Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040924e.jpg" width="353">
Capital goods orders in the UK, that is, in the &quot;engineering&quot; sector, were reported today for July. Total new orders were up 1.1% in the month, with orders on hand (i.e., the order &quot;backlog&quot; or &quot;book&quot;) rising 0.3%. (See the first graph.) Through their wide month-to-month swings, new orders appear to be forming a bottoming pattern, perhaps a precursor to some strengthening ahead.
The UK&#39;s Office for National Statistics (ONS) gives two breakdowns of these orders. Industries are shown in two broad groupings, materials and equipment and electrical and optical equipment. New orders in the former division, with a July index level of 105.4, have hovered near the 2000 base level since the origin of these data in 1996. The other category, electrical, has shown more cyclicality. New orders there were at 71.3 in July, still nearly 29% below their average in the year 2000. Obviously, Britain&#39;s high tech sector has not yet recovered from its post-Y2K decline.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040924d.jpg" width="353">
The ONS also tells us the origin of these orders, whether they come from domestic or foreign customers. Unlike Germany, whose industrial orders we discussed here a couple of weeks ago, in the UK, domestic orders are running firmer than foreign demand. This is particularly the case for the electrical/optical sector. Both domestic and foreign orders have sagged from their peaks in 2000, but new orders for export have fallen to just 60% of their 2000 volume while domestic orders are about 80%. (See second graph.) This hardly says that domestic orders are &quot;strong&quot; by pre-2000 standards, but they fell less during the downturn and bottomed sooner -- a 12-month moving average stopped falling in September 2002 -- than foreign orders, of which a 12-month average continued to decline until mid-2003.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Index, 2000=100, SA</th>
<th scope="col">July 2004</th>
<th scope="col">June 2004</th>
<th scope="col">May 2004</th>
<th scope="col">July 2003</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total New Orders</td>
<td>81.8</td>
<td>80.9</td>
<td>83.5</td>
<td>-2.5</td>
<td>0.4</td>
<td>-10.2</td>
<td>-10.5</td>
</tr>
<tr>
<td class="firstcol">Home (Domestic)</td>
<td>88.9</td>
<td>88.3</td>
<td>89.4</td>
<td>-2.2</td>
<td>4.5</td>
<td>-7.6</td>
<td>-5.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign (Export)</td>
<td>72.4</td>
<td>70.9</td>
<td>75.6</td>
<td>-2.7</td>
<td>-6.3</td>
<td>-14.1</td>
<td>-17.1</td>
</tr>
<tr>
<td class="firstcol">Ratio: Foreign/Home: Total</td>
<td>0.81</td>
<td>0.80</td>
<td>0.86</td>
<td>0.82</td>
<td>0.74</td>
<td>0.82</td>
<td>0.89</td>
</tr>
<tr class="odd">
<td class="firstcol">Machinery &amp; Equipment</td>
<td>0.95</td>
<td>0.97</td>
<td>1.09</td>
<td>1.00</td>
<td>0.88</td>
<td>0.94</td>
<td>0.91</td>
</tr>
<tr>
<td class="firstcol">Electrical &amp; Optical Equip</td>
<td>0.78</td>
<td>0.75</td>
<td>0.76</td>
<td>0.76</td>
<td>0.71</td>
<td>0.79</td>
<td>0.91</td>
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</tbody>
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Capital goods orders in the UK, that is, in the "engineering" sector, were reported today for July. Total new orders were up 1.1% in the month, with orders on hand (i.e., the order "backlog" or "book") rising 0.3%. (See the first [...]

UK "Engineering" Orders Gain in July; Home Market More Stable than Export Demand

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040924c.jpg" width="353">
Existing single family home sales fell 2.7% in August to 6.54M following an unrevised 2.9% drop in July. Consensus expectations had been for a lesser decline to 6.72M.
The figures reflect closings of home sales in earlier months.
Sales fell across the nation except in the Northeast where they were unchanged m/m (+1/4% y/y).
The median price of an existing home fell slightly for the second month to $190,100 (+7.3% y/y).
The latest release from the National Association of Realtors is available <a href="http://www.realtor.org/rmodaily.nsf/pages/News2004092401"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E905/@E90501/@E90501.HTM"> Existing Home Sales (000, AR)</a></th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Existing Single-Family</td>
<td>&nbsp;6,540</td>
<td>&nbsp;6,720</td>
<td>2.3%</td>
<td>6,098</td>
<td>5,593</td>
<td>5,290</td>
</tr>
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Existing single family home sales fell 2.7% in August to 6.54M following an unrevised 2.9% drop in July. Consensus expectations had been for a lesser decline to 6.72M. The figures reflect closings of home sales in earlier months. [...]

