Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050802b.jpg" width="353">
June personal income rose 0.5% following an unrevised 0.2% gain in May. Consensus expectations had been for a 0.4% increase. The strength in the total&#39;s rise owed to a 2.0% (6.1% y/y) increase in proprietors&#39; income.
Higher receipts from assets also lifted earnings last month as interest income rose 1.5% (4.3% y/y) and dividend income rose 0.8% (9.5% y/y).
Wages &amp; salaries rose a modest 0.2% (7.4% y/y) following a slim 0.1% gain in May. Factory sector wages fell 0.2% (5.7% y/y) though service sector wages rebounded 0.3% (8.8% y/y) following no change the prior month.
Disposable personal income jumped 0.5% (5.3% y/y) following a 0.2% increase in May. Adjusted for price inflation take home pay rose 0.5% (2.9% y/y) though upward revisions to pricing lowered slightly recent y/y gains.
Matching Consensus expectations, personal consumption expenditures surged 0.8% on the strength of higher sales of light vehicles. Spending on durables overall reversed the May decline with a 2.9% (8.0% y/y) increase. Nondurables spending rose a moderate 0.7% (7.3% y/y) and spending on services increased 0.5% (6.2% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050802a.jpg" width="353">
The personal savings rate fell to 0.0% though the household sector&#39;s net worth (from the Flow of Funds Accounts) has been rising, helped by a 16% increase in owners&#39; equity in real estate.
The PCE chain price index fell slightly due to a 0.3% decline in gasoline prices which subsequently rose 6.2% in July. In August, gas prices are about equal to the prior month&#39;s average of $2.29. Less food &amp; energy, prices also were unchanged as durable goods prices fell 0.4% (-0.5% y/y) and services prices increased a moderate 0.2% (2.9% y/y).
Closing the Gap from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/mt/20050801/cover.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/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.5%</td>
<td>0.2%</td>
<td>6.6%</td>
<td>5.9%</td>
<td>3.2%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.8%</td>
<td>-0.0%</td>
<td>6.7%</td>
<td>6.5%</td>
<td>4.9%</td>
<td>4.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>0.0%</td>
<td>0.4%</td>
<td>1.5%</td>
<td>1.7%</td>
<td>2.1%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>-0.0%</td>
<td>0.0%</td>
<td>2.2%</td>
<td>2.6%</td>
<td>1.9%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.0%</td>
<td>0.2%</td>
<td>1.9%</td>
<td>2.0%</td>
<td>1.3%</td>
<td>1.8%</td>
</tr>
</tbody>
</table>
</body>
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June personal income rose 0.5% following an unrevised 0.2% gain in May. Consensus expectations had been for a 0.4% increase. The strength in the total's rise owed to a 2.0% (6.1% y/y) increase in proprietors' income. Higher receipts [...]

June Growth in U.S. Personal Income Firm

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050802b.jpg" width="353">
June personal income rose 0.5% following an unrevised 0.2% gain in May. Consensus expectations had been for a 0.4% increase. The strength in the total&#39;s rise owed to a 2.0% (6.1% y/y) increase in proprietors&#39; income.
Higher receipts from assets also lifted earnings last month as interest income rose 1.5% (4.3% y/y) and dividend income rose 0.8% (9.5% y/y).
Wages &amp; salaries rose a modest 0.2% (7.4% y/y) following a slim 0.1% gain in May. Factory sector wages fell 0.2% (5.7% y/y) though service sector wages rebounded 0.3% (8.8% y/y) following no change the prior month.
Disposable personal income jumped 0.5% (5.3% y/y) following a 0.2% increase in May. Adjusted for price inflation take home pay rose 0.5% (2.9% y/y) though upward revisions to pricing lowered slightly recent y/y gains.
Matching Consensus expectations, personal consumption expenditures surged 0.8% on the strength of higher sales of light vehicles. Spending on durables overall reversed the May decline with a 2.9% (8.0% y/y) increase. Nondurables spending rose a moderate 0.7% (7.3% y/y) and spending on services increased 0.5% (6.2% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050802a.jpg" width="353">
The personal savings rate fell to 0.0% though the household sector&#39;s net worth (from the Flow of Funds Accounts) has been rising, helped by a 16% increase in owners&#39; equity in real estate.
The PCE chain price index fell slightly due to a 0.3% decline in gasoline prices which subsequently rose 6.2% in July. In August, gas prices are about equal to the prior month&#39;s average of $2.29. Less food &amp; energy, prices also were unchanged as durable goods prices fell 0.4% (-0.5% y/y) and services prices increased a moderate 0.2% (2.9% y/y).
Closing the Gap from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/mt/20050801/cover.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/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.5%</td>
<td>0.2%</td>
<td>6.6%</td>
<td>5.9%</td>
<td>3.2%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.8%</td>
<td>-0.0%</td>
<td>6.7%</td>
<td>6.5%</td>
<td>4.9%</td>
<td>4.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>0.0%</td>
<td>0.4%</td>
<td>1.5%</td>
<td>1.7%</td>
<td>2.1%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>-0.0%</td>
<td>0.0%</td>
<td>2.2%</td>
<td>2.6%</td>
<td>1.9%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.0%</td>
<td>0.2%</td>
<td>1.9%</td>
<td>2.0%</td>
<td>1.3%</td>
<td>1.8%</td>
</tr>
</tbody>
</table>
U.S. Factory Inventories Down Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 2, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050802c.jpg" width="353">
Factory inventories fell in June, down modestly for the third consecutive month. Three month growth in inventories fell to -0.9% (AR) versus the peak rate of accumulation near 12% in March and 7.5% growth last year. The slowdown accounts for much of this year&#39;s slowdown in factory output growth.
Slower rates of inventory accumulation continue notable in the primary metals industry where three month growth fell to 0.5% versus the high of 42.2% and in the electrical equipment industry where growth in inventories fell to 1.8% versus an 18.5% peak. The level of computer inventories has been declining this year versus a peak growth rate of 13% last summer.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050802d.jpg" width="353">
Factory shipments fell slightly in June and three month growth fell to 3.7% versus the high above 20% early last year.
Orders to the factory sector jumped 1.0% and the rise in durable goods orders was revised up to 2.0% from the advance report of a 1.4% gain.
Unfilled orders surged another 2.8% as backlogs of aircraft &amp; parts jumped 5.8% (30.2% y/y). Less transportation altogether backlogs rose 1.9% (9.5% y/y) boosted by a 2.5% (14.8% y/y) gain in machinery. The ratio of unfilled orders to shipments outside of transportation jumped the highest level since 2002.<a href="http://research.stlouisfed.org/publications/review/05/07/Gali.pdf"> </a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory Survey</a> (NAICS)</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>-0.0%</td>
<td>-0.2%</td>
<td>6.4%</td>
<td>7.5%</td>
<td>-1.3%</td>
<td>-1.8%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>1.0%</td>
<td>3.6%</td>
<td>9.8%</td>
<td>10.9%</td>
<td>3.7%</td>
<td>-1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>-0.1%</td>
<td>0.3%</td>
<td>6.2%</td>
<td>10.5%</td>
<td>2.6%</td>
<td>-2.0%</td>
</tr>
<tr>
<td class="firstcol">Unfilled Orders</td>
<td>2.8%</td>
<td>2.1%</td>
<td>10.1%</td>
<td>9.1%</td>
<td>4.2%</td>
<td>-6.1%</td>
</tr>
</tbody>
</table>
Chain Store Sales Ended July Strong 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 2, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050802e.jpg" width="353">
Chain store sales jumped 0.9% during the final week of July according to the International Council of Shopping Centers (ICSC)-UBS survey. This fifth consecutive gain lifted sales in July 0.4% higher than during June when sales fell 0.4% versus May.
During the last ten years there has been a 56% correlation between the y/y change in chain store sales and the change in non-auto retail sales less gasoline, as published by the US Census Department. Chain store sales correspond directly with roughly 14% of non-auto retail sales less gasoline.
The leading indicator of chain store sales from ICSC was unchanged (0.3% y/y).
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.

