Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071030h.jpg" align="left" class="large">
The IFO indexes from Germany provide us with detail to their
earlier
release. The chart on the left shows that the EU indexes for Germany&#8217;s
MFG sector track the result for the IFO. Both indexes are pointing
lower with the IFO index more up-to-date. The climate gauge is closing
in on a level that is near its position when Germany&#8217;s economy was
still struggling with EU debt limits and growth before the recent run
up in growth and optimism came to pass. The table below documents some
of the more worrisome elements of the new IFO survey 
 

The percentile column (the last column) and red highlights
provide
the best overview for this table. While the strong and rising euro
seems to be one of the main risk factors to German growth, foreign
orders on hand continue to be buoyant (last listing in the table).
Foreign orders on hand rank high in terms of the individual sector
percentile readings. The foreign order series is just beginning to show
decline in its monthly measures (not encroaching red highlights)
whereas the more inclusive &#8216;orders on hand&#8217; category has been dropping
for some time and shows percentile ranks for current readings that are
at or below the midpoint mark except for capital goods. We know that
capital goods is one area of strength for Germany That may be one of
the reason its export demand or orders are holding up better that
orders in general. But that is not all of it since all export orders
are holding up better than orders in general. With the euro so strong
that has to be viewed as a curiosity. Even though many German &#8216;foreign&#8217;
orders do not cross the exchange market at some point they are still
exports and subject to competition from weak currencies. 
 

Capital goods also tend to work on longer lags and the longer
the
Euro remains high the greater the prospect for Germany to lose orders
to capital goods competitors like Japan and the US even though it does
not appear to have happened yet. 
 

Percentiles for activity measures also have slipped to mid
range or
weaker except for capital goods. Despite this, expectations for the
next six months are generally upbeat even for consumer goods. The
percentile readings are generally around the 60% mark or higher with a
few exceptions. As for current conditions, the percentile sector
readings are solid to strong. 
 