U.S. Existing Home Sales Fell A Second Month

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040924a.jpg" width="353">
Mass layoffs in the US as reported to the Bureau of Labor Statistics plunged 61.4% in August to the lowest level since August 2000. The decline, however, followed sharp increases in the prior two months.
The number of firms reporting mass layoffs in August fell to 809 from 2,094 in July.
These layoffs generated 69,033 (-48.4% y/y) initial claims for unemployment insurance, down a sharp 72.8% m/m.
Since the series inception in 1995 there has been a (negative) 45% correlation between the number of initial claims generated by mass layoffs and the one month change in non-farm payrolls.
The Mass Layoff Statistics (MLS) program collects reports on mass layoff actions that result in workers being separated from their jobs. Monthly mass layoff numbers are from establishments which have at least 50 initial claims for unemployment insurance (UI) filed against them during a 5-week period. Extended mass layoff numbers (issued quarterly) are from a subset of such establishments--where private sector non-farm employers indicate that 50 or more workers were separated from their jobs for at least 31 days.
Creative destruction and heightened job uncertainty are explored in this paper from the Federal Reserve Bank of Philadelphia titled <a href="http://www.phil.frb.org/files/br/brq304ln.pdf"> &quot;CEOs, Clerks, Computers, and the Rise of Competition in the Late 20th Century.&quot;</a>

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF10/@EF1001/@EF1001.HTM"> Mass Layoffs</a></th>
<th scope="col"> Aug</th>
<th scope="col"> July</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
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<td class="firstcol">Number of Events: All Industries</td>
<td>809</td>
<td>2,094</td>
<td>-35.7%</td>
<td>18,963</td>
<td>20,277</td>
<td>21,467</td>
</tr>
<tr>
<td class="firstcol">Numbers of Persons Filing Initial Unemployment Insurance Claim: All Industries</td>
<td>69,033</td>
<td>253,929</td>
<td>-48.4%</td>
<td>1,888,926</td>
<td>2,245,051</td>
<td>2,514,862</td>
</tr>
</tbody>
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Mass layoffs in the US as reported to the Bureau of Labor Statistics plunged 61.4% in August to the lowest level since August 2000. The decline, however, followed sharp increases in the prior two months. The number of firms reporting [...]

Mass Layoffs Plunge

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040924b.jpg" width="353">
Volatile orders for aircraft &amp; parts dominated the durable goods figures again in August as a 35.1% m/m decline followed a 37.3% July surge. This pulled total durable goods orders down 0.5% last month following a 1.8% jump in July that was little revised. Consensus expectations had been for no change in total August orders. Less aircraft durable orders were quite strong, up 2.5% (11.3% y/y) following a 0.4% decline in July. 
Commercial aircraft orders retraced nearly all of the doubling of bookings in July.
The volatility in aircraft orders pulled total nondefense capital goods orders down 7.4%. Less aircraft, capital goods orders still fell 0.5% (11.2% y/y), the fourth monthly decline in the last five.
Orders for computers &amp; electronic products recouped most of a 4.3% decline in July with a 4.1% (+4.3% y/y) August rise. Computer orders only gained back 0.8% (0.3% y/y) of the 5.2% July plunge but orders for communications equipment added 6.8% (1.3% y/y) to the 5.3% July strength. Orders for electrical equipment, appliance &amp; components rose 1.8% (9.2% y/y) after a 6.7% spike in July. Machinery orders were unchanged (17.5% y/y) following moderate gains in the prior three months.
&quot;The Software Patent Experiment&quot; from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.phil.frb.org/files/br/brq304rh.pdf"> here</a>.
During the last ten years there has been an 80% correlation between the y/y change in real nonresidential fixed investment in equipment &amp; software and the change in orders for nondefense capital goods. The correlation with shipments has been 93%.
Shipments of durable goods jumped 1.7% (13.4% y/y) following a 0.4% July rise. Shipments excluding the transportation sector, which were pumped by the motor vehicle and the aircraft sectors, rose 0.7% (+14.9% y/y).
Durable inventories rose 0.6% (5.1% y/y) following an upwardly revised 1.1% July spike.

