance continued to reflect the effects of higher interest rates and fell 2.4% last week. That decline added to a 32.9% decline the prior week and lowered refinancings 59.4% versus the late May peak.
Interest rates on a conventional 30-Year mortgage jumped 44 basis points w/w to 6.64%. That was versus a low for 30-Year financing of 5.31% in the second week of June. The effective rate on a 15-year mortgage surged as well to 6.07% versus the low of 4.76%.
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 at <a href="http://www.mbaa.org/">www.mbaa.org.</a>

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<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">8/01/03</th>
<th scope="col">7/25/03</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>983.2</td>
<td>972.4</td>
<td>799.7</td>
<td>625.6</td>
<td>322.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>456.4</td>
<td>426.9</td>
<td>354.7</td>
<td>304.9</td>
<td>302.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>4,047.5</td>
<td>4,145.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
<td>438.8</td>
</tr>
</tbody>
</table>
</body>
</html>

The index of mortgage applications compiled by the Mortgage Bankers Association ticked up a slight 1.1% last week following steep declines in five of the prior eight weeks. Those declines pulled applications down 47% from the peak [...]

Mortgage Applications Tick Higher Following Sharp Declines

Louise Curley

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030805d.jpg" width="353">
The service industry in the Euro Zone expanded in July for the first time this year. The diffusion index for the service industry based on a survey of purchasing managers by NTC Research in Henley-on-Thames, England for Reuters Group Plc rose 4.34% to 50.24 in July from 48.15 in June. A reading above 50 indicates expansion. A companion index for the manufacturing industry, released earlier, was 48.04 in July, up 2.98% from June, suggesting that the manufacturing industry, while improving, is still in the contracting stage.
Among the countries of the Euro Zone for which there are data, all except Germany were reported to be in the 50+ expansion stage. Italy showed the strongest gain in the month--5.43%--and was even stronger than a year ago. In France there was a 4.94% gain but an 8.37% decline from July, 2002. Ireland posted a 3.37% gain in July and was only 0.19% below July of last year. Spain showed a small decline in July but was still above 50 and only 1.34% below, July, 2002. Germany&#39;s service industry remained in the contracting phase, but rose 4.45% in July.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">(50+ = Expansion)</th>
<th scope="col">July 2003</th>
<th scope="col">&nbsp;June 2003</th>
<th scope="col">July 2002</th>
<th scope="col">M/M(%)</th>
<th scope="col">Y/Y(%) </th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">PMI Mfg.</td>
<td>48.04</td>
<td>46.65</td>
<td>51.59</td>
<td>2.98</td>
<td>-6.88</td>
<td>49.78</td>
<td>47.78</td>
<td>57.40</td>
</tr>
<tr>
<td class="firstcol">PMI Services</td>
<td>50.24</td>
<td>48.15</td>
<td>52.34</td>
<td>4.34</td>
<td>-4.01</td>
<td>51.58</td>
<td>51.63</td>
<td>59.78</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Germany</td>
<td>48.14</td>
<td>46.09</td>
<td>50.20</td>
<td>4.45</td>
<td>-4.10</td>
<td>48.62</td>
<td>48.87</td>
<td>56.66</td>
</tr>
<tr>
<td class="firstcol">&nbsp; France</td>
<td>51.79</td>
<td>49.35</td>
<td>56.52</td>
<td>4.94</td>
<td>-8.37</td>
<td>54.71</td>
<td>54.26</td>
<td>64.19</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Italy</td>
<td>52.04</td>
<td>49.36</td>
<td>51.09</td>
<td>5.43</td>
<td>1.86</td>
<td>52.97</td>
<td>53.91</td>
<td>59.68</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Ireland</td>
<td>51.87</td>
<td>50.18</td>
<td>51.97</td>
<td>3.37</td>
<td>-0.19</td>
<td>55.29</td>
<td>51.88</td>
<td>65.07</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Spain</td>
<td>51.5</td>
<td>51.66</td>
<td>52.20</td>
<td>-0.31.</td>
<td>-1.34</td>
<td>52.57</td>
<td>51.64</td>
<td>60.72</td>
</tr>
</tbody>
</table>
</body>
</html>

The service industry in the Euro Zone expanded in July for the first time this year. The diffusion index for the service industry based on a survey of purchasing managers by NTC Research in Henley-on-Thames, England for Reuters Group [...]

