Louise Curley

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/020813a.jpg">
Retail sales increased 1.2% in July according to the Advance Monthly Sales for Retail and Food Services, after a revised increase of 1.4% in June.
Sales of motor vehicle and parts dealers rose 4.2% in each month as a result of zero-financing and other incentives offered by the automakers.
Excluding sales of motor vehicles and parts dealers, retail sales rose only 0.2% in July, compared with 0.5% in June.
Sales increased 2.7% at gasoline stations, due in part to price increases, 1.1% at health and personal care stores, 1.0% at food services and drinking places, 0.5% at nonstore retailer, 0.4% at sporting goods, hobby, book and music stores and 0.3% at food and beverage stores.
Sales declined 1.4% at furniture and home furnishing stores, 1.3% at clothing and clothing accessories stores, 1.3% at miscellaneous store retailers, 1.2% at building material and garden equipment and supplies dealers and 1.0% at electronics and appliance stores.

<table border="0" cellspacing="0" width="100%">
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<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">July</th>
<th scope="col">June</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"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM">Retail Sales &amp; Food Services</a></td>
<td>1.2%</td>
<td>1.4%</td>
<td>4.8%</td>
<td>3.8%</td>
<td>6.7%</td>
<td>8.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>0.2%</td>
<td>0.5%</td>
<td>3.9%</td>
<td>3.4%</td>
<td>7.3%</td>
<td>7.4%</td>
</tr>
</tbody>
</table>
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Retail sales increased 1.2% in July according to the Advance Monthly Sales for Retail and Food Services, after a revised increase of 1.4% in June. Sales of motor vehicle and parts dealers rose 4.2% in each month as a result of zero- [...]

July Retail Sales Rose; June Revised Higher

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/020809a.jpg" width="353">
Nonfarm labor productivity grew more than expected last quarter. Consensus estimates were for a 0.8% rate of growth.
Revisions to productivity left 1Q02 growth unchanged at 8.6% but 2001 growth was lowered to 1.1% from 1.8%. Growth in 2000 was lowered to 2.9% from 3.3%.
Output in the nonfarm business sector rose 0.5% (AR) following a 6.2% gain in 1Q02. Hours worked fell 0.7%, the eighth decline in the last nine quarters.
Unit Labor costs rose 2.4% following three consecutive quarters of decline. Compensation growth held steady at its 1Q02 rate, but that&#39;s up sharply from the quarterly rates of growth last year.
Manufacturing sector productivity grew at a 4.9% rate following a 9.7% surge in 1Q02. Unit labor costs fell at a 1.8% rate, the fourth consecutive quarterly decline.
Inflation pressure rose. The price deflator for the nonfarm business sector rose 1.4% following two consecutive quarters of decline.
The price-to-unit labor cost ratio, a key measure of corporate profitability, fell slightly following four quarters of gain.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EC/@EC02/@EC02.HTM">Nonfarm Business Sector</a> (SAAR)</th>
<th scope="col">2Q &#39;02</th>
<th scope="col">1Q &#39;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 class="odd">
<td class="firstcol">Output per Hour</td>
<td>1.1%</td>
<td>8.6%</td>
<td>4.7%</td>
<td>1.1%</td>
<td>2.9%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">Compensation</td>
<td>3.6%</td>
<td>3.6%</td>
<td>2.4%</td>
<td>2.7%</td>
<td>7.0%</td>
<td>4.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor Costs</td>
<td>2.4%</td>
<td>-4.6%</td>
<td>-2.2%</td>
<td>1.6%</td>
<td>3.9%</td>
<td>2.0%</td>
</tr>
</tbody>
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Nonfarm labor productivity grew more than expected last quarter. Consensus estimates were for a 0.8% rate of growth. Revisions to productivity left 1Q02 growth unchanged at 8.6% but 2001 growth was lowered to 1.1% from 1.8%. Growth in [...]