<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/@ED0101.HTM"> NAICS Classification</a></th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Durable Goods Orders</td>
<td>-0.5%</td>
<td>1.8%</td>
<td>11.7%</td>
<td>2.6%</td>
<td>-1.7%</td>
<td>-10.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non-defense Capital Goods</td>
<td>-7.4%</td>
<td>9.3%</td>
<td>13.0%</td>
<td>5.6%</td>
<td>-7.2%</td>
<td>-15.5%</td>
</tr>
</tbody>
</table>
</body>
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Volatile orders for aircraft & parts dominated the durable goods figures again in August as a 35.1% m/m decline followed a 37.3% July surge. This pulled total durable goods orders down 0.5% last month following a 1.8% jump in July [...]

U.S. Durable Goods Orders Down: Aircraft Orders Quite Volatile

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040924b.jpg" width="353">
Volatile orders for aircraft &amp; parts dominated the durable goods figures again in August as a 35.1% m/m decline followed a 37.3% July surge. This pulled total durable goods orders down 0.5% last month following a 1.8% jump in July that was little revised. Consensus expectations had been for no change in total August orders. Less aircraft durable orders were quite strong, up 2.5% (11.3% y/y) following a 0.4% decline in July. 
Commercial aircraft orders retraced nearly all of the doubling of bookings in July.
The volatility in aircraft orders pulled total nondefense capital goods orders down 7.4%. Less aircraft, capital goods orders still fell 0.5% (11.2% y/y), the fourth monthly decline in the last five.
Orders for computers &amp; electronic products recouped most of a 4.3% decline in July with a 4.1% (+4.3% y/y) August rise. Computer orders only gained back 0.8% (0.3% y/y) of the 5.2% July plunge but orders for communications equipment added 6.8% (1.3% y/y) to the 5.3% July strength. Orders for electrical equipment, appliance &amp; components rose 1.8% (9.2% y/y) after a 6.7% spike in July. Machinery orders were unchanged (17.5% y/y) following moderate gains in the prior three months.
&quot;The Software Patent Experiment&quot; from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.phil.frb.org/files/br/brq304rh.pdf"> here</a>.
During the last ten years there has been an 80% correlation between the y/y change in real nonresidential fixed investment in equipment &amp; software and the change in orders for nondefense capital goods. The correlation with shipments has been 93%.
Shipments of durable goods jumped 1.7% (13.4% y/y) following a 0.4% July rise. Shipments excluding the transportation sector, which were pumped by the motor vehicle and the aircraft sectors, rose 0.7% (+14.9% y/y).
Durable inventories rose 0.6% (5.1% y/y) following an upwardly revised 1.1% July spike.

<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/@ED0101.HTM"> NAICS Classification</a></th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Durable Goods Orders</td>
<td>-0.5%</td>
<td>1.8%</td>
<td>11.7%</td>
<td>2.6%</td>
<td>-1.7%</td>
<td>-10.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non-defense Capital Goods</td>
<td>-7.4%</td>
<td>9.3%</td>
<td>13.0%</td>
<td>5.6%</td>
<td>-7.2%</td>
<td>-15.5%</td>
</tr>
</tbody>
</table>
Mass Layoffs Plunge 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 24, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040924a.jpg" width="353">
Mass layoffs in the US as reported to the Bureau of Labor Statistics plunged 61.4% in August to the lowest level since August 2000. The decline, however, followed sharp increases in the prior two months.
The number of firms reporting mass layoffs in August fell to 809 from 2,094 in July.
These layoffs generated 69,033 (-48.4% y/y) initial claims for unemployment insurance, down a sharp 72.8% m/m.
Since the series inception in 1995 there has been a (negative) 45% correlation between the number of initial claims generated by mass layoffs and the one month change in non-farm payrolls.
The Mass Layoff Statistics (MLS) program collects reports on mass layoff actions that result in workers being separated from their jobs. Monthly mass layoff numbers are from establishments which have at least 50 initial claims for unemployment insurance (UI) filed against them during a 5-week period. Extended mass layoff numbers (issued quarterly) are from a subset of such establishments--where private sector non-farm employers indicate that 50 or more workers were separated from their jobs for at least 31 days.
Creative destruction and heightened job uncertainty are explored in this paper from the Federal Reserve Bank of Philadelphia titled <a href="http://www.phil.frb.org/files/br/brq304ln.pdf"> &quot;CEOs, Clerks, Computers, and the Rise of Competition in the Late 20th Century.&quot;</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF10/@EF1001/@EF1001.HTM"> Mass Layoffs</a></th>
<th scope="col"> Aug</th>
<th scope="col"> July</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Number of Events: All Industries</td>
<td>809</td>
<td>2,094</td>
<td>-35.7%</td>
<td>18,963</td>
<td>20,277</td>
<td>21,467</td>
</tr>
<tr>
<td class="firstcol">Numbers of Persons Filing Initial Unemployment Insurance Claim: All Industries</td>
<td>69,033</td>
<td>253,929</td>
<td>-48.4%</td>
<td>1,888,926</td>
<td>2,245,051</td>
<td>2,514,862</td>
</tr>
</tbody>
</table>
U.S. Existing Home Sales Fell A Second Month 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 24, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040924c.jpg" width="353">
Existing single family home sales fell 2.7% in August to 6.54M following an unrevised 2.9% drop in July. Consensus expectations had been for a lesser decline to 6.72M.
The figures reflect closings of home sales in earlier months.
Sales fell across the nation except in the Northeast where they were unchanged m/m (+1/4% y/y).
The median price of an existing home fell slightly for the second month to $190,100 (+7.3% y/y).
The latest release from the National Association of Realtors is available <a href="http://www.realtor.org/rmodaily.nsf/pages/News2004092401"> here</a>.