Today&#8217;s German survey on consumer optimism, a poll by the
Forsa
institute, was commissioned by Germany's RTL television. It was carried
out among 2,503 respondents from October 22 to 26. Some 43% of those
surveyed said they expected the state of the economy to worsen, up from
28% in the previous Forsa survey conducted in May. Only 26% in the
current survey said they expected the economy to pick up further, down
from 41% in the May survey. Clearly, conditions and expectations are in
flux in Germany. The IFO components are only beginning to show some of
the ill effects of these shifts. The optimism of past success seems to
weigh heavily on new assessments for the future among the IFO
respondents.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th colspan="10" scope="col"> IFO
Survey: Germany</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="5">Percent: Yr/Yr</td>
<td colspan="4">Index Numbers</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Oct 
07</td>
<td>Sep 
07</td>
<td>Aug 
07</td>
<td>Jul 
07</td>
<td>Jun 
07</td>
<td>Current</td>
<td>Average</td>
<td>Curr/ 
Avg</td>
<td>%tile</td>
</tr>
<tr>
<td class="firstcol">Biz Climate</td>
<td style="color: red;">-1.5%</td>
<td style="color: red;">-0.9%</td>
<td>0.7%</td>
<td>0.8%</td>
<td>0.2%</td>
<td>103.9</td>
<td>95.7</td>
<td>108.5%</td>
<td>79.7%</td>
</tr>
<tr>
<td class="firstcol">Current Situation</td>
<td style="color: red;">-2.1%</td>
<td style="color: red;">-1.3%</td>
<td>2.5%</td>
<td>2.4%</td>
<td>1.6%</td>
<td>109.6</td>
<td>94.8</td>
<td>115.6%</td>
<td>82.3%</td>
</tr>
<tr>
<td class="firstcol">Biz Expectations</td>
<td style="color: red;">-0.7%</td>
<td style="color: red;">-0.4%</td>
<td style="color: red;">-1.1%</td>
<td style="color: red;">-0.9%</td>
<td style="color: red;">-1.2%</td>
<td>98.6</td>
<td>96.7</td>
<td>102.0%</td>
<td>68.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Oct 
07</td>
<td>Sep 
07</td>
<td>Aug 
07</td>
<td>Jul 
07</td>
<td>Jun 
07</td>
<td>Current</td>
<td>Average</td>
<td>Curr/ 
Avg</td>
<td>%tile</td>
</tr>
<tr>
<td class="firstcol">Biz Climate</td>
<td style="color: red;">-1.5%</td>
<td style="color: red;">-0.9%</td>
<td>0.7%</td>
<td>0.8%</td>
<td>0.2%</td>
<td>103.9</td>
<td>95.7</td>
<td>108.5%</td>
<td>79.7%</td>
</tr>
<tr>
<td class="firstcol">Current Situation</td>
<td style="color: red;">-2.1%</td>
<td style="color: red;">-1.3%</td>
<td>2.5%</td>
<td>2.4%</td>
<td>1.6%</td>
<td>109.6</td>
<td>94.8</td>
<td>115.6%</td>
<td>82.3%</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>0.0%</td>
<td>0.8%</td>
<td>4.4%</td>
<td>4.4%</td>
<td>4.4%</td>
<td>109.5</td>
<td>92.4</td>
<td>118.5%</td>
<td>90.8%</td>
</tr>
<tr>
<td class="firstcol">Intermediate</td>
<td style="color: red;">-1.6%</td>
<td style="color: red;">-0.5%</td>
<td>3.1%</td>
<td>3.0%</td>
<td>4.3%</td>
<td>109.0</td>
<td>91.0</td>
<td>119.8%</td>
<td>86.6%</td>
</tr>
<tr>
<td class="firstcol">Capital</td>
<td>2.9%</td>
<td style="color: red;">-0.4%</td>
<td>5.5%</td>
<td>4.8%</td>
<td>5.1%</td>
<td>113.1</td>
<td>92.1</td>
<td>122.7%</td>
<td>97.1%</td>
</tr>
<tr>
<td class="firstcol">Consumer</td>
<td>1.0%</td>
<td>4.3%</td>
<td>5.4%</td>
<td>5.3%</td>
<td>5.3%</td>
<td>105.5</td>
<td>95.9</td>
<td>110.0%</td>
<td>81.3%</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td style="color: red;">-5.9%</td>
<td style="color: red;">-6.0%</td>
<td style="color: red;">-2.2%</td>
<td style="color: red;">-3.1%</td>
<td style="color: red;">-4.0%</td>
<td>112.3</td>
<td>103.0</td>
<td>109.0%</td>
<td>64.0%</td>
</tr>
<tr>
<td class="firstcol">Wholesale</td>
<td style="color: red;">-5.9%</td>
<td style="color: red;">-2.2%</td>
<td style="color: red;">-1.9%</td>
<td style="color: red;">-0.8%</td>
<td>0.0%</td>
<td>114.4</td>
<td>99.3</td>
<td>115.2%</td>
<td>68.7%</td>
</tr>
<tr>
<td class="firstcol">Retail</td>
<td style="color: red;">-4.4%</td>
<td style="color: red;">-6.6%</td>
<td>2.1%</td>
<td>1.1%</td>
<td style="color: red;">-4.1%</td>
<td>103.3</td>
<td>95.4</td>
<td>108.3%</td>
<td>77.7%</td>
</tr>
<tr>
<td colspan="10" rowspan="1" class="firstcol">Next
6 Mos&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Biz Expectations</td>
<td>Oct 
07</td>
<td>Sep 
07</td>
<td>Aug 
07</td>
<td>Jul 
07</td>
<td>Jun 
07</td>
<td>Current</td>
<td>Average</td>
<td>Curr/ 
Avg</td>
<td>%tile</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td style="color: red;">-2.4%</td>
<td style="color: red;">-1.5%</td>
<td style="color: red;">-1.9%</td>
<td style="color: red;">-0.5%</td>
<td style="color: red;">-2.8%</td>
<td>97.4</td>
<td>96.5</td>
<td>100.9%</td>
<td>67.4%</td>
</tr>
<tr>
<td class="firstcol">Intermediate</td>
<td style="color: red;">-6.5%</td>
<td style="color: red;">-4.8%</td>
<td style="color: red;">-2.8%</td>
<td style="color: red;">-2.3%</td>
<td style="color: red;">-4.2%</td>
<td>94.2</td>
<td>96.0</td>
<td>98.2%</td>
<td>51.7%</td>
</tr>
<tr>
<td class="firstcol">Capital</td>
<td>2.4%</td>
<td>2.1%</td>
<td style="color: red;">-1.4%</td>
<td>4.4%</td>
<td style="color: red;">-2.7%</td>
<td>100.6</td>
<td>96.4</td>
<td>104.4%</td>
<td>75.4%</td>
</tr>
<tr>
<td class="firstcol">Consumer</td>
<td style="color: red;">-0.5%</td>
<td>1.0%</td>
<td>0.5%</td>
<td style="color: red;">-2.3%</td>
<td>0.9%</td>
<td>99.1</td>
<td>97.8</td>
<td>101.3%</td>
<td>62.6%</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>3.4%</td>
<td>3.4%</td>
<td>0.1%</td>
<td>0.2%</td>
<td>0.4%</td>
<td>101.3</td>
<td>98.2</td>
<td>103.1%</td>
<td>57.4%</td>
</tr>
<tr>
<td class="firstcol">Wholesale</td>
<td style="color: red;">-3.4%</td>
