Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071031i.jpg" class="large" align="left">
UK consumer confidence fell in October after dropping sharply
in September. The
index now resides in the lower 15 percentile of its range - a very poor
standing. But the index is not without its paradoxes. Consumers rate
their financial situation as the best ever, at the top of its range of
responses. But the environment for making major purchases is rated as
the worst ever (going back to January 1996).
Over the last 12 months the household financial situation was
rated
at zero, which garners a percentile standing of 75% - top 25 percentile
of its range. But the general economic condition is only rated in the
bottom 30%.
Over the next 12 months the financial situation is put at +13
which
is a top 15% of range standing. But again the general economic
situation is rated much lower, in its 46th
percentile below the neutral mark of 50%.
As to income levels the bottom income group and the top group
each
rate conditions in the bottom 20 percentile of range or worse.
Consumers in the UK are having some fickle moments. But for
the most
part their assessment of the economy and the period ahead is that the
times that lie ahead will not be so good.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th colspan="7" scope="col"> GFK
Consumer Survey</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>% of 2Yr</td>
<td>% of 10Yr</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Oct-07</td>
<td>Sep-07</td>
<td>Aug-07</td>
<td>Jul-07</td>
<td>Range</td>
<td>Range</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Confidence</td>
<td>-8</td>
<td>-7</td>
<td>-4</td>
<td>-6</td>
<td> 14.3%</td>
<td>16.7%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">Current</td>
</tr>
<tr class="odd">
<td class="firstcol">Household Fin Sit</td>
<td>25</td>
<td>25</td>
<td>25</td>
<td>25</td>
<td> 100.0%</td>
<td> 100.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Major Purchases</td>
<td>-5</td>
<td>-3</td>
<td>4</td>
<td>-2</td>
<td> 0.0%</td>
<td> 0.0%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">Last
12 Months</td>
</tr>
<tr class="odd">
<td class="firstcol">Household Fin Sit</td>
<td>2</td>
<td>4</td>
<td>2</td>
<td>0</td>
<td>75.0%</td>
<td>70.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">General Econ Sit</td>
<td>-30</td>
<td>-29</td>
<td>-25</td>
<td>-25</td>
<td>29.4%</td>
<td>29.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">CPI</td>
<td>69</td>
<td>64</td>
<td>62</td>
<td>66</td>
<td> 100.0%</td>
<td> 100.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings</td>
<td>38</td>
<td>38</td>
<td>42</td>
<td>42</td>
<td>81.0%</td>
<td> 93.1%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">
Next
12-months
</td>
</tr>
<tr class="odd">
<td class="firstcol">Household Fin Sit</td>
<td>13</td>
<td>12</td>
<td>12</td>
<td>13</td>
<td> 85.7%</td>
<td> 85.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">General Econ Sit</td>
<td>-17</td>
<td>-19</td>
<td>-15</td>
<td>-13</td>
<td>46.2%</td>
<td>56.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment</td>
<td>29</td>
<td>27</td>
<td>29</td>
<td>27</td>
<td>28.6%</td>
<td>58.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Major Purchases</td>
<td>-18</td>
<td>-20</td>
<td>-18</td>
<td>-21</td>
<td>62.5%</td>
<td>29.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings</td>
<td>19</td>
<td>17</td>
<td>20</td>
<td>17</td>
<td>63.6%</td>
<td> 85.2%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">By
Income</td>
</tr>
<tr class="odd">
<td class="firstcol">Lower</td>
<td>-14</td>
<td>-13</td>
<td>-11</td>
<td>-8</td>
<td>20.0%</td>
<td> 12.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Upper</td>
<td>-3</td>
<td>-1</td>
<td>1</td>
<td>0</td>
<td> 10.0%</td>
<td> 9.1%</td>
</tr>
</tbody>
</table>
</body></html>

UK consumer confidence fell in October after dropping sharply in September. The index now resides in the lower 15 percentile of its range - a very poor standing. But the index is not without its paradoxes. Consumers rate their [...]

UK Consumer Confidence Stays in a Downdraft

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071031g.jpg" width="353">
Flash flare does not seem to be part of trend&#133;Wake up call or wrong number? 
The survey on flash inflation for the EMU region does not appear to be part of a trend. Indeed with the euro rising, the only real impulse to inflation right now is from commodity prices and since they are priced in dollars even that channel is muted. 
The jump in the flash HICP seems to be just a flash in the pan but it&#146;s a pan with explosives in it since the flash has made a huge impact. On a day when the EU Commission indexes show widespread losing in the Euro area and Draghi and Liikanen have made statements about the coming adverse impact on growth. On a totally different track, the BKK&#146;s/ECB&#146;s Weber has cautioned that the pressures on prices could force the ECB to act again to quell rising inflation pressures. 
The table below shows the relative trends. There are only three new observations for October for the flash overall rate and the overall rates for German and Italian inflation. For the others, trends derive from prices in September. Through that point there is no solid evidence of inflation spiking or even gradually rising. But Italy and Germany do support the acceleration in the overall rate in October. 
There is no core rate to look at to infer what the culprit was in creating price pressures. But there is little evidence of inflation building in the pipeline. In the Euro area 13 both goods and services prices have been pushed to lower rates of increase by the rising euro. For goods the strong euro is at work as the new three-month inflation rate through September is only 0.1% down from inflation in the area of 2% previously. Service sector inflation is at 2.1% for three months up from 2% over six months but down from 2.6% Yr/Yr. In short the 2.6% Euro area flash CPI may be a wake up call but it may also be a wrong number.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr><th colspan=" 8" scope="col"> Trends in HICP</th>