Services in the Euro-zone Expand While Manufacturing is Still in Contracting Stage

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>

 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030805a.jpg" width="353">
The Institute for Supply Management reported that its July index of activity in the nonmanufacturing sector rose to the highest level in the series brief seven year history. The index rose to 65.1 versus Consensus expectations for a rise to 58.0.
The 4.5 point m/m rise followed a 6.1 point gain in June and over the last four months the activity index has jumped 17.2 points.
During the last five years, there has been a 66% correlation between the level of the Business Activity Index from the ISM nonmanufacturing survey and quarterly growth in real GDP in the service sector plus structures.
The seasonally adjusted new orders index jumped to a record high 66.9. The employment index also improved to 50.7, the third month above 50 since early 2001. During the last five years there has been a 68% correlation between the level of the ISM nonmanufacturing employment index and the m/m change in payroll employment in the service producing and construction industries.
Business activity for the nonmanufacturing sector is a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index weights the components.
The seasonally adjusted prices index fell to 50.6 versus 53.9 during all of last year.
ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The nonmanufacturing survey dates only to July 1997, therefore its seasonal adjustment should be viewed tentatively. 

<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/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Business Activity Index</td>
<td>65.1</td>
<td>60.6</td>
<td>53.7</td>
<td>55.1</td>
<td>49.0</td>
<td>59.3</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>50.6</td>
<td>51.4</td>
<td>59.1</td>
<td>53.9</td>
<td>51.6</td>
<td>63.5</td>
</tr>
</tbody>
</table>
Challenger Layoffs Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 5, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030805c.jpg" width="353">
According to Challenger, Gray &amp; Christmas, announced job cuts rose last month from very depressed levels in May and June. Layoff announcements rose 42.5% in July versus June.
The three month moving average of job cut announcements collapsed to its lowest level since November 2000.
Job cut announcements differ from layoffs in that many are achieved through attrition or just never occur.
During the last nine years there has been a 72% correlation between the y/y change in announced job cuts and the y/y percent change in initial claims for jobless insurance. Like claims, job cut announcements indicate little about new hiring activity.
The increase in job cut announcements m/m was dominated by huge gains in a few industries including aerospace, consumer goods, government and services. Elsewhere announcements were mixed.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>85,117</td>
<td>59,715</td>
<td>5.1%</td>
<td>1,431,052</td>
<td>1,956,876</td>
</tr>
</tbody>
</table>
Chain Store Sales Rose 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 5, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030805b.jpg" width="353">
Chain store sales rose 0.8% last week, rising for the fourth week in the last five according to the BTM-UBSW survey.
For all of July sales rose 1.4% from the June average which was barely changed from May.
During the last five years there has been a 62% correlation between the year-to-year percent change in chain store sales and the change in nonauto retail sales less gasoline.
The BTM-UBSW retail chain-store sales index is constructed from the sales results reported by seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

<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">BTM-UBSW (SA, 1977=100)</a></th>
<th scope="col">8/2/03</th>
<th scope="col">7/26/03</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>427.7</td>
<td>424.1</td>
<td>3.0%</td>
<td>3.6%</td>
<td>2.1%</td>
<td>3.4%</td>
</tr>
</tbody>
</table>


</html>

The Institute for Supply Management reported that its July index of activity in the nonmanufacturing sector rose to the highest level in the series brief seven year history. The index rose to 65.1 versus Consensus expectations for a [...]

ISM Nonmanufacturing Index Strong

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030804b.jpg" width="353">
There has been a major realignment of currencies over the past year or so. The trade weighted US dollar against the major currencies has depreciated by more than 12% over the past year, but only 6% against a broader selection of countries. The Euro and the Canadian, Australian and New Zealand currencies have appreciated strongly against the US dollar.. Relative to the US dollar the Chinese Yuan and Japanese Yen have, on the contrary, been relatively unchanged. While in Latin America, the Brazilian Real, which had depreciated over the year, has recently strengthened against the dollar