<td>3.5%</td>
<td>0.5%</td>
<td style="color: red;">-3.8%</td>
<td>2.8%</td>
<td>101.3</td>
<td>97.0</td>
<td>104.4%</td>
<td>63.5%</td>
</tr>
<tr>
<td class="firstcol">Retail</td>
<td>5.5%</td>
<td style="color: red;">-3.0%</td>
<td style="color: red;">-0.5%</td>
<td style="color: red;">-0.5%</td>
<td style="color: red;">-0.5%</td>
<td>98.4</td>
<td>96.0</td>
<td>102.5%</td>
<td>70.1%</td>
</tr>
<tr>
<td colspan="10" rowspan="1" class="firstcol">(m/m)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Activty(m/m)</td>
<td>Oct 
07</td>
<td>Sep 
07</td>
<td>Aug 
07</td>
<td>Jul 
-07</td>
<td>Jun 
07</td>
<td>Current</td>
<td>Average</td>
<td>Curr/ 
Avg</td>
<td>%tile</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td style="color: red;">-5.3%</td>
<td style="color: red;">-4.5%</td>
<td>1.0%</td>
<td style="color: red;">-1.8%</td>
<td style="color: red;">-3.6%</td>
<td>96.9</td>
<td>97.0</td>
<td>99.9%</td>
<td>52.9%</td>
</tr>
<tr>
<td class="firstcol">Intermediate</td>
<td style="color: red;">-8.6%</td>
<td style="color: red;">-5.8%</td>
<td>0.5%</td>
<td style="color: red;">-5.9%</td>
<td style="color: red;">-4.6%</td>
<td>93.2</td>
<td>96.3</td>
<td>96.8%</td>
<td>42.4%</td>
</tr>
<tr>
<td class="firstcol">Capital</td>
<td style="color: red;">-3.3%</td>
<td style="color: red;">-2.3%</td>
<td>0.0%</td>
<td>0.5%</td>
<td style="color: red;">-2.7%</td>
<td>99.0</td>
<td>97.1</td>
<td>102.0%</td>
<td>63.8%</td>
</tr>
<tr>
<td class="firstcol">Consumer</td>
<td style="color: red;">-3.9%</td>
<td style="color: red;">-3.3%</td>
<td>3.5%</td>
<td style="color: red;">-0.5%</td>
<td style="color: red;">-2.4%</td>
<td>99.3</td>
<td>98.4</td>
<td>100.9%</td>
<td>50.9%</td>
</tr>
<tr>
<td colspan="10" rowspan="1" class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Demand M/M</td>
<td>Oct 
07</td>
<td>Sep 
07</td>
<td>Aug 
07</td>
<td>Jul 
07</td>
<td>Jun 
07</td>
<td>Current</td>
<td>Average</td>
<td>Curr/ 
Avg</td>
<td>%tile</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td style="color: red;">-8.4%</td>
<td style="color: red;">-6.4%</td>
<td style="color: red;">-2.8%</td>
<td style="color: red;">-3.3%</td>
<td style="color: red;">-7.1%</td>
<td>95.3</td>
<td>97.1</td>
<td>98.2%</td>
<td>48.5%</td>
</tr>
<tr>
<td class="firstcol">Intermediate</td>
<td style="color: red;">-13.8%</td>
<td style="color: red;">-9.2%</td>
<td style="color: red;">-3.8%</td>
<td style="color: red;">-6.8%</td>
<td style="color: red;">-10.3%</td>
<td>91.5</td>
<td>97.5</td>
<td>93.8%</td>
<td>33.0%</td>
</tr>
<tr>
<td class="firstcol">Capital</td>
<td style="color: red;">-3.7%</td>
<td style="color: red;">-4.2%</td>
<td style="color: red;">-1.9%</td>
<td style="color: red;">-3.2%</td>
<td style="color: red;">-4.9%</td>
<td>98.8</td>
<td>96.0</td>
<td>102.9%</td>
<td>72.5%</td>
</tr>
<tr>
<td class="firstcol">Consumer</td>
<td style="color: red;">-9.5%</td>
<td style="color: red;">-6.4%</td>
<td style="color: red;">-2.8%</td>
<td>6.0%</td>
<td style="color: red;">-7.4%</td>
<td>93.3</td>
<td>96.6</td>
<td>96.6%</td>
<td>35.2%</td>
</tr>
<tr>
<td colspan="10" rowspan="1" class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Orders on hand</td>
<td>Oct 
07</td>
<td>Sep 
07</td>
<td>Aug 
07</td>
<td>Jul 
07</td>
<td>Jun 
07</td>
<td>Current</td>
<td>Average</td>
<td>Curr/ 
Avg</td>
<td>%tile</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td style="color: red;">-7.9%</td>
<td style="color: red;">-4.6%</td>
<td style="color: red;">-2.3%</td>
<td style="color: red;">-2.7%</td>
<td style="color: red;">-3.6%</td>
<td>97.4</td>
<td>96.5</td>
<td>101.0%</td>
<td>55.7%</td>
</tr>
<tr>
<td class="firstcol">Intermediate</td>
<td style="color: red;">-13.3%</td>
<td style="color: red;">-9.6%</td>
<td style="color: red;">-5.2%</td>
<td style="color: red;">-8.4%</td>
<td style="color: red;">-6.7%</td>
<td>93.5</td>
<td>96.5</td>
<td>96.8%</td>
<td>39.9%</td>
</tr>
<tr>
<td class="firstcol">Capital</td>
<td style="color: red;">-1.8%</td>
<td style="color: red;">-0.9%</td>
<td style="color: red;">-0.5%</td>
<td>1.0%</td>
<td>0.8%</td>
<td>101.5</td>
<td>95.7</td>
<td>106.1%</td>
<td>77.1%</td>
</tr>
<tr>
<td class="firstcol">Consumer</td>
<td style="color: red;">-6.3%</td>
<td style="color: red;">-2.4%</td>
<td>0.5%</td>
<td>1.0%</td>
<td style="color: red;">-5.1%</td>
<td>98.2</td>
<td>98.5</td>
<td>99.7%</td>
<td>40.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Fgn orders on hand</td>
<td>Oct 
07</td>
<td>Sep 
07</td>
<td>Aug 
07</td>
<td>Jul 
07</td>
<td>Jun 
07</td>
<td>Current</td>
<td>Average</td>
<td>Curr/ 
Avg</td>
<td>%tile</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td style="color: red;">-0.4%</td>
<td>0.5%</td>
<td>2.4%</td>
<td>1.9%</td>
<td>2.0%</td>
<td>111.0</td>
<td>94.6</td>
<td>117.3%</td>
<td>95.2%</td>
</tr>
<tr>
<td class="firstcol">Intermediate</td>
<td style="color: red;">-3.4%</td>
<td>-2.0%</td>
<td>0.0%</td>
<td style="color: black;">-0.5%</td>
<td>0.0%</td>
<td>107.2</td>
<td>93.7</td>
<td>114.3%</td>
<td>83.3%</td>
</tr>
<tr>
<td class="firstcol">Capital</td>
<td>3.2%</td>
<td>2.9%</td>
<td>6.1%</td>
<td>5.3%</td>
<td>6.3%</td>
<td>114.7</td>
<td>93.5</td>
<td>122.6%</td>
<td>97.6%</td>
</tr>
<tr>
<td class="firstcol">Consumer</td>
<td style="color: red;">-0.4%</td>
<td>2.1%</td>
<td>1.6%</td>
<td>0.0%</td>
<td style="color: red;">-0.5%</td>
<td>112.2</td>
<td>98.5</td>
<td>113.9%</td>
<td>93.7%</td>
</tr>
<tr class="grey1">
<td colspan="10" class="firstcol">Yr/Yr percentage changes in
underlying Indices</td>
</tr>
</tbody>
</table>
</body></html>