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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">07/30/05</th>
<th scope="col">07/23/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>462.8</td>
<td>456.9</td>
<td>4.9%</td>
<td>4.6%</td>
<td>2.9%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
UK's CBI Survey of Distributive Trades Confirms Slowdown in Retail Trade and Expects Continued Weakness 
by <a href="/comment/Curley.html">Louise Curley</a> August 2, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050802g.jpg" width="353">
The results of the CBI (Confederation of British Industries) survey of the distributive trades released today show that the balance of opinion on the volume of retail sales improved minimally in July to -18 from -19 in June, the lowest figure since the survey began in 1983. Expectations of the volume of retail sales have caught up with the reported volumes and suggest that August will once again show only a minimal improvement to a balance of -17. The balance of reported sales volume for the retail sector has shown only one modest positive number--2 in February--since the beginning of the year.
There was more positive news for wholesale trade as can be seen in the first chart which shows the balance on reported sales volume for retail and wholesale trade. Although the balance on reported wholesale trade sales volume declined to 22 from 32 in June, the balance is significantly positive. Expected sales volume for August, however, are down to a positive 10. The balance on reported motor trade sales volume has been positive since May, but decreasing and the expected balance for August is once again negative at -4.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050802h.jpg" width="353">
Balances of opinions on the annual growth of sales volume are also reported. In the most recent survey, Grocers showed the most positive results and Furniture and Carpet stores, the most dismal, as seen in the second chart.
The CBI Distributive Trades survey covers 20,000 outlets of firms responsible for 40% of employment in retailing. The most recent survey was conducted between June 29 and July 20, 2005 and included 125 responses.

<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/UK/@U9/@U9.HTM">CBI Distributive Trade Survey</a></th>
<th scope="col">Aug 05</th>
<th scope="col">July 05</th>
<th scope="col">Jun 05</th>
<th scope="col">May&nbsp; 05</th>
<th scope="col">April&nbsp; 05</th>
<th scope="col">Mar 05&nbsp;&nbsp;</th>
<th scope="col">&nbsp;Feb 05</th>
<th scope="col">Jan&nbsp; 05</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Retail Trade Sales Volume</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Expected</td>
<td>-17</td>
<td>-18</td>
<td>5</td>
<td>1</td>
<td>3</td>
<td>14</td>
<td>7</td>
<td>8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Reported</td>
<td></td>
<td>-18</td>
<td>-19</td>
<td>-7</td>
<td>-14</td>
<td>-9</td>
<td>2</td>
<td>-3</td>
</tr>
<tr>
<td class="firstcol">Wholesale Trade Sales Volume</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expected</td>
<td>10</td>
<td>25</td>
<td>23</td>
<td>16</td>
<td>-7</td>
<td>-4</td>
<td>15</td>
<td>6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Reported</td>
<td>&nbsp;</td>
<td>22</td>
<td>32</td>
<td>24</td>
<td>2</td>
<td>-17</td>
<td>9</td>
<td>28</td>
</tr>
<tr class="odd">
<td class="firstcol">Motor Trade Sales Volume</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Expected</td>
<td>-4</td>
<td>2</td>
<td>7</td>
<td>6</td>
<td>-5</td>
<td>4</td>
<td>7</td>
<td>-4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Reported</td>
<td>&nbsp;</td>
<td>3</td>
<td>7</td>
<td>8</td>
<td>-7</td>
<td>-16</td>
<td>2</td>
<td>-9</td>
</tr>
<tr>
<td class="firstcol">Growth in Annual Sales Volume--Reported</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Grocers</td>
<td></td>
<td>21</td>
<td>31</td>
<td>77</td>
<td>20</td>
<td>31</td>
<td>19</td>
<td>4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Furniture and Carpets</td>
<td></td>
<td>-92</td>
<td>-84</td>
<td>-77</td>
<td>-58</td>
<td>-72</td>
<td>6</td>
<td>-16</td>
</tr>
</tbody>
</table>
</body>
</html>

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050802f.jpg" width="353">
While the number of employed persons in Japan declined 0.26% in June from May to 64.18 million on a seasonally unadjusted basis, it was 0.69% above the June, 2004 figure. The number of unemployed persons declined by 8.8% in May to June and was 9.4% below June, 2004. As a result, the unemployment rate is now 4.2% compared with 4.6% in May, 2005 and also in June, 2004.
June also saw a year-to-year rise in Japanese wages. The average monthly cash wage in Japan amounted to 467,814 Yen or $4,156 at the current rate of exchange. The granting of bonuses in June and December distorts the month to month changes in the wage data that are available only on a not seasonally adjusted basis. The year to year changes are the more meaningful comparisons. In June, cash wages were almost 0.7% above the comparable figure of last year.
Cash Earnings are equal to money earned before deductions for income tax, social insurance contribution, union dues and payment for good purchased, etc. In the Haver Data Base for Japan there is a breakdown of cash earnings. Total cash earnings consist of Contractual Cash Earnings and Bonuses. Contractual Cash Earnings, in turn are the sum of Scheduled Cash Earnings and Overtime Earnings, which include, in addition to over-time payments, other special payments, such as marriage allowances, etc.
In the attached chart we show the year-to-year changes in the Scheduled Cash Earnings and Overtime Earnings. Scheduled cash earnings have shown year-to-year increases in April, May and June of this year, the first increases since April, 2003. Overtime earnings, on the other hand have shown year-to-year increases since mid 2002 and in June were 2.4% above the comparable figure for last year.
Rising employment and wages should augur well for Japanese consumer incomes and spending.

