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/041027a.jpg" width="353">
September durable goods orders continued to be pushed around by the aircraft sector. Orders in that volatile industry fell back for a second month after their spike in June and July. Total durable goods orders turned up 0.2% following August&#39;s 0.6% fall; machinery and high tech equipment were mainly responsible for the advance.
Nondefense capital goods orders managed a 0.6% increase in September. Excluding the decline in commercial aircraft, they were up a notable 2.6%. This was the fourth consecutive monthly gain in that segment and extended a generally rising trend that began early in 2003.
Shipments, after a good gain of 1.9% in August, dropped back 1.2% last month. The distribution was mixed among industries and categories. With the decline in shipments, the backlog of unfilled orders rose 0.7%. A simple ratio of the backlog to shipments in industries that have unfilled orders stands at almost 4.0 months. This is not high by recent standards, but indicates a stabilization after a two-and-a-half year downtrend.
Inventories of durable goods rose 0.3% (6.3% y/y) moderating further after July&#39;s 1.1% spike and August&#39;s sizable 0.8% rise.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
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<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED0101.HTM">NAICS Classification</a></th>
<th scope="col">Sept</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 class="odd">
<td class="firstcol">Durable Goods Orders</td>
<td>0.2%</td>
<td>-0.6%</td>
<td>1.9%</td>
<td>9.3%</td>
<td>3.0%</td>
<td>-1.9%</td>
<td>-10.6%</td>
</tr>
<tr>
<td class="firstcol">Nondefense Capital Goods</td>
<td>0.6%</td>
<td>-7.2%</td>
<td>9.3%</td>
<td>8.5%</td>
<td>6.4%</td>
<td>-7.4%</td>
<td>-15.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Excluding Aircraft</td>
<td>2.6%</td>
<td>0.3%</td>
<td>0.6%</td>
<td>7.5%</td>
<td>2.8%</td>
<td>-6.4%</td>
<td>-10.5%</td>
</tr>
</tbody>
</table>
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September durable goods orders continued to be pushed around by the aircraft sector. Orders in that volatile industry fell back for a second month after their spike in June and July. Total durable goods orders turned up 0.2% following [...]

U.S. Durable Goods Orders Turn Up, Helped by Machinery & Computers

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041026e.jpg" width="353">
The fourth quarter survey of industrial trends in the United Kingdom undertaken by the Confederation of Business Industries (CBI) revealed a sharp increase in pessimism among the 770 manufacturers participating in the survey. The CBI publishes the percent balance between those respondents who have a positive outlook and those who have a negative outlook on a number of business issues.
There were 10% more pessimists regarding domestic prospects than optimists in the latest survey. This compares with an excess of optimists of 7% in the third quarter survey. The pessimists and optimists were equally balanced regarding the outlook for exports in the fourth quarter survey, compared with an excess of optimists of 3% in the previous quarter.
One bright spot in the survey is the outlook for output over the next three months. In spite of the decline in optimism and a one percentage point drop in the balance, 6% more respondents increased rather than decreased output over the past three months and the balance of those expecting to increase over those expecting to lower output in the next three months rose to 14% from 6% in the third quarter..
In contrast to the optimism among manufacturers regarding output over the next three months is the pessimism regarding the outlook for capital spending and employment. The balance between those who expect to increase over those who expect to decrease spending on buildings has gone from -16 in the third quarter to -26 in the fourth. The comparable balances for spending on plant and equipment are 0 and -17. Furthermore, the balance between those who expect to increase over those intending to decrease employment in the next three months was -15 in the fourth quarter, compared to -7 in the third quarter.
In the first quarter of this year, the balance of those expecting prices to rise over those expecting them to fall was, for the first time since early 2001, greater than the balance of those expecting costs to rise over those expecting them to fall, suggesting that the respondents to the survey were looking forward to better profit trends. This relationship was, however, short lived and once more the balance of those predicting an increase over those predicting a decrease in costs is greater than the balance of those predicting a rise over those predicting a fall in prices. The trends are shown in the attached chart.