The IFO indexes from Germany provide us with detail to their earlier release. The chart on the left shows that the EU indexes for Germany’s MFG sector track the result for the IFO. Both indexes are pointing lower with the IFO index [...]

IFO Details Begin to Show Cracks…

Tom Moeller

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<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071030b.jpg" width="353">
Consumer confidence fell in October according to the Conference Board Survey. The 3.9% m/m decline was preceded by declines of 5.8% and 5.6% during the prior two months.
The decline in the index to 95.6, in fact, was to the lowest level since October 2005. Economists generally had expected a lesser decline to 99.0.
The present conditions fell 2.0% after declines of 6.8% and 5.9% during the prior two months. The decline also was to the lowest level in about two years.
The percentage of respondents who viewed business conditions as good dropped sharply for the third consecutive month while the percentage who viewed jobs as plentiful also fell hard for the third month. Those who felt jobs were hard to get rose to the highest since late 2005.
The expectations index similarly fell sharply by 5.8% m/m to the lowest in two years. Expectations about business conditions and income both fell but expectations about employment rose slightly. <img align="right" class="large" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071030c.jpg">
Plans to buy major appliances fell most sharply to the lowest in two years while plans to buy carpet held steady at a low level. The percentage of respondents who would buy a new car fell to the lowest since July.
The expected inflation rate in twelve months remained at 5.1%, equal to expectations during all of last year for inflation in twelve months.
U.S. home prices fell 0.8% m/m in August for the 14th consecutive month, according to the S&amp;P/Case-Shiller home price index composite 10.
The index of just 10 U.S. cities and their surrounding areas is not adjusted for the quality or the size of the home. It fell five percent in August from a year ago.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Conference Board &nbsp;(SA, 1985=100)</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Confidence Index</td>
<td>95.6</td>
<td>99.5</td>
<td>-9.0%</td>
<td>105.9</td>
<td>100.3</td>
<td>96.1</td>
</tr>
<tr>
<td class="firstcol">Present Conditions</td>
<td>118.8</td>
<td>121.2</td>
<td>-5.0%</td>
<td>130.2</td>
<td>116.1</td>
<td>94.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Expectations</td>
<td>80.1</td>
<td>85.0</td>
<td>-12.8%</td>
<td>89.7</td>
<td>89.7</td>
<td>96.9</td>
</tr>
</tbody>
</table>
</body>
</html>

Consumer confidence fell in October according to the Conference Board Survey. The 3.9% m/m decline was preceded by declines of 5.8% and 5.6% during the prior two months. The decline in the index to 95.6, in fact, was to the lowest [...]

Consumer Confidence Tanked as Gasoline Prices Rose & Home Prices Fell

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071030a.jpg" width="353">
The International Council of Shopping Centers (ICSC)-UBS reported that chain store sales held steady last week (2.5% y/y) after a 1.5% decline during the week prior.
The average level of store sales in October is down 0.8% from the September average. That follows a 0.8% decline in the average level of chain store sales during September versus the August average.
During the last ten years there has been a 45% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
The leading indicator of chain store sales from ICSC-UBS fell 0.2% (-0.7% y/y) after a 0.2% decline during the prior week.
The decline in chain store sales accompanied a another nickel rise in average gasoline prices across the country to $2.87 (27.9% y/y) per gallon.
Higher gasoline prices followed the 4.7% m/m increase in crude oil prices so far in October to $83.47 per barrel. That rise since has backed off slightly from the daily high this month of $89.48 per barrel but only to $87.57.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">10/27/07</th>
<th scope="col">10/20/07</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>473.3</td>
<td>472.9</td>
<td>2.5%</td>
<td>3.3%</td>
<td>3.6%</td>
<td>4.7%</td>
</tr>
</tbody>
</table>


</html>

The International Council of Shopping Centers (ICSC)-UBS reported that chain store sales held steady last week (2.5% y/y) after a 1.5% decline during the week prior. The average level of store sales in October is down 0.8% from the [...]

U.S. Chain Store Sales Sustain Lower Level, Gasoline Prices Up Again

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071029c.jpg" width="353">
The average price of the quality adjusted house in the UK declined 0.11% in October to 176.1 thousands of British pounds, the first decline since December, 2005. Other measures of activity in the housing market revealed in the Hometrack Housing Survey also showed weakness. The ratio of the selling price to the asking price declined to 94.3 from 94.8 in September. The average time to sell a house rose to 7.4 weeks from 6.9 and the number of viewings before a sale rose to 11.5 from 11.0. These last two indicators are shown with the house price in the first chart. The house price is on an inverted scale.
December, 2005 marked the end of a year and a half of year of almost constant year to year declines in the quarterly house prices. In spite of the price declines, which may well have resulted from rising interest rates at that time, the housing market did not collapse. Construction remained strong. Once again, there has been a period of rising interest rates that has now begun to affect the housing market. The standard average variable interest rate on mortgages is shown in the second chart together with the house price. The question now is: Will the current rise in interest rates leave the housing market as unscathed as it did in the 2004-5 period?
In one respect, that regarding housing starts, the effect is already apparent. There were only two year to year declines in England&#39;s quarterly housing starts in 2005, one of 4.6% in the first quarter and one of 0.74% in the third quarter. Contrast that with the current decline beginning in the second quarter of 2006 and continuing into the second quarter of 2007. Data for housing starts for all of Great Britain are available only through 2006, but data for England are available through the second quarter of 2007. Since the trend in activity in England largely determine the trend in activity for the whole United Kingdom, as the third chart attests, it is clear that there has already been a significant impact on actual housing starts. 