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Currency (EOP)</th>
<th scope="col"></th>
<th scope="col"></th>
<th scope="col"></th>
<th scope="col"></th>
Appreciation/ Depreciation
<th scope="col"></th>
<th scope="col"></th>
<th scope="col"></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td>Q2/03</td>
<td>Q1/03</td>
<td>Q2/02</td>
<td>M/M</td>
<td>Y/Y</td>
<td>2002</td>
<td>2001</td>
<td>2000</td>
</tr>
<tr>
<td class="firstcol">Euro</td>
<td>Euro/US$</td>
<td>1.1502</td>
<td>1.0900</td>
<td>0.9856</td>
<td>5.52</td>
<td>16.70</td>
<td>1.0485</td>
<td>0.8801</td>
<td>0.9388</td>
</tr>
<tr class="odd">
<td class="firstcol">New Zealand</td>
<td>US$/NZ$</td>
<td>0.5866</td>
<td>0.5538</td>
<td>0.4860</td>
<td>5.92</td>
<td>20.70</td>
<td>0.5239</td>
<td>0.4161</td>
<td>0.4423</td>
</tr>
<tr>
<td class="firstcol">Australia</td>
<td>US$/A$</td>
<td>0.6713</td>
<td>0.6045</td>
<td>0.5638</td>
<td>11.05</td>
<td>19.07</td>
<td>0.5625</td>
<td>0.5117</td>
<td>0.5560</td>
</tr>
<tr class="odd">
<td class="firstcol">Canada</td>
<td>C$/US$</td>
<td>1.3556</td>
<td>1.4695</td>
<td>1.5190</td>
<td>8.40</td>
<td>12.06</td>
<td>1.1580</td>
<td>1.5925</td>
<td>1.4995</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">China</td>
<td>Yuan/US$</td>
<td>8.2771</td>
<td>8.2774</td>
<td>8.2770</td>
<td>0.00</td>
<td>0.00</td>
<td>8.2808</td>
<td>8.2776</td>
<td>8.2774</td>
</tr>
<tr>
<td class="firstcol">South Korea</td>
<td>Won/US$</td>
<td>1196.00</td>
<td>1252.00</td>
<td>1205.00</td>
<td>4.68</td>
<td>0.75</td>
<td>1186.30</td>
<td>1313.50</td>
<td>1267.00</td>
</tr>
<tr class="odd">
<td class="firstcol">Japan</td>
<td>Yen/US$</td>
<td>119.87</td>
<td>118.07</td>
<td>119.85</td>
<td>-1.50</td>
<td>-0.02</td>
<td>118.75</td>
<td>131.04</td>
<td>114.35</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Brazil</td>
<td>Real/US$</td>
<td>2.8520</td>
<td>3.332</td>
<td>2.83</td>
<td>16.83</td>
<td>-0.77</td>
<td>3.54</td>
<td>2.312</td>
<td>1.951</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Trade-Weighted Dollar</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Broad Index</td>
<td>1/97=100</td>
<td>119.67</td>
<td>123.96</td>
<td>127.33</td>
<td>-3.46</td>
<td>-6.02</td>
<td>127.19</td>
<td>126.09</td>
<td>119.93</td>
</tr>
<tr class="odd">
<td class="firstcol">Major Countries</td>
<td>3/73=100</td>
<td>90.78</td>
<td>95.11</td>
<td>103.97</td>
<td>-4.55</td>
<td>-12.69</td>
<td>102.93</td>
<td>104.30</td>
<td>98.34</td>
</tr>
</tbody>
</table>
</body>
</html>

There has been a major realignment of currencies over the past year or so. The trade weighted US dollar against the major currencies has depreciated by more than 12% over the past year, but only 6% against a broader selection of [...]

Realignment of Currencies

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

Our global data offering is unparalleled in terms of coverage, quality, and organization. We offer 290+ databases from 2500 government and private sources, a wealth of key survey and forecast data covering the world’s economies, and a robust offering of archive databases that drive machine learning for big data applications.

Optimized for precision analytics, our data is seamlessly integrated with Microsoft Office and all leading statistical packages through our DLX® software and platform independent HaverView™ website. We further offer direct database feeds, client server or cloud-based delivery, and RESTful API.


Privacy Policy

Disclaimer

Contact us

A premier time series data platform for the global strategy, research, and quant communities. 