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<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E905/@E90501/@E90501.HTM"> Existing Home Sales (000, AR)</a></th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Existing Single-Family</td>
<td>&nbsp;6,540</td>
<td>&nbsp;6,720</td>
<td>2.3%</td>
<td>6,098</td>
<td>5,593</td>
<td>5,290</td>
</tr>
</tbody>
</table>
</body>
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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040923e.jpg" width="353">
Today, Statistics New Zealand published that nation&#39;s second quarter current account. As with South Africa yesterday, there was notable deterioration. In New Zealand, though, both trade and income balances contributed to the larger deficit. At NZ$2,074 million, the current account had only the third deficit larger than NZ$2.0 billion in the 17-year history of this balance of payments compilation.
The balance on goods and services trade, often in sizable surplus, shrank to nearly zero in Q2. A surge in goods imports of 11.5% was the main force, illustrated in the first graph; the country&#39;s separate trade data indicate that, as in many other countries, &quot;mineral fuels&quot; imports were up sharply. At the same time, exports of goods were far from weak, with a gain of 7.3% (quarterly percent changes), extending their recovery for a third quarter.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040923f.jpg" width="353">
Another major factor in New Zealand&#39;s current account is the balance on income and transfers. This deficit of $2.1 billion in Q2 is the largest ever. Foreign investment is important in New Zealand, and its expansion last year is now leading to more outflows of investment income this year, as seen in the second graph. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Seasonally Adjusted, Million NZ$</th>
<th scope="col">Q2 2004</th>
<th scope="col">Q1 2004</th>
<th scope="col">Q4 2003</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Current Account Balance </td>
<td>-2074</td>
<td>-1520</td>
<td>-1225</td>
<td>-5624</td>
<td>-3949</td>
<td>-2962</td>
</tr>
<tr>
<td class="firstcol">Balance on Goods &amp; Services</td>
<td>+30</td>
<td>+267</td>
<td>+161</td>
<td>+842</td>
<td>+2168</td>
<td>+3716</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports of Goods -- %Chg</td>
<td>7.3%</td>
<td>5.8%</td>
<td>2.9%</td>
<td>-7.6%</td>
<td>-5.4%</td>
<td>11.1%</td>
</tr>
<tr>
<td class="firstcol">Imports of Goods -- %Chg</td>
<td>11.5%</td>
<td>3.0%</td>
<td>0.7%</td>
<td>-1.9%</td>
<td>1.8%</td>
<td>4.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Balance on Income &amp; Current Transfers</td>
<td>-2104</td>
<td>-1786</td>
<td>-1386</td>
<td>-6466</td>
<td>-6117</td>
<td>-6677</td>
</tr>
</tbody>
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Today, Statistics New Zealand published that nation's second quarter current account. As with South Africa yesterday, there was notable deterioration. In New Zealand, though, both trade and income balances contributed to the larger [...]

New Zealand Current Account Deteriorates in Q2

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040923d.jpg" width="353">
The Chicago Fed National Activity Index (CFNAI) fell last month to 0.19 following a sharp improvement in July.
The three-month moving average of the CFNAI also fell to its lowest level of the year.
A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth.
During the last twenty years there has been a 74% correlation between the level of the CFNAI and q/q growth in real GDP.
The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production and income, the labor market, personal consumption and housing, manufacturing and trade sales, and inventories &amp; orders.
A recent speech by Fed Governor Edward M. Gramlich titled &quot;Oil Shocks and Monetary Policy&quot; is available <a href="http://www.federalreserve.gov/boarddocs/speeches/2004/20040916/default.htm"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM"> Chicago Fed</a></th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">Aug &#39;03</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>0.19</td>
<td>0.53</td>
<td>-0.44</td>
<td>-0.11</td>
<td>-0.40</td>
<td>-1.19</td>
</tr>
</tbody>
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The Chicago Fed National Activity Index (CFNAI) fell last month to 0.19 following a sharp improvement in July. The three-month moving average of the CFNAI also fell to its lowest level of the year. A zero value of the CFNAI indicates [...]