 <img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071029d.jpg"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071029e.jpg">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">UK HOMETRACK HOUSING SURVEY&nbsp;</th>
<th scope="col">Oct 07</th>
<th scope="col">Sep 07&nbsp;</th>
<th scope="col">Oct 06&nbsp;</th>
<th scope="col">M/M% Chg&nbsp;</th>
<th scope="col">Y/Y % Chg&nbsp;</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Weighted Average Price (1000 GBP)</td>
<td>176.1</td>
<td>176.3</td>
<td>168.6</td>
<td>-0.11</td>
<td>4.45</td>
<td>165.7</td>
<td>161.9</td>
<td>165.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Sale&#39;s Price as % of Asking Price</td>
<td>94.3</td>
<td>94.8</td>
<td>94.9</td>
<td>-0.5*</td>
<td>-0.6*</td>
<td>94.7</td>
<td>93.3</td>
<td>95.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Time to Sell in weeks</td>
<td>7.4</td>
<td>6.9</td>
<td>6.5</td>
<td>0.5*</td>
<td>0.9*</td>
<td>6.8</td>
<td>7.8</td>
<td>5.3</td>
</tr>
<tr class="odd">
<td class="firstcol"> Average Number of Viewings per Sale </td>
<td>11.5</td>
<td>11.0</td>
<td>10.8</td>
<td>0.5*</td>
<td>0.7*</td>
<td>10.9</td>
<td>12.3</td>
<td>11.00</td>
</tr>
<tr>
<td class="firstcol"></td>
<td>Q2 07</td>
<td>Q1 07&nbsp;</td>
<td>Q2&nbsp; 06&nbsp;</td>
<td>Q/Q Chg&nbsp;</td>
<td>Y/Y Chg&nbsp;</td>
<td>2006</td>
<td>2005</td>
<td>2004</td>
</tr>
<tr class="odd">
<td class="firstcol">Housing Starts in England (000)</td>
<td>39.7</td>
<td>42.8</td>
<td>47.2</td>
<td>-7.18</td>
<td>-9.92</td>
<td>178.5</td>
<td>177.0</td>
<td>176.6</td>
</tr>
<tr class="odd">
<td class="firstcol">* difference</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>
</body>
</html>

The average price of the quality adjusted house in the UK declined 0.11% in October to 176.1 thousands of British pounds, the first decline since December, 2005. Other measures of activity in the housing market revealed in the [...]

U.K. Housing Market Cooling Off

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<div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071029b.jpg" width="353">
Real retail sales surged in August but they fell in September. Still, the combination leaves retail sales net better off over the past two months. The Yr/Yr chart (real retail sales) shows that the downtrend that has been in place is blunted by these recent movements. Still retail sales in the quarter are going to be lower; they are falling at a 3.2% annual rate in Q3. The main nominal measures show distinct slowing as well. 
Japan continues to be caught in between as the central bank looks for recovery and anticipates rate hikes and as the government plans for tax hikes to address Japan&#39;s excessive fiscal situation. Yet the economy, after a few hopeful quarters, has failed to deliver on the promise of growth and failed to let either of these policy moves occur. Moreover, the backsliding on the inflation front is a clear reminder of how fragile this economy is. The ongoing weakness in the yen should be a constant reminder of Japan&#146;s weakness as export growth continues to drive growth. In short, Japan&#146;s retail sales in September are not so encouraging despite the fact that they let much of the August strength stand. </div>

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
<th colspan=9 scope="col">Japan Real and Nominal Retail Sales</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Nominal</td>
<td>Sep-07</td>
<td>Aug-07</td>
<td>Jul-07</td>
<td>3-MO</td>
<td>6-MO</td>
<td>12-MO</td>
<td>YrAGo</td>
<td>QTR Q3 Saar</td>
</tr>
<tr>
<td class="firstcol">Retail Total</td>
<td>-0.6%</td>
<td>3.6%</td>
<td>-2.8%</td>
<td>0.8%</td>
<td>1.6%</td>
<td>0.5%</td>
<td>0.5%</td>
<td>-3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol"> Motor Vehicles and Parts</td>
<td>-6.5%</td>
<td>8.0%</td>
<td>-0.4%</td>
<td>2.3%</td>
<td>-1.9%</td>
<td>0.0%</td>
<td>-6.9%</td>
<td>3.4%</td>
</tr>
<tr>
<td class="firstcol">Food Beverages &amp; Tobacco</td>
<td>0.9%</td>
<td>1.2%</td>
<td>-1.0%</td>
<td>4.7%</td>
<td>-1.4%</td>
<td>0.4%</td>
<td>1.8%</td>
<td>-2.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Clothing footwear</td>
<td>-0.4%</td>
<td>8.7%</td>
<td>-8.3%</td>
<td>-3.1%</td>
<td>0.4%</td>
<td>-1.1%</td>
<td>-1.5%</td>
<td>-10.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Real</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail Total</td>
<td>-1.5%</td>
<td>3.9%</td>
<td>-2.5%</td>
<td>-0.8%</td>
<td>-0.2%</td>
<td>0.5%</td>
<td>-0.1%</td>
<td>-3.2%</td>
</tr>
</tbody>
</table>
</body>
</html>

Real retail sales surged in August but they fell in September. Still, the combination leaves retail sales net better off over the past two months. The Yr/Yr chart (real retail sales) shows that the downtrend that has been in place is [...]