<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/JAPAN.HTM">Japan</a></th>
<th scope="col">Jun 05</th>
<th scope="col">May 05</th>
<th scope="col">Jun 04</th>
<th scope="col">M/M%</th>
<th scope="col">Y/Y%</th>
<th scope="col">&nbsp;2004&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2003</th>
<th scope="col">&nbsp;2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Employment and Unemployment (No. of persons in Mil)</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Employed Persons</td>
<td>64.18</td>
<td>64.35</td>
<td>63.74</td>
<td>-0.26</td>
<td>0.69</td>
<td>63.29</td>
<td>63.16</td>
<td>63.30</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployed Persons&nbsp;</td>
<td>2..80</td>
<td>3.07</td>
<td>3.09</td>
<td>-8.79</td>
<td>-9.39</td>
<td>3.13</td>
<td>3.50</td>
<td>3.59</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate %</td>
<td>4.2</td>
<td>4.6</td>
<td>4.6</td>
<td>-0.4*</td>
<td>-0.4*</td>
<td>4.7</td>
<td>5.3</td>
<td>5.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Monthly Averages in Yen</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Cash Wages</td>
<td>467,801</td>
<td>276,908</td>
<td>466,932</td>
<td>n.m.</td>
<td>1.27</td>
<td>332,598</td>
<td>341,790</td>
<td>343,219</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Contract Wages</td>
<td>273,712</td>
<td>271,336</td>
<td>272,652</td>
<td>0.97</td>
<td>0.39</td>
<td>272,049</td>
<td>278,748</td>
<td>278,873</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp; Scheduled Wages</td>
<td>254,875</td>
<td>252,332</td>
<td>254,258</td>
<td>1.01</td>
<td>0.24</td>
<td>253,106</td>
<td>260,153</td>
<td>261,000</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp; Over-Time</td>
<td>18,837</td>
<td>18,742</td>
<td>18,394</td>
<td>0.51</td>
<td>2.41</td>
<td>18,943</td>
<td>18,595</td>
<td>17,873</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Bonus &amp; Other Wages</td>
<td>194,102</td>
<td>5,833</td>
<td>189,280</td>
<td>n.m.</td>
<td>2.35</td>
<td>60,549</td>
<td>63,042</td>
<td>64,344</td>
</tr>
</tbody>
</table>
</body>
</html>

While the number of employed persons in Japan declined 0.26% in June from May to 64.18 million on a seasonally unadjusted basis, it was 0.69% above the June, 2004 figure. The number of unemployed persons declined by 8.8% in May to [...]

Rises in Japanese Employment and Wages: Good Omens for Japanese Consumer Incomes and Spending

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050801b.jpg" width="353">
The June value of construction put in place fell 0.3% following a deepened decline in May. June was the fifth monthly drop this year. Consensus expectations had been for a 0.7% increase.
The 2005 declines in construction spending generally have been moderate especially when set against a 7.5% upward spike in February.
Private residential building activity added to earlier month&#39;s declines with a 0.4% dip but remained up 9.1% versus last year. A 12.2% pop in February was driven by improvements. The value of new single family building rose 0.2% (7.6% y/y) for the seventh consecutive monthly gain.
Nonresidential building rose 0.2% following the downwardly revised 2.1% May decline. Multi-retail building was quite strong, up 2.3% (22.1% y/y), led by shopping mall construction which rose 15.8% (-7.2% y/y).
Public construction spending dipped 0.5% after an upwardly revised 3.2% May gain. Construction activity on highways &amp; streets, nearly one third of the value of public construction spending, dipped 0.4% (+8.6% y/y).
These more detailed categories represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for Automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.

<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/@E9/@E907/@E90701/@E90701.HTM">Construction Put-in-place</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-0.3%</td>
<td>-1.7%</td>
<td>7.9%</td>
<td>11.1%</td>
<td>5.4%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>-0.2%</td>
<td>-3.1%</td>
<td>8.1%</td>
<td>13.8%</td>
<td>6.3%</td>
<td>-0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>-0.4%</td>
<td>-3.4%</td>
<td>9.1%</td>
<td>18.5%</td>
<td>12.9%</td>
<td>8.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>0.2%</td>
<td>-2.1%</td>
<td>5.6%</td>
<td>3.9%</td>
<td>-5.4%</td>
<td>-13.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>-0.5%</td>
<td>3.2%</td>
<td>7.2%</td>
<td>2.5%</td>
<td>2.7%</td>
<td>5.7%</td>
</tr>
</tbody>
</table>
</body>
</html>

The June value of construction put in place fell 0.3% following a deepened decline in May. June was the fifth monthly drop this year. Consensus expectations had been for a 0.7% increase. The 2005 declines in construction spending [...]

U.S. Construction Spending Down for Fifth Month This Year

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050801a.jpg" width="353">
The Institute of Supply Management reported that last month the Composite Index of activity in the manufacturing sector jumped nearly three points from June to 56.6. The latest is the highest level for the index since December and easily beat Consensus expectations for a modest up tick to 54.5.
During the last twenty years there has been a 64% correlation between the level of the Composite Index and the three month growth in factory sector industrial production.
Pricing in the factory sector weakened further with the prices paid index falling below 50, to 48.5, for the first time since February 2002.
Production strengthened materially as indicated by a 5.6 jump in the index to 61.2, its highest level since last September. Inventory restocking apparently provided little of the boost to output as the inventory index fell to the lowest level since April 2004.
New orders added to the strong gain in June and rose to the year&#39;s highest level of 60.6 with higher export orders leading the gain. The export order index recovered all of the prior month&#39;s drop with a 5.5 point jump to 55.9.
Job growth improved as well. After two months below the break even level of 50 the employment index rose 3.3 points to 53.2, its highest since March. During the last twenty years there has been a 67% correlation between the level of the ISM Employment Index and the three month growth in factory sector employment.