Chicago Fed Nat'l Activity Index Lower in August

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040923c.jpg" width="353">
The Conference Board reported that the Composite Index of Leading Economic Indicators for August fell 0.3%, the third consecutive monthly decline. A 0.1% decline had been the Consensus expectation and July&#39;s decline was unrevised.
Among the 10 components only 30% rose over a one month span. A narrowing of the yield curve and lower building permits had the largest negative influences. Over a six month span 70% of the leaders rose.
The leading index is based on eight previously reported economic data series. Two series, orders for consumer goods and orders for capital goods, are estimated.
A 1997 article from the Federal Reserve Bank of St. Louis titled &quot;Strengthening the Case for the Yield Curve as a Predictor of U.S. Recessions&quot; can be found <a href="http://research.stlouisfed.org/publications/review/97/03/9703md.pdf"> here</a>.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040923b.jpg" width="353">
The coincident indicators rose 0.2% and has not declined m/m since April of last year. During the last ten years there has been an 82% correlation between the six month growth in the coincident indicators and two quarter growth in real GDP.
The lagging indicators fell 0.1% and the ratio of the coincident to the lagging indicators, a measure of how the economy is performing relative to its excess, rose for the first month in three.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM"> Business Cycle Indicators</a></th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">6-Month Growth</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>-0.3%</td>
<td>-0.3%</td>
<td>2.8%</td>
<td>1.3%</td>
<td>2.2%</td>
<td>-0.8%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.4%</td>
<td>0.4%</td>
<td>-0.5%</td>
<td>-0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.1%</td>
<td>0.6%</td>
<td>-1.3%</td>
<td>-2.2%</td>
<td>-2.8%</td>
<td>-1.4%</td>
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The Conference Board reported that the Composite Index of Leading Economic Indicators for August fell 0.3%, the third consecutive monthly decline. A 0.1% decline had been the Consensus expectation and July's decline was unrevised. [...]

Leading Indicators Down Again

PMIs showing widespread revival of global economy

Crude oil price has returned to pre-conflict level but traffic through Hormuz still subpar

Surging orders for computers and electronics propelling durable goods orders

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

Disrupted global supply chains placing upward pressure on US goods prices

Construction of data centers has overtaken transportation construction in US

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

US is big leader in global surge in private AI investment

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

Sharply rising share of AI-related jobs

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

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

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

Cost of transporting crude oil has soared to series high

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

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

Is recent drop in sentiment signaling softer growth ahead?

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

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

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

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Andrew Cates

**Growth Surprises Continue to Underpin Equity Resilience**
Global equity markets have proved remarkably resilient in recent weeks, shrugging off intermittent bouts of geopolitical and policy uncertainty to grind higher. Chart 1 below helps explain why: it tracks the relationship between global growth-versus-inflation surprises and world equity markets, and on that measure the recent run of global growth data has continued to surprise on the upside relative to inflation outturns — a combination that has historically been supportive for risk assets. Whether that resilience persists will depend on whether the growth-surprise advantage evident in the chart below can be sustained in the face of the inflationary pressures explored below.

260709Z1.jpg

**PMIs Confirm a Broadly Solid Global Expansion**
This week's final composite PMI readings for June reinforced the broader impression of resilient global growth. As chart 2 below shows, most major economies posted readings comfortably in expansionary territory, with India continuing to lead the pack and the US not far behind. Even the laggards in the sample are hovering close to the expansion threshold rather than falling decisively below it, suggesting stabilisation rather than outright contraction (and with the UK a notable exception).

260709Z2.jpg

**Inflation Surprises Are Creeping Back, and Bond Yields Are Taking Notice**
The US growth picture painted by Haver's surprise indices broadly echoes the message from the global PMI data. Chart 3 below shows the combined growth-and-inflation surprise index drifting higher this week, and closer inspection suggests growth is doing most of that work, with activity data continuing to outperform expectations. That is, on the face of it, good news. But it has not stopped bond markets from taking notice: short-dated Treasury yields have remained elevated in recent weeks, as stronger growth keeps alive the possibility that the Federal Reserve holds rates higher for longer or even lifts them in coming weeks.