Japan Retail Sales Edge Back in Sept...Is Slowing Trend Still in Place?

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071029a.jpg" align="left" border="0" height="265" width="353">

Readings are mostly firm, strong. 


France's service sector continues to claim strong readings.
While Euro area and French manufacturing measures have softened, the
service sector continues to post its strongest overall reading since
2000. The outlook index shows a bit more weakness, dropping by one
point in October and holding to the 87th percentile in its range. Sales
held to their second strongest reading on the period and were flat on
the month. Expected sales (next 3-months) slipped by one point and
remained in their 82nd percentile. Price expectations slipped and were
in the 30th to 40th percentiles. Employment readings showed current of
&#8216;observed' employment in only its 40th percentile but expected
employment (3-mos) was at 100%. Viva la optimism!


The service sector readings indicate that for France at least
expectations remain somewhat compartmentalized. Manufacturing
indicators have been weakening but the services survey shows no hint of
this or fear of its consequences. The same goes for the unrelenting
rise in the euro which has brought forth a good deal of negative
commentaries from French officials. There appears to have been no
spillover impact into the services sector stemming from these sorts of
concerns. Still, the upward momentum in the services index has clearly
slowed both for the climate and the outlook indicators. We may soon see
if the service sector is really this strong or if survey participants
have just been excessively optimistic. 



<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th colspan="11" scope="col">France
INSEE Services Survey Jan 2000-date</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Oct 
07</td>
<td>Sep 
07</td>
<td>Aug 
07</td>
<td>Jul 
07</td>
<td>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
</tr>
<tr class="grey3">
<td class="firstcol">Climate Indicator</td>
<td>113</td>
<td>112</td>
<td>113</td>
<td>113</td>
<td>100.0</td>
<td>1</td>
<td>113</td>
<td>83</td>
<td>30</td>
<td>102</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Climate:
3-Mo MAV</td>
<td>113</td>
<td>113</td>
<td>112</td>
<td>111</td>
<td>100.0</td>
<td>1</td>
<td>113</td>
<td>85</td>
<td>28</td>
<td>102</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Climate:
12-Mo MAV</td>
<td>110</td>
<td>110</td>
<td>110</td>
<td>109</td>
<td>100.0</td>
<td>1</td>
<td>110</td>
<td>91</td>
<td>20</td>
<td>101</td>
</tr>
<tr>
<td class="firstcol">Outlook</td>
<td>7</td>
<td>8</td>
<td>8</td>
<td>8</td>
<td>87.9</td>
<td>11</td>
<td>11</td>
<td>-22</td>
<td>33</td>
<td>-1</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan=11>Sales</td>

</tr>
<tr>
<td class="firstcol" >&nbsp; Observed 3-mos</td>
<td>18</td>
<td>18</td>
<td>16</td>
<td>13</td>
<td>96.7</td>
<td>2</td>
<td>19</td>
<td>-11</td>
<td>30</td>
<td>6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expected 3-Mos</td>
<td>13</td>
<td>14</td>
<td>15</td>
<td>16</td>
<td>82.1</td>
<td>12</td>
<td>18</td>
<td>-10</td>
<td>28</td>
<td>7</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan=11>Sales Price</td>

</tr>
<tr>
<td class="firstcol">&nbsp; Observed over 3-Mos</td>
<td>0</td>
<td>2</td>
<td>1</td>
<td>0</td>
<td>33.3</td>
<td>34</td>
<td>8</td>
<td>-4</td>
<td>12</td>
<td>0&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expected over 3-Mos</td>
<td>-1</td>
<td>1</td>
<td>1</td>
<td>2</td>
<td>40.0</td>
<td>59</td>
<td>5</td>
<td>-5</td>
<td>10</td>
<td>1</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan=11>Employment</td>

</tr>
<tr>
<td class="firstcol">&nbsp; Observed over 3-Mos</td>
<td>3</td>
<td>8</td>
<td>10</td>
<td>13</td>
<td>41.2</td>
<td>50</td>
<td>23</td>
<td>-11</td>
<td>34</td>
<td>5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expected over 3-Mos</td>
<td>17</td>
<td>9</td>
<td>8</td>
<td>6</td>
<td>100.0</td>
<td>1</td>
<td>17</td>
<td>-5</td>
<td>22</td>
<td>5</td>
</tr>
</tbody>
</table>
</html>

Readings are mostly firm, strong. France's service sector continues to claim strong readings. While Euro area and French manufacturing measures have softened, the service sector continues to post its strongest overall reading since [...]

France's Service Sector Holds Its Strength

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071029a.jpg" align="left" border="0" height="265" width="353">

Readings are mostly firm, strong. 


France's service sector continues to claim strong readings.
While Euro area and French manufacturing measures have softened, the
service sector continues to post its strongest overall reading since
2000. The outlook index shows a bit more weakness, dropping by one
point in October and holding to the 87th percentile in its range. Sales
held to their second strongest reading on the period and were flat on
the month. Expected sales (next 3-months) slipped by one point and
remained in their 82nd percentile. Price expectations slipped and were
in the 30th to 40th percentiles. Employment readings showed current of
&#8216;observed' employment in only its 40th percentile but expected
employment (3-mos) was at 100%. Viva la optimism!