Nonfarm Productivity Firm

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/020808a.jpg" width="353">
Finished producer prices were weak last month, falling instead of rising 0.2% as the Consensus expected. It was the third decline in producer prices this year. Excluding food and energy prices also were weaker than expectations for a 0.1% rise.
Energy prices rose a modest 0.1% following no change in June and a decline in May.
Food prices fell for the third month in four.
Core finished consumer goods prices fell a sharp 0.4% (0.2% y/y). Core nondurable goods prices fell for the first month since February. Consumer durables prices were off 0.7% reflecting lower prices for electronics, furniture and cars. Capital goods prices fell 0.4%, the fourth decline this year. 
Intermediate goods prices rose moderately reflecting higher core intermediate prices. 
Crude goods prices rose reflecting higher prices for energy and other commodities.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</a></th>
<th scope="col">July</th>
<th scope="col">June</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 class="odd">
<td class="firstcol">Finished Goods</td>
<td>-0.2%</td>
<td>-0.1%</td>
<td>-1.1%</td>
<td>2.0%</td>
<td>3.7%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-0.3%</td>
<td>0.2%</td>
<td>-0.2%</td>
<td>1.4%</td>
<td>1.3%</td>
<td>1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>0.2%</td>
<td>0.2%</td>
<td>-1.3%</td>
<td>0.4%</td>
<td>4.9%</td>
<td>0.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.2%</td>
<td>0.2%</td>
<td>-0.3%</td>
<td>-0.1%</td>
<td>2.6%</td>
<td>-0.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>0.6%</td>
<td>-3.6%</td>
<td>-6.3%</td>
<td>0.3%</td>
<td>22.8%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>1.7%</td>
<td>1.6%</td>
<td>6.7%</td>
<td>-9.9%</td>
<td>7.3%</td>
<td>-4.7%</td>
</tr>
</tbody>
</table>
Initial Claims for Jobless Insurance Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 8, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/020808b.jpg" width="353">
Initial claims for unemployment insurance fell more than expected in the latest week. The prior week&#39;s level was revised up slightly. 
Continuing claims for unemployment insurance rose a sharp 1.5%, but the prior week&#39;s level was revised down.
The four-week moving average of initial claims fell to 379,000, -4.2% y/y. 
The insured rate of unemployment rose slightly to 2.8%.

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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">8/3/02</th>
<th scope="col">7/27/02</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>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>376.0</td>
<td>391.0</td>
<td>-5.3%</td>
<td>405.8</td>
<td>299.8</td>
<td>297.7</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,532</td>
<td>15.6%</td>
<td>3,021</td>
<td>2,114</td>
<td>2,186</td>
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</tbody>
</table>
</body>
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Finished producer prices were weak last month, falling instead of rising 0.2% as the Consensus expected. It was the third decline in producer prices this year. Excluding food and energy prices also were weaker than expectations for a [...]

Producer Prices Fell

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/020807a.jpg" width="353">
Prices for imported commodities rose twice the Consensus expectation last month. June figures were revised up.
Petroleum import prices reversed all of their June decline. So far in August, the price of Arab Light crude oil is up slightly to $23.26/bbl versus $23.09 in July.
Nonpetroleum import prices were unchanged and have risen 0.1% YTD.
Prices for imported capital goods fell a sharp 0.4% and are down 1.5% YTD. Nonauto consumer goods prices rose 0.1%, down 0.6% YTD and auto prices were unchanged, up 0.1% YTD.
Export prices rose following two months of no change, up 0.7% YTD. Food and industrial supplies prices have been strong but other export prices have been weak or lower.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E807/@E807.HTM">Import/Export Prices (NSA)</a></th>
<th scope="col">July</th>
<th scope="col">June</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 class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>0.4%</td>
<td>-0.3%</td>
<td>-1.7%</td>
<td>-3.5%</td>
<td>6.5%</td>
<td>0.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>4.9%</td>
<td>-4.8%</td>
<td>4.4%</td>
<td>-17.2%</td>
<td>66.5%</td>
<td>34.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonpetroleum</td>
<td>0.0%</td>
<td>0.1%</td>
<td>-1.5%</td>
<td>-1.5%</td>
<td>1.0%</td>
<td>-1.4%</td>
</tr>
<tr>
<td class="firstcol">Export - All Commodities</td>
<td>0.3%</td>
<td>0.0%</td>
<td>-0.7%</td>
<td>-0.8%</td>
<td>1.6%</td>
<td>-1.3%</td>
</tr>
</tbody>
</table>
Consumer Credit Growth Steady 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 7, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/020807b.jpg" width="353">
Consumer borrowing rose 0.5% in June, as expected. May figures were unrevised, up 0.6%. So far this year, consumer credit outstanding has risen at a 5.5% annual rate. 
Revolving credit rose by a moderate 0.5% m/m. Year to date revolving credit has grown at a 4.5% annual rate.
Nonrevolving credit also rose 0.5%, 6.3% (AR) YTD.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E103/@E10308/@E10308.HTM">Consumer Credit Outstanding</a></th>
<th scope="col">June m/m</th>
<th scope="col">May m/m</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 class="odd">
<td class="firstcol">Total</td>
<td>$8.4B</td>
<td>$9.5B</td>
<td>6.1%</td>
<td>6.8%</td>
<td>10.2%</td>
<td>7.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revolving</td>
<td>$3.8B</td>
<td>$2.4B</td>
<td>2.7%</td>
<td>4.9%</td>
<td>11.5%</td>
<td>6.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonrevolving</td>
<td>$4.5B</td>
<td>$7.1B</td>
<td>8.6%</td>
<td>8.3%</td>
<td>9.2%</td>
<td>8.4%</td>
</tr>
</tbody>
</table>
</body>
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Prices for imported commodities rose twice the Consensus expectation last month. June figures were revised up. Petroleum import prices reversed all of their June decline. So far in August, the price of Arab Light crude oil is up [...]