<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/@EF02/@EF02.HTM">ISM Manufacturing Survey</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">July &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Index</td>
<td>56.6</td>
<td>53.8</td>
<td>61.6</td>
<td>60.5</td>
<td>53.3</td>
<td>52.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>60.6</td>
<td>57.2</td>
<td>63.8</td>
<td>63.5</td>
<td>57.9</td>
<td>56.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>48.5</td>
<td>50.5</td>
<td>77.0</td>
<td>79.8</td>
<td>59.6</td>
<td>57.6</td>
</tr>
</tbody>
</table>
</body>
</html>

The Institute of Supply Management reported that last month the Composite Index of activity in the manufacturing sector jumped nearly three points from June to 56.6. The latest is the highest level for the index since December and [...]

July ISM Factory Index Highest This Year

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050801a.jpg" width="353">
The Institute of Supply Management reported that last month the Composite Index of activity in the manufacturing sector jumped nearly three points from June to 56.6. The latest is the highest level for the index since December and easily beat Consensus expectations for a modest up tick to 54.5.
During the last twenty years there has been a 64% correlation between the level of the Composite Index and the three month growth in factory sector industrial production.
Pricing in the factory sector weakened further with the prices paid index falling below 50, to 48.5, for the first time since February 2002.
Production strengthened materially as indicated by a 5.6 jump in the index to 61.2, its highest level since last September. Inventory restocking apparently provided little of the boost to output as the inventory index fell to the lowest level since April 2004.
New orders added to the strong gain in June and rose to the year&#39;s highest level of 60.6 with higher export orders leading the gain. The export order index recovered all of the prior month&#39;s drop with a 5.5 point jump to 55.9.
Job growth improved as well. After two months below the break even level of 50 the employment index rose 3.3 points to 53.2, its highest since March. During the last twenty years there has been a 67% correlation between the level of the ISM Employment Index and the three month growth in factory sector employment.

<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/@EF02/@EF02.HTM">ISM Manufacturing Survey</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">July &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Index</td>
<td>56.6</td>
<td>53.8</td>
<td>61.6</td>
<td>60.5</td>
<td>53.3</td>
<td>52.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>60.6</td>
<td>57.2</td>
<td>63.8</td>
<td>63.5</td>
<td>57.9</td>
<td>56.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>48.5</td>
<td>50.5</td>
<td>77.0</td>
<td>79.8</td>
<td>59.6</td>
<td>57.6</td>
</tr>
</tbody>
</table>
U.S. Construction Spending Down for Fifth Month This Year  
by <a href="/comment/Moeller.html">Tom Moeller</a> August 1, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050801b.jpg" width="353">
The June value of construction put in place fell 0.3% following a deepened decline in May. June was the fifth monthly drop this year. Consensus expectations had been for a 0.7% increase.
The 2005 declines in construction spending generally have been moderate especially when set against a 7.5% upward spike in February.
Private residential building activity added to earlier month&#39;s declines with a 0.4% dip but remained up 9.1% versus last year. A 12.2% pop in February was driven by improvements. The value of new single family building rose 0.2% (7.6% y/y) for the seventh consecutive monthly gain.
Nonresidential building rose 0.2% following the downwardly revised 2.1% May decline. Multi-retail building was quite strong, up 2.3% (22.1% y/y), led by shopping mall construction which rose 15.8% (-7.2% y/y).
Public construction spending dipped 0.5% after an upwardly revised 3.2% May gain. Construction activity on highways &amp; streets, nearly one third of the value of public construction spending, dipped 0.4% (+8.6% y/y).
These more detailed categories represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for Automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.

<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/@E9/@E907/@E90701/@E90701.HTM">Construction Put-in-place</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-0.3%</td>
<td>-1.7%</td>
<td>7.9%</td>
<td>11.1%</td>
<td>5.4%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>-0.2%</td>
<td>-3.1%</td>
<td>8.1%</td>
<td>13.8%</td>
<td>6.3%</td>
<td>-0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>-0.4%</td>
<td>-3.4%</td>
<td>9.1%</td>
<td>18.5%</td>
<td>12.9%</td>
<td>8.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>0.2%</td>
<td>-2.1%</td>
<td>5.6%</td>
<td>3.9%</td>
<td>-5.4%</td>
<td>-13.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>-0.5%</td>
<td>3.2%</td>
<td>7.2%</td>
<td>2.5%</td>
<td>2.7%</td>
<td>5.7%</td>
</tr>
</tbody>
</table>
 Rises in Japanese Employment and Wages: Good Omens for Japanese Consumer Incomes and Spending 
by <a href="/comment/Curley.html">Louise Curley</a> August 1, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050802f.jpg" width="353">
While the number of employed persons in Japan declined 0.26% in June from May to 64.18 million on a seasonally unadjusted basis, it was 0.69% above the June, 2004 figure. The number of unemployed persons declined by 8.8% in May to June and was 9.4% below June, 2004. As a result, the unemployment rate is now 4.2% compared with 4.6% in May, 2005 and also in June, 2004.
June also saw a year-to-year rise in Japanese wages. The average monthly cash wage in Japan amounted to 467,814 Yen or $4,156 at the current rate of exchange. The granting of bonuses in June and December distorts the month to month changes in the wage data that are available only on a not seasonally adjusted basis. The year to year changes are the more meaningful comparisons. In June, cash wages were almost 0.7% above the comparable figure of last year.
Cash Earnings are equal to money earned before deductions for income tax, social insurance contribution, union dues and payment for good purchased, etc. In the Haver Data Base for Japan there is a breakdown of cash earnings. Total cash earnings consist of Contractual Cash Earnings and Bonuses. Contractual Cash Earnings, in turn are the sum of Scheduled Cash Earnings and Overtime Earnings, which include, in addition to over-time payments, other special payments, such as marriage allowances, etc.
In the attached chart we show the year-to-year changes in the Scheduled Cash Earnings and Overtime Earnings. Scheduled cash earnings have shown year-to-year increases in April, May and June of this year, the first increases since April, 2003. Overtime earnings, on the other hand have shown year-to-year increases since mid 2002 and in June were 2.4% above the comparable figure for last year.
Rising employment and wages should augur well for Japanese consumer incomes and spending.