The service sector readings indicate that for France at least
expectations remain somewhat compartmentalized. Manufacturing
indicators have been weakening but the services survey shows no hint of
this or fear of its consequences. The same goes for the unrelenting
rise in the euro which has brought forth a good deal of negative
commentaries from French officials. There appears to have been no
spillover impact into the services sector stemming from these sorts of
concerns. Still, the upward momentum in the services index has clearly
slowed both for the climate and the outlook indicators. We may soon see
if the service sector is really this strong or if survey participants
have just been excessively optimistic. 



<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th colspan="11" scope="col">France
INSEE Services Survey Jan 2000-date</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Oct 
07</td>
<td>Sep 
07</td>
<td>Aug 
07</td>
<td>Jul 
07</td>
<td>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
</tr>
<tr class="grey3">
<td class="firstcol">Climate Indicator</td>
<td>113</td>
<td>112</td>
<td>113</td>
<td>113</td>
<td>100.0</td>
<td>1</td>
<td>113</td>
<td>83</td>
<td>30</td>
<td>102</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Climate:
3-Mo MAV</td>
<td>113</td>
<td>113</td>
<td>112</td>
<td>111</td>
<td>100.0</td>
<td>1</td>
<td>113</td>
<td>85</td>
<td>28</td>
<td>102</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Climate:
12-Mo MAV</td>
<td>110</td>
<td>110</td>
<td>110</td>
<td>109</td>
<td>100.0</td>
<td>1</td>
<td>110</td>
<td>91</td>
<td>20</td>
<td>101</td>
</tr>
<tr>
<td class="firstcol">Outlook</td>
<td>7</td>
<td>8</td>
<td>8</td>
<td>8</td>
<td>87.9</td>
<td>11</td>
<td>11</td>
<td>-22</td>
<td>33</td>
<td>-1</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan=11>Sales</td>

</tr>
<tr>
<td class="firstcol" >&nbsp; Observed 3-mos</td>
<td>18</td>
<td>18</td>
<td>16</td>
<td>13</td>
<td>96.7</td>
<td>2</td>
<td>19</td>
<td>-11</td>
<td>30</td>
<td>6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expected 3-Mos</td>
<td>13</td>
<td>14</td>
<td>15</td>
<td>16</td>
<td>82.1</td>
<td>12</td>
<td>18</td>
<td>-10</td>
<td>28</td>
<td>7</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan=11>Sales Price</td>

</tr>
<tr>
<td class="firstcol">&nbsp; Observed over 3-Mos</td>
<td>0</td>
<td>2</td>
<td>1</td>
<td>0</td>
<td>33.3</td>
<td>34</td>
<td>8</td>
<td>-4</td>
<td>12</td>
<td>0&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expected over 3-Mos</td>
<td>-1</td>
<td>1</td>
<td>1</td>
<td>2</td>
<td>40.0</td>
<td>59</td>
<td>5</td>
<td>-5</td>
<td>10</td>
<td>1</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan=11>Employment</td>

</tr>
<tr>
<td class="firstcol">&nbsp; Observed over 3-Mos</td>
<td>3</td>
<td>8</td>
<td>10</td>
<td>13</td>
<td>41.2</td>
<td>50</td>
<td>23</td>
<td>-11</td>
<td>34</td>
<td>5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expected over 3-Mos</td>
<td>17</td>
<td>9</td>
<td>8</td>
<td>6</td>
<td>100.0</td>
<td>1</td>
<td>17</td>
<td>-5</td>
<td>22</td>
<td>5</td>
</tr>
</tbody>
</table>
Japan Retail Sales Edge Back in Sept...Is Slowing Trend Still in Place? 
by <a href="/comment/Brusca.html">Robert Brusca</a> October 29, 2007


<div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071029b.jpg" width="353">
Real retail sales surged in August but they fell in September. Still, the combination leaves retail sales net better off over the past two months. The Yr/Yr chart (real retail sales) shows that the downtrend that has been in place is blunted by these recent movements. Still retail sales in the quarter are going to be lower; they are falling at a 3.2% annual rate in Q3. The main nominal measures show distinct slowing as well. 
Japan continues to be caught in between as the central bank looks for recovery and anticipates rate hikes and as the government plans for tax hikes to address Japan&#39;s excessive fiscal situation. Yet the economy, after a few hopeful quarters, has failed to deliver on the promise of growth and failed to let either of these policy moves occur. Moreover, the backsliding on the inflation front is a clear reminder of how fragile this economy is. The ongoing weakness in the yen should be a constant reminder of Japan&#146;s weakness as export growth continues to drive growth. In short, Japan&#146;s retail sales in September are not so encouraging despite the fact that they let much of the August strength stand. </div>