Import Prices Rose Sharply

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/020806a.jpg" width="353">
Chain store sales rose 0.1% following a 0.4% dip the prior week according to the BTM-UBSW survey.
Sales began the month of August about even with the average for July.
During the last five years there has been a 61% 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">8/3/02</th>
<th scope="col">7/27/02</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>
<tbody>
<tr>
<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>415.1</td>
<td>414.5</td>
<td>3.8%</td>
<td>2.1%</td>
<td>3.4%</td>
<td>6.7%</td>
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Chain store sales rose 0.1% following a 0.4% dip the prior week according to the BTM-UBSW survey. Sales began the month of August about even with the average for July. During the last five years there has been a 61% correlation [...]

Weekly Chain Store Sales Tick Higher

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/020805a.jpg" width="353">
The Institute for Supply Management business activity index of the nonmanufacturing sector fell more than expected last month, down for the second month from a peak in May. 
The overall index has been above 50, the dividing line for expansion and contraction, since February.
Of the seasonally adjusted subgroups, new orders and imports fell but employment rose slightly. The not seasonally adjusted index of export orders was quite strong. 
The not seasonally adjusted index of prices rose, recouping virtually all of the decline of the prior two months. 
During the last five years, there has been a 51% correlation between the level of the NAPM nonmanufacturing index and quarterly growth in real GDP in the service sector.
Business activity for the nonmanufacturing sector is a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index weights the components.
ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The nonmanufacturing survey dates only to July 1997, therefore its seasonal adjustment should be viewed tentatively.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">July</th>
<th scope="col">June</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">Business Activity Index</td>
<td>53.1</td>
<td>57.2</td>
<td>48.5</td>
<td>49.0</td>
<td>59.2</td>
<td>59.1</td>
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</tbody>
</table>
</body>
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The Institute for Supply Management business activity index of the nonmanufacturing sector fell more than expected last month, down for the second month from a peak in May. The overall index has been above 50, the dividing line for [...]

ISM Nonmanufacturing Index Fell Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/020802a.jpg" width="353">
Payrolls rose less than expected last month, but moderate gains in May and June were revised up. Payrolls have fallen 0.1% YTD.
The modest rise in July payrolls was accompanied by a sharp drop in the length of the workweek. As a result, the index of aggregate hours worked (employment times hours worked) fell 0.6% and started the quarter 0.4% below the 2Q average.
Amongst industries, factory sector jobs fell by the least since April 2000. Construction jobs plunged 30,000, or 0.5%, and are down 1.6% so far this year. Jobs in service producing industries rose 46,000 despite a 16,000 decline in government employment. Private service producing jobs are up 0.3% YTD.
The one-month diffusion index for nonfarm payrolls again fell below the 50% level, to 48.4. The level suggests little or no employment growth near term. The three month diffusion index was 50. 
Average hourly earnings rose as expected and the June gain was revised down slightly.
The unemployment rate held steady at it&#39;s high 2Q average. Both employment and the labor force fell.
The employment figures for nonfarm payrolls are based on reports provided to the US Labor Department by businesses, while the figures from which the unemployment rate is derived are based on a survey of US households.