<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/JAPAN.HTM">Japan</a></th>
<th scope="col">Jun 05</th>
<th scope="col">May 05</th>
<th scope="col">Jun 04</th>
<th scope="col">M/M%</th>
<th scope="col">Y/Y%</th>
<th scope="col">&nbsp;2004&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2003</th>
<th scope="col">&nbsp;2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Employment and Unemployment (No. of persons in Mil)</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Employed Persons</td>
<td>64.18</td>
<td>64.35</td>
<td>63.74</td>
<td>-0.26</td>
<td>0.69</td>
<td>63.29</td>
<td>63.16</td>
<td>63.30</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployed Persons&nbsp;</td>
<td>2..80</td>
<td>3.07</td>
<td>3.09</td>
<td>-8.79</td>
<td>-9.39</td>
<td>3.13</td>
<td>3.50</td>
<td>3.59</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate %</td>
<td>4.2</td>
<td>4.6</td>
<td>4.6</td>
<td>-0.4*</td>
<td>-0.4*</td>
<td>4.7</td>
<td>5.3</td>
<td>5.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Monthly Averages in Yen</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Cash Wages</td>
<td>467,801</td>
<td>276,908</td>
<td>466,932</td>
<td>n.m.</td>
<td>1.27</td>
<td>332,598</td>
<td>341,790</td>
<td>343,219</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Contract Wages</td>
<td>273,712</td>
<td>271,336</td>
<td>272,652</td>
<td>0.97</td>
<td>0.39</td>
<td>272,049</td>
<td>278,748</td>
<td>278,873</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp; Scheduled Wages</td>
<td>254,875</td>
<td>252,332</td>
<td>254,258</td>
<td>1.01</td>
<td>0.24</td>
<td>253,106</td>
<td>260,153</td>
<td>261,000</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp; Over-Time</td>
<td>18,837</td>
<td>18,742</td>
<td>18,394</td>
<td>0.51</td>
<td>2.41</td>
<td>18,943</td>
<td>18,595</td>
<td>17,873</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Bonus &amp; Other Wages</td>
<td>194,102</td>
<td>5,833</td>
<td>189,280</td>
<td>n.m.</td>
<td>2.35</td>
<td>60,549</td>
<td>63,042</td>
<td>64,344</td>
</tr>
</tbody>
</table>
</body>
</html>

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050729c.jpg" width="353">
The Chicago Purchasing Managers Business Barometer in July reversed much of the decline during the prior two months with a near 10 point rise versus June. At 63.5 the index stood at its highest level since April. Consensus expectations had been for near stability at 55.0.
During the last ten years there has been a 65% correlation between the level of Chicago PMI and the three month change in factory sector industrial production.
New orders improved sharply to the highest level since April and the employment index recouped the prior month&#39;s weakness with a rise to 56.1. During the last ten years there has been a 75% correlation between the level of the employment index and the three month change in factory sector employment.
The index of prices also improved to its highest level since April. During the last ten years there has been an 86% correlation between the Chicago price index and the three month change in the &quot;core&quot; intermediate goods PPI.

<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/@EF05/@EF05.HTM">Chicago Purchasing Managers Index, SA</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">&nbsp;July &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Business Barometer</td>
<td>63.5</td>
<td>53.6</td>
<td>64.5</td>
<td>62.9</td>
<td>54.6</td>
<td>52.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders</td>
<td>69.6</td>
<td>56.5</td>
<td>68.9</td>
<td>67.0</td>
<td>58.0</td>
<td>56.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid</td>
<td>61.3</td>
<td>59.7</td>
<td>80.0</td>
<td>80.1</td>
<td>55.8</td>
<td>56.9</td>
</tr>
</tbody>
</table>
</body>
</html>

The Chicago Purchasing Managers Business Barometer in July reversed much of the decline during the prior two months with a near 10 point rise versus June. At 63.5 the index stood at its highest level since April. Consensus [...]

Chicago Purchasing Agents' Index Much Improved

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050729b.jpg" width="353">
The employment cost index for private industry workers rose the same 0.6% last quarter as during 1Q05 and contrasted to Consensus expectations for a 0.8% increase.
The 0.8% increase in benefit costs was the slowest since early 2002 and reflected slower growth in the service sector while benefit costs grew more rapidly in manufacturing. The y/y gain in the cost of health benefits fell to 6.3%, the slowest since 1999.
Wage and salary growth was stable at 0.6%. Wages account for roughly 70% of the compensation index.
Labor Market Developments in the United States and Canada since 2000 from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/newsevents/news/research/2005/rp050725.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/@EB/@EB08/@EB08.HTM">ECI- Private Industry Workers</a></th>
<th scope="col">2Q &#39;05</th>
<th scope="col">1Q &#39;05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Compensation</td>
<td>0.6%</td>
<td>0.6%</td>
<td>3.2%</td>
<td>3.8%</td>
<td>4.0%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wages &amp; Salaries</td>
<td>0.6%</td>
<td>0.6%</td>
<td>2.4%</td>
<td>2.4%</td>
<td>3.0%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Benefit Costs</td>
<td>0.8%</td>
<td>1.1%</td>
<td>4.9%</td>
<td>6.9%</td>
<td>6.4%</td>
<td>4.7%</td>
</tr>
</tbody>
</table>
</body>
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The employment cost index for private industry workers rose the same 0.6% last quarter as during 1Q05 and contrasted to Consensus expectations for a 0.8% increase. The 0.8% increase in benefit costs was the slowest since early 2002 [...]

Employment Cost Index Stable As Benefit Costs Slowed

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

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

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Winnie Tapasanun

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New orders for durable goods fell a more-than-expected 1.4% m/m in February, the fourth monthly fall in five months, after decreases of 0.5% in January (0.0% initially) and 0.9% in December (unrevised), according to today’s advance report by the U.S. Census Bureau. The Action Economics Forecast Survey had expected a 1.0% m/m February decline. The year-on-year rate eased to 7.3% in February, the lowest since October, from 9.9% in January, though remaining positive since January 2025. Durable goods orders excluding the transportation sector rose 0.8% (6.0% y/y) in February, the 10th straight m/m rise, after a 0.3% increase in January. Durable goods orders excluding defense fell 1.2% (+7.3% y/y) following a 0.2% January rebound.

The m/m fall in February durable goods orders was led by a 28.6% m/m plunge in orders for nondefense aircraft & parts following decreases of 1.7% in January and 22.7% in December. Orders for defense aircraft & parts fell 3.8% after a 27.2% January slump and an 11.8% December jump. Orders excluding aircraft rose 1.2% (6.6% y/y), the seventh m/m rise in eight months, after a 0.3% January increase.