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
<th colspan=9 scope="col">Japan Real and Nominal Retail Sales</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Nominal</td>
<td>Sep-07</td>
<td>Aug-07</td>
<td>Jul-07</td>
<td>3-MO</td>
<td>6-MO</td>
<td>12-MO</td>
<td>YrAGo</td>
<td>QTR Q3 Saar</td>
</tr>
<tr>
<td class="firstcol">Retail Total</td>
<td>-0.6%</td>
<td>3.6%</td>
<td>-2.8%</td>
<td>0.8%</td>
<td>1.6%</td>
<td>0.5%</td>
<td>0.5%</td>
<td>-3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol"> Motor Vehicles and Parts</td>
<td>-6.5%</td>
<td>8.0%</td>
<td>-0.4%</td>
<td>2.3%</td>
<td>-1.9%</td>
<td>0.0%</td>
<td>-6.9%</td>
<td>3.4%</td>
</tr>
<tr>
<td class="firstcol">Food Beverages &amp; Tobacco</td>
<td>0.9%</td>
<td>1.2%</td>
<td>-1.0%</td>
<td>4.7%</td>
<td>-1.4%</td>
<td>0.4%</td>
<td>1.8%</td>
<td>-2.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Clothing footwear</td>
<td>-0.4%</td>
<td>8.7%</td>
<td>-8.3%</td>
<td>-3.1%</td>
<td>0.4%</td>
<td>-1.1%</td>
<td>-1.5%</td>
<td>-10.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Real</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail Total</td>
<td>-1.5%</td>
<td>3.9%</td>
<td>-2.5%</td>
<td>-0.8%</td>
<td>-0.2%</td>
<td>0.5%</td>
<td>-0.1%</td>
<td>-3.2%</td>
</tr>
</tbody>
</table>
U.K. Housing Market Cooling Off 
by <a href="/comment/Curley.html">Louise Curley</a> October 29, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071029c.jpg" width="353">
The average price of the quality adjusted house in the UK declined 0.11% in October to 176.1 thousands of British pounds, the first decline since December, 2005. Other measures of activity in the housing market revealed in the Hometrack Housing Survey also showed weakness. The ratio of the selling price to the asking price declined to 94.3 from 94.8 in September. The average time to sell a house rose to 7.4 weeks from 6.9 and the number of viewings before a sale rose to 11.5 from 11.0. These last two indicators are shown with the house price in the first chart. The house price is on an inverted scale.
December, 2005 marked the end of a year and a half of year of almost constant year to year declines in the quarterly house prices. In spite of the price declines, which may well have resulted from rising interest rates at that time, the housing market did not collapse. Construction remained strong. Once again, there has been a period of rising interest rates that has now begun to affect the housing market. The standard average variable interest rate on mortgages is shown in the second chart together with the house price. The question now is: Will the current rise in interest rates leave the housing market as unscathed as it did in the 2004-5 period?
In one respect, that regarding housing starts, the effect is already apparent. There were only two year to year declines in England&#39;s quarterly housing starts in 2005, one of 4.6% in the first quarter and one of 0.74% in the third quarter. Contrast that with the current decline beginning in the second quarter of 2006 and continuing into the second quarter of 2007. Data for housing starts for all of Great Britain are available only through 2006, but data for England are available through the second quarter of 2007. Since the trend in activity in England largely determine the trend in activity for the whole United Kingdom, as the third chart attests, it is clear that there has already been a significant impact on actual housing starts. 

 <img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071029d.jpg"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071029e.jpg">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">UK HOMETRACK HOUSING SURVEY&nbsp;</th>
<th scope="col">Oct 07</th>
<th scope="col">Sep 07&nbsp;</th>
<th scope="col">Oct 06&nbsp;</th>
<th scope="col">M/M% Chg&nbsp;</th>
<th scope="col">Y/Y % Chg&nbsp;</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Weighted Average Price (1000 GBP)</td>
<td>176.1</td>
<td>176.3</td>
<td>168.6</td>
<td>-0.11</td>
<td>4.45</td>
<td>165.7</td>
<td>161.9</td>
<td>165.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Sale&#39;s Price as % of Asking Price</td>
<td>94.3</td>
<td>94.8</td>
<td>94.9</td>
<td>-0.5*</td>
<td>-0.6*</td>
<td>94.7</td>
<td>93.3</td>
<td>95.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Time to Sell in weeks</td>
<td>7.4</td>
<td>6.9</td>
<td>6.5</td>
<td>0.5*</td>
<td>0.9*</td>
<td>6.8</td>
<td>7.8</td>
<td>5.3</td>
</tr>
<tr class="odd">
<td class="firstcol"> Average Number of Viewings per Sale </td>
<td>11.5</td>
<td>11.0</td>
<td>10.8</td>
<td>0.5*</td>
<td>0.7*</td>
<td>10.9</td>
<td>12.3</td>
<td>11.00</td>
</tr>
<tr>
<td class="firstcol"></td>
<td>Q2 07</td>
<td>Q1 07&nbsp;</td>
<td>Q2&nbsp; 06&nbsp;</td>
<td>Q/Q Chg&nbsp;</td>
<td>Y/Y Chg&nbsp;</td>
<td>2006</td>
<td>2005</td>
<td>2004</td>
</tr>
<tr class="odd">
<td class="firstcol">Housing Starts in England (000)</td>
<td>39.7</td>
<td>42.8</td>
<td>47.2</td>
<td>-7.18</td>
<td>-9.92</td>
<td>178.5</td>
<td>177.0</td>
<td>176.6</td>
</tr>
<tr class="odd">
<td class="firstcol">* difference</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>
</html>

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

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

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

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

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250905A2.jpg

250905B2.jpg

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

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

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

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

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

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

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

250905C2.jpg

250905D2.jpg

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

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

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

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

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250905F2.jpg

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

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

Andrew Cates

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

250904Z1.jpg

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

250904Z2.jpg

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

250904Z3.jpg

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

250904Z4.jpg

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

250904Z5.jpg

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

250904Z6.jpg

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

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/0sd6yLt6aGEGOdVpZ2VZbW?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: A Few Cuts More

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

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

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

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

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

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

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

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

U.S. ISM Services PMI Increases in August

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

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

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

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

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

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

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

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

U.S. ADP Employment Increase Slows in August

Sandy Batten

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

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

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

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

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

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

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

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

Economy in Brief: 2007

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