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<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
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<th scope="col" class="firstcol">CBI SURVEY&nbsp; (Percent Balances)</th>
<th scope="col">Q4 04</th>
<th scope="col">Q3&nbsp;04</th>
<th scope="col">Q4 03</th>
<th scope="col">Q/Q Pt Chg</th>
<th scope="col">Y/Y&nbsp; Pt Chg</th>
<th scope="col">2004</th>
<th scope="col">2003&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2002&nbsp;</th>
<th scope="col">&nbsp; 2001&nbsp;</th>
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<td class="firstcol">Business Optimism Domestic</td>
<td>-10</td>
<td>7</td>
<td>-7</td>
<td>-17</td>
<td>-3</td>
<td>7</td>
<td>-17</td>
<td>-6</td>
<td>-27</td>
</tr>
<tr>
<td class="firstcol">Business Optimism Exports</td>
<td>0</td>
<td>3</td>
<td>-8</td>
<td>-3</td>
<td>8</td>
<td>7</td>
<td>-15</td>
<td>-6</td>
<td>-22</td>
</tr>
<tr class="odd">
<td class="firstcol">Output, past three months</td>
<td>6</td>
<td>7</td>
<td>-19</td>
<td>-1</td>
<td>25</td>
<td>11</td>
<td>-12</td>
<td>-13</td>
<td>-4</td>
</tr>
<tr>
<td class="firstcol">Output, next three months</td>
<td>14</td>
<td>6</td>
<td>-4</td>
<td>8</td>
<td>18</td>
<td>13</td>
<td>-4</td>
<td>5</td>
<td>-2</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Prices, next three months</td>
<td>1</td>
<td>6</td>
<td>-7</td>
<td>-5</td>
<td>8</td>
<td>3</td>
<td>-10</td>
<td>-13</td>
<td>-12</td>
</tr>
<tr>
<td class="firstcol">Unit Cost, next three months</td>
<td>14</td>
<td>13</td>
<td>-2</td>
<td>1</td>
<td>16</td>
<td>7</td>
<td>-1</td>
<td>-7</td>
<td>-4</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital Expenditures, buildings</td>
<td>-26</td>
<td>-16</td>
<td>-29</td>
<td>-10</td>
<td>3</td>
<td>-18</td>
<td>-29</td>
<td>-26</td>
<td>-24</td>
</tr>
<tr>
<td class="firstcol">Capital Expenditures, plant &amp; equip</td>
<td>-17</td>
<td>0</td>
<td>-14</td>
<td>-17</td>
<td>-3</td>
<td>-3</td>
<td>-21</td>
<td>-23</td>
<td>-15</td>
</tr>
<tr class="odd">
<td class="firstcol">Employment, past three months</td>
<td>-4</td>
<td>2</td>
<td>-21</td>
<td>-6</td>
<td>17</td>
<td>-6</td>
<td>-25</td>
<td>-31</td>
<td>-15</td>
</tr>
<tr>
<td class="firstcol">Employment, next three months</td>
<td>-15</td>
<td>-7</td>
<td>-26</td>
<td>-8</td>
<td>11</td>
<td>-11</td>
<td>-28</td>
<td>-26</td>
<td>-21</td>
</tr>
</tbody>
</table>
</body>
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The fourth quarter survey of industrial trends in the United Kingdom undertaken by the Confederation of Business Industries (CBI) revealed a sharp increase in pessimism among the 770 manufacturers participating in the survey. The CBI [...]

Pessimism Among U. K. Manufacturers Rises in the Fourth Quarter

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041026c.jpg" width="353">
Chain store sales fell another 0.6% last week and added to the 0.2% slip the prior period, according to the International Council of Shopping Centers (ICSC)-UBS.
The decline dropped sales so far in October 0.2% below the September average which fell 0.7% versusAugust.
During the last ten years there has been a 60% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart. 

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">10/23/04</th>
<th scope="col">10/16/04</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">Total Weekly Retail Chain Store Sales</td>
<td>433.9</td>
<td>436.4</td>
<td>3.7%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
</tr>
</tbody>
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Chain store sales fell another 0.6% last week and added to the 0.2% slip the prior period, according to the International Council of Shopping Centers (ICSC)-UBS. The decline dropped sales so far in October 0.2% below the September [...]

U.S. Chain Store Sales Down Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041026b.jpg" width="353">
The average price for unleaded regular gasoline rose to $2.03 per gallon last week and has averaged $2.00 so far this month.
The inflation adjusted &quot;real&quot; price of gasoline remained well below the early 1981 peak, but the roughly 50% increase during the last two years rivals the gain leading to the prior peak.
Crude oil prices also rose further. The price of West Texas Intermediate crude surged yesterday to $55.23 per barrel versus $53.29/bbl. averaged last week and $45.95 in September.
Wholesale natural gas prices also rose yesterday to $7.12/mmbtu (+55.8% y/y) and have averaged $5.96 in October versus $4.98 in September.
For the latest Short Term Energy Outlook from the US Department of Energy click <a href="http://www.eia.doe.gov/emeu/steo/pub/contents.html">here</a>.
&quot;Monetary Policy and Inflation Dynamics&quot; from the Federal Reserve Board can be found <a href="http://www.federalreserve.gov/pubs/feds/2004/200462/200462abs.html">here.</a>