Durable goods orders for transportation generally fell 5.4% (+10.1% y/y) in February, the fourth m/m fall in five months, after a 1.9% decline in January. In addition to the drops in nondefense and defense aircraft orders, orders for motor vehicles & parts rose 3.1% (7.6% y/y), the third consecutive m/m rise, after a 0.7% January increase. Orders for electrical equipment, appliances & components slipped 0.1% (+5.0% y/y) following a 1.0% January decline, while orders for primary metals advanced 2.2% (10.2% y/y), the third successive m/m increase, after a 1.1% January rise. Machinery orders climbed 1.5% (9.2% y/y), the 10th straight m/m gain, on top of a 0.6% January increase. Orders for fabricated metal products rose 0.5% (5.4% y/y), the seventh m/m rise in eight months, following a flat January reading. Orders for all other durable goods rose 0.5% (1.3% y/y), up for the sixth consecutive month, after a 0.3% January increase. Meanwhile, orders for computers & electronic products were essentially unchanged (+7.5% y/y) after five straight m/m gains.

Capital goods orders fell 6.6% (+11.5% y/y) in February, the fourth m/m fall in five months, after a 3.0% drop in January. Nondefense capital goods orders slid 7.4% (+9.5% y/y), the fifth m/m slide in six months, after a 1.0% January decrease. Core capital goods orders (i.e., nondefense capital goods orders excluding aircraft) rebounded 0.6% (5.1% y/y), the seventh m/m rise in eight months, following a 0.4% January decline. Defense capital goods orders fell 1.1% (+25.1% y/y), down for the fourth time in five months, after a 14.2% January drop. Notably, core capital goods shipments (core capex shipments)—a reliable coincident indicator of business spending on equipment in the national accounts—rose 0.9% (5.7% y/y), the fifth m/m increase in six months, after no change in January.

Shipments of all manufactured goods advanced 1.4% (3.5% y/y) in February, the fourth m/m gain in five months, after a 0.7% increase in January. Durable goods shipments rose 1.3% (6.8% y/y), up for the fifth time in six months, after a 0.9% January gain. Nondurable goods shipments climbed 1.4% (0.1% y/y), the third straight m/m rise, after a 0.5% January increase.

Unfilled orders of durable goods edged up 0.1% (11.1% y/y) in February, the seventh straight m/m gain, after a 0.6% rise in January. Excluding transportation, unfilled orders increased 0.2% (1.9% y/y), also up for the seventh consecutive month, following a 0.3% January rise.

Manufacturing inventories inched up 0.1% (0.8% y/y) in February, the fourth straight m/m increase, after a 0.1% uptick in December. Durable goods inventories edged up 0.1% (1.8% y/y) in February, the fifth consecutive m/m increase, after a 0.2% rise in January, while nondurable goods inventories were virtually unchanged (-0.8% y/y) following two successive m/m declines.

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

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- Headline orders -1.4% (+7.3% y/y) in Feb., fourth m/m decline in five mths.
- Nondefense aircraft & parts -28.6% m/m following January’s -1.7%.
- Transportation orders -5.4%, down for the fourth time in five mths.; orders ex transportation +0.8%, 10th straight m/m rise.
- Core capital goods shipments +0.9%, fifth m/m gain in six mths.
- Durable goods shipments +1.3%; unfilled orders +0.1%; inventories +0.1%.

U.S. Durable Goods Orders Fall in February, Led by a Plunge in Nondefense Aircraft Orders

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The U.S. ISM Services PMI decreased to 54.0 in March following a 2.3-point rise to 56.1 in February (the highest reading since July 2022), according to today’s report by the Institute for Supply Management, indicating expansion in the services sector for the 21st consecutive month but at a slower pace. The March index, while above 50.8 in March 2025 and a low of 49.4 in June 2024, remained below a high of 55.5 in October 2024 and a record-high 67.5 in November 2021. The 12-month average was 52.3, pointing to continued growth in the U.S. services sector. The Action Economics Forecast Survey had expected 54.9 for March.

Haver Analytics constructs a composite index combining the services index and the manufacturing reading. This index fell to 53.8 in March after a 2.0-point increase to 55.7 in February, signaling expansion for the 10th straight month, albeit at a slower rate. The latest reading was above 50.6 in March 2025 and a low of 49.3 in June 2024, while remaining below a record-high 66.7 in November 2021. These series date back to July 1997.

In the latest services survey, the business activity index declined to 53.9 in March after rising to 59.9 in February, indicating continued expansion in business activity for 21 consecutive months, though at the slowest pace since September. The index was above a low of 50.0 in June 2024 but below a record-high 70.9 in November 2021. In March, 22.8% of respondents (NSA) reported higher activity while 14.6% reported an activity decline. The new orders index rose to 60.6 in March after increasing to 58.6 in February, reflecting expansion in new orders for the 10th straight month and the highest level since February 2023. The index was above its recent low of 47.2 in May 2025 but below a high of 61.0 in February 2023 and a record-high 69.2 in October 2021. In March, 32.0% of respondents (NSA) reported higher new orders while a lessened 12.6% reported declines. Meanwhile, the supplier deliveries index (NSA) increased to 56.2 in March from 53.9 in February, indicating slower supplier delivery performance for the 16th straight month after one month in faster territory in November 2024.

On the labor front, the employment index fell to 45.2 in March after rising to 51.8 in February, showing employment activity in the services sector contracted for the first time since November and at the lowest level since December 2023. The latest reading was above a low of 43.5 in December 2023 but below a high of 54.1 in June 2023 and a high of 58.9 in April 2021. A reduced 10.7% of respondents (NSA) indicated higher employment in March while an increased 18.4% reported declines.

On the inflation front, the prices index jumped to 70.7 in March from 63.0 in February, indicating prices paid by services organizations for materials and services had risen (i.e., above 50) since June 2017 and at the fastest pace since October 2022. The index was above a low of 53.9 in March 2024 and a low of 55.1 in June 2023 but significantly below a peak of 83.7 in March 2022. An increased 45.7% of respondents (NSA) reported higher prices in March while only 1.2% reported price declines.

Additionally, the new export orders index dropped to 50.7 in March from 57.2 in February, showing new export orders expanded for the third time in four months but at a slower rate. The imports index rose to 55.2 in March from 51.8 in February, registering the third expansion in four months and the highest level since January 2024. The inventories index declined to 54.8 in March from 56.4 in February, indicating inventories expanded for the fourth time in five months but at a slower pace. The inventory sentiment index slipped to 54.3 in March from 55.3 in February, showing continued expansion since May 2023. The backlog of orders index fell to 53.6 in March from 55.9 in February, marking the second successive month of expansion following 11 straight months of contraction. These series are not seasonally adjusted and not included in the ISM Services PMI total.