London

Singapore

Tokyo

New York

Economy in Brief

Viewpoints

Contact Us

Our Data

Our Products

What We Do

Our Authors

About Us

Data News

Resources

Release Calendars

Training Center

Webinars

Newsletters

Download Software

For Clients

Live Updates

Winnie Tapasanun

251105A.jpg

251105B.jpg

Mortgage applications fell 1.9% w/w (+73.6% y/y) in the week ending October 31 following a 7.1% gain in the week ending October 24, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. The latest reading was the fifth w/w fall in six weeks to the index level of 332.3. Applications for loans to purchase a house declined 0.6% (+24.8% y/y) in the October 31 week, down for the fifth week in six, after a 4.5% increase in the previous week. Applications for loan refinancing dropped 2.8% (+151.4% y/y) in the October 31 week, down for the first week in three, following a 9.3% advance in the October 24 week.

The effective interest rate on a 30-year fixed-rate loan edged up to 6.48% in the week ending October 31 after declining to 6.47% in the week ending October 24; it was up from a low of 6.29% in the week of September 20, 2024 but down from a peak of 8.12% in the week of October 20, 2023. The rate on 15-year fixed-rate mortgages slipped to 5.81% in the October 31 week, the lowest since the September 12 week, after decreasing to 5.82% in the previous week; it was up from a low of 5.60% in the week of September 20, 2024 but down from a high of 7.44% in the week of October 27, 2023. The rate on 30-year jumbo loans rose 4bps to a three-week-high 6.52% in the October 31 week after declining to 6.48% in the prior week; however, it was slightly down from a low of 6.57% in the week of September 13, 2024 and below a high of 7.99% in the week of October 27, 2023. The rate on a 5-year ARM rose 4bps to 5.88% in the October 31 week, the highest since September 26 week, after rising to 5.84% in the previous week; it was above a low of 5.84% in the week of September 13, 2024 but below a high of 7.31% in the week of October 27, 2023.

The share of applications for refinancing an existing loan edged down to 57.0% of total applications in the week ending October 31 after rising to a five-week-high 57.1% in the week ending October 24; those numbers remained below a peak of 60.2% in the week of September 19. The adjustable-rate mortgage (ARM) share of activity fell to 8.7% in the October 31 week, the lowest reading since the September 26 week, after falling to 8.9% in the prior week; it was below its recent peak of 12.9% in the September 12 week and a high of 9.6% in the April 11 week but up from a low of 4.7% in the January 3 week.

The average size of a mortgage loan, up for the third week in four, increased 0.6% w/w (7.3% y/y) to $414,900 in the October 31 week, the highest level since the September 19 week, reversing a 0.6% drop to $412,300 in the October 24 week. The average size of a purchase loan fell 0.4% (-2.3% y/y) to $435,100 in the October 31 week on top of a 0.5% decline to $436,800 in the prior week, marking the fourth weekly fall in five weeks and the lowest level since the October 10 week. The average size of a loan to refinance a mortgage rose 1.5% (34.0% y/y) to $399,700 in the October 31 week after a 0.4% decline to $393,900 in the previous week, registering the third weekly rise in four weeks and the highest level since the September 19 week.

The Mortgage Bankers Association Survey covers 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver’s **SURVEYS** database.

- Purchase applications -0.6% w/w; refinancing loan applications -2.8% w/w.
- Effective interest rate on 30-year fixed loans ticks up to 6.48% despite ongoing downward trend.
- Average loan size rebounds to the highest level since the September 19 week.

U.S. Mortgage Applications Drop 1.9% in the October 31 Week After Previous Gain

251104C0.jpg

251104D0.jpg

Retail gasoline prices for all grades slipped to $3.15 per gallon (-1.3% y/y), on average, in the week ended November 3 after rising to $3.16 in the previous week. The recent high was $3.79 in the week ending April 22, 2024. Their all-time high of $5.11 occurred in the week ending June 13, 2022. Haver Analytics seasonally adjusts the retail prices of regular grade gasoline. That price held at $3.05 last week versus $3.05 in the previous week.