<table border="0" cellspacing="0" width="100%">
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<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/daily/@D3/@D306/@D306.HTM">Energy Prices</a></th>
<th scope="col">10/19/04</th>
<th scope="col">12/31/03</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">US Retail Gasoline, Regular ($/Gal.)</td>
<td>$2.03</td>
<td>$1.48</td>
<td>31.8%</td>
<td>$1.56</td>
<td>$1.35</td>
<td>$1.42</td>
</tr>
<tr>
<td class="firstcol">Domestic Spot Market Price: West Texas Intermediate ($/Barrel)</td>
<td>$53.29</td>
<td>$32.55</td>
<td>76.6%</td>
<td>$32.78</td>
<td>$31.23</td>
<td>$19.38</td>
</tr>
</tbody>
</table>
</body>
</html>

The average price for unleaded regular gasoline rose to $2.03 per gallon last week and has averaged $2.00 so far this month. The inflation adjusted "real" price of gasoline remained well below the early 1981 peak, but the roughly 50% [...]

Gasoline Above $2.00/gal. & Crude Oil Topped $50/bbl.

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041026a.jpg" width="353">
The Conference Board&#146;s Index of Consumer Confidence fell a sharp 4.0% in October to 92.8. It was the third consecutive monthly decline and was to the lowest level since March. Consensus expectations had been for a reading of 93.5.
During the last twenty years there has been a 50% correlation between consumer confidence and the y/y change in real consumer spending.
The present situation index fell a moderate 1.2% (+40.6% y/y) for the third consecutive down month but the index of consumer expectations fell a sharp 5.8% to 92.0 (+0.5% y/y).
Jobs were viewed as hard to get by fewer survey participants, 27.8% versus 28.0% in September although 18.4% of participants expected fewer jobs in six months, the highest percentage since February.
The Conference Board&#146;s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1401/@EF1401.HTM">Conference Board</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</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">Consumer Confidence</td>
<td>92.8</td>
<td>96.7</td>
<td>13.6%</td>
<td>79.8</td>
<td>96.6</td>
<td>106.6</td>
</tr>
</tbody>
</table>
</body>
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The Conference Boards Index of Consumer Confidence fell a sharp 4.0% in October to 92.8. It was the third consecutive monthly decline and was to the lowest level since March. Consensus expectations had been for a reading of 93.5. [...]

Consumer Confidence Down Sharply

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041026a.jpg" width="353">
The Conference Board&#146;s Index of Consumer Confidence fell a sharp 4.0% in October to 92.8. It was the third consecutive monthly decline and was to the lowest level since March. Consensus expectations had been for a reading of 93.5.
During the last twenty years there has been a 50% correlation between consumer confidence and the y/y change in real consumer spending.
The present situation index fell a moderate 1.2% (+40.6% y/y) for the third consecutive down month but the index of consumer expectations fell a sharp 5.8% to 92.0 (+0.5% y/y).
Jobs were viewed as hard to get by fewer survey participants, 27.8% versus 28.0% in September although 18.4% of participants expected fewer jobs in six months, the highest percentage since February.
The Conference Board&#146;s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1401/@EF1401.HTM">Conference Board</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</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">Consumer Confidence</td>
<td>92.8</td>
<td>96.7</td>
<td>13.6%</td>
<td>79.8</td>
<td>96.6</td>
<td>106.6</td>
</tr>
</tbody>
</table>
Gasoline Above $2.00/gal. & Crude Oil Topped $50/bbl. 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 26, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041026b.jpg" width="353">
The average price for unleaded regular gasoline rose to $2.03 per gallon last week and has averaged $2.00 so far this month.
The inflation adjusted &quot;real&quot; price of gasoline remained well below the early 1981 peak, but the roughly 50% increase during the last two years rivals the gain leading to the prior peak.
Crude oil prices also rose further. The price of West Texas Intermediate crude surged yesterday to $55.23 per barrel versus $53.29/bbl. averaged last week and $45.95 in September.
Wholesale natural gas prices also rose yesterday to $7.12/mmbtu (+55.8% y/y) and have averaged $5.96 in October versus $4.98 in September.
For the latest Short Term Energy Outlook from the US Department of Energy click <a href="http://www.eia.doe.gov/emeu/steo/pub/contents.html">here</a>.
&quot;Monetary Policy and Inflation Dynamics&quot; from the Federal Reserve Board can be found <a href="http://www.federalreserve.gov/pubs/feds/2004/200462/200462abs.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/daily/@D3/@D306/@D306.HTM">Energy Prices</a></th>
<th scope="col">10/19/04</th>
<th scope="col">12/31/03</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">US Retail Gasoline, Regular ($/Gal.)</td>
<td>$2.03</td>
<td>$1.48</td>
<td>31.8%</td>
<td>$1.56</td>
<td>$1.35</td>
<td>$1.42</td>
</tr>
<tr>
<td class="firstcol">Domestic Spot Market Price: West Texas Intermediate ($/Barrel)</td>
<td>$53.29</td>
<td>$32.55</td>
<td>76.6%</td>
<td>$32.78</td>
<td>$31.23</td>
<td>$19.38</td>
</tr>
</tbody>
</table>
U.S. Chain Store Sales Down Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 26, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041026c.jpg" width="353">
Chain store sales fell another 0.6% last week and added to the 0.2% slip the prior period, according to the International Council of Shopping Centers (ICSC)-UBS.
The decline dropped sales so far in October 0.2% below the September average which fell 0.7% versusAugust.
During the last ten years there has been a 60% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">10/23/04</th>
<th scope="col">10/16/04</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">Total Weekly Retail Chain Store Sales</td>
<td>433.9</td>
<td>436.4</td>
<td>3.7%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041026d.jpg">
Surprisingly the Munich based IFO Institute&#39;s index of the business appraisal of the German economic climate improved marginally in October to 95.3 from 95.2 (2000=100) in September. The consensus had predicted a decline to 94.8 and the ZEW survey of financial opinion, which frequently anticipates moves in the IFO index, earlier this month had shown a drop of 29.0 points from September to October.
The overall index is the geometric mean of the index of current conditions and the index of expectations of conditions six months hence, both of which are shown in the attached chart. In 2002 and from mid 2003 into early 2004 , expectations have greatly exceeded current conditions. Currently expectations appear to be more in line with current conditions.
The IFO institute publishes its results in both index and percent balance form. However, not all the data are released at the same time. For example, the industrial breakdown on a percent balance basis is available a week or so before that on an index basis. According to the percent balance data, shown in the table below, the business climate in manufacturing, which is the only industry showing positive percent balances, dipped in October to 3.6% from 4.1% in September, but it is still 3.1 percentage points above October of 2003. The percent balance for the economic climate in retail sales was 2.4 percentage points better in October than September.NOTE: The current and expectations indexes are based on the percent balances of respondents to questions concerning their current condition and their expectations of conditions six months hence. The respondents appraise current conditions as &quot;good&quot;, &quot;satisfactory&quot; or &quot;poor&quot; and their expectations as &quot;more favorable&quot;, &quot;unchanged&quot; or &quot;more unfavorable&quot;. The &quot;satisfactory&quot; and &quot;unchanged&quot; categories are considered neutral and the balance is calculated as the difference between the &quot;good&quot; and &quot;poor&quot; in the case of the current conditions balance; and between the &quot;more favorable&quot; and the &quot;more unfavorable&quot; in the case of the expectations balance. These balances are then linked to a base year (2000 currently) and seasonally adjusted. The balance for the climate balance is the geometric mean of the current and expectations indexes.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Oct 04</th>
<th scope="col">Sep 04</th>
<th scope="col">Oct 03</th>
<th scope="col">M/M %</th>
<th scope="col">Y/Y %</th>
<th scope="col">2003&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2002 &nbsp;</th>
<th scope="col">&nbsp; 2001&nbsp; &nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Business Climate (2000=100)</td>
<td>95.5</td>
<td>95.2</td>
<td>95.3</td>
<td>0.11</td>
<td>0.0</td>
<td>91.7</td>
<td>89.4</td>
<td>92.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Situation</td>
<td>94.7</td>
<td>94.8</td>
<td>91.0</td>
<td>-0.11</td>
<td>4.07</td>
<td>88.4</td>
<td>85.3</td>
<td>93.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>95.9</td>
<td>95.7</td>
<td>99.8</td>
<td>0.21</td>
<td>-3.91</td>
<td>95.1</td>
<td>93.4</td>
<td>91.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>Pt.Dif</td>
<td>Pt.Dif</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Business Climate (% Balance)</td>
<td>-10.3</td>
<td>-10.4</td>
<td>-10.4</td>
<td>0.1</td>
<td>0.1</td>
<td>-17.5</td>
<td>-22.0</td>
<td>-16.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>3.6</td>
<td>4.1</td>
<td>0.5</td>
<td>-0.5</td>
<td>3.1</td>
<td>-7.9</td>
<td>10.3</td>
<td>-10.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Construction</td>
<td>-45.2</td>
<td>-45.6</td>
<td>-45.1</td>
<td>0.4</td>
<td>-0.1</td>
<td>-42.8</td>
<td>-44.4</td>
<td>-38.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale trade</td>
<td>-15.6</td>
<td>-15.3</td>
<td>-15.2</td>
<td>-0.4</td>
<td>-0.4</td>
<td>-24.0</td>
<td>-29.8</td>
<td>-20.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Retail trade</td>
<td>-28.9</td>
<td>-31.3</td>
<td>-17.7</td>
<td>2.4</td>
<td>-11.2</td>
<td>-25.4</td>
<td>-40.1</td>
<td>-20.5</td>
</tr>
</tbody>
</table>
</body>
</html>

Surprisingly the Munich based IFO Institute's index of the business appraisal of the German economic climate improved marginally in October to 95.3 from 95.2 (2000=100) in September. The consensus had predicted a decline to 94.8 and [...]

Germany's Ifo Index Surprises With a Small Improvement

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041025b.jpg" width="353">
The Weekly Leading Index of the US economy published by the Economic Cycle Research Institute (ECRI) has remained roughly unchanged since July. That performance pulled the smoothed six-month growth rate in the index to negative 1.0%.
Past recessionary periods in the US economy were signaled by negative growth in the ECRI Leading Index in the -5 to -10% range. During the last ten years there has been a 69% correlation between the six-month growth in the ECRI leading index of the US economy and two quarter growth in real GDP.
The components of the ECRI weekly leading index are money supply plus stock &amp; bond mutual funds, the JOC-ECRI industrial materials price index, mortgage applications, bond quality spreads, stock prices, bond yields, and initial jobless insurance claims.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041025a.jpg" width="353">
The ECRI Leading Index&#39;s recent pattern generally mirrors the Conference Board&#39;s Index of Leading Economic Indicators, with a slight lead. Construction of the ECRI Leading Index differs from the Conference Board Index but there has been a 70% correlation between the y/y percent change in the two series over the last 10 years.
The median lead of the ECRI index at business cycle peaks has been 10.5 months and at cycle troughs 3.0 months.
The latest from ECRI is available <a href="http://www.businesscycle.com/showstory.php?storyID=733."> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/weekly/@W8/@W801/@W801.HTM"> ECRI Leading Index</a></th>
<th scope="col">10/15/04</th>
<th scope="col">10/08/04</th>
<th scope="col">Growth Rate</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">Weekly</td>
<td>131.6</td>
<td>131.0</td>
<td>-1.0%</td>
<td>6.5%</td>
<td>1.1%</td>
<td>-5.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Sept</td>
<td>Aug</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Monthly</td>
<td>131.7</td>
<td>131.3</td>
<td>-0.3%</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body>
</html>

The Weekly Leading Index of the US economy published by the Economic Cycle Research Institute (ECRI) has remained roughly unchanged since July. That performance pulled the smoothed six-month growth rate in the index to negative 1.0%. [...]

ECRI U.S. Leading Index Flat Since July

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

Even with expected tariff-induced increases in inflation, BCFF forecasters look for a more aggressive round of monetary easing

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

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The **Industrial Materials Price Index** from the Foundation for International Business and Economic Research (FIBER) declined 1.7% during the last four weeks, after easing 0.4% in the prior four weeks. Together, these declines left prices unchanged during the last twelve months. During July, factory sector production rose an improved 1.4% y/y.

**Crude Oil & Benzene** group costs led the overall price weakening as they moved 3.3% lower (-12.6% y/y) in the latest four week period. The price of West Texas Intermediate crude oil declined 5.0% to $62.94 per barrel and remained 14.7% lower y/y. It had fallen to a low of $58.50 per barrel in the second week of May. The cost of the petrol-chemical benzene, used for making plastics & synthetic fibers, weakened 7.0% (-32.3% y/y). Excluding crude oil, the industrial commodity price index weakened 1.5% (+1.0% y/y) during the last four weeks.

Lower **Miscellaneous** group prices followed with a 2.9% weakening in the latest four week period, but prices remained up 4.0% y/y. Lumber prices fell 9.9% (+15.2% y/y) during the last four weeks. Natural rubber prices also were fairly weak as they fell 6.9% (-11.5% y/y) in four weeks. Working higher, tallow costs (used in the soap industry) improved 0.6% (32.9% y/y) over the last four weeks.

**Metals** group prices fell 1.2% (+1.1% y/y) over four weeks. Lead prices declined 2.6% (-4.3% y/y) while copper scrap prices weakened 1.6% (+5.9% y/y). Aluminum prices were off 1.5% in four weeks (+7.5% y/y), and the cost of zinc declined 1.4% (+0.5% y/y). Tin prices eased 0.4% (+4.4% y/y), but steel scrap costs edged 0.2% higher (-6.7% y/y) over four weeks.

Prices in the **Textile** group moved 0.3% higher (2.0% y/y) during the last four weeks. Burlap costs improved 3.9% (15.9% y/y), but cotton prices fell 0.9% (+2.3% y/y) in four weeks.

The Foundation for International Business and Economic Research (FIBER) develops economic measurement techniques as applied to business cycles and inflation in the U.S. and other market economies. The commodity price data can be found in Haver's **DAILY**, **WEEKLY**, **USECON** and **CMDTY** databases.

**Monetary Policy and the Fed’s Framework Review** is the title of today’s speech by Fed Chair Jerome H. Powell, and it can be found [here](https://www.federalreserve.gov/newsevents/speech/powell20250822a.htm).

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- Decline reverses earlier strength.
- Crude oil costs lead the weakening.
- Lumber & metals prices follow, but textile costs rise.

FIBER: Industrial Commodity Prices Decline Sharply in Latest Four Weeks

Andrew Cates

**The US housing market**
This first chart below highlights the growing downside risks to the US economic outlook stemming from the housing market. The S&P Case-Shiller home price index has slowed sharply from the pandemic-era surge, while the NAHB (National Association of Homebuilders) housing market index has weakened to levels historically associated with falling home prices. Housing matters because it is not just a cyclical sector but also a key transmission channel for the broader economy: consumer confidence, household balance sheets and credit conditions are all heavily influenced by shifts in the housing market.

250821Z1.jpg

**China’s economy**
The latest run of data from China has also reinforced downside risks for the broader world economy. As the Citigroup Economic Surprise Indices show below, China-specific data have more consistently undershot expectations in recent days. China’s July releases in particular disappointed: retail sales growth slowed to just 3.7% y/y, with weakness in autos and furniture hinting that earlier policy-driven boosts are fading. Industrial output and fixed-asset investment also came in below consensus, while property prices continued to fall and retail sector investment contracted by double digits. Even the labour market showed strain, with unemployment edging higher. The worry is not just China’s slowdown in isolation, but the spillovers. Softer Chinese demand feeds directly into global supply chains, commodity markets, and regional trade partners. Combined with tariff and non-tariff headwinds from the US, the risk is that China’s structural challenges spill into weaker global growth momentum.

250821Z2.jpg

**UK inflation** 
Persistently high services inflation remains one of the biggest headaches for UK monetary policy - and the UK is far from unique in that regard. Services are wage- and demand-sensitive, and their stickiness complicates the calibration of monetary policy even as broader disinflation takes hold. This week’s July upside surprise to UK services inflation was driven in no small part by airfares, which spiked 30% month-on-month – the largest July rise on record. While such volatility may prove temporary, it nonetheless lifted year-on-year services inflation to 5.0%, well above comfort levels. Still, the offsets are important: stripping out airfares and other volatile components, underlying services momentum appears to have eased, while broader data on wages, employment, and activity point to cooling demand. Nevertheless, this tension – headline stickiness versus softer underlying trends – underscores why the Bank of England is treading carefully.

250821Z3.jpg

**Inflation expectations and energy**
US medium-term inflation expectations have been unusually decoupling from oil prices in recent weeks. Normally, falling oil prices would help anchor breakevens, yet the 5-year forward inflation rate has edged higher of late even as WTI has slipped. This probably reflects US tariff policies that are shifting inflation dynamics away from energy and toward trade-related costs. At the same time, a weaker dollar has lifted imported prices, and the upward creep in expectations suggests markets may be more actively questioning whether the Fed’s “higher for longer” stance is sufficient to contain medium-term inflation risks.

250821Z4.jpg

**Clean energy**
Pivoting to more structural issues, the stark divergence between the global clean energy equity market index and the broader S&P 500 underlines the mounting challenges facing the renewables sector at present. While US equities have pushed to record highs, clean energy stocks have languished, weighed down by policy uncertainty, higher financing costs, and a more sceptical public mood. In the US, shifting political winds and uneven implementation of green subsidies have clouded the outlook for investment, while globally, resistance to renewables has grown as consumers and businesses grapple with high energy bills. Rising interest rates have further undermined the economics of capital-intensive clean energy projects, eroding returns and delaying investment pipelines. At the same time, bottlenecks in transmission infrastructure, permitting delays, and questions over the pace of the net-zero transition have all dented confidence. The result is a sector underperforming dramatically even as the urgency of the climate challenge grows.

250821Z5.jpg

**Renewables versus non-renewables**
Global energy consumption data show how limited—and in some respects, stalled—the transition away from fossil fuels has become. Oil, gas, and coal still dominate the energy mix, with shares that have proven remarkably resilient over the past several years. In fact, coal use has ticked higher of late as countries turned back to cheaper, more secure supplies amid energy price spikes and supply disruptions. While renewables have grown rapidly in percentage terms, their absolute contribution remains small compared with the scale of fossil fuel demand. Nuclear and hydro have also struggled to gain ground, leaving the overall mix looking more like a story of continuity than transformation. The result is a global transition that has not just slowed but, in key areas, has partially reversed—highlighting the gulf between climate ambitions and energy realities.

250821Z6.jpg

Recent financial market gains have been underpinned by resilient global data, AI-fuelled optimism, and hopes that most central banks will continue to loosen monetary policy. Yet beneath the surface, a more complicated picture may be emerging. In the US, housing indicators are flashing warnings about household balance sheets and credit channels (chart 1), while China’s latest data—covering retail sales, industrial output, and property—underscore persistent weakness (chart 2). In the UK, this week’s data showing sticky services inflation is complicating the Bank of England’s easing path (chat 3), while back in the US, medium-term inflation expectations have been rising despite softer oil prices (chart 4), hinting at a more disruptive role for trade policy. Against this cyclical backdrop sit deeper structural challenges: global energy consumption remains overwhelmingly dependent on fossil fuels, the clean energy sector has lost momentum amid high costs and policy uncertainty, and equity markets have punished renewables even as climate imperatives intensify (charts 5 and 6). Together, these dynamics suggest that while markets continue to trade on optimism, the mix of weak housing signals, patchy Chinese demand, sticky inflation, and an uneven energy transition potentially leaves the global outlook more fragile than headline performance implies.

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/1GqSlFq3gfZuMYDWhif8Ht?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: Cracks Beneath The Shine

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Existing home sales rose 2.0% (0.8% y/y) to 4.01 million (SAAR) in July after falling 2.7% in June to an unrevised to 3.93 million and rising 1.0% to 4.04 million in May, according to the National Association of Realtors (NAR). The Action Economics Forecast Survey expected 3.91 million unit sales in July. Last month’s sales decline accompanied a decline in the effective 30-year mortgage interest rate to 6.72% from 6.82% in June. The sales figures are based on closings of sales signed over the past couple of months.

Existing single-family home sales rose 2.0% (1.1% y/y) during July to 3.64 million units after a 3.0% decline to 3.57 million in June and a 1.4% May rise to 3.68 million. Sales of condos and co-ops rose 2.8% (-2.6% y/y) to 370,000 after holding steady in June.

Sales were mixed across the country last month. Sales in the Northeast increased 8.7% (2.0% y/y) to 500,000 following an 8.0% June decline. Sales in the South improved 2.2% both m/m and y/y to 1.85 million, after falling 2.2% in June. Sales in the West rose 1.4% (-4.0% y/y) to 720,000 after a 1.4% June gain. Falling by 1.1% (+1.1% y/y) to 940,000 were sales in the Midwest after falling 4.0% in June.

The median price of all existing homes (NSA) in July weakened 2.4% (+0.2% y/y) from the June record to $422,400. The median price of an existing single-family home fell 2.3% (+0.3% y/y) to $428,500 in July, and the median price of condos & co-ops declined 3.1% (-1.2% y/y) to $362,600 last month. Prices for homes in the West declined 1.1% (-1.4% y/y) to $620,700 while prices in the Northeast fell 6.3% (+0.8% y/y) to $509,300. In the South, prices were off 1.8% (-0.6% y/y) to $367,400 while in the Midwest, home prices fell 1.1% (+3.9% y/y) to $333,800.

The number of existing homes for sale (NSA) rose 0.6% (15.7% y/y) to 1.55 million units in July. The supply of homes on the market at the current selling rate (NSA) slipped to 4.6 months, still nearly the highest level in nine years, up from a low of 1.6 months 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.

The minutes to the latest **FOMC** meeting can be found [here](https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20250730.pdf).

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- Home sales remain below recent high in December.
- Sales are slightly higher m/m in most of country.
- Median sales price slips from record high.

U.S. Existing Home Sales Rise Slightly in July; Home Prices Decline

Sandy Batten

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The Current Activity Diffusion Index from the latest Manufacturing Business Outlook Survey (MBOS) conducted by the Federal Reserve Bank of Philadelphia, fell more than 16 points to -0.3 in August from 15.9 in July. The index has posted negative readings, which indicate that activity is declining, in four of the previous five months. A reading of +5.0 for August had been expected by the Action Economics Forecast Survey. Nearly 30% of respondents reported an increase in activity in August, down from 31.7% in July, while 30% reported a decline, up markedly from 16% in July. Responses to this month's survey were collected from August 11 to August 18.

The headline index reflects the answer to a single question on activity. Haver Analytics calculates an ISM-adjusted current activity diffusion index from five key components using the methodology employed in constructing the national ISM index. That calculated index fell to 49.1 in August, the first reading below the critical 50 level that separates expansion from contraction since April, from 51.2 in July.

Looking at the component indexes, both new orders and shipments posted significant declines in August with orders plummeting into negative territory at -1.9 versus 18.4 in July. This was the first negative reading for new orders since the tariff-induced plunge in April. Thirty-four percent of respondents reported an increase in orders in August, little changed from 35% in July. In contrast, 36% reported a decline in orders in August, up markedly from 17% in July. Shipments also declined significantly in August although they remained in positive territory at 4.5 versus 23.7 in July. Twenty-nine percent of respondents reported an increase in shipments, down slightly from 32% in July. In contrast, 24% reported a decline, up markedly from 9% in July.

Firms continued to report overall increases in employment, but at a slower pace. The employment index fell 4 points to 5.9 in August from 10.3 in July. Most firms continued to report no change in employment levels (74%), while the share of firms reporting increases (16%) exceeded the share reporting decreases (10%, up from 7% in July). The average workweek index rose from 0.4 in July to 4.7 in August, its highest reading since March.

There was still no indication that increased tariffs have damaged supply chains. The delivery times index slipped further below zero to -5.4 in August, the fourth negative reading in five months indicating that delivery times are shortening, from -4.7 in July. Thirteen percent of respondents reported an increase in delivery times in August, up from 8% in July, while 18% reported a decrease versus 13% in July.

Inflation indicators continued to rise in August. The prices paid index jumped to 66.8 in August, its highest reading since May 2022, from an already elevated 58.8 in July. Nearly 67% of respondents reported an increase in input prices while no respondent reported a decline. The prices received index edged up to 36.1 in August, its highest reading in three months, from 34.8 in July. In the answer to a special question, firms expected a 4.1% increase in the prices of their own products over the coming year, up from 3.8% when this question was last asked in the May survey.

The outlook for the next six months brightened marginally in August with the Future Activity Index rising to 25.0 following an increase to 21.5 in July. Forty-one percent of respondents expect activity to increase over the coming six months, the same as in July, while 16% expect it to decline, down from 20% in July. The pace of increase in both new orders and shipments is expected to pick up. Delivery times are expected to increase only slightly. Employment growth is expected to slow. The outlook for capital expenditures rose markedly to 38.4 in August, the highest reading since January.

The Manufacturing Business Outlook Survey (MBOS), conducted by the Federal Reserve Bank of Philadelphia, is a monthly survey of manufacturers in the Third Federal Reserve District. Participants indicate the direction of change in overall business activity and in the various measures of activity at their plants. The diffusion indexes in the MBOS represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. The series from the survey dating back to May 1968 can be found in Haver's **SURVEYS** database. The expectations forecast figures are from the Action Economics Forecast Survey in **AS1REPNA**.

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- The headline index fell more than 16 points to -0.3, led by outsized declines in both new orders and shipments.
- The ISM-adjusted composite fell below the critical 50 level for the first time in four months, also pointing to a decline in activity.
- Delivery times shortened further while both prices paid and prices received indexes posted gains.

U.S. Philly Fed Manufacturing Index Dipped Below Zero in August

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Initial claims for unemployment insurance rose to 235,000 during the week ended August 16 after falling to an unrevised 224,000 in the prior week. The Action Economics Forecast Survey expected 226,000 initial claims for last week. The four-week moving average of initial claims increased to 226,250 from 221,750. It was the highest level since the second week of July.

In the week ended August 9, the total number of unemployment insurance beneficiaries – also known as “continuing claims” – rose to 1.972 million from 1.942 million in the prior week, revised from 1.953 million. The four-week moving average rose to 1.955 million, the highest level in five weeks.

In the week ending August 9, the insured rate of unemployment (the number of beneficiaries as a percent of covered employment) was 1.3% for the eleventh straight week.

The insured unemployment rate varied greatly across individual states and territories. In the week ended August 2, the highest unemployment rates were in New Jersey (2.74%), Puerto Rico (2.62%), Rhode Island (2.52%), California (2.14%), Minnesota (2.20%) and Massachusetts (2.15%). The lowest were in South Dakota (0.27%), Florida (0.39%), North Carolina (0.47%), Kansas (0.58%), Georgia (0.59%) and Louisiana (0.61%). Rates in other notable states include Pennsylvania (1.90%), Illinois (1.72%), New York (1.73%), Texas (1.25%) and Michigan (1.17%). 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. The expectations figure is from the Action Economics Forecast Survey in the **AS1REPNA** database.

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- Initial claims surge to highest level in eight weeks.
- Continuing claims extend upward trend.
- Insured unemployment rate holds steady.

Economy in Brief: 2004

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U.S. Durable Goods Orders Turn Up, Helped by Machinery & Computers

Pessimism Among U. K. Manufacturers Rises in the Fourth Quarter

U.S. Chain Store Sales Down Again

Gasoline Above $2.00/gal. & Crude Oil Topped $50/bbl.

Consumer Confidence Down Sharply

Consumer Confidence Down Sharply

Germany's Ifo Index Surprises With a Small Improvement

ECRI U.S. Leading Index Flat Since July