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<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB01/@EB01.HTM">Employment</a></th>
<th scope="col">July</th>
<th scope="col">June</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">Payroll Employment</td>
<td>6,000</td>
<td>66,000</td>
<td>-1.0%</td>
<td>0.2%</td>
<td>2.2%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-7,000</td>
<td>-13,000</td>
<td>-5.1%</td>
<td>-4.2%</td>
<td>-0.4%</td>
<td>-1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>34.0</td>
<td>34.3</td>
<td>34.2</td>
<td>34.2</td>
<td>34.4</td>
<td>34.5</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.3%</td>
<td>0.3%</td>
<td>3.2%</td>
<td>4.1%</td>
<td>3.9%</td>
<td>3.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>5.9%</td>
<td>5.9%</td>
<td>4.6%</td>
<td>4.8%</td>
<td>4.0%</td>
<td>4.2%</td>
</tr>
</tbody>
</table>
Personal Income & Spending Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 2, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/020802b.jpg" width="353">
Personal income rose slightly more than expected in June. May&#39;s gain was revised slightly higher. Income is up 5.6% (AR) year-to-date. 
Personal consumption expenditures rose slightly less than expected following benchmark revisions that generally lowered the level of spending. In chained 96 dollars, spending is up 2.9% (AR) year-to-date.
Wage and salary disbursements rose 0.7%, the strongest gain since July 2000. Wages are up 3.3% (AR) YTD. 
Personal spending rose slightly less than expected. Durables spending was notably strong as unit sales of light vehicles rose 5.2%. Spending on nondurables and services rose moderately
Disposable income rose 0.7% (11.7% AR, YTD, following upwardly revised gains. Personal tax payments fell sharply in January and in five of six months this year. 
The PCE price deflator rose 0.1% following an unrevised 0.1% decline in May. Prices were up 2.1% (AR) year to date. Less food and energy the price deflator rose 0.1% following no change in May.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.6%</td>
<td>0.4%</td>
<td>3.4%</td>
<td>3.3%</td>
<td>8.0%</td>
<td>4.9%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.5%</td>
<td>-0.0%</td>
<td>4.2%</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>4.1%</td>
<td>1.7%</td>
<td>2.3%</td>
<td>2.8%</td>
<td>2.7%</td>
</tr>
<tr>
<td class="firstcol">PCE Price Deflator</td>
<td>0.1%</td>
<td>-0.1%</td>
<td>1.0%</td>
<td>2.0%</td>
<td>2.5%</td>
<td>1.6%</td>
</tr>
</tbody>
</table>
U.S. Light Vehicle Sales Surge 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 2, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/020802c.jpg" width="353">
Unit sales of light vehicles rose 9.8% last month versus June as 0% financing plans spurred buying. Sales were quite a bit higher than expected and were the highest since October.
Sales of domestically built vehicles rose 11.8% m/m as both car and truck sales surged.
Imported vehicle sales rose 1.9% vs. June. Autos were about flat but truck sales were strong.
Imports captured 18.5% of the US light vehicle market in July, the lowest percentage this year.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED09/@ED0901/@ED0901.HTM">Light Vehicle Sales (SAAR, Mil.Units)</a></th>
<th scope="col">July</th>
<th scope="col">June</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>18.10</td>
<td>16.48</td>
<td>9.7%</td>
<td>17.25</td>
<td>17.40</td>
<td>16.95</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Domestic</td>
<td>14.75</td>
<td>13.19</td>
<td>9.2%</td>
<td>14.18</td>
<td>14.58</td>
<td>14.47</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imported</td>
<td>3.35</td>
<td>3.29</td>
<td>11.9%</td>
<td>3.06</td>
<td>2.82</td>
<td>2.48</td>
</tr>
</tbody>
</table>
Factory Inventory Decumulation Slowed 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 2, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/020802d.jpg" width="353">
Manufacturing inventories fell by the least amount since the start of the runoff early last year. May&#39;s decline was unrevised.
Inventory decumulation amongst durable gods industries continued strong and was broad based. Nondurable goods inventories rose 0.4% after sideways movement most of the year. Gains were broad based but strongest for petroleum. 
Shipments plunged 1.0% (-1.5% y/y) following three months of gain.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Inventories</a></th>
<th scope="col">June</th>
<th scope="col">May</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">Mfg Inventories</td>
<td>-0.1%</td>
<td>-0.4%</td>
<td>-7.7%</td>
<td>-8.0%</td>
<td>4.5%</td>
<td>3.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

Payrolls rose less than expected last month, but moderate gains in May and June were revised up. Payrolls have fallen 0.1% YTD. The modest rise in July payrolls was accompanied by a sharp drop in the length of the workweek. As a [...]