260709Z3.jpg

**Supply Chains Are Tightening** 
Latest data show that global supply chain pressures tightened by less in June than they had the month before, likely reflecting the easing of Middle East tensions through much of the period. Chart 4 below shows that pressures troughed in the middle of last year and have been building gradually since, though June's slower pace of tightening suggests that easing had started to feed through. Still, today's flare-up threatens to undo that improvement, particularly if it affects shipping routes or energy flows through the region once again.

260709Z4.jpg

**Extreme Weather: An Old Supply-Side Risk Returns**
Geopolitics is not the only source of supply-side risk currently in play. Large parts of Europe have been gripped this week by another intense and prolonged heatwave, with temperatures in several major cities running well above seasonal norms. Extreme heat of this kind carries real economic costs: it depresses labour productivity, particularly in outdoor and manufacturing-adjacent sectors, strains electricity grids as air-conditioning demand spikes, and can disrupt agricultural output and river-based transport when water levels fall. Episodes like this have become more frequent in recent years, and while any single heatwave rarely shifts the macro picture on its own, the cumulative effect of more frequent and more severe weather events could start showing up in productivity and inflation data across the advanced economies. It is a reminder that the supply side of the global economy faces structural as well as cyclical challenges, and that climate-related disruption deserves a permanent place alongside geopolitics and demographics in any assessment of medium-term inflation risk.

260709Z5.jpg

**AI Investment: The Other Side of the Supply Equation**
Set against these supply-side headwinds is a genuinely positive structural development: the extraordinary scale of private investment now flowing into artificial intelligence. Chart 6 below shows just how sharply that investment has grown in recent years, reaching a fresh high last year. If even a fraction of that investment translates into genuine productivity gains, it could provide a meaningful long-run offset to the energy, climate and geopolitical constraints highlighted elsewhere in this week's charts. The scale of the bet now being placed on AI is large enough that it is beginning to show up in aggregate investment and capital expenditure data across the advanced economies, and it is likely to remain one of the defining structural themes shaping the global growth outlook over the remainder of this decade.

260709Z6.jpg

Global markets head into this week’s closing stages digesting a mixed set of signals. Last week's US non-farm payrolls report undershot expectations, adding to questions about the durability of the US labour market even as broader activity data have continued to hold up well. Compounding that picture, news broke today of renewed instability in the Middle East, reintroducing a geopolitical risk premium into markets just as investors had begun to look past it. Global equity markets have nonetheless remained resilient, continuing to track the broadly encouraging tone of incoming activity data (chart 1). That resilience was reinforced by a solid set of global PMIs across most major economies over the past few days (chart 2). Haver's surprise indices tell a similar story of positive growth momentum in the US, but with an important caveat: incoming inflation data have also been surprising to the upside, driven largely by higher oil prices (chart 3). These inflation risks could persist moreover, as global supply chain pressures have picked up in recent months and today's flare-up in the Middle East threatens to add further strain (chart 4). The world economy remains vulnerable to other supply-side shocks too, such as the extreme heat gripping much of Europe this week (chart 5). Still, on the other side of the ledger the enormous scale of investment now flowing into artificial intelligence could be a genuine source of supply-side potential (chart 6).

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Charts of the Week: Growth Holds Firm

Robert Brusca

260710E.jpg

Manufacturing output in the countries of the European Monetary Union continues to underperform. The median change for the 11 countries reporting on the table is a 0.5% decline in May following a 0.3% increase in April. However, only 41.7% of the reporters are accelerating in May, compared to 25% in April, although in March over half of the reporters had showed some acceleration, with output at 61.5%.

In May, of these eleven early reporters, seven showed month-to-month declines in output. This compares to four showing declines in April and four showing declines in March.

**Sequential trends**
Over 12 months, output is declining in four of these eleven countries: Germany, Luxembourg, Ireland, and Portugal. Over six months, output declines in five of the eleven countries. Over three months, output declines in four of the eleven countries. Over these broader sequential periods, output is increasing in most cases; only one country, Ireland, shows consistent declines in output over three months, six months, and 12 months. However, among EMU countries, only Italy shows output expanding on all three timelines, although Sweden, an EU member country, also shows output increasing in all three periods.

Amid the output weakness in May, the quarter-to-date calculation for industrial production growth is also broadly weak. In May, seven of the eleven quarter-to-date changes in industrial production are negative. Positive results, increases in the quarter-to-date, are registered by Germany, Luxembourg, Greece, and Portugal.