The price of West Texas Intermediate crude oil rose to $60.70 per barrel (-11.2% y/y) in the week ended October 31 after improving to $59.43 per barrel in the prior week. It was the highest price in three weeks but prices remained below a recent high of $74.17 during the third week of June. The cost of crude oil peaked at $120.46 in the week of June 10, 2022. Yesterday, the price was $61.05 per barrel. The price of European Brent crude increased to $65.02 per barrel (-10.5% y/y) in the week of October 31 after rising to $63.22 in the prior week. Prices remained below a recent high of $95.61 in the week of September 29, 2023 and below a peak of $127.40 in June 2022. Yesterday, the price was $65.79 per barrel.

Natural gas prices rose to an average $3.43/mmbtu (88.5% y/y) in the week ended October 31 after rising to $3.25/mmbtu in the prior week. The rise left prices at the highest level since the second week of April and well above the low of $1.40/mmbtu in the week of March 15, 2024. Yesterday, the price was $3.37 per mmbtu.

Gasoline demand declined 4.2% y/y in the four weeks ending October 24, following a 3.6% y/y decline in the prior four weeks. Demand for all petroleum products weakened 0.9% y/y in the four weeks ending October 24, after slipping 0.1% y/y in the previous four-week period. Crude oil input to refineries declined 1.7% y/y in the four weeks ending October 24, after a 0.3% y/y gain in the prior four weeks.

Gasoline inventories ease 0.1% y/y in the week ending October 24 following a 1.5% y/y gain in the prior week. Residual fuel oil inventories fell 10.0% y/y in the October 24 week after falling 13.0% y/y in the prior week. Working higher, crude oil inventories rose 1.7% y/y in the week of October 24 after rising 2.6% y/y in the previous week.

Measured in days’ supply, gasoline inventories fell to 24.3 days in the week of October 24. The recent low was 22.9 days in the week of November 8, 2024. The supply of crude oil held steady at 26.7 days in the week of October 24. The supply remained below a recent high of 31.9 days in the week of March 3, 2023.

These data are reported by the Energy Information Administration of the U.S. Department of Energy. The price and supply/demand data can be found in Haver’s **WEEKLY** and **USENERGY** databases.

- Gasoline prices are minimally changed.
- Crude oil costs rise further.
- Natural gas prices strengthen.

U.S. Energy Prices Are Mixed in Latest Week

251103F4.jpg

251103G4.jpg

U.S. light vehicle sales dove 6.9% (-4.5% y/y) in October to 15.48 million units (SAAR) after holding steady at 16.62 million units in September. Sales fell broadly. 

Light truck sales slid 6.9% (-1.4% y/y) in October to 12.90 million units, after rising 0.9% in September. Purchases of domestically-made light trucks fell 7.9% (+1.4% y/y) to 10.10 million units, the lowest level since February, after rising 3.4% in September. Sales of imported light trucks fell 2.8% (-10.3% y/y) to 2.80 million units, following a 7.4% September decline.

Trucks’ 83.3% share of the light vehicle market last month was steady with September and compared to 82.6% in August, and to 80.7% in October of last year. The share has averaged 82.4% so far this year versus 56.5% ten years earlier.

Passenger car sales declined 6.9% (-17.6% y/y) last month to 2.58 million, after falling 4.8% in September. Purchases of domestically-produced cars fell 7.2% (-16.5% y/y) last month to 1.93 million units, after weakening 7.1% in September. Imported auto sales declined 4.5% (-22.0% y/y) to 0.64 million units after holding steady in September.

Imports' 22.2% share of the U.S. light vehicle market rose from 21.4% in September. These compared to a high of 26.3% in November of 2023. Imports' share of the passenger car market edged up to 24.8% last month from 24.2% in September. It reached a high of 38.1% in September 2021. Imports' share of the light truck market increased to 21.7% last month from 20.8% in September.

U.S. vehicle sales figures can be found in Haver's **USECON** database. Additional detail by manufacturer is in the **INDUSTRY** database.

251103H4.jpg

251103I4.jpg

- Light truck sales and auto purchases decline m/m.
- Total sales decline sharply y/y.
- Imports' market share declines.

U.S. Light Vehicle Sales Fall Sharply in October

251103J1.jpg

251103K1.jpg

Factory sector activity remains under pressure. The ISM U.S. manufacturing PMI declined to 48.7 in October after rising to 49.1 during September from 48.7 in August, according to the Institute for Supply Management. These figures are below the 50 expansion-contraction dividing line. As a result, they continue to indicate that the U.S. manufacturing sector weakened for the eighth consecutive month. The reading remained remain above, however, a low of 46.9 in October of last year. A November index of 49.4 had been expected in the Action Economics Forecast Survey.