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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

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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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Sandy Batten

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The Producer Price Index for final demand fell 0.3% m/m (+5.5% y/y) in June following a downwardly revised 0.6% (6.0%y/y) gain in May (previously 1.1% m/m, 6.5% y/y) according to the Bureau of Labor Statistics (BLS). This was the first monthly decline in the headline index since August 2025 and the largest decline since April 2025. The Action Economics Forecast Survey expected an unchanged reading in June. Producer prices excluding food, energy and trade services edged up 0.1% m/m (+5.1% y/y) in June after having jumped 0.8% m/m (5.1% y/y) in May. The PPI excluding food and energy (the previous core index) rose 0.2% m/m (4.7% y/y) in June versus a 0.1% m/m (4.6% y/y) increase in May. A 0.1% m/m increase was expected.

The June decline in the index for final demand was attributable to a 1.4% m/m decline (+7.9% y/y) in prices for final demand goods following a 2.3% monthly rise in May. The index for final demand services increased 0.2% m/m (4.6% y/y) in June after a 0.1% monthly decline in May.

The 1.4% m/m decline in final demand goods prices was the largest since July 2022. Leading the decline in June, prices for final demand energy dropped 6.4% m/m. A 12.0% m/m decline in gasoline prices accounted for two-thirds of the decline in final demand goods prices in June. The index for final demand foods moved down 0.6% m/m, the first monthly decline in three months. Conversely, prices for final demand goods less food and energy increased 0.2% m/m (+5.1% y/y). The indexes for diesel fuel, jet fuel, fresh vegetables (except potatoes), crude petroleum, and thermoplastic resins and materials fell. In contrast, prices for plastic products advanced 1.6% m/m. The indexes for residential electric power and for potatoes also increased.

The index for final demand services rose 0.2% m/m (4.6% y/y) in June after falling 0.1% m/m in May. Over 60% of the advance in June can be attributed to margins for final demand trade services, which moved up 0.4% m/m after a 2.3% m/m decline in May. (Trade indexes measure changes in margins received by wholesalers and retailers.) Prices for final demand services less trade, transportation, and warehousing increased 0.1% m/m. Conversely, the index for final demand transportation and warehousing services declined 0.1% m/m. The indexes for securities brokerage, dealing, and investment advice; furniture retailing; apparel, jewelry, footwear, and accessories retailing; loan services (partial); and inpatient care rose. In contrast, margins for machinery and vehicle wholesaling declined 8.4%. The indexes for food and alcohol wholesaling and for deposit services (partial) also fell.

Final demand construction costs edged up 0.1% m/m (3.5% y/y) in June, the same monthly increase as in May. Construction prices for private capital investment also edged up 0.1% (3.4% y/y) in June, the same monthly gain as in May.

Prices for intermediate demand processed goods fell 1.2% m/m (+11.1% y/y) in June, the first monthly decline since October 2025 and the largest monthly decline since December 2022. Processed energy goods prices slumped 7.3% m/m, the first monthly decline since January. Processed foods prices edged up 0.1% m/m following a 0.6% m/m jump in May. Prices of processed goods excluding foods and energy rose 0.6% m/m, down markedly from 1.7% monthly gains in both April and May.

The PPI data are published by the Bureau of Labor Statistics and can be found in Haver’s **USECON** database. Further detail is contained in **PPI** and **PPIR**. The expectations figures are available in the **AS1REPNA** database.

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- Led by a 6.4% m/m decline in energy prices, the PPI for final demand fell 0.3% m/m in June.
- Goods prices fell 1.4% m/m, the first monthly decline since January, while services prices rose 0.2% m/m.
- Excluding food, energy and trade margins, the new core measure edged up 0.1% m/m while the old core (excluding just food and energy) rose 0.2% m/m in June.

U.S. Producer Prices Fell in June

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

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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?

Economy in Brief

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July Retail Sales Rose; June Revised Higher

Nonfarm Productivity Firm

Nonfarm Productivity Firm

Producer Prices Fell

Import Prices Rose Sharply

Weekly Chain Store Sales Tick Higher

ISM Nonmanufacturing Index Fell Again

July Payrolls Weak, Hours Plunge