The ranking of the year-over-year growth rates shows seven countries with output growth rate rankings below 50%, marking them as below their respective medians. The comparisons for output growth are taken back to 2006, a period of about 20 years.

Four EMU countries rank above their twenty-year medians: France, Italy, Luxembourg, and Greece.

The snapshot of industry in the monetary union is consistent, showing little momentum, little strength, and relatively low rankings for current growth rates; only a minority of reporters show an acceleration in growth in May compared to April. With the situation in the Strait of Hormuz deteriorating again, the outlook for industrial production has to remain guarded.

260710.jpg

Europe

Industrial Sector Remains Under Pressure in EMU

Winnie Tapasanun

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Existing home sales unexpectedly fell 2.4% m/m (+2.8% y/y) to 4.09 million units (SAAR) in June, the first monthly decline since March, following an upwardly revised 3.7% increase to 4.19 million in May (previously +3.2%; 4.17 mil.), according to the National Association of Realtors (NAR). The Action Economics Forecast Survey had expected June sales of 4.20 million units. Sales remained 36.4% below a high of 6.43 million in January 2022 and 38.0% below a peak of 6.60 million in January 2021. The June decline coincided with a rise in the average 30-year fixed mortgage rate to 6.49% in June, the highest since August 2025, after increasing to 6.44% in May, according to Freddie Mac. The sales figures are based on closings of sales contracts signed over the past couple of months.

Existing single-family home sales fell 2.4% (+3.3% y/y) to 3.73 million units in June, the first m/m fall in three months, following a 4.1% gain to 3.82 million in May, remaining 34.6% below a high of 5.70 million in January 2022. Sales of condos and co-ops decreased 2.7% (-2.7% y/y) to 360,000 in June, the lowest level since May 2025, after being unchanged m/m for the third successive month at 370,000, remaining 50.7% below a high of 730,000 in January 2022.

Regionally, June existing home sales declined m/m in all regions except the Northeast. Sales in the South dropped 3.6% (+3.8% y/y) to 1.89 million in June, a three-month low, after a 3.2% rise in May, and sales in the Midwest slid 3.0% (+2.1% y/y) to 980,000 following a 7.4% May advance; both posted the first m/m decrease in three months. Sales in the West fell 1.3% (+2.8% y/y) to 740,000, the lowest level since January, after being flat m/m at 750,000 in May. In contrast, sales in the Northeast increased 2.1% (0.0% y/y) to 480,000 after a 4.4% May gain. Notably, the South remained the dominant region, accounting for 46.2% of total U.S. existing home sales.

The median price of all existing homes (NSA) rose 2.2% (1.8% y/y) to $440,600 in June, the fifth consecutive m/m rise, on top of an upwardly revised 3.3% increase to $431,200 in May ($429,300 previously). Prices were 22.1% above a low of $360,800 in January 2023. The median price of an existing single-family home climbed 2.3% (1.8% y/y) to $446,400 in June, the fifth straight m/m increase, after a 3.4% advance to $436,400 in May. The median price of condos and co-ops, up for the sixth time in seven months, grew 0.6% (1.6% y/y) to $380,000 following a 1.0% May gain to $377,800. Regionally, overall prices rose m/m and y/y in June in the Northeast (+5.6%; +3.9% y/y), Midwest (+2.1%; +2.7% y/y), South (+1.0%; +0.9% y/y), and West (+0.8%; +0.9% y/y). All these price series were at their record highs.

Inventories of homes for sale fell m/m in June for the first time since December. The number of existing homes for sale (NSA) declined 0.6% (+1.3% y/y) to 1.56 million units following an upwardly revised 4.7% May rise to 1.57 million (the highest level since November 2019). The supply of homes on the market at the current selling rate (NSA) increased to 4.6 months in June from 4.5 months in May and April, matching the highest level since August 2025. A record low in supply of 1.6 months was in January 2022.

The data on existing home sales, prices and affordability are compiled by the National Association of Realtors. The data on single-family home sales extend back to February 1968. Total sales and price data and regional sales can be found in Haver's **USECON** database. Regional price and affordability data and national inventory data are available in the **REALTOR** database. Mortgage interest rates can be found in the **WEEKLY** database. The expectations figure is from the Action Economics Forecast Survey, reported in the **AS1REPNA** database.