The production component declined to 48.2 last month after rising to 51.0 in September. It remained increased from an April low of 44.0. A lessened 27.3% (NSA) of respondents reported higher production while an increased 22.0% reported lower output levels. The inventory reading fell to a 12-month low of 45.8 from 47.7 in September. A lessened 13.2% (NSA) of respondents raised inventories while a higher 21.7% shed them.

Working higher, the new orders index rose to 49.4 during October from 48.9 in September. An increased 20.4% (NSA) of respondents reported new orders improvement while 26.0% reported a decline. The employment index increased to a five-month high of 46.0 last month after rising to 45.3 in September. An increased 13.1% (NSA) of respondents more hiring while 22.3% reported less. The supplier delivery index rose to 54.2 in October from 52.6 in September. Twelve percent (NSA) of respondents reported slower product delivery speeds while 3.2% reported a quickening.

The prices index weakened to 58.0 (NSA) during October from 61.9 in September. It was below a high of 69.8 in April, and well above its low of 39.4 in December 2022. A lessened 27.3% of respondents reported higher prices, a nine month low, while an increased 8.7% reported lower.

In other series, the export orders index rose to a seasonally adjusted 44.5 in October after falling sharply to 43.0 in September. It remained up from 40.1 May low. The imports index edged up to 45.2 last month from 44.7 in September. The index is below a high of 52.6 in February.

The ISM figures are based on responses from over 400 purchasing and supply executives from 18 industries, which are weighted according to each industry’s contribution to GDP. These data are diffusion indexes where a reading above 50 indicates expansion; below 50 indicates contraction. The ISM Manufacturing PMI is a composite index based on the diffusion indexes of five of the indexes (seasonally adjusted) with equal weights: New Orders, Production, Employment, Supplier Deliveries, and Inventories. The figures from the Institute for Supply Management can be found in Haver’s **USECON** database; further detail is found in the **SURVEYS** database. The expectations number is available in Haver’s **AS1REPNA** database.

251103L1.jpg

251103M1.jpg

- Decline reverses all of September increase.					
- Lower production offsets new orders rise.
- Price index falls to nine-month low.

U.S. ISM Manufacturing PMI Eases in October; Price Index Declines Sharply

Tian Yong Woon

This week, we review a wave of key developments across Asia following US President Trump’s tour of the region last week. A central theme concerned countries courting closer ties with the US to avoid harsher actions, while also boosting regional cooperation amid trade barriers and scrutiny of China. This push for closer ties has manifested through new and updated trade agreements—ironically driven by ongoing uncertainty in global trade and supply chains, with US–China relations at the core. A major outcome of Trump’s trip was the new US–China trade agreement, which included the US halving tariffs on Chinese fentanyl-related products to 10%, while China suspended rare earth export controls and resumed soybean purchases vital to the US (chart 1). Perhaps more importantly, the deal signalled a small conciliatory shift and avoided a potentially worse outcome. Beyond the US–China agreement at the APEC Summit in South Korea, the US–South Korea trade deal also gained more clarity. Under the deal, US auto tariffs on South Korea has fallen to 15%, matching the rate applied to Japan and likely providing relief for South Korean automakers (chart 2).

Trump’s visit to Japan was another highlight. Relations with new Prime Minister Takaichi got off to a strong start, and further details emerged on Japan’s previously cited $550 billion investment commitment in the US—substantial even relative to Japan’s existing direct investment there (chart 3). However, specifics on the timing and implementation of the investment remain limited. Meanwhile, at the ASEAN Summit earlier in the week, aside from Trump’s engagements, the bloc officially welcomed its 11th member—Timor-Leste—the first new member in decades—granting it access to the bloc’s mechanisms and potentially supporting a catch-up in economic development (chart 5). Looking ahead, the focus on China and Japan is likely to continue, with China set to release its October trade (chart 6) and CPI data, and Japan scheduled to report employee wages and household spending.