</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% mo/mo</td>
<td colspan="4">% saar</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td>Oct-07</td>
<td>Sep-07</td>
<td>Aug-07</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
</tr>
<tr class="grey3">
<td class="firstcol">EU-13</td>
<td>#N/A</td>
<td>0.4%</td>
<td>0.0%</td>
<td>1.8%</td>
<td>2.5%</td>
<td>2.1%</td>
<td>1.7%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Core</td>
<td>#N/A</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.1%</td>
<td>2.0%</td>
<td>2.0%</td>
<td>1.5%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Goods</td>
<td>#N/A</td>
<td>1.0%</td>
<td>0.0%</td>
<td>0.1%</td>
<td>2.2%</td>
<td>1.9%</td>
<td>1.6%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Services</td>
<td>#N/A</td>
<td>-0.5%</td>
<td>0.2%</td>
<td>1.8%</td>
<td>2.5%</td>
<td>2.5%</td>
<td>2.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">FLASH -&nbsp;</td>
<td>0.2%</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.1%</td>
<td>2.0%</td>
<td>2.6%</td>
<td>1.6%</td>
</tr>
<tr class="grey2">
<td colspan="8" class="firstcol">Monthly Flash data are derived from Yr/Yr presentation</td>
</tr>
<tr class="grey3">
<td colspan="8" class="firstcol">HICP</td>
</tr>
<tr class="grey3">
<td class="firstcol">Germany</td>
<td>0.2%</td>
<td>0.7%</td>
<td>-0.1%</td>
<td>3.1%</td>
<td>2.7%</td>
<td>2.7%</td>
<td>1.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">France</td>
<td>#N/A</td>
<td>0.1%</td>
<td>0.3%</td>
<td>1.8%</td>
<td>2.7%</td>
<td>1.6%</td>
<td>1.5%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Italy</td>
<td>0.7%</td>
<td>0.3%</td>
<td>0.2%</td>
<td>4.7%</td>
<td>3.3%</td>
<td>2.3%</td>
<td>1.9%</td>
</tr>
<tr class="grey3">
<td class="firstcol">UK</td>
<td>#N/A</td>
<td>0.1%</td>
<td>0.1%</td>
<td>-0.4%</td>
<td>0.6%</td>
<td>1.7%</td>
<td>2.4%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Spain</td>
<td>#N/A</td>
<td>0.4%</td>
<td>0.0%</td>
<td>2.3%</td>
<td>2.8%</td>
<td>2.7%</td>
<td>2.9%</td>
</tr>
<tr class="grey3">
<td colspan="8" class="firstcol">Core Excl Food Energy &amp; A</td>
</tr>
<tr class="grey3">
<td class="firstcol">Germany</td>
<td>#N/A</td>
<td>0.3%</td>
<td>0.1%</td>
<td>2.4%</td>
<td>2.6%</td>
<td>2.3%</td>
<td>0.8%</td>
</tr>
<tr class="grey3">
<td class="firstcol">France</td>
<td>#N/A</td>
<td>0.1%</td>
<td>0.3%</td>
<td>2.0%</td>
<td>2.0%</td>
<td>1.6%</td>
<td>1.2%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Italy</td>
<td>#N/A</td>
<td>0.4%</td>
<td>0.2%</td>
<td>2.3%</td>
<td>1.8%</td>
<td>1.8%</td>
<td>2.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">UK</td>
<td>#N/A</td>
<td>#N/A</td>
<td>0.2%</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>1.6%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Spain</td>
<td>#N/A</td>
<td>0.2%</td>
<td>0.3%</td>
<td>3.0%</td>
<td>2.7%</td>
<td>2.6%</td>
<td>3.0%</td>
</tr>
<tr class="grey1">
<td colspan="8" class="firstcol">Blue shaded area data trail by one month</td>
</tr>
</tbody>
</table>
</body>
</html>

Flash flare does not seem to be part of trend Wake up call or wrong number? The survey on flash inflation for the EMU region does not appear to be part of a trend. Indeed with the euro rising, the only real impulse to inflation right [...]

Sentiment Slips but Flash Inflation Flares

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071031h.jpg" align="left" class="large">
EU readings still strong&#8230;but countries and sectors are slowing 
 

The accompanying chart shows the diminished lift in the
aggregate EU sentiment index and the same result for the largest EMU
nations. Only France is still showing Yr/Yr gains in sentiment; the
rest have crossed the line to reveal Yr/Yr contraction. Not
surprisingly Italy, probably the least competitive of the large EMU
countries, is showing the sharpest contraction. Surprisingly France is
the most resilient, but the chart also tells why. France did not enjoy
the same degree of upswing that the others did. The EU and EMU members
plotted had Yr/Yr gains of 12% or more at some point. France&#8217;s peak
Yr/Yr gain came later and only amounted to 8%. In this way France seems
to be a laggard that is prospering off the growth of others. That
suggests that France&#8217;s decline will come later too. It does not promise
that France&#8217;s decline when it comes will be shallower. 
 

The top panel in the table below shows the relative strength
of the individual sectors within EU. Construction is the relative
strongest in that it is at the highest relative point in its own range
at the 93.3 percentile. That is followed by the industrial and retail
sectors at about a percentile reading of 85, consumer confidence at
75.9 and services at 65.8. 
 

In terms of the major EMU nations plus the UK, France as we
saw above is the relative strongest in EMU but, standing in the 88th
percentile of its range, the non-EMU UK is stronger still. The EMU
itself stands in the 73rd percentile of its range and the other major
EMU countries are below that with Germany in the 63rd percentile, Italy
in the 61st and Spain in the 50th. Over the last four months all of
these are showing slippage. Europe is slowing down. Is it the strong
euro or something else? With the spike in the inflation is the ECB
still going to hikes rates? All interesting questions to stay in touch
with, aren&#8217;t they? 
 
 


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th colspan="12" scope="col"> EU
Sectors and Country level Overall Sentiment</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">EU</td>
<td>Oct 
07</td>
<td>Sep 
07</td>
<td>Aug 
07</td>
<td>Jul 
07</td>
<td>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
<td>R-SQ 
w/ 
overall</td>
</tr>
<tr>
<td class="firstcol">Overall</td>
<td>109.5</td>
<td>110.6</td>
<td>113.1</td>
<td>113.3</td>
<td>82.9</td>
<td>48</td>
<td>117</td>
<td>74</td>
<td>43</td>
<td>100</td>
<td>1.00</td>
</tr>
<tr>
<td class="firstcol">Industrial</td>
<td>2</td>
<td>3</td>
<td>5</td>
<td>5</td>
<td>85.3</td>
<td>27</td>
<td>7</td>
<td>-27</td>
<td>34</td>
<td>-7</td>
<td>0.89</td>
</tr>
<tr>
<td class="firstcol">Consumer Confidence</td>
<td>-5</td>
<td>-4</td>
<td>-3</td>
<td>-2</td>
<td>75.9</td>
<td>42</td>
<td>2</td>
<td>-27</td>
<td>29</td>
<td>-10</td>
<td>0.82</td>
</tr>
<tr>
<td class="firstcol">Retail</td>
<td>2</td>
<td>1</td>
<td>6</td>
<td>5</td>
<td>85.2</td>
<td>14</td>
<td>6</td>
<td>-21</td>
<td>27</td>
<td>-6</td>
<td>0.47</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>0</td>
<td>1</td>
<td>0</td>
<td>0</td>
<td>93.3</td>
<td>14</td>
<td>3</td>
<td>-42</td>
<td>45</td>
<td>-18</td>
<td>0.44</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>19</td>
<td>19</td>
<td>22</td>
<td>20</td>
<td>65.8</td>
<td>61</td>
<td>32</td>
<td>-6</td>
<td>38</td>
<td>17</td>
<td>0.80</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>% m/m</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td colspan="2">Based on 
Level</td>
<td colspan="4">Level</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">EMU</td>
<td style="color: red;">-0.9%</td>
<td style="color: red;">-2.8%</td>
<td style="color: red;">-0.9%</td>
<td style="color: red;">-0.6%</td>
<td>73.7</td>
<td>70</td>
<td>117</td>
<td>74</td>
<td>44</td>
<td>100</td>
<td>0.94</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td style="color: red;">-0.6%</td>
<td style="color: red;">-3.3%</td>
<td style="color: red;">-0.9%</td>
<td style="color: red;">-0.5%</td>
<td>63.7</td>
<td>64</td>
<td>121</td>
<td>79</td>
<td>42</td>
<td>100</td>
<td>0.62</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>0.1%</td>
<td style="color: red;">-1.5%</td>
<td style="color: red;">-1.2%</td>
<td>0.6%</td>
<td>81.4</td>
<td>26</td>
<td>119</td>
<td>72</td>
<td>47</td>
<td>100</td>
<td>0.80</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td style="color: red;">-0.2%</td>
<td style="color: red;">-0.8%</td>
<td style="color: red;">-3.0%</td>
<td style="color: red;">-0.9%</td>
<td>61.5</td>
<td>90</td>
<td>121</td>
<td>72</td>
<td>49</td>
<td>100</td>
<td>0.79</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td style="color: red;">-2.7%</td>
<td style="color: red;">-3.4%</td>
<td>1.1%</td>
<td style="color: red;">-0.9%</td>
<td>50.4</td>
<td>178</td>
<td>118</td>
<td>67</td>
<td>50</td>
<td>100</td>
<td>0.66</td>
</tr>
<tr>
<td class="firstcol">Memo: UK</td>
<td style="color: red;">-2.0%</td>
<td>1.1%</td>
<td>4.5%</td>
<td style="color: red;">-5.7%</td>
<td>88.3</td>
<td>15</td>
<td>119</td>
<td>69</td>
<td>50</td>
<td>101</td>
<td>0.39</td>
</tr>
<tr class="grey1">
<td colspan="5" class="firstcol">since 1990
except services (Oct
1996)208</td>
<td colspan="2">-count</td>
<td colspan="2">services:</td>
<td>126</td>
<td colspan="2">-count</td>
</tr>
<tr class="grey1">
<td colspan="12" class="firstcol">Sentiment
is
an index, sector
readings are net balance diffusion measures</td>
</tr>
</tbody>
</table>
</body></html>

EU readings still strong…but countries and sectors are slowing The accompanying chart shows the diminished lift in the aggregate EU sentiment index and the same result for the largest EMU nations. Only France is still showing Yr/Yr [...]

EU Readings Still Strong…but FADING

Tom Moeller

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<img align="left" class="large" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071031d.jpg">
The ADP National Employment Report, reported by the payroll processor, found that private nonfarm payrolls rose a much improved 106,000 during October versus a 61,000 rise during September.
The U.S. Bureau of Labor Statistics employment figure for October will be published this Friday.
Last month, ADP&#39;s measure of private nonfarm payrolls for September indicated an upwardly revised 61,000 increase in jobs that was followed by a 73,000 increase in private nonfarm payrolls.
The sub-index for small payrolls, rose 63,000.
The sub-index for large payrolls, conversely, fell 7,000.
According to ADP and Macro Advisers, the correlation between the monthly percentage change in the ADP estimate and that in the BLS data is 0.90.
ADP compiled the estimate from its database of individual companies&#39; payroll information. Macroeconomic Advisers, LLC, the St. Louis economic consulting firm, developed the methodology for transforming the raw data into an economic indicator.
The ADP National Employment Report data is maintained in Haver&#39;s USECON database; historical data go back to December 2000. The figures in this report cover only private sector jobs and exclude employment in the public sector, which rose an average 11,083 during the last twelve months.
The full ADP National Employment Report can be found <a href="http://www.adpemploymentreport.com/PDF/FINAL_NER_Report_October2007.pdf">here</a>, and the ADP methodology is explained <a href="http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB25/@EB25.HTM">LAXEPA@USECON</a></th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Nonfarm Private Payroll Employment (m/m Chg.)</td>
<td>106,000</td>
<td>61,000</td>
<td>1.0%</td>
<td>1.7%</td>
<td>1.8%</td>
<td>1.3%</td>
</tr>
</tbody>
</table>
</body>
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The ADP National Employment Report, reported by the payroll processor, found that private nonfarm payrolls rose a much improved 106,000 during October versus a 61,000 rise during September. The U.S. Bureau of Labor Statistics [...]

ADP Report: Private Payroll Growth Much Improved

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071031a.jpg" width="353">
U.S. real GDP growth last quarter of 3.9% (AR), in the advance report from the Commerce Department, was higher than expectations for 3.2% growth.
The contribution to growth from net export improvement was another 0.9 percentage points after the 1.3 percentage point contribution during 2Q. Exports boomed at a 16.2% annual rate (9.6% y/y) while import growth of 5.2% (2.9% y/y) reflected the slowdown in U.S. final demand growth.
Growth in final sales to domestic purchasers at 2.5% (AR) wasn&#39;t bad following 2.1% 2Q growth and 1.7% growth in 1Q, but the likely increase for all of this year around 2.0% will lag last year&#39;s advance of 2.7% and 3.3% in 2004.
The shortfall in domestic demand growth was led by a whopping 20.1% AR (-16.4% y/y) decline in residential investment. It was near the top quarterly rate of decrease during this down cycle in the housing sector.
Firm growth in business fixed investment was again a mainstay of overall domestic demand. It rose 7.9% AR (4.8% y/y) rate after an 11.0% surge in 2Q. Spending on structures, in late cycle fashion, led that increase and rose 12.4% AR (12.8% y/y). Spending on equipment &amp; software also was firm at 5.9% (AR), the strongest since 1Q &#39;06, but the y/y gain of 1.4% was reduced by weak growth or q/q declines from 2Q &#39;06 to 1Q &#39;07.
Growth in real personal consumption expenditures also wasn&#39;t bad at 3.0% (3.0% y/y) which was double growth during 2Q. Growth in spending on durable goods amounted to 4.4% (4.7% y/y) as 11.8% growth in spending on furniture &amp; appliances offset a 5.4% drop in spending on motor vehicles. Spending on other durable goods boomed at an 11.7% rate. Nondurable goods spending turned in a 2.7% (2.4% y/y) advance and services spending growth was steady at 2.9% (3.0% y/y).
Inventories added just 0.4 percentage points to GDP growth after a 0.2 point contribution during 2Q. That contribution has been negative this year.
The GDP chain price index rose just 0.8% led by declines in both the nonresidential and residential price indexes. Consumer prices rose only 1.7%, held back by the decline in gasoline prices, while less food &amp; energy it rose just 1.8% (1.9% y/y).
<img align="right" class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071031b.jpg"><img align="left" class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071031c.jpg">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained 2000$, % AR</a></th>
<th scope="col">3Q &#39; 07 Advance</th>
<th scope="col">2Q &#39;07</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>3.9</td>
<td>3.8</td>
<td>2.6</td>
<td>2.9</td>
<td>3.1</td>
<td>3.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>0.4</td>
<td>0.2</td>
<td>-0.4</td>
<td>0.1</td>
<td>-0.2</td>
<td>0.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>3.5</td>
<td>3.6</td>
<td>3.0</td>
<td>2.8</td>
<td>3.3</td>
<td>3.3</td>
</tr>
<tr>
<td class="firstcol">Foreign Trade Effect</td>
<td>0.9</td>
<td>1.3</td>
<td>0.9</td>
<td>-0.1</td>
<td>-0.2</td>
<td>-0.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>2.5</td>
<td>2.1</td>
<td>2.1</td>
<td>2.7</td>
<td>3.3</td>
<td>3.8</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>0.8</td>
<td>2.6</td>
<td>2.3</td>
<td>2.6</td>
<td>1.7</td>
<td>2.1</td>
</tr>
</tbody>
</table>


</html>

U.S. real GDP growth last quarter of 3.9% (AR), in the advance report from the Commerce Department, was higher than expectations for 3.2% growth. The contribution to growth from net export improvement was another 0.9 percentage points [...]

US GDP Growth Boosted Again by Improved Trade Deficit

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071030d.jpg" width="353">
Both Germany and Japan released labor force data for September today. Labor market conditions were weaker than expected in Japan and slightly stronger in Germany. The data are likely to restrain policy moves by both the Bank of Japan and the European Central Bank. In the case of Japan, the data suggest that the Bank may, once again, be thwarted in its desire to raise rates. In the case of Germany, the data are a reason for the European Central Bank to resist pressure to lower rates.
The Japanese unemployment rate rose to 4.0% from 3.8% in September while the German unemployment rate fell to 8.1% from 8.3%. Expectations had been for a decline in the Japanese rate and no change in the German rate. The unemployment rates for the two countries are shown in the first chart.
Even though the Japanese data are seasonally adjusted, they still exhibit a fair degree of volatility. To show a less busy picture we have used quarterly averages in the second and third charts showing the year to year percentage changes in total employment and unemployment in the two countries. The decline of 3% in Japanese employment in September from August led not only to an increase in the unemployed but also a 0.2% decline in the labor force. In Germany there was no change in the labor force and the increase in employment led to an equivalent decline in unemployment.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071030e.jpg" width="353"><img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071030f.jpg" width="353">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">LABOR MARKET DATA&nbsp;</th>
<th scope="col">Sep 07</th>
<th scope="col">Aug&nbsp;07&nbsp;</th>
<th scope="col">Sep 06&nbsp;</th>
<th scope="col">M/M % chg&nbsp;</th>
<th scope="col">Y/Y % chg&nbsp;</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GERMANY</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp;Employment&nbsp; (millions)</td>
<td>39.8</td>
<td>39.7</td>
<td>39.1</td>
<td>0.09</td>
<td>1.71</td>
<td>39.0</td>
<td>38.7</td>
<td>38.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Unemployment (millions)</td>
<td>3.5</td>
<td>3.6</td>
<td>4.1</td>
<td>-1.40</td>
<td>-14.6</td>
<td>4.2</td>
<td>4.6</td>
<td>4.2</td>
</tr>
<tr>
<td class="firstcol"> &nbsp;Labor Force (millions) </td>
<td>43.3</td>
<td>43.3</td>
<td>43.2</td>
<td>0.0</td>
<td>0.2</td>
<td>43.2</td>
<td>43.2</td>
<td>43.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Unemployment Rate (%)</td>
<td>8.1</td>
<td>8.3</td>
<td>9.6</td>
<td>-0.2*</td>
<td>-1.5*</td>
<td>9.8</td>
<td>10.6</td>
<td>9.8</td>
</tr>
<tr class="odd">
<td class="firstcol">JAPAN</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp;Employment&nbsp; (millions)</td>
<td>63.7</td>
<td>64.0</td>
<td>63.8</td>
<td>-0.3</td>
<td>-0.1</td>
<td>63.8</td>
<td>63.6</td>
<td>63.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Unemployment (millions)</td>
<td>2.7</td>
<td>2.5</td>
<td>2.8</td>
<td>0.2</td>
<td>-0.1</td>
<td>2.8</td>
<td>2.9</td>
<td>3.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Labor Force (millions)</td>
<td>66.4</td>
<td>66.5</td>
<td>66.6</td>
<td>-0.2</td>
<td>-0.3</td>
<td>66.6</td>
<td>66.5</td>
<td>66.3</td>
</tr>
<tr>
<td class="firstcol"> &nbsp;Unemployment Rate (%) </td>
<td>4.0</td>
<td>3.8</td>
<td>4.2</td>
<td>0.2*</td>
<td>-0.2*</td>
<td>4.1</td>
<td>4.4</td>
<td>4.7</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">*Difference</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>
</body>
</html>

Both Germany and Japan released labor force data for September today. Labor market conditions were weaker than expected in Japan and slightly stronger in Germany. The data are likely to restrain policy moves by both the Bank of Japan [...]

September Unemployment Rates in Japan and in Germany Pose Problems for Central Banks

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071030g.jpg" width="353">
German real ex-auto wholesale sales fell by 0.3% in September after dropping by 0.8% in August. These declines blunted the sharp 1.3% gain in July that followed a rise of 0.6% in June. Around mid-year German wholesale sales seemed to be breaking out of their early in the year slump believed to have been induced by the turn-of-the year hike in the VAT. However, the past two months have discredited that view. Nonetheless, the mid-year strength was enough to boost real ex-auto wholesales sales to solid positive quarterly rate of growth. Real wholesale sales are up at a 3.3% annual rate in Q3 with nominal sales up at a pace of 3.9%. These readings are up from a year ago by 1.5% in real terms and by 1.8% in nominal terms. It is growth but is far from robust growth. And lest the quarterly result seem too strong recall that this rise in Q3 offsets a similar drop of 3% (annualized) in real ex-auto wholesale sales in Q2. The graph clearly shows no lasting boost to wholesale sales growth.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
<th scope="col" colspan=4>Quarter Complete</th>
</tr>
<tr>
<th scope="col" colspan="4">Quarterly showing</th>
</tr>
</thead><tbody>


<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>% Q/Q</td>
<td>%-Saar</td>
<td>% Q/Yr Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">Nominal</td>
<td>1.0%</td>
<td>3.9%</td>
<td>2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Real</td>
<td>0.8%</td>
<td>3.3%</td>
<td>1.5%</td>
</tr>
</tbody>
</table>
</body>
</html>

German real ex-auto wholesale sales fell by 0.3% in September after dropping by 0.8% in August. These declines blunted the sharp 1.3% gain in July that followed a rise of 0.6% in June. Around mid-year German wholesale sales seemed to [...]

German Wholesale Sales Falter Again

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

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

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

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250905A2.jpg

250905B2.jpg

Nonfarm payrolls increased 22,000 during August after rising 79,000 in July, revised from 73,000 and falling 13,000 during June, revised from a 14,000 increase. Expectations had been for an 83,000 rise in the Action Economics Forecast Survey. The three-month average change in payrolls of 29,300 compared to 28,300 in July, but stood far below its high of 231,700 in January.

Average hourly earnings rose an expected 0.3% in August after unrevised gains of 0.3% in July and 0.2% in June. Earnings growth of 3.7% y/y equals that in June which is the lowest since July 2024, but has been trending lower from its 5.9% high in March 2022.

The unemployment rate, measured in the household survey, edged up m/m to an expected 4.3% from 4.2% in July and 4.1% in June. It reached a low of 3.4% in April 2023. The unemployment rate, including employees working part-time for economic reasons plus all marginally-attached workers, rose to 8.1% last month from 7.9% In July. It was 6.6% in April 2023.

In the **establishment survey**, private-sector employment in August rose 38,000 after rising 77,000 in July.  Factory sector jobs declined 12,000, off for the fourth straight month. Durable goods employment fell 19,000 after rising 5,000, as motor vehicle & parts hiring declined 7,300 after a 2,000 July gain. Nondurables employment rose 7,000, reversing a 7,000 July decline. Construction sector employment weakened 7,000, down for the third straight month. The number of mining & logging industry jobs declined 6,000, also registering the fourth consecutive month of decline.

Private service-sector employment increased 63,000 during August after improving 85,000 in July. Increases varied greatly amongst service-sector categories. Private education & health sector employment rose 46,000 last month, following a 77,000 increase in July. The number of leisure & hospitality jobs rose 28,000 after a 6,000 gain. Trade, transportation & utilities employment gained 2,000, following a 5,000 increase, but financial activities employment weakened 3,000 after increasing 9,000 in July. The number of professional & business services jobs fell 17,000, down for the fourth straight month as temporary help employment declined 9,800, also off for the fourth month in a row. Information sector employment declined 5,000, after falling 7,000 in July and 3,000 in June. Transportation & warehousing hiring weakened 3,600 last month following a 6,300 drop.

Government sector payrolls declined 16,000 last month following a 2,000 rise. Federal government employment weakened 15,000 and has fallen for seven straight months. State government payrolls declined 13,000 after falling in each of the prior three months. To the upside, local government hiring rose 12,000 following a 17,000 July increase.

Private-sector average hourly earnings rose 0.3% (3.7% y/y) in August, the same as in July. Earnings in the goods-producing sector increased 0.4% (4.0% y/y) in August, double the July rise. In construction, earnings rose 0.6% (4.2% y/y) following a 0.3% rise, while factory sector earnings improved 0.3% (3.9% y/y) after a 0.2% gain. In the service sector, earnings rose 0.3% (3.6% y/y) in August, the same as in July. Professional & business services pay increased 0.4% (5.0% y/y) for the second consecutive month while leisure & hospitality earnings also increased 0.4% (3.7% y/y) after two straight months of 0.3% increase. Information earnings rose 0.2% (4.6% y/y) for the second straight month.

250905C2.jpg

250905D2.jpg

The length of the average workweek was 34.2 hours in August for the third straight month. The workweek in the goods-producing sector eased to 39.8 hours from 39.9 hours in July. The construction sector average workweek held at 39.0 hours while the factory sector workweek eased to 40.0 hours from 40.2 hours. The average workweek in the private service sector held at 33.2 hours. Information sector hours edged up to 37.0 from 36.9. Financial activities hours held at 37.6. Private education & health services hours eased to 32.7 from 32.8 in July.

In the **household survey**, the unemployment rate increased to 4.3% in August after rising to 4.2% in July from 4.1% in June as employment rose 288,000 after falling 260,000 in July and the size of the labor force increased 436,000 after three straight months of decline. The labor force participation rate rose to 62.3% last month from 62.2%, remaining well below the high of 63.3% early in 2020. The rate for teenagers eased to 34.8%, a five-year low. For workers aged 20-24, the rate plunged to 70.2%, a four year-low. For workers aged 25-54, the participation rate increased to 83.7%, an eleven-month high. For individuals 55 and over, the rate held steady at 38.1% but remained near a 20-year low of 38.0% in June.

The employment/population ratio for all workers steadied at 59.6% last month. It remained below the peak reading of 61.1% in February, 2020 just prior to the pandemic. For men, the rate rose to 65.0% from 64.7% in July and for women, the rate eased to 54.5 % on the heels of a slip to 54.7% in July.

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

250905X2.jpg

250905F2.jpg

- Hiring weakens broadly; factory, construction & government jobs decline.
- Earnings gain slows y/y.
- Unemployment rate increases as job growth lags rise in labor force.

U.S. Payroll Employment Report Reveals Unexpected Weakness in August; Earnings Rise Steadily, but Jobless Rate Increases

Andrew Cates

**Gold prices and trade policy uncertainty**
This week’s record-breaking surge in gold prices has coincided with renewed volatility in trade policy uncertainty, reflecting the market’s heightened sensitivity to political and legal developments in Washington. A series of legislative challenges to the administration’s latest tariff measures has raised the prospect that parts of the policy framework could be overturned or significantly diluted. That possibility has injected another layer of uncertainty into an already fragile trade environment, amplifying demand for gold as a hedge. Investors appear to be weighing not only the inflationary risks of tariffs that remain in place but also the destabilizing effects of unpredictable policy reversals, leaving gold prices at historic highs and the trade policy uncertainty index elevated.

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**US Tariffs**
Although the data in this chart extend only through June 2025, they clearly illustrate which trading partners would gain the most if US tariff policies were to be reversed. China stands out as the most heavily penalised, with effective tariff rates rising by more than 25 percentage points in just six months. Japan and South Korea have also faced significant tariff hikes, suggesting that their exporters would benefit substantially from any policy rollback. Taiwan, India, and the EU also feature prominently, though at more moderate levels. By contrast, ASEAN economies, Australia, and the UK have seen relatively smaller increases, leaving them less exposed. In aggregate, a broad reversal of tariffs would most immediately alleviate the pressure on East Asian exporters—particularly China—while also reducing costs for US importers and consumers who have been disproportionately affected by higher prices on goods from the region.

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**The Indian economy and US trade policy** 
India faces a particularly sharp squeeze from the latest wave of US tariff hikes, given that the US now absorbs nearly one-fifth of its exports. The imposition of higher barriers has dealt a direct blow to key sectors, such as textiles and jewellery, while also undermining investor confidence. That pressure is clearly visible in the sharp depreciation of India’s trade-weighted currency, which has accelerated in 2025. Rather than offering a competitiveness boost, the weaker rupee has compounded difficulties by lifting import costs and stoking inflation at home. The result is that tariffs have both curtailed India’s export earnings and strained its domestic economy, leaving policymakers with limited options beyond seeking trade diversification and targeted support measures.

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**Global monetary policy** 
The latest Blue Chip Financial Forecasts survey helps explain why equity markets have remained upbeat despite escalating geopolitical and trade tensions. The survey points to an expected sizeable policy easing over the coming year, particularly in the US and UK where forecasters anticipate close to a full percentage point of rate cuts. Australia and Canada are also projected to deliver meaningful reductions, while the euro area is expected to ease more modestly. Japan stands out as the exception, with expectations tilted toward further tightening. For equities, these projections of broad-based rate cuts provide a crucial cushion—supporting valuations, lowering discount rates, and reinforcing the sense that policymakers are prepared to offset the drag from tariffs and slowing global growth.

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**Euro area inflation** 
By contrast with the US and UK, where forecasters in the latest Blue Chip Financial Forecasts survey anticipate close to a full percentage point of rate cuts, expectations for the ECB are more restrained. This reflects the fact that the ECB has already delivered a relatively large degree of policy easing, while headline inflation has now fallen back to levels close to its target. Even so, further rate reductions remain likely if underlying price pressures continue to moderate. As the chart shows, services inflation has begun to move lower in line with a clear decline in wage growth, suggesting that disinflationary momentum is building. Should this trend persist, the ECB will have scope to add to its easing cycle, though at a slower and more cautious pace than peers such as the Fed or the Bank of England.

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**Prices and cost pressures in the US corporate sector** 
Corporate profitability has long been one of the best leading signals for US equity cycles, and the measure here (Non-financial corporate profits per unit of output – i.e. profit margins) has slipped from its late-2023 peak and moved sideways for much of the past year. That’s not a collapse, but it does raise questions about how long equities can keep rising without stronger profit momentum. The recent Q2 uptick—a 1.8% annualised gain—came despite a hefty rise in non-labour costs, with margins protected by modest pricing power and a notable 2.2% drop in unit labour costs. Whether that labour relief reflects softer wage pressures or a structural productivity boost—potentially tied to AI—will be crucial in determining if profits can remain resilient, or if this plateau is the prelude to a downturn.

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Equity markets have lost a little ground in recent days and bond markets have been more jittery, as legal challenges to US tariff policies add to a tense backdrop of geopolitical meetings between China, Russia, and India. Gold’s surge to record highs arguably captures the search for safe havens amid this uncertainty (chart 1), while the possibility of tariff reversals keeps alive the prospect of relief for the most affected exporters, notably China, Japan, and South Korea (chart 2). India’s position looks more precarious, with its reliance on the US market colliding with a weakening trade-weighted currency as tariffs bite into growth and investor confidence (chart 3). Monetary policy expectations, however, continue to offer some support, with the latest Blue Chip Financial Forecasts survey pointing to sizeable easing in the US and UK (chart 4). The ECB is expected to tread more cautiously after earlier cuts and with headline inflation now near target. Still, if inflation continues to ease, further action remains possible (chart 5). In the US, corporate resilience is also helping offset some of the gloom: despite tariff-driven spikes in non-labour costs, falling unit labour costs—possibly aided by AI productivity gains—and firmer prices allowed profits per unit of output to rise in Q2 (chart 6).

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Charts of the Week: A Few Cuts More

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The U.S. ISM Services PMI increased to 52.0 in August after falling to 50.1 in July from 50.8 in June, according to the Institute for Supply Management. The index had been declining since it reached 53.5 in February. The index hit a recent high of 55.8 in October of last year and remains below the all-time high of 67.5 in November 2021. The Action Economics Forecast Survey expected a reading of 51.0 for August.

The ISM Composite Index combines the services index and the manufacturing index released on Tuesday. This index rose to 51.6 in August from 49.8 in July. This also was the highest level in six months.

Amongst the services component series, the business activity index rose to 55.0 last month after falling to 52.6 in July. Twenty-three percent (NSA) of respondents reported improved activity while 14.2% reported decline. The new orders index increased to 56.0 from 50.3 in July. Twenty-seven percent (NSA) of respondents reported improved orders while a lessened 16.2% reported decline. The employment series was little-changed in August at 46.5, after falling from 47.2 in June. A lessened 10.3% (NSA) of respondents reported increased employment while a lower 16.8% reported decline. Working lower, the supplier delivery series fell to 50.3 in August after rising to 51.0 in July. Four percent of respondents (NSA) reported faster delivery speeds while 4.5% reported slower speeds.

On the inflation front, the prices index eased to 69.2 after surging to 69.9 in July. A lessened 36.7% (NSA) of respondents reported higher prices while 2.6% reported lower prices. The index has increased from its December 2023 53.1.

Additionally, the new export orders index eased to 47.3 (NSA) in July following a decline to 47.9 in July. Twelve percent of survey respondents reported higher exports while 16.9% reported decline. The imports index surged to 54.6 last month after falling to 45.9 in July. A higher 18.9%% of respondents reported higher imports while a lessened 9.8% reported decline. The inventory change index rose to 53.2 from 51.8 and the order backlog index fell to 40.4 in August after rising to 44.3 in July. These series are not seasonally adjusted and not included in the ISM Services PMI total.

The ISM Services PMI is a composite index consisting of four equally weighted diffusion indexes: Business Activity, New Orders, Employment, and Supplier Deliveries. A reading above 50 indicates expansion in the services sector, while below 50 suggests contraction. Supplier Deliveries is the only ISM index that is inversed; a reading above 50 indicates slower deliveries.

The ISM figures are available in Haver's **USECON** database, with additional detail in the **SURVEYS** database. The expectations figure from Action Economics is in the **AS1REPNA** database.

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- Total index rebounds to six-month high.	
- Business activity and new orders improve.
- Prices index eases.

U.S. ISM Services PMI Increases in August

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The ADP National Employment Report indicated that nonfarm private sector payrolls rose 54,000 (1.1% y/y) during August after increasing 106,000 in July, revised from 104,000 and declining an unrevised 23,000 in June. The Action Economic Forecast Survey expected a 75,000 increase in August.

Small business hiring (less than 50 employees) increased 12,000 (0.4% y/y) in August after an 8,000 July rise, revised from 12,000. Employment at medium-sized firms (50-499 employees) rose 25,000 (1.1% y/y) in August after increasing 53,000 in July, revised from 46,000. Large business hiring (500+ employees) gained 18,000 (2.4% y/y) following a 47,000 July increase, revised from 46,000.

Goods-producing employment rose 13,000 (1.3% y/y) after increasing 32,000 in July. Construction jobs increased 16,000 (2.4% y/y) following a 13,000 gain in July. Manufacturing jobs declined 7,000 (+0.1% y/y), after two months of moderate increase. Natural resources and mining jobs increased 4,000 (4.1% y/y) in August after rising 11,000 in July.

Service-producing jobs increased 42,000 (1.0% y/y) after a 74,000 July gain. Changes amongst industry sectors were mixed. Leisure & hospitality employment rose 50,000 (3.5% y/y) after increasing 45,000 in July. Professional & business jobs improved 15,000 (0.5% y/y) following a 9,000 increase. Information sector employment rose 7,000 (1.1% y/y) after increasing 9,000.  Working lower, trade, transportation & utilities employment fell 17,000 (+0.3% y/y) after rising 20,000 in July. Education & health services posted a 12,000 decline (+0.2% y/y) after falling 40,000 in July. This was the sixth decline in seven months. Financial activities employment slid 2,000 (+1.9% y/y) after a 28,000 strengthening.

By region, in the Northeast the number of jobs rose 15,000 (1.2% y/y) in August following four consecutive monthly declines. Jobs rose 14,000 (1.3% y/y) in the Midwest after increasing 12,000 in July. In the West, jobs rose 8,000 (0.8% y/y) following a 67,000 increase, and in the South, employment rose 4,000 (0.8% y/y) following a 40,000 July strengthening.

Wage growth for job-stayers continued to moderate in August as year/year growth of median annual pay weakened to 4.4% from 4.5% in July, the slowest pace since June 2021. The slowdown in wage growth for job-stayers was widespread across major industries. Wage growth for job-changers was steady at 7.1% y/y, but down from a high of 16.1% in April 2022.

The ADP National Employment Report and Pay Insights data can be found in Haver's **USECON** database. Historical figures date back to January 2010 for private employment. Pay data date back to October 2020. The expectation figure is available in Haver's **AS1REPNA** database.

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- Private payroll job increase is half July’s gain.
- Goods-producing employment slows as factory hiring falls; service-sector jobs also moderate.
- Job-stayer wage growth eases.

U.S. ADP Employment Increase Slows in August

Sandy Batten

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The U.S. trade deficit in goods and services (BOP basis) widened to $78.3 billion in July from a slightly downwardly revised $59.1 billion in June (previously -$60.2 billion), according to the U.S. Census Bureau. This was the largest trade shortfall since March. The Action Economics Forecast Survey expected a deficit of $78.6 billion. The goods deficit ballooned to $103.9 billion from $85.7 billion in June, while the services surplus narrowed to $25.6 billion, its smallest reading since January 2024, from $26.6 billion in June. The real (inflation-adjusted) trade deficit widened to $100.1 billion (2017$) from $84.6 billion in June. The surge in the deficit in July is a very poor beginning for Q3 GDP as it indicates that the trade deficit could once again be a big drag on real GDP growth after contributing nearly 5%-points in Q2.

The marked widening in the goods trade deficit was led by a 25.9% m/m surge in imports of industrial goods. This once again reflected an outsized jump in imports of nonmonetary gold but also contained a significant increase in copper imports. The jump in nonmonetary gold imports will not be included in the calculation of real GDP but the jump in copper imports will.

Goods exports were essentially unchanged in July (+3.2% y/y) after having fallen 0.6% m/m in June. Auto exports increased 2.7%, the third monthly gain. Capital goods exports excluding autos rose 0.9% m/m. In contrast, exports of industrial supplies fell 0.4% m/m, their third consecutive monthly decline. Exports of consumer goods excluding autos slid 0.9% m/m, their first decline in three months.

Goods imports jumped 7.0% m/m (+1.6% y/y) after having declined in each of the preceding three months. As noted above, the July jump was led by a surge in imports of industrial supplies. In this category, imports of nonmonetary gold surged more than $9 billion while copper rebounded. Capital goods imports rose a solid 5.1% m/m, and imports of consumer goods excluding autos increased 2.2% m/m after a 12.7% fall in June. In contrast, auto imports fell 4.0% m/m, their third monthly decline in the past four months.

Services exports edged up 0.6% m/m (4.8% y/y) in July. Transport services exports rose 3.1% m/m; charges for use of intellectual property increased 1.5% m/m; exports of government goods and services jumped 5.5% m/m, the first monthly gain in ten months. In contrast, travel exports fell 1.7% m/m. Services imports increased 2.3% m/m (+6.7% y/y) in July. The monthly increase was widespread across major sectors. Travel increased 3.4% m/m; transport services rose 4.7% m/m; imported construction services gained 3.4% m/m, their first monthly gain in seven months; imports of telecommunications and information services increased 1.9% m/m.

After having narrowed in each of the previous five months, the goods trade deficit with China in July widened to $14.7 billion from $9.4 billion in June. Exports to China edged down 0.2% m/m while imports from China jumped 27.3% m/m, their largest monthly increase since 2020. The trade deficit with the European Union narrowed further to $8.6 billion in July from $9.5 billion in June. The deficit with Japan narrowed further to $4.8 billion from $5.7 billion in June.

The international trade data can be found in Haver’s **USECON** database. Detailed figures on international trade are available in the **USINT** and **USTRADE** databases. The expectations figures are from the Action Economics Forecast Survey in **AS1REPNA**.

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- The trade deficit widened to $78.3 billion in July from $59.1 billion in June.
- This was the largest deficit since March.
- Exports rebounded, increasing by 0.3% m/m after a 0.3% m/m decline in June.
- Imports surged, rising 5.9% following a 3.6% decline in June.
- The July import surge was led by imports of industrial supplies.

Economy in Brief: 2007

Jump to:

UK Consumer Confidence Stays in a Downdraft

Sentiment Slips but Flash Inflation Flares

EU Readings Still Strong…but FADING

ADP Report: Private Payroll Growth Much Improved

US GDP Growth Boosted Again by Improved Trade Deficit

US GDP Growth Boosted Again by Improved Trade Deficit

September Unemployment Rates in Japan and in Germany Pose Problems for Central Banks

German Wholesale Sales Falter Again