260709H57.jpg

260709I57.jpg

- June sales -2.4% m/m to 4.09 mil., first drop in three mths.; +2.8% y/y, third straight y/y rise.
- Sales m/m down in the South (-3.6%), Midwest (-3.0%), and West (-1.3%); up in the Northeast (+2.1%).
- Sales y/y up in all regions except the Northeast w/ a flat reading.
- Median sales price +2.2% (+1.8% y/y) to $440,600, a record high.
- Unsold inventory -0.6% (+1.3% y/y) to 1.56 mil. units, first m/m decline since Dec.; 4.6 months' supply, highest since Aug. ’25.

U.S. Existing Home Sales Unexpectedly Fall in June from a Five-Month High

Kathleen Stephansen, CBE

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Initial claims for unemployment insurance declined 2,000 to 215,000 in the week ending July 4, from 217,000 in the week ending June 27, revised from 215,000. The four-week average was 218,750 in the July 4 week, down from 222,500 in the week ending June 27. The Action Economics/Haver Analytics Survey looked for 218,000 claims to have been filed. 

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—rose by 8,000 to 1.814 million in the week ending June 27, from 1.806 million in the week ending June 20, revised from 1.814 million. The four-week moving average rose to 1.808 million in the June 27 week from 1.801 million in the June 20 week. The insured unemployment rate was unchanged at 1.2% in the week of June 27. Except for a one-week dip to 1.1% in the week of April 25, the insured unemployment rate has been at 1.2% since the week of November 29, 2025.

The insured unemployment rate varied greatly across individual states and territories. In the week ending June 20, the highest unemployment rates were in Washington (2.03%), New Jersey (2.11%), Minnesota (2.15%), and Puerto Rico (2.45%). The lowest rates were in South Dakota (0.28%), Florida (0.35%), Alabama and North Carolina (both 0.41%), Louisiana (0.42%), and Arkansas (0.49%). Rates in other notable states include California (1.88%), Pennsylvania (1.63%), Illinois (1.58%), New York (1.52%), and Texas (1.12%). These state data are not seasonally adjusted.

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

260709C1.jpg

260709D1.jpg

- New claims declined by 2,000 to 215,000 in the week ending July 4.
- Continuing claims rose by 8,000 to 1.814 million in the week ending June 27.
- The insured unemployment rate was unchanged at 1.2% in the week of June 27.

U.S. Initial Unemployment Claims Declined in the Week of July 4

260709E.jpg

The German trade surplus surged in May to €19.1 billion from €14.7 billion in April. Exports rose by 0.9% in May while imports fell by 2.5%, creating a jump in the surplus month-to-month. In April, exports increased by 0.8% while imports rose by 1.1%.

Details on exports and imports lag by one month. In April, exports for motor vehicles and consumer goods declined, while exports of capital goods and other exports rose. On the import side, there were increases in imports ranging from 2.8% to 4.3% month-to-month across capital goods, motor vehicles, and consumer goods, but for the catch-all category ‘other’ imports fell by 2.7% month-to-month.

Flows adjusted for inflation showed an increase in exports of 0.4% in May while real imports fell by 3.3%. In April, real exports were flat while real imports fell by 0.2%.

The sequential behavior of real exports and real imports show independent activity. Imports log a clear weakening, rising 0.1% over 12 months, falling at a 5% annual rate over six months, and then falling at a 10.3% annual rate over three months. On the export side, real exports rose by 2.6% over 12 months, accelerated to a 7.2% annual rate over six months, but over three months have pulled back and fallen at a 1.6% annual rate. However, export growth still exceeds import growth over each of these horizons: 12 months, six months, and three months.

Trade trends paint a darkening picture of the German economy, with imports weak in real terms and trending even weaker, while activity on the export side of the equation pops over 12 months and six months but takes a hit over three months.

260709.jpg

The situation in the Strait of Hormuz continues to muddy the waters for the future. Passage through the strait has been sharply stopped, stabilized, revived, and now is back to being destabilized. That makes the strait a major uncertainty zone; it's hard to tell how these effects are going to play out over the coming months for German trade results and everyone else's. The deterioration of conditions in the Strait of Hormuz is now unknowable because Iran has decided to start shooting at ships, further destabilizing the outlook.

Economy in Brief

Jump to:

UK "Engineering" Orders Gain in July; Home Market More Stable than Export Demand

U.S. Existing Home Sales Fell A Second Month

Mass Layoffs Plunge

U.S. Durable Goods Orders Down: Aircraft Orders Quite Volatile

U.S. Durable Goods Orders Down: Aircraft Orders Quite Volatile

New Zealand Current Account Deteriorates in Q2

Chicago Fed Nat'l Activity Index Lower in August

Leading Indicators Down Again