**The APEC summit**
The US and China made a modest but meaningful step forward on trade following the Trump–Xi meeting at the APEC Summit in South Korea. The US lowered tariffs on Chinese fentanyl-related products to 10% from 20% and suspended enforcement of rules targeting subsidiaries of blacklisted firms—previous points of contention for Beijing. In return, China pledged stronger efforts to curb fentanyl flows, paused rare earth export controls for a year, and resumed purchases of US soybeans—significant given its historically large share of US export demand (chart 1). While not a comprehensive reset, these moves eased immediate tensions and helped avert more severe outcomes, including Trump’s previously threatened 100% tariff hike. The tone of the meeting also suggests a more conciliatory shift, though relations remain fragile and the risk of renewed escalation is still material.

251103T1.jpg

Beyond the headline-grabbing US–China trade deal, the APEC Summit in South Korea also saw the US reach a trade agreement with South Korea. Under the deal, US tariffs on South Korean autos and auto parts have fallen to 15% from 25%, matching the US tariff rate on Japanese autos and providing relief to South Korea’s sizable automotive export sector (chart 2). The agreement also clarified South Korea’s supposed $350 billion investment in the US: $200 billion in cash, capped at $20 billion per year to avoid currency market distortions, with the remaining $150 billion directed toward shipbuilding cooperation. While also not a major breakthrough, the deal represents incremental progress, addressing prior uncertainties and signalling steps toward a more favourable trade framework.

251103T2.jpg

**US President Trump’s Japan Visit**
Turning to US President Trump’s visit to Japan last week, new Prime Minister Takaichi appears to have gotten off to a strong start, with Trump hailing US–Japan relations as entering a “NEW GOLDEN AGE.” The two countries signed several agreements, including a Technology Prosperity Deal, and deepened cooperation on critical minerals and rare earths. Japan’s previously vague $550 billion investment commitment in the US is now somewhat clearer: up to $332 billion will support critical US infrastructure, $30 billion will target AI, and $15 billion will go toward electronics and supply chains, among other areas. While the headline figure is substantial—even relative to Japan’s already significant direct investment assets in the US (chart 3)—the open-ended nature of the commitment and the lack of a clear timeline leave its actual impact uncertain.

251103T3.jpg

**The ASEAN summits**
Whilst US President Trump’s attendance at the ASEAN–US Summit in Malaysia dominated headlines, there were also several other notable developments at last week’s ASEAN meetings in Kuala Lumpur. Most prominently, Timor-Leste was officially admitted as ASEAN’s eleventh member, following a two-decade accession process during which the country actively aligned its political and economic frameworks with ASEAN standards. Membership grants Timor-Leste access to the bloc’s broader security and economic mechanisms and could open further avenues for trade, investment, and development cooperation. Nonetheless, the country still has considerable ground to make up relative to its new ASEAN peers, particularly in terms of both GDP and GDP per capita (chart 4).

251103T4.jpg

The accession of Timor-Leste into ASEAN aside, last week’s summits also brought a number of economic developments for the bloc. More concretely, ASEAN and China signed an upgrade to their free trade agreement last week, bringing the deal to so-called version 3.0. The upgraded deal (ACFTA 3.0) introduces commitments in new areas such as Digital Economy, Green Economy, and Supply Chain Connectivity, among other themes. And notably, just as the US and ASEAN have found common ground to collaborate in fields such as those relating to rare earths, given how the US has seen vulnerabilities arising from this space given China’s dominance in the field, China has taken the year’s US-China frictions to foster closer ties with its neighbours in the region, including the collectively sizable ASEAN bloc. Just by the trade dimension alone, China-ASEAN-11 trade has growth significantly this year (chart 2), although the economies’ total trade with the US also rose, and at a more significant pace, despite tariff measures.

251103T5.jpg

Looking ahead, investors will focus on a series of China-related releases this week, notably the Caixin PMI readings, as well as October trade and CPI inflation data. These indicators will help gauge the economy’s performance under ongoing US tariffs and assess domestic demand and supply conditions, all in the broader context of recent US–China interactions during Trump’s Asia tour. In Japan, attention will turn to updated data on employee wages and household spending, which—together with developments in the external environment—will shape expectations for the Bank of Japan’s future policy stance. Elsewhere in the region, investors will watch interest rate decisions from Australia and Malaysia, where rates are expected to remain unchanged, as well as GDP readings from Indonesia and the Philippines.

Economy in Brief: 2003

Jump to: