Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021202b.jpg" width="353">
The ISM Composite Index of manufacturing sector activity rose less than expected last month and remained below 50 for the third month. The rise to 49.2 was less than suggested by the Chicago purchasing managers report and other regional reports of November business activity.
The production and inventory sub indexes rose, but new orders, employment and the supplier delivery indexes fell.
The separate index of inflation pressure fell for the third month in four to the lowest level since March. The percentage (NSA) of companies reporting higher prices fell to 18%.
Over the last ten years there has been a 57% correlation between the ISM Composite Index and the change in factory sector industrial production in the next month.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF02/@EF02.HTM">ISM Manufacturing Survey</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Index</td>
<td>49.2</td>
<td>48.5</td>
<td>44.7</td>
<td>43.9</td>
<td>51.6</td>
<td>54.6</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>55.7</td>
<td>58.3</td>
<td>32.0</td>
<td>43.0</td>
<td>64.8</td>
<td>54.2</td>
</tr>
</tbody>
</table>
Construction Spending Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 2, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021202a.jpg" width="353">
The value of construction put in place rose slightly more than expected in October due to higher nonresidential building. Figures for September and August were revised down.
Residential building was unchanged. A huge 1.0% gain in one-unit structures, the second spurt in two months, offset a 3.0% drop in spending on multi unit structures. 
Nonresidential building activity rose for the first monthly gain since April. Spending here was still down 14.2% YTD. The gain was due to widespread increases amongst categories, but spending on industrial and office structures continued down.
Public construction fell. Performance amongst categories was decidedly mixed

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E907/@E90701/@E90701.HTM">Construction Put-in-place</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.3%</td>
<td>0.3%</td>
<td>-0.2%</td>
<td>2.5%</td>
<td>7.3%</td>
<td>8.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Residential</td>
<td>0.0%</td>
<td>0.7%</td>
<td>5.1%</td>
<td>3.3%</td>
<td>7.4%</td>
<td>11.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonresidential</td>
<td>1.1%</td>
<td>-2.0%</td>
<td>-16.7%</td>
<td>-3.1%</td>
<td>7.1%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Public</td>
<td>-0.3%</td>
<td>1.6%</td>
<td>6.4%</td>
<td>7.4%</td>
<td>5.4%</td>
<td>10.6%</td>
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The ISM Composite Index of manufacturing sector activity rose less than expected last month and remained below 50 for the third month. The rise to 49.2 was less than suggested by the Chicago purchasing managers report and other [...]

ISM Index Up Slightly

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021127b.jpg" width="353">
Personal income (4.2% AR, YTD) rose as expected last month. It was the weakest gain in income since a slight decline in July. September&#39;s figure was unrevised
Wage and salary disbursements were unchanged (3.0% AR, YTD) following 0.6% gains in both the prior two months. Wages in the goods-producing industries fell 0.3% and are down YTD. Personal transfer payments were unchanged (9.2% YTD, AR). Personal interest income fell for the fourth straight month (0.8% YTD, AR).
Personal consumption expenditures (4.7% YTD, AR) rose slightly more than expected and began 4Q 0.2% above the 3Q average. Durable goods purchases fell a sharp 1.0% following a 5.0% September drop. Unit sales of light vehicles plunged in both months. Spending on nondurable goods rose 0.7%, recovering after two months of decline. Spending on services also rose a firm 0.5% (5.4% YTD, AR).
Disposable personal income rose 0.2% (8.3% YTD, AR) following two months of solid gain. Personal tax payments fell for the eighth month this year. 
The PCE price deflator rose 0.2% for the third month in a row. Prices were up 2.3% (YTD, AR). Less food and energy, the price deflator rose only 0.1% (1.8% YTD, AR). 

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
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<td class="firstcol">Personal Income</td>
<td>0.1%</td>
<td>0.4%</td>
<td>4.1%</td>
<td>3.3%</td>
<td>8.0%</td>
<td>4.9%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.4%</td>
<td>-0.4%</td>
<td>3.7%</td>
<td>4.5%</td>
<td>7.0%</td>
<td>6.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>4.2%</td>
<td>4.4%</td>
<td>0.3%</td>
<td>2.3%</td>
<td>2.8%</td>
<td>2.7%</td>
</tr>
<tr>
<td class="firstcol">PCE Price Deflator</td>
<td>0.2%</td>
<td>0.2%</td>
<td>1.7%</td>
<td>2.0%</td>
<td>2.5%</td>
<td>1.6%</td>
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</tbody>
</table>
Initial Unemployment Insurance Claims Fell 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 27, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021127a.jpg" width="353">
Initial claims for unemployment insurance fell more than expected in the latest week and were at the lowest level since early last year. Claims in the prior week were revised up slightly.
The recent sharp decline in initial claims may reflect aberrant seasonal adjustment factors as well as genuine improvement in the labor market.The four-week moving average of initial claims dropped to 385,750, down 11.8% y/y.
Continuing claims for unemployment insurance rose a sharp 2.6%, more than recovering the sharp decline in the prior week which was deepened.
The insured rate of unemployment rose slightly to 2.9%.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">11/23/02</th>
<th scope="col">11/16/02</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
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<td class="firstcol">Initial Claims</td>
<td>364.0</td>
<td>381.0</td>
<td>-21.0%</td>
<td>405.8</td>
<td>299.8</td>
<td>297.7</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,650</td>
<td>4.9%</td>
<td>3,021</td>
<td>2,114</td>
<td>2,186</td>
</tr>
</tbody>
</table>
Durable Goods Orders Recovered, Some 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 27, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021127c.jpg" width="353">
Durable goods orders last month rose twice Consensus expectations for a 1.5% rise. The steep decline in September was lessened slightly.
Orders for nondefense capital goods recovered some of their September plunge which was lessened. Importantly, capital goods orders excluding aircraft and parts orders rose 5.3%. That gain recouped all the sharp declines of the prior two months
Civilian aircraft and parts orders fell another 3.3% following a huge 47.6% drop in September. Orders for motor vehicles and parts rose 3.9% and gained back all of the prior two months&#39; declines. Orders excluding all transportation equipment rose 2.4% last month and are up 3.6% YTD.
Orders for computers and electronic products rose 6.2% (-0.9% YTD) following two months of sharp decline. Machinery orders also rose sharply after two months of decline, but still were up 3.0% YTD. Orders for electrical equipment dropped 1.6% and were down 0.4% YTD.
Shipments of durable goods rose 1.2% (3.0% YTD), the first in three months.
Durable inventories fell 0.2% (-4.5% YTD), the thirteenth consecutive monthly decline.

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<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">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
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<td class="firstcol">Durable Goods Orders</td>
<td>2.8%</td>
<td>-4.6%</td>
<td>0.0%</td>
<td>-11.4%</td>
<td>3.3%</td>
<td>5.4%</td>
</tr>
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<td class="firstcol">&nbsp; Nondefense Capital Goods</td>
<td>4.2%</td>
<td>-10.7%</td>
<td>7.9%</td>
<td>-16.5%</td>
<td>7.9%</td>
<td>3.9%</td>
</tr>
</tbody>
</table>
Chicago Purchasing Agents' Index Up Sharply 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 27, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021127d.jpg" width="353">
The Chicago Purchasing Manager&#146;s Index of Business activity rose more than expected in November. Consensus estimates were for moderate rise to 48.5. 
The rise recouped virtually all of the declines in the prior two months. Directionally, the gain is sympathetic with other improved activity surveys reported for November including the Philadelphia Fed and Empire State surveys.
An 87% correlation over the last ten years between the Chicago PMI and the ISM Composite Index suggests the ISM index will improve when released next Monday.
The indexes of new orders, production, order backlogs, employment and inventories all rose. The delivery speed index fell to the lowest level since February, indicating that delivery speeds rose. 
The prices paid index fell to the lowest level since June.
Visit the Chicago Purchasing Managers website at <a href="http://www.napm-chicago.org/">www.napm-chicago.org.</a>

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF05/@EF05.HTM">Chicago Purchasing Managers Index, SA</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
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</thead>
<tbody>
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<td class="firstcol">Business Barometer</td>
<td>54.3</td>
<td>45.9</td>
<td>42.7</td>
<td>41.4</td>
<td>51.8</td>
<td>56.5</td>
</tr>
<tr>
<td class="firstcol">Prices Paid</td>
<td>57.2</td>
<td>62.0</td>
<td>40.3</td>
<td>50.5</td>
<td>65.6</td>
<td>57.6</td>
</tr>
</tbody>
</table>
Help Wanted Advertising Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 27, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021127e.jpg" width="353">
The Conference Board&#39;s National Index of Help-Wanted Advertising in October fell to a new cycle low last month. It was the lowest index reading since early 1964.
The proportion of labor markets with rising want-ad volume plummeted to 24% versus 76% in September.
During the last five years there has been a 75% correlation between the level of help-wanted advertising and the monthly change in nonfarm payrolls. 
Job opportunities deteriorated in virtually all of the regions of the country.
The figures are seasonally adjusted.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/CBDB/@C3/@C3.HTM">Conference Board</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Oct &#39;01</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">National Help Wanted Index</td>
<td>40</td>
<td>43</td>
<td>46</td>
</tr>
</tbody>
</table>
Consumer Sentiment Up in November 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 27, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021127f.jpg" width="353">
Consumer Sentiment for all of November rose 4.5% from October according to the University of Michigan. The gain was slightly less than expected and did not recoup the sharp decline in October.
Indexes of consumer expectations and current conditions both rose, but the current index rose just slightly.
The University of Michigan survey is not seasonally adjusted.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
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</thead>
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<td class="firstcol">Consumer Sentiment</td>
<td>84.2</td>
<td>80.6</td>
<td>0.4%</td>
<td>89.2</td>
<td>107.6</td>
<td>105.8</td>
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Personal income (4.2% AR, YTD) rose as expected last month. It was the weakest gain in income since a slight decline in July. September's figure was unrevised Wage and salary disbursements were unchanged (3.0% AR, YTD) following 0.6% [...]

Personal Income Modest

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021126a.jpg" width="353">
Real GDP last quarter was revised up more than Consensus expectations for a revision to 3.6% growth. Year to date growth in real GDP has been 3.4% (AR).
The effect from inventory accumulation was raised notably, adding nearly one half of a percentage point to growth, as production was stronger than estimated initially.
Corporate profits after tax were strong, rising 8.7%, though they were still down 1.0% y/y. Profits with IVA &amp; CCA fell 7.0% (+12.2% y/y), the third consecutive down quarter. Tax law changes greatly boosted the Capital Consumption Adjustment (depreciation) as of 4Q01. The CCA has fallen sharply since the 4Q peak.
Domestic final demand growth was revised slightly higher led by an upward revision to residential investment, revised to show a 2.1% increase rather than the decline reported initially. Personal consumption growth was revised to 4.1%.
Capital spending declined 0.7% instead of rising 0.6% as reported initially. The decline in business spending on structures was deepened to 20.6%. Spending on equipment was revised up slightly to 6.6% as a result of a raised estimate of spending on information processing equipment &amp; software (14.4%).
The trade sector&#39;s contribution to growth was revised up slightly to zero as export growth was raised to 3.3% (2.5% y/y). Import growth was little changed at 2.3% (6.5% y/y).
Estimated inflation was little changed and down slightly from 1Q02.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained &#39;96 $, % AR</a></th>
<th scope="col">3Q&#39;02 (Prelim.)</th>
<th scope="col">3Q&#39;02 (Advance)</th>
<th scope="col">2Q&#39;02 (Final)</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
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</thead>
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<td class="firstcol">GDP</td>
<td>4.0%</td>
<td>3.1%</td>
<td>1.3%</td>
<td>3.2%</td>
<td>0.3%</td>
<td>3.8%</td>
<td>4.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>0.4%</td>
<td>-0.1%</td>
<td>1.3%</td>
<td>0.7%</td>
<td>-1.2%</td>
<td>0.1%</td>
<td>-0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>3.5%</td>
<td>3.2%</td>
<td>-0.1%</td>
<td>2.5%</td>
<td>1.5%</td>
<td>3.7%</td>
<td>4.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Trade Effect</td>
<td>0.0%</td>
<td>-0.1%</td>
<td>-1.4%</td>
<td>-0.5%</td>
<td>-0.1%</td>
<td>-0.6%</td>
<td>-0.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>3.4%</td>
<td>3.2%</td>
<td>1.3%</td>
<td>3.0%</td>
<td>1.6%</td>
<td>4.3%</td>
<td>5.2%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Deflator</td>
<td>1.0%</td>
<td>1.1%</td>
<td>1.2%</td>
<td>0.8%</td>
<td>2.4%</td>
<td>2.1%</td>
<td>1.4%</td>
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</tbody>
</table>
Weekly Chain Store Sales Recover a Bit 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 26, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021126b.jpg" width="353">
Chain store sales rose 0.9% last week according to the BTM-UBSW survey. The rise recouped some of the 1.2% drop the prior week.
With the important Thanksgiving week to go, November sales were down 0.2% from the average sales level a month earlier. October sales fell 1.5% from September.
During the last ten years there has been a 48% correlation between the year-to-year percent change in monthly chain store sales and the change in GAF retail sales.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">BTM-UBSW (SA, 1977=100)</a></th>
<th scope="col">11/23/02</th>
<th scope="col">11/16/02</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
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<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>400.8</td>
<td>397.1</td>
<td>2.0%</td>
<td>2.1%</td>
<td>3.4%</td>
<td>6.7%</td>
</tr>
</tbody>
</table>
Consumer Confidence Recovered a Bit 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 26, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021126d.jpg" width="353">
The Conference Board&#146;s Index of Consumer Confidence this month recovered some of the October plunge. Consensus expectations were for a reading of 85.0. October&#39;s level was revised up slightly.
The 5.7% m/m gain in Consumer Confidence was the first m/m gain since May. It was in line with the rebound in the Consumer Sentiment reading from the University of Michigan.
The rise in confidence reflected higher readings of both the present situation and consumer expectations, but the gain in the present situation reading was just slight.
During the last ten years there has been a 48% correlation between the level of Consumer Confidence and the y/y percent change in real PCE. 
The Conference Board&#39;s survey is conducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond. 

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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">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Consumer Confidence</td>
<td>84.1</td>
<td>79.6</td>
<td>-0.9%</td>
<td>106.6</td>
<td>139.0</td>
<td>135.3</td>
</tr>
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</table>
New Home Sales Again Strong 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 26, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021126c.jpg" width="353">
Sales of new single family homes remained near record territory last month. Sales fell 4.5% from September, but the strong sales in both August and September were revised higher. Consensus expectations were for a 980,000 sales rate.
Sales were mixed across the country&#146;s regions. In the Northeast, sales fell 32.3% following the huge 88.2% gain a month earlier. Sales in the Midwest fell for the second consecutive month. In the West, sales rose for the third consecutive month and in the South sales recovered a piece of the September decline.
The median price of a new home rose 0.3% to $176,700 (3.2% y/y). Prices in September were revised down.
The new home sales data reflect current sales versus the existing home sales figure which reflect closings on past sales.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E904/@E90401/@E90401.HTM">Homes Sales (000s, AR)</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
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</thead>
<tbody>
<tr>
<td class="firstcol">New Single-Family</td>
<td>1,007</td>
<td>1,054</td>
<td>16.4%</td>
<td>908</td>
<td>880</td>
<td>879</td>
</tr>
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Real GDP last quarter was revised up more than Consensus expectations for a revision to 3.6% growth. Year to date growth in real GDP has been 3.4% (AR). The effect from inventory accumulation was raised notably, adding nearly one half [...]

3Q GDP Growth Revised Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021125b.jpg" width="353">
Sales of existing single family homes rose much more than expected in October. Sales rose 6.1% from September which was revised up slightly.
Sales through October were up 11.0% versus last December. During the first ten months of 2002 sales were up 5.3% versus 2001.
Home sales rose in each of the country&#39;s regions.
The median price of an existing home rose 1.1% to $159,600 (9.8% y/y). The median price in September was revised down.
The figures reflect closings of past home sales. 
The average rate on a conventional 30-year mortgage rose slightly last month versus September to 6.11%. Rates averaged 6.97% during all of last year. The decline this year in mortgage rates has combined with strong growth in disposable income to offset higher home prices and thus raise home affordability.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E905/@E90501/@E90501.HTM">Existing Home Sales (000, AR)</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
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</thead>
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<td class="firstcol">Existing Single-Family</td>
<td>&nbsp;5,770</td>
<td>&nbsp;5,440</td>
<td>9.5%</td>
<td>5,291</td>
<td>5,159</td>
<td>5,193</td>
</tr>
</tbody>
</table>
OECD Leaders Fell Further 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 25, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021125c.jpg" width="353">
The OECD Index of Leading Indicators fell in each of the three months ending in September, heralding an end to the steady gains in industrial production of this year.
In the European Union, industrial production rose through the summer capped by a strong 1.5% August gain in Germany, but German leading indicators have fallen moderately in each of the last four months. EU leaders also have fallen in each of the last four months.
In the UK, production already has started to move lower, down in three of the four months ended September (-0.7% YTD). Leaders have fallen in the last two months.
Production in France has moved sideways since some respectable monthly gains early this year. Leading indicators in France have fallen in each of the last four months.
Trends in Japan have been firm relative to Europe. Production in Japan fell moderately in September but has gained 5.1% YTD. Leading indicators have been moving steadily higher since last Fall with a modest decline only this past September
The OECD Economic Outlook (Preliminary Edition) for November 2002 can be found by clicking <a href="http://www.oecd.org/EN/document/0,,EN-document-0-nodirectorate-no-2-21578-0,00.html">here</a>.

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Sales of existing single family homes rose much more than expected in October. Sales rose 6.1% from September which was revised up slightly. Sales through October were up 11.0% versus last December. During the first ten months of 2002 [...]

Existing Home Sales Up Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021122a.jpg" width="353">
The Chicago Fed National Activity Index (CFNAI) fell last month to its lowest level since last November.
The reading pulled the three-month moving average of the CFNAI down to -0.55, a level consistent with roughly 2% growth in real GDP.. A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth.
During the last ten years there has been a 72% correlation between the level of the CFNAI and quarterly growth in real GDP.
The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production &amp; income, the labor market, personal consumption &amp; housing, mfg. &amp; trade sales, and inventories &amp; orders.
For a complete discussion of the Chicago Fed&#39;s National Activity Index click <a href="http://www.chicagofed.org/economicresearchanddata/national/index.cfm">here</a>.
A discussion of the CFNAI and its role as a business cycle indicator can be found <a href="http://www.chicagofed.org/publications/economicperspectives/2002/3qepart2.pdf">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago Fed</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Oct &#39;01</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
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<td class="firstcol">CFNAI</td>
<td>-0.81</td>
<td>-0.39</td>
<td>-1.12</td>
<td>-1.10</td>
<td>-0.18</td>
<td>0.27</td>
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</tbody>
</table>
Mortgage Refinancing Booms 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 22, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021122b.jpg" width="353">
The index of mortgage applications to refinance, compiled by the Mortgage Bankers Association, surged last week back to near record territory.
Mortgage applications for home purchase also rose, but just slightly. Applications for purchase have been moving irregularly lower since peaking this past Spring.. The indexes equated to $680 bil. of mortgage originations in 4Q01 of which $476 bil. then was for refinancing (70%) and $204 bil. was for purchase.. The recent contract rate on a conventional 30 year mortgage was 5.94% versus 6.93% averaged last year. The effective rate, including points, was 6.23%.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">11/15/02</th>
<th scope="col">10/18/02</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
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</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>1,200.2</td>
<td>1,128.3</td>
<td>625.6</td>
<td>322.7</td>
<td>352.0</td>
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<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>345.0</td>
<td>361.5</td>
<td>304.9</td>
<td>302.7</td>
<td>275.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>6,174.1</td>
<td>5,588.7</td>
<td>2,491.0</td>
<td>438.8</td>
<td>795.2</td>
</tr>
</tbody>
</table>
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The Chicago Fed National Activity Index (CFNAI) fell last month to its lowest level since last November. The reading pulled the three-month moving average of the CFNAI down to -0.55, a level consistent with roughly 2% growth in real [...]

Chicago Fed National Activity Index Hit a Soft Spot in October

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021121a.jpg" width="353">
Initial claims for unemployment insurance were lower than expected in the latest week at the lowest level in four months. Claims in the prior week were revised up slightly.
The latest figure is for the survey period for November nonfarm payrolls. Initial claims were down 38,000 (9.2%) from the October survey period.
There has been a 65% correlation during the last ten years between the level of initial claims and the m/m change in nonfarm payrolls.
The four-week moving average of initial claims dropped to 395,750, down 10.3% y/y.
Continuing claims for unemployment insurance fell 1.7% w/w from the prior week&#39;s elevated level which was little revised.
The insured rate of unemployment fell slightly to 2.8%, back to the average of the last four months.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">11/16/02</th>
<th scope="col">11/09/02</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
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</thead>
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<td class="firstcol">Initial Claims</td>
<td>376.0</td>
<td>401.0</td>
<td>-11.5%</td>
<td>405.8</td>
<td>299.8</td>
<td>297.7</td>
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<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,582</td>
<td>-2.0%</td>
<td>3,021</td>
<td>2,114</td>
<td>2,186</td>
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</tbody>
</table>
Leading Indicators Unchanged 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 21, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021121b.jpg" width="353">
The Composite Index of Leading Economic Indicators, reported by the Conference Board, was unchanged last month, as expected. Prior months&#39; declines were revised deeper.
The breadth-of-gain amongst the leaders&#39; component series improved sharply to 60% from a downwardly revised level of 35% in September. The six-month diffusion index remained at a low 50%.
Lower claims for jobless insurance and a higher money supply had the largest positive influences on the leading index in October offset by lower consumer expectations and vendor deliveries and a shorter workweek.
The ratio of coincident-to-lagging indicators was unchanged. The ratio is an indicator of excess relative to actual economic performance.
The coincident indicators and the lagging indicators were unchanged.
The Leading index is based on eight previously reported economic data series and two that are estimated.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM">Business Cycle Indicators</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
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<td class="firstcol">Leading</td>
<td>0.0%</td>
<td>-0.4%</td>
<td>2.0%</td>
<td>-0.7%</td>
<td>1.1%</td>
<td>3.3%</td>
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<tr>
<td class="firstcol">Coincident</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.7%</td>
<td>-0.5%</td>
<td>3.4%</td>
<td>3.2%</td>
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<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.0%</td>
<td>-0.5%</td>
<td>-3.8%</td>
<td>-1.3%</td>
<td>2.8%</td>
<td>1.7%</td>
</tr>
</tbody>
</table>
Philadelphia Fed Index Improved 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 21, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021121c.jpg" width="353">
The Philadelphia Fed&#146;s index of general business conditions for November improved more than expected. The Business Activity Index rose to 6.1, the highest level since July. A reading of -5.0 had been expected.
The improvement mirrored the rise reported last week in the Empire State General Conditions Index for November.
Amongst the sub indexes, new orders improved sharply and shipments turned positive versus their negative readings last month. Employment was virtually flat.
The business conditions index reflects a separate survey question, not the components. 
The prices paid index fell moderately, but remained quite positive as it has since March.
During the last ten years there has been a 46% correlation between the level of the General Activity Index and the quarterly change in real GDP. Over the last twenty years that correlation has been 67%.
For a discussion of the Philadelphia Fed&#39;s Business Outlook Survey click <a href="http://www.phil.frb.org/files/bos/brso98mt.pdf">here</a>. 

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S504/@S504.HTM">Philadelphia Fed Business Outlook</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
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</thead>
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<td class="firstcol">General Activity Index</td>
<td>6.1</td>
<td>-13.1</td>
<td>-18.5</td>
<td>-17.3</td>
<td>8.2</td>
<td>13.3</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>13.0</td>
<td>14.3</td>
<td>-17.6</td>
<td>-1.0</td>
<td>27.1</td>
<td>10.0</td>
</tr>
</tbody>
</table>
U.S. Budget Deficit Deepened in October 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 21, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021121d.jpg" width="353">
The US budget deteriorated last month versus Consensus expectations for a $45 bil. deficit.
Receipts fell sharply m/m in payback for the 54.7% surge in September. Individual tax payments fell m/m and were down 13.0% from last year. 
Federal expenditures surged m/m following a decline in September and were up 8.6% y/y. Defense spending was up 15.2% y/y. Spending on transportation and education also continued strong.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E106/@E10602/@E10602.HTM">US Government Finance</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">y/y</th>
<th scope="col">FY2002</th>
<th scope="col">FY2001</th>
<th scope="col">FY2000</th>
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<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>$-54.0B</td>
<td>$42.5B</td>
<td>$-7.7B</td>
<td>$-158.5B</td>
<td>$127.1B</td>
<td>$125.5B</td>
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<tr>
<td class="firstcol">&nbsp; Revenues</td>
<td>$124.9B</td>
<td>$192.8B</td>
<td>-20.5%</td>
<td>-6.9%</td>
<td>-1.7%</td>
<td>10.8%</td>
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<tr class="odd">
<td class="firstcol">&nbsp; Outlays</td>
<td>$178.9B</td>
<td>$150.3B</td>
<td>8.6%</td>
<td>7.9%</td>
<td>4.2%</td>
<td>5.1%</td>
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</tbody>
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Initial claims for unemployment insurance were lower than expected in the latest week at the lowest level in four months. Claims in the prior week were revised up slightly. The latest figure is for the survey period for November [...]

Initial Claims for Unemployment Insurance Down

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021120a.jpg" width="353">
Housing starts fell more than expected last month and reversed September&#39;s spike. Starts fell 11.4% m/m. The run-up in September was lessened slightly.
Single family starts were relatively firm, falling 7.0% from the previous month. September&#39;s starts rose 16.3% (downwardly revised). 
Multi-family starts fell a sharp 29.3% following a 6.3% decline in September that was revised deeper.
Building permits rose 1.7% m/m to near the highest level of the year.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
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<td class="firstcol">Total</td>
<td>1,603</td>
<td>1,810</td>
<td>4.7%</td>
<td>1,603</td>
<td>1,573</td>
<td>1,647</td>
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<tr>
<td class="firstcol">&nbsp; Single Family</td>
<td>1,350</td>
<td>1,452</td>
<td>9.0%</td>
<td>1,273</td>
<td>1,232</td>
<td>1,306</td>
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<td class="firstcol">&nbsp; Multi Family</td>
<td>253</td>
<td>358</td>
<td>-13.7%</td>
<td>330</td>
<td>341</td>
<td>341</td>
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Housing starts fell more than expected last month and reversed September's spike. Starts fell 11.4% m/m. The run-up in September was lessened slightly. Single family starts were relatively firm, falling 7.0% from the previous month. [...]

Housing Starts Fell Sharply

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021119c.jpg" width="353">
Chain store sales fell sharply last week, according to the BTM-UBSW survey. Sales fell 1.2% and erased virtually all the gains in the prior two weeks.
So far in November, sales were down 0.3% from the average sales level a month earlier. October sales fell 1.5% from September.
The October decline in chain store sales was not mirrored by declines in the BLS figures on general merchandise store sales (+1.1%) or apparel store sales (+4.0%).
During the last ten years there has been a 38% correlation between the year-to-year percent change in monthly chain store sales and the change in nonauto retail sales.

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<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">BTM-UBSW (SA, 1977=100)</a></th>
<th scope="col">11/16/02</th>
<th scope="col">11/09/02</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>397.1</td>
<td>402.0</td>
<td>2.0%</td>
<td>2.1%</td>
<td>3.4%</td>
<td>6.7%</td>
</tr>
</tbody>
</table>
U.S. Trade Deficit Remained Quite Deep in September 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 19, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021119b.jpg" width="353">
The U.S. foreign trade deficit remained deeper than expected in September following the record deficit of the month earlier. The previously reported August deficit was lessened slightly due to a lessened decline in exports. Consensus expectations had been for a September deficit of $37.2B
Exports fell for the second consecutive month. The y/y comparison improved due to a sharp 7.3% m/m decline in exports last September. Capital goods exports rose a moderate 0.8% (9.6% AR, YTD) but nonauto consumer goods exports fell for the second consecutive month (-0.5% AR, YTD).
Imports rose moderately, held back by the third consecutive monthly decline in capital goods imports. Imports of nonauto consumer goods fell 1.4% following the 5.2% August spurt.
The refiner&#39;s acquisition cost of imported crude oil rose to $26.64 in September versus $15.95 in December. Crude oil prices rose further in October but have fallen sharply in November.

<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/@EE/@EE03/@EE03.HTM">Foreign Trade</a></th>
<th scope="col">Sept</th>
<th scope="col">Aug</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Trade Deficit</td>
<td>$38.0B</td>
<td>$38.3B</td>
<td>$19.5B(9/01)</td>
<td>$358.3B</td>
<td>$378.7B</td>
<td>$262.2B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports - Goods &amp; Services</td>
<td>-0.4%</td>
<td>-0.5%</td>
<td>6.7%</td>
<td>-6.2%</td>
<td>11.2%</td>
<td>2.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports - Goods &amp; Services</td>
<td>-0.5%</td>
<td>2.4%</td>
<td>24.5%</td>
<td>-6.0%</td>
<td>18.3%</td>
<td>10.9%</td>
</tr>
</tbody>
</table>
CPI Rose As Expected 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 19, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021119a.jpg" width="353">
The Consumer Price Index (CPI-U) rose 0.3% last month, slightly above the YTD average of 0.2%. The gain was as expected. Excluding food and energy, prices also rose as expected, about equal to the YTD average.
Lower tobacco prices (-3.1%) helped restrain inflation last month, though the core CPI less tobacco rose the same 0.2% as the overall core due to rounding.
Amongst other goods, some prices firmed. Household furnishings and operation prices rose 0.3%, the first gain in five months. New vehicle prices rose 0.4% following a 0.5% September gain.On the downside were used car prices (-1.6%). Apparel prices were flat.
Services prices were mixed. Shelter prices rose just 0.2% following the 0.1% gain in the prior month. Public transportation prices fell 1.6% for the fourth decline in five months. Education prices were flat following a 0.2% decline the month prior. Recreation prices were up 0.3%, however, and medical care services prices surged 0.7%, nearly double the elevated September gain.
Energy prices were again strong last month led by a 3.4% (33.1% AR, YTD) rise in gasoline prices. Fuel oil prices also were strong, up 1.7%. Piped gas &amp; electricity prices were up 0.4% for the third month.

<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/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total&nbsp;</td>
<td>0.3%</td>
<td>0.2%</td>
<td>2.1%</td>
<td>2.8%</td>
<td>3.4%</td>
<td>2.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.2%</td>
<td>0.1%</td>
<td>2.2%</td>
<td>2.7%</td>
<td>2.4%</td>
<td>2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>-0.1%</td>
<td>0.0%</td>
<td>-1.1%</td>
<td>0.3%</td>
<td>0.5%</td>
<td>0.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.3%</td>
<td>0.1%</td>
<td>3.7%</td>
<td>3.7%</td>
<td>3.3%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>1.9%</td>
<td>0.7%</td>
<td>3.0%</td>
<td>3.7%</td>
<td>16.9%</td>
<td>3.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food &amp; Beverages</td>
<td>0.1%</td>
<td>0.2%</td>
<td>0.9%</td>
<td>3.1%</td>
<td>2.3%</td>
<td>2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a></td>
<td>0.2%</td>
<td>0.2%</td>
<td>1.7%</td>
<td>2.1%</td>
<td>2.0%</td>
<td>NA</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>1.7%</td>
<td>1.9%</td>
<td>&nbsp;1.4%</td>
<td>NA</td>
</tr>
</tbody>
</table>
NAHB Housing Index Surged 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 19, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021119d.jpg" width="353">
The National Association of Home Builders index of new home sales rose sharply last month and during the recent several months following a period of relative stability early this year. The latest rise was to the highest level in two years.
Surveys of market conditions both currently and prospectively in the next six month improved. The current sales index improved sharply. 
During the last fifteen years there has been a 70% correlation between the annual percent change in the NAHB Index and the change in new home sales.
For a description of the housing market index from the National Association of Home Builders, visit the <a href="http://www.nahb.org/generic.aspx?sectionID=134&amp;genericContentID=532">NAHB website</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/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Housing Market Index</td>
<td>65</td>
<td>63</td>
<td>49</td>
<td>56</td>
<td>62</td>
<td>73</td>
</tr>
</tbody>
</table>
</body>
</html>

Chain store sales fell sharply last week, according to the BTM-UBSW survey. Sales fell 1.2% and erased virtually all the gains in the prior two weeks. So far in November, sales were down 0.3% from the average sales level a month [...]

Weekly Chain Store Sales Falter

PMIs showing widespread revival of global economy

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

Surging orders for computers and electronics propelling durable goods orders

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

Disrupted global supply chains placing upward pressure on US goods prices

Construction of data centers has overtaken transportation construction in US

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

US is big leader in global surge in private AI investment

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

Sharply rising share of AI-related jobs

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

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

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

Cost of transporting crude oil has soared to series high

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

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

Is recent drop in sentiment signaling softer growth ahead?

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

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

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

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Michael J. Moran

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Most analysts were looking for a dip in the CPI because of a likely retreat in gasoline prices, but the published decline of 0.4% in the headline index was noticeably softer than the consensus estimate of -0.1%. Gasoline prices did not disappoint, with a drop of 9.7% offsetting approximately one-quarter of the cumulative surge in the prior three months. Prices of fuel oil fell almost as much as gasoline prices, and electricity charges contributed to the softness with a decline of 1.0%. The price of natural gas services was the only major energy item to increase in June (0.5%). All told, the energy component of the CPI fell 5.7% after climbing 19.6% in the prior three months.

The drop in energy prices was notable, but the core component provided a bigger surprise by posting a decline, the first since a series of three consecutive decreases during the pandemic. Before the pandemic-related retreat, the core component fell only twice from 1990 to 2019. The drop in June was minuscule (-0.02%), but the fact that it carried a minus sign was striking.

Both the goods and services components of the core index contributed to the restraint. Prices of goods other than food and energy fell 0.1%. The Bureau of Labor Statistics publishes six key subcategories of core goods, and five of them fell in June. Apparel prices stood out with a decline of 0.6%. Prices of core services were nearly unchanged at 0.03%, restrained by declines in medical services and motor vehicle insurance. Airfares, which showed upward pressure from rising fuel prices in the prior three months, posted a nondescript increase of 0.2%. The modest increase in the prices of core services led to a dip in the 12-month average increase after stepping up in April and May. The trend in core goods prices continued its gradual deceleration (chart, below right).

Food prices in June rose 0.2%, a reading comfortably within the range of the past few years.

The Consumer Price figures can be found in Haver's **USECON** database. The expectations figure is contained in the **AS1REPNA** database.

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- The energy component retraced a portion of its surge in the prior three months.
- Prices excluding food and energy provided a surprise by posting a rare decline.

June CPI: Cooling Energy Prices and a Restrained Core Component

Winnie Tapasanun

260714T36.jpg

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The NFIB Small Business Optimism Index rose to 97.4 in June, the highest level since February, after a 0.6-point decline to 95.3 in May, according to the Small Business Economic Trends survey conducted by the National Federation of Independent Business. The index was slightly below its 52-year average of 98.0 for the fourth consecutive month and down from a peak of 105.1 in December 2024, albeit above a low of 88.5 in March 2024. Seven of the 10 index components rose, while three fell. Meanwhile, the NFIB Small Business Uncertainty Index edged down to 89 in June following a three-point increase to 91 in May, remaining well above its historical average of 68. The index was below its record high of 110 in October 2024 but above its recent low of 84 in December 2025 and a low of 65 in November 2023.

The outlook for business conditions in the next six months remained positive for the 20th straight month in the latest survey. The net balance of respondents expecting the economy to improve advanced to 13% in June, a four-month high, following a one-point decline to 3% in May; these readings were far below a high of 52% in December 2024 but significantly above a record low of -61% in June 2022. Expected real sales climbed to a net 9% in June, a five-month high, from 1% in May; the latest figure was below a high of 22% in December 2024 but above a low of -18% in August 2024. A net -4% of respondents reported higher nominal sales in the past three months, up from -5% in May and marking the highest reading in four months; the latest result remained above a low of -20% in October 2024 but below the recent positive reading of 1% in February and a peak of 9% in June 2021.

Plans to expand the business inched up to 8% in June from 7% in May and April; the latest figure was down from a high of 20% in December 2024 but up from a low of 2% in March 2023. Plans to make capital outlays rebounded to 20% in June from 16% in May; these numbers were still below a high of 28% in November 2024 and a peak of 31% in October 2021. Expected credit conditions slipped to -5% in June, a three-month low, from -3% in May; this result was slightly below a high of -2% in December 2024 but above a low of -11% in November 2023. Meanwhile, a net 0% of respondents viewed current inventory stocks as “too low” in June, up from -4% in May and matching the highest reading since August 2025 (also 0%); the positive reading of 1% was recorded in May 2025.

On the labor front, 51% of respondents reported that qualified workers to fill job openings were hard to find in June, up from 46% in May and registering the highest level since September 2024. These numbers were above a low of 43% in August 2025 but below a high of 56% in August 2024 and a peak of 62% in September 2021. A net 11% planned to increase employment in June, up from 9% in May; it matched a low of 11% in March 2024 but remained below its recent high of 19% in November 2025 and a peak of 32% in August 2021. Notably, 32% reported positions not able to be filled in June, up from 29% in May (the lowest level since May 2020); these figures remained below a high of 51% in May 2022.

Overall earnings trends had remained in negative territory since December 2019. The measure fell to -20% in June, the lowest level in three months, following a four-point increase to -15% in May. These readings were below the most recent high of -14% in February and a high of -5% in June 2021 but above a low of -37% in August 2024,

On the pricing front, actual and expected selling prices remained at an inflationary level, indicating continued inflationary pressures. The net percent of firms raising their average selling prices rose to 38% in June, the highest reading since February 2023, after a six-point increase to 36% in May. The latest reading was up from a low of 20% in August 2024 but well below a peak of 66% in March 2022. The percentage planning to raise prices eased to a still-elevated 32% in June following a seven-point rise to 34% in May (the highest level since November 2023); these readings remained above a low of 21% in April 2023.

Wage inflation remained relatively high in the June survey. A net 28% of respondents raised compensation during the last three months, down from 31% in May and marking the lowest since November 2025. It was also below a high of 46% in February 2023 and a peak of 50% in January 2022. A net 17% of firms planned to raise worker compensation in the next three months, slightly down from 18% in May and matching the lowest reading since July 2025; this remained below highs of 28% in November 2024, 30% in November 2023, and 32% in October 2022.

Inflation was cited as the single most important problem facing small businesses, as reported by 21% of NFIB members in June, up from 18% in May and representing the highest since October 2024; these readings were well below a peak of 37% in July 2022. Taxes ranked second as the next most important problem (alongside labor quality), as reported by 19% of respondents in June, unchanged from May. Labor quality also remained a key challenge for small businesses, as reported by 19% of respondents in June—the highest since December—compared with 13% in May (the lowest level since December 2016). Other concerns (in June vs. May) included labor costs (8% vs. 14%), government requirements (8% vs. 10%), insurance cost/availability (8% vs. 8%), poor sales (7% vs. 7%), and competition from large businesses (5% vs. 6%).

According to the Small Business Administration, there are 33 million small businesses in the United States, which employ 62 million workers. The NFIB surveys anywhere from 500 to 2000 respondents each month and the typical firm employs 10 people and reports gross sales of about $500,000 a year. The NFIB figures can be found in Haver’s **SURVEYS** database.

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- Uncertainty Idx down 2 pts. to 89, remaining well above the historical avg. of 68.
- Expectations for economy up 10 pts. to 13%, a four-month high.
- Expected real sales up 8 pts. to 9%, a five-month high.
- Plans to expand business up 1 pt. to 8%, highest in three mths.
- Firms raising avg. selling prices up 2 pts. to 38%, highest since Feb. ’23.
- Top three business concerns: inflation (21%), taxes (19%), and labor quality (19%).

U.S. NFIB Small Business Optimism Rebounds in June to a Four-Month High

Robert Brusca

260714E.jpg

Industrial production in Japan fell by 0.5% in May after rising by 0.7% in April and declining by 0.2% in March. Manufacturing output rose by 0.1% in May after rising by 0.4% in April and declining by 0.3% in March. Total industrial output shows a 0.7% gain over 12 months, a 3.4% annual rate gain over six months, and zero change in output over three months. For manufacturing, 12-month output is up 0.7%; over six months, output is up at a 6.1% annual rate; and over three months, output is up by 0.8% at an annual rate.

These trends show that output continues to grow for manufacturing as well for total industry, but not by a great margin. In fact, there are still a number of industries still fighting off negative trends, such as textiles, where output falls over three months, six months, and 12 months, as well as investment goods and mining, both of which show declines over three months, six months and 12 months. One year ago, all of these sectors were showing year-over-year declines except for manufacturing, which was up by 0.5% over 12 months. Manufacturing output is now up by 0.7% year-over-year, with consumer goods up by 1.8%, intermediate goods output up by 2%, and investment goods falling by 3%. Japan is currently trying to fight off a legacy of weakness. The strength of the rebound is being borne by consumer goods and intermediate goods, with investment goods undergoing significant contractive effects.

Manufacturing is showing gains on all three sequential horizons. Utilities output is showing growth on each horizon, and actually shows gathering strength, rising by 0.9% over 12 months, at a 1.4% annual rate over six months, and at a very strong 7.9% annual rate over three months.

In the quarter-to-date (QTD) basis, most of these sectors are losing the battle against weakness, with most industry or sectors showing declines two months into the new quarter. Overall output declines at a 0.2% annual rate. Manufacturing output falls at a 2.2% annual rate, intermediate goods output falls at a 0.2% annual rate, and investment goods output falls at a 7.2% annual rate. The only exception is consumer goods output, which is rising at a solid 5.3% annual rate, but that's not strong enough to drag all of industrial output or even manufacturing into the plus column.

Manufacturing output currently is at about 87.7% of its past peak. Activity in electric and gas utilities are at 90.4% of their past peak, while mining is only at 59.6% of its past peak of activity. Comparing levels of output to where they were in January 2020, manufacturing is at 94% of that value, with total industry also at 94% of that value. Consumer goods are at 98% of that value, intermediate goods at 92%, and investment goods at 93%. Mining is only at 74% of its January 2020 value, while electric and gas utilities have moved beyond the January 2020 level and are 3.3% higher than they were and early 2020.

Since 2020, it has been a relatively difficult time for the global economy. The Japanese statistics show only one sector that has managed to create positive growth compared to its level in January 2020. The current month is a mix of plus-and-minus activity changes. Sequential trends generally show more positives than negatives, but there are still a lot of negatives in train that keep Japanese manufacturing from reaching clearly solid footing. When the Strait of Hormuz opened, it appeared that Japan would be in a position to build on its recovery, but now, with the failed peace agreement and failed ceasefire, the strait once again has been closed and the outlook is shrouded in negativity.

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Japan

Japan’s IP Is Fighting Off Weak Trends

Industrial output in Norway fell by 1% in May after rising by 0.6 in April and falling by 1.1% in March. The seesaw act for output continues. Over broader horizons, however, output is falling. It falls by 0.1% over 12 months, falls at a 1.1% annual rate over six months, and falls at a 6.2% annual rate over three months, giving us a clear sequential trend toward falling and decelerating output. Utilities output has chaotic trends, as do mining and quarrying; however, manufacturing shows a clear trend toward output acceleration, with a 2.1% output increase over 12 months, a 2.6% annual rate rise over six months, and a 9% annual rate increase over three months.

Manufacturing sectors show consumer goods output increasing in May, also showing secular acceleration from 12 months to six months to three months. Durable goods, however, are the fly in the ointment, with output up 2.2% over 12 months, accelerating over six months, and then dropping at a 20.4% annual rate over three months. However, consumer nondurables show growth and acceleration, with a 12-month gain of 1.8%, rising to a 3.6% annual rate increase over six months and a 10.9% annual rate increase over three months. Intermediate goods output trends return to more difficult times and show declines over 12 months, six months, and three months, but not a clear path of deceleration. Capital goods output is up 5.4% over 12 months and at an 8.5% annual rate over three months, but there is an intervening soft spot with output up at only a 3.4% annual rate over six months.

Against this background, inflation in Norway showed solid increases in May, rising by 0.2% overall and by 0.3% for the core HICP. However, sequentially inflation gains 3% over 12 months, rises at a 3.8% annual rate over six months, and then backs down to a 1.2% annual rate over three months. The core HICP is steadier, with a 3.4% gain over 12 months, rising to a 3.8% annual rate over six months, and then backing down to 3.2% at an annual rate over three months. That's a set of growth rates that are more stable than either accelerating or decelerating.

In the quarter-to-date (QTD) basis, industrial production is falling 4.6%; this is two months into the second quarter. On the other hand, manufacturing output is rising QTD at a 4.9% annual rate, with consumer nondurables showing strong positive growth along with intermediate goods output. There is a solid gain of 3.1% at an annual rate from capital goods. The QTD inflation trends remain somewhat mixed, with a weak headline showing a 1.6% annual rate, against a core HICP at a 3.4% annual rate rise, the latter gain being well in step with its sequential results.

The far right-hand column compares industrial production over the broad period from just before COVID (in January 2020) looking at the ratio of the level of output in May 2026 to its index value in January 2020. Remember that IP data are inflation-adjusted, so these are real data. Over this span, industrial production excluding construction is up by approximately 10%, with utilities output up at about 21%, mining and quarrying up about 5%, and manufacturing up a little more than 7%. This is a 5½-year period. Consumer goods output is up by 2.7%, led by consumer nondurables which rise 4.1% on the period and against durable goods output where there is a decline of about 13% on that timeline. Intermediate goods output drops slightly on the timeline by less than half a percentage point, while capital goods output is up at a solid and strong 23% gain. Looking at prices over the same period, the headline HICP is higher by 27% while the core is higher by 24%.

The weakened output shows the stresses and strains of the period, with weak gains in place over the last 5½ years and with the consumer showing considerable wear and tear, leaving consumer goods output lower on balance over this 5½-year span. It hasn't been such a bad time for capital goods, where output rose by 23% over the period. Inflation got out-of-the-box and grew quite strongly. The headline HICP grew by 27% since January 2020, a duration of time during which, sticking to its target, would have implied a gain in the price level of only 11.5%.

**Ongoing overshooting**
Even now central banks are trying to decide how to come to grips with the inflation pressures from that. Pressures continue to linger and threaten the economies. Of course, there are some new factors in place, but that's the nature of inflation: if it's not one thing, it's something else. And failing to respond to the one thing means that you're going to get hit even worse when it becomes something else. This is the lesson the central banks haven't learned during this period. 

**Have central banks learned their lesson?**
Noting that inflation is over target and then forecasting that it's going to come back down to target over some period ahead puts the inflation performance at risk to whatever happens between now and the end of that period ‘ahead.’ If that forecast isn't perfectly right and if there's something else that disturbs the path of prices, what will happen is that an inflation that is already over the top of the target will push even farther over the top of the target and the dilemma faced by the central bank will become even worse. This is why kicking the can down the road generally is not a very good strategy, but it's one that virtually all the central banks pursued in the wake of COVID. So, will central bankers come to see inflation that is here and now as a here-and-now problem to be addressed here and now, or as a candidate for tomorrow land? The ECB seems to be changing, and the Fed has formed task forces. What about Norway and the rest of the world? Norway did push its target rate up as the ECB hiked. But what is its plan?

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Norway

Norwegian IP Struggles, but Manufacturing Shows Some Strength

Tian Yong Woon

In this week's Letter, we examine the underbelly of the AI boom, the risks that sit beneath its optimism. Start with the public mood: American concern about AI has grown alongside adoption over the past three to four years (chart 1). Those worries span mass job displacement, misuse of top-end models by bad actors, and fears of being left behind. The first of these is already surfacing: in June, AI was again the most cited reason for announced US layoffs, with year-to-date AI-linked cuts above 100,000 (chart 2). Technology led all sectors in overall cuts, though the data do not isolate how many were AI-driven. Among those hit, the young are arguably the most exposed to these labour effects. They enter a labour pool swollen by displaced professionals, just as AI masters the entry-level tasks where they would start. India and Indonesia illustrate the stakes on youth NEET, the share not in education, employment, or training, both above 20% and among Asia's highest (chart 3). Beyond the labour market, the same optimism reshapes asset prices. The rally has lifted AI-related valuations to historic highs and concentrated a few names in cap-weighted indexes (chart 4). That raises correlation and the risk of a sharper index fall should the rally unravel. The same concentration runs through economies via exports, from Taiwan's advanced chips to South Korea's memory (chart 5). Its footprint is physical too, and cuts both ways: data-centre investment has lifted growth in Johor, Malaysia (chart 6) while straining local power and water. None of this argues against riding the AI wave, which still promises real productivity and welfare gains. Rather, these are caveats that investors and policymakers must keep in view, since the story is not all upside.

**AI-related concerns**
AI adoption has exploded over the past three to four years, and Americans' concerns have risen alongside it (chart 1). That is understandable, given how advanced and broad AI's proven applications have become. They now span everyday tasks and subject-specific work across fields such as finance and production, as well as tech and development, the sector AI was born in. Major concerns run from mass AI-induced job displacement to a more recent fear, that top-end models fall into the wrong hands and are used by bad actors. A further worry is distributional: AI advances are powerful and could deliver leaps in productivity, yet they may also leave many people behind. Those most exposed include workers already displaced from their jobs and people facing scarcer basic resources as AI demand competes for them. Others simply lack equitable access to AI tools or their benefits.

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**AI-driven job displacement**
Some of the fears US workers first had about AI-driven job displacement are already playing out. In June, AI was again the most cited reason for announced job cuts in the US (chart 2). That pushed year-to-date job cuts attributed to AI above 100,000, more than half of all AI-tagged cuts since AI became a selectable reason in 2023. The data come from the latest survey by Challenger, Gray & Christmas. This likely reflects AI's disproportionately heavy impact on certain industries such as technology, which again led all sectors in cuts. At the same time, announced hiring plans stayed subdued, leaving laid-off workers with limited opportunities to find new roles. All of this is occurring even as market valuations remain elevated on the broader wave of AI optimism.

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**AI and youth unemployment**
Arguably among those bearing the brunt of these labour-related effects are the youth. Many have graduated on a curriculum built largely for a pre-AI era. They now enter a labour pool swollen by experienced professionals whom AI has displaced. At the same time, AI is proving especially capable at the entry-level tasks on which young workers usually start. An elevated youth unemployment rate only intensifies the competition young people face for gainful employment. On the broader NEET measure, which also captures youth who are neither working nor studying, India and Indonesia stand out. On the latest available WDI data, both have youth NEET rates above 20%, among the highest in Asia and above the global average (chart 3). Should employers in these economies adopt AI aggressively across processes and production, including physical AI such as humanoid robots, the problem could worsen. Yet firms that stay purely labour-intensive risk losing out to rivals using more efficient, and perhaps cheaper, AI-driven methods.

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**Concentration risk**
The recent wave of AI optimism has pushed the equity valuations of major AI developers and AI-related goods producers to historically high levels. These gains are partly backed by strong earnings and upbeat forward guidance. Most major indexes are weighted by market capitalisation, so a counter's weight tracks its price. As these counters have outperformed their peers (chart 4), their index weight has risen close to mechanically, when holding the number of shares constant. This raises concentration risk, since a small group of counters now carries more of the index and moves it more closely. So, if the rally in these counters were to unravel deeply, it would drag the broader index down more heavily with it.

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AI-related concentration risk is not confined to equity indexes; it also shows up in the growth of major economies. In Asia, that risk usually runs through a country's exports. Take Taiwan, the world's largest advanced semiconductor exporter, as an example. As chart 5 shows, its recent export growth has come more than entirely from integrated circuits and from infocomm and audiovisual equipment. Other goods categories have often contributed negatively in recent months. This is good news for the Taiwanese economy, which sits right at the centre of the global AI boom. Yet it is also a source of concentration risk, should AI-related goods demand collapse or substantial alternative supply emerge elsewhere. A similar story applies to South Korea, through its role in supplying high-end memory chips.

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**Data centres, energy, and water**
Finally, rapidly advancing AI promises major productivity gains and broad improvements to daily life. Yet AI infrastructure rests on resource-intensive inputs: the energy needed for data centre compute, and the water needed to cool those centres. Both may deprive real people of the very resources they need to survive. One recent hotspot is Malaysia, which has courted a wave of foreign direct investment to expand its data centre footprint in the state of Johor. These capital inflows are welcome, and have lifted state-level growth through the construction sector (chart 6). But they have also raised concerns about straining local grids and water supplies, possibly leaving less for residents. Among estimates, a recent one puts data centres at around 40% of Johor's electricity demand by 2035. That is pressuring the state to expand generation capacity and grid access to match the data centre pipeline already in place. Its neighbour Singapore faced similar strains earlier, and has since repositioned itself as a hub for the most advanced and efficient data centres, partly because of its severe land constraints. 