The ISM Services PMI is a composite index consisting of four equally weighted diffusion indexes: Business Activity, New Orders, Employment, and Supplier Deliveries. A reading above 50 indicates expansion in the services sector; below 50 suggests contraction. Supplier Deliveries is the only ISM index that is inversed; a reading above 50 indicates slower deliveries. The ISM figures are available in Haver's **USECON** database, with additional detail in the **SURVEYS** database. The expectations figure from Action Economics is in the **AS1REPNA** database.

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- ISM Services PMI at 54.0 in Mar., down 2.1 pts. from Feb.; below forecasts but above the 12-month avg. of 52.3.
- Business Activity (53.9, 21st straight month of expansion); New Orders (60.6, 10th consecutive month of expansion and fastest since Feb. ’23); Employment (45.2, first contraction since Nov.); Supplier Deliveries (56.2 vs. 53.9).
- Prices Index (70.7) indicates prices rising since June ’17, the fastest pace since Oct. ’22.

U.S. ISM Services PMI Slips in March, Still Indicating Expansion for the 21st Straight Month

Tian Yong Woon

In this week’s Letter, we examine the first-round price impacts of the surge in oil prices stemming from the ongoing Middle East conflict in Asia. Despite recent rhetoric and reports suggesting a potentially swift resolution, the conflict continues to unfold, with a ceasefire hanging in the balance, and with some measures of shipping volumes through the Strait of Hormuz still reduced to a trickle. At the same time, crude oil prices have been whipsawing amid shifting market perceptions about the persistence of the current supply shock (chart 1). The initial effects of higher oil prices are already showing up in hard data, particularly in energy- and fuel-related inflation across Indonesia, South Korea, and Vietnam (chart 2). In response, several governments have rolled out sizeable subsidy programmes to cushion rising energy costs, though these measures come with significant fiscal strain.

We also assess recent consumer inflation expectations in South Korea and Taiwan, which show early signs of edging higher (chart 3), although there is as yet no clear evidence of a meaningful unanchoring. To add further nuance, our latest Blue Chip survey suggests that most panellists expect only a limited and temporary pass-through from higher energy prices to core inflation, though a non-trivial minority anticipate a more persistent effect (chart 4). On the policy front, respondents broadly expect central banks to delay easing while avoiding outright tightening, with outcomes likely to diverge across regions (chart 5). In the near term, upcoming policy decisions in India, New Zealand, and South Korea—alongside other key data releases—will provide a useful test of these expectations (chart 6).

**The Middle East conflict**
The Middle East conflict continues to rage, with IMF-tracked shipping volumes through the Strait of Hormuz still reduced to a trickle. Meanwhile, crude oil prices remain volatile, gyrating alongside shifting perceptions over how soon normal oil flows might resume. In reality, there is still little sign of a substantive resolution, and no agreement to fully reopen the strait appears imminent, suggesting that oil flows are likely to remain constrained at low levels in the near term. That said, some investors are closely monitoring developments following reports of discussions around a potential 45-day ceasefire, which could pave the way toward a more lasting resolution. Until then, and absent any meaningful supply relief, crude oil prices—and by extension, energy-related inflation—are likely to face continued upward pressure, particularly for oil-dependent, importing economies.

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**Initial price impacts**
The initial inflation concerns among policymakers and investors stemming from the surge in oil prices are now beginning to show up in the data, as illustrated in chart 2. The latest March readings—capturing the period after the onset of the Middle East conflict—already point to a sharp acceleration in energy-related prices on a year-ago basis. Indonesia’s energy CPI basket has risen by around 9%, while diesel prices in South Korea have jumped 17%. Vietnam’s retail gasoline prices have seen an even more pronounced increase, at roughly 25.6%. Given the scale of these price surges, and their direct impact on everyday essentials—particularly fuel for daily commutes and broader economic activity—governments across Asia have begun rolling out sizeable subsidy programmes. These measures, often implemented at significant fiscal cost, aim to cushion the burden on households and firms. For instance, South Korea’s finance ministry proposed a supplementary budget of around $17.3 billion in late March to support low-income households, youth, and businesses amid higher oil prices, with approval expected by April 10. Meanwhile, Indonesia has allocated approximately $22.4 billion toward energy subsidies and support for selected energy and utilities firms to help keep prices affordable.

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**Consumer inflation expectations**
What policymakers are likely to focus on—beyond the immediate price impacts—is how the recent surge in oil prices feeds into inflation expectations. If left unanchored, these expectations could pose a far greater challenge than the supply-driven price shock itself, including reduced monetary policy effectiveness in reining in inflation and the risk of a self-fulfilling inflation cycle—though it is worth noting that such dynamics are not yet close to materialising. So far, there are some early, albeit inconclusive, signs that near-term consumer inflation expectations are beginning to drift higher in certain economies. As shown in chart 3, one-year-ahead inflation expectations edged up to 2.7% in March, while in Taiwan, consumer sentiment regarding domestic price trends over the next six months has turned notably more pessimistic relative to overall confidence.

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**The latest Blue Chip survey**
Turning to investor perspectives on how higher energy prices may feed into inflation, our special questions in the latest Blue Chip Financial Forecasts (BCFF) survey offer some useful nuance. As shown in chart 4, around two-thirds of panellists expect only a limited and temporary pass-through from higher oil prices to core inflation. That said, a non-trivial minority (31%) anticipate a more moderate and persistent pass-through. This is notable given the focus on core inflation, and underscores how energy prices can generate second-round effects even in typically non-energy components, reflecting the pervasive role of energy in everyday economic activity—from manufacturing to the upkeep of a wide range of goods and services.

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Delving deeper, we also asked panellists about their views on the prospective path of central bank policy should energy-driven inflation prove persistent. As shown in chart 5, responses broadly coalesce around two themes: central banks are likely to delay easing rather than tighten, and policy responses will vary meaningfully across regions. The former is already playing out to some extent in recent central bank decisions across Asia, with several explicitly citing the ongoing Middle East conflict as a reason to remain vigilant on inflation and refrain from easing policy prematurely. As for the latter, there are already signs of divergence in how different central banks are approaching the situation.

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**The week ahead**
Looking to the week ahead, there will be ample opportunities to assess whether investor expectations for central bank policy moves play out across Asia, with several rate decisions due—most notably in India, New Zealand, and South Korea. Also on the docket are China’s March CPI print and a range of Japan-related releases. Policymakers are likely to remain focused on balancing inflation control with supporting growth and maintaining currency stability. For now, and absent offsetting domestic factors, expectations for further near-term easing have been tempered by rising inflation risks. In China, recent CPI readings point to a modest pickup, while producer price deflation has begun to ease after a prolonged period of weak or negative inflation.

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Asia

Economic Letter from Asia: First-Round Effects

Michael J. Moran

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The report on payroll employment for March was impressive when viewed in isolation. Job growth was strong at 178,000, and the advance was broadly based. The construction and manufacturing sectors both posted solid gains, and the service-producing sector registered its firmest performance in more than a year. However, the gain might be viewed as a continuation of an unusual bout of random volatility. The March advance followed a notable drop in February (-133,000, revised down from -92,000), which followed an upside surprise in January (160,000, revised up from 126,000).

To be sure, statistical noise has been a factor in the past three months, but the results also represent an encouraging shift in job growth from that in the second half of last year, when employment rose only marginally in the third quarter and fell in the fourth. The net change in the past three months seems to signal that job growth is not drying up. The net advance so far this year is far from brisk, but it is clearly in the plus column and noticeably better than results in late 2025.

The unemployment rate also might be viewed as favorable, as it dipped 0.1 percentage point to 4.3%, although it was a “soft” decline. That is, employment as measured by the household survey declined 64,000, but the size of the labor force fell by a larger amount (off 396,000). Still, the jobless rate has climbed only modestly higher since the labor market started to ease in 2023, and it has inched lower in the past few months.

Unemployment has been contained despite modest hiring because layoffs also have been light. Initial claims for unemployment benefits have moved sideways in the past few years, indicating no change in the pace of layoffs. This pattern is confirmed by terminations data in the report on job openings and labor turnover (JOLTs) from the Bureau of Labor Statistics.

A supply-side shift in the labor market also has helped to contain the unemployment rate. Growth in the size of the labor force has slowed, and with fewer individuals seeking employment, those searching are more easily absorbed. Measures of the size of the labor force can be difficult to assess because there are breaks in the series every year. The Bureau of Labor Statistics adjusts the population controls used in its estimating procedure every January without revising past data to align with the new estimates. Thus, every January involves a discontinuity in the series, which will distort year-over-year changes.

However, Haver Analytics maintains a smoothed series originally developed by BLS to eliminate the breaks in the labor force data. As shown in the chart below, the smoothed series on the size of the labor force had been growing at a pace centered on 1.2% through 2022, but it has slowed irregularly since then (an observation for October is not available because of limited data collection during the government shutdown). The overall labor force is still growing, but the slower pace means fewer individuals looking for work, which most likely results in fewer being counted as unemployed.

The BLS collects data every month on both native-born and foreign-born individuals in the labor force. The breaks in these series are an issue, and Haver does not maintain smoothed series. However, the use of moving averages achieves enough smoothing to provide a sense of underlying changes. The native-born labor force has moved erratically in the past couple of years, but it has continued to advance. The foreign-born labor force, in contrast, seems to have peaked in mid-2025 and has generally declined since then.

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

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- The jump of 178,000 in payroll employment in March easily exceeded the expected gain of 51,000.
- Following a net gain in January and February, the employment setting seems to have brightened slightly.
- A dip in the unemployment rate continued the recent pattern of marginal changes.

Payroll Employment: Another Surprise in March, The Third Consecutive

Robert Brusca

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French manufacturing industrial production was flat in February after a January rebound; output rose by 0.2% following a 0.8% decline in December.

The components of industrial production in February showed 2.6% increase in consumer durables, a 0.4% increase in consumer nondurables, flat output from capital goods, and a 0.7% month to month decline in intermediate output.

Sequentially, French output had been growing at a slow, steady pace of 0.8% at an annual rate over both 12 months and six months, but then slipped to a 6.1% contraction at an annual rate over three months. Consumer durable goods output on this span shows consistent increases, but there are no trends to clear acceleration or deceleration. Consumer nondurables trace an accelerating path of moderate means from -1.8% over 12 months, to -0.4% over six months, and then rising at a 5.5% annual rate over three months. Capital goods output is moving in the opposite direction, growing by 3.4% over 12 months, slowing to a 0.7% annual pace over six months, and then contracting at a 9.5% annual rate over three months. Intermediate goods output is falling at 0.8% pace over 12 months, but then it switches to an expansion rate of 0.8% over six months and 0.6% and over three months. There's nothing remarkable about these patterns, except there's some acceleration, some deceleration, and a lot of mulling about at low growth rates.

As a separate item, French auto production is slipping and decelerating, falling by 7.1% at an annual rate over 12 months, falling at a 7.9% pace over six months, and then plunging at a 19.3% annual rate over three months. On these same horizons, motor vehicle registrations fall by 14.7% over 12 months; the weakness pares back to an 11.2% annual rate decline over six months, and then it steps up to a 22.1% decline at an annual rate over three months. French demand for autos is not in good shape.

In the quarter to date—now two months into the first quarter—manufacturing industrial production is falling at a 0.8% annual rate. That pace is boosted by 9.4% annual rate gain in consumer durables output but restrained by just a 0.2% annual rate increase in consumer nondurable goods. Capital goods output is falling at a 1.9% annual rate, while intermediate goods output is falling at a 1% annual rate. Also in the quarter to date, automobile production is plunging at a 24.3% annual rate, while on the demand side, motor vehicle registrations are falling at a 15% annual rate.

French manufacturing data are somewhat confusing. The chart shows that the industrial production trend has been showing consistent increases over 12 months, but it has recently been pulling back relatively sharply. On the other hand, the manufacturing PMI for France has been consistently negative going back to mid-2022 and only in early 2026 has the manufacturing PMI been posting some values above the 50% mark, indicating that output was starting to actually expand. In March, the PMI reading for manufacturing has slipped back by the thinnest margin below the 50% mark.

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Of course, events in the Middle East make everything more speculative, with the war effectively closing the Strait of Hormuz and no certainty about how or when that is going to be sorted out. In the meantime, the potential threat of ongoing oil price pressures has put both the ECB and the Bank of England in a position to be more wary with policy, and they warned markets about the potential for rate hikes as soon as their next meetings are engaged. That also raises questions about the outlook for growth. But we continue to track and chronicle trends in the data. It's also quite clear that we could have events that will play out that could completely undermine these trends before they get a chance to run to conclusion. It's an important time to be wary and watch all developments—a lot is in play.

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U.S. Construction Spending Down for Fifth Month This Year

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July ISM Factory Index Highest This Year

Chicago Purchasing Agents' Index Much Improved

Employment Cost Index Stable As Benefit Costs Slowed