Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041019c.jpg" width="353">
Housing starts fell 6.0% last month to 1.898M following an upwardly revised 1.8% August rise.Consensus expectations had been for 1.95M starts in September.
Single-family starts fell a sharp 8.2% m/m. but the year to date single family average 6.2% above last year. Multi-family starts rose 4.7% following an upwardly revised 5.6% August gain.
Housing starts in the Northeast fell a hard 26.9% (-21.0% y/y) and were off m/m throughout the rest on the country
Building permits rose 1.8% m/m and gained back some of the prior month&#39;s 4.7% decline.
&quot;House Prices and Fundamental Value&quot; from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2004/el2004-27.pdf"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM"> Housing Starts (000s, AR)</a></th>
<th scope="col"> Sept</th>
<th scope="col"> Aug</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>1,898</td>
<td>2,020</td>
<td>-1.2%</td>
<td>1,853</td>
<td>1,710</td>
<td>1,601</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,540</td>
<td>1,678</td>
<td>0.2%</td>
<td>1,505</td>
<td>1,363</td>
<td>1,272</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>358</td>
<td>342</td>
<td>-7.0%</td>
<td>348</td>
<td>347</td>
<td>330</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>2,005</td>
<td>1,969</td>
<td>3.2%</td>
<td>1,889</td>
<td>1,749</td>
<td>1,637</td>
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Housing starts fell 6.0% last month to 1.898M following an upwardly revised 1.8% August rise.Consensus expectations had been for 1.95M starts in September. Single-family starts fell a sharp 8.2% m/m. but the year to date single family [...]

Housing Starts Down More Than Expected

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041019d.jpg" width="353">
The Consumer Price Index (CPI-U) rose 0.2% last month. The gain matched Consensus forecasts, but the 0.3% rise in prices less food and energy exceeded the 0.2% expectation.
The CPI for &quot;core&quot; commodities rose for the first month in three, up 0.2%. The increase wholly reflected a rise in used motor vehicle prices. New vehicle prices fell 0.2% (-1.1% y/y). Household furnishings &amp; operations prices were unchanged (-0.2% y/y) as were apparel prices (-0.7% y/y).
Services prices less energy rose a moderate 0.3%. Shelter prices, up 0.4% (3.0% y/y), health care services, up 0.3% (5.0% y/y), and education &amp; communication prices, up 0.4% (1.7% y/y) all were relatively firm. Public transportation prices fell 1.1% (-2.8% y/y), the second consecutive down month.
Gasoline prices last month ticked up a modest 0.1% (+9.4% y/y) but in October have risen another 6.4% on average and were $2.04/gallon last week. Fuel oil prices were strong again with a 1.9% (23.9% y/y) rise. Natural gas prices fell 1.0% (+3.0% y/y) though they have recouped all of that decline in October.
The chained CPI, which adjusts for shifts in the mix of consumer purchases rose a firm 0.3%. It is similar to the PCE price deflator. The core chain price measure rose for the first time since April.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM"> Consumer Price Index</a></th>
<th scope="col"> Sept</th>
<th scope="col"> Aug</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total&nbsp;</td>
<td>0.2%</td>
<td>0.1%</td>
<td>2.5%</td>
<td>2.3%</td>
<td>1.6%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.3%</td>
<td>0.1%</td>
<td>2.0%</td>
<td>1.5%</td>
<td>2.3%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>0.2%</td>
<td>-0.1%</td>
<td>-0.5%</td>
<td>-2.0%</td>
<td>-1.1%</td>
<td>0.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.3%</td>
<td>0.1%</td>
<td>3.0%</td>
<td>2.9%</td>
<td>3.8%</td>
<td>3.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>-0.4%</td>
<td>-0.3%</td>
<td>6.7%</td>
<td>12.2%</td>
<td>-5.8%</td>
<td>3.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food</td>
<td>0.0%</td>
<td>0.1%</td>
<td>3.4%</td>
<td>2.1%</td>
<td>1.8%</td>
<td>3.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM"> Chained CPI: Total (NSA)</a></td>
<td>0.3%</td>
<td>0.0%</td>
<td>2.1%</td>
<td>1.9%</td>
<td>1.3%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.4%</td>
<td>0.0%</td>
<td>1.6%</td>
<td>1.1%</td>
<td>1.9%</td>
<td>&nbsp;2.0%</td>
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</tbody>
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The Consumer Price Index (CPI-U) rose 0.2% last month. The gain matched Consensus forecasts, but the 0.3% rise in prices less food and energy exceeded the 0.2% expectation. The CPI for "core" commodities rose for the first month in [...]

Consumer Prices Rose Moderately: Used Car Prices Firm

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041019d.jpg" width="353">
The Consumer Price Index (CPI-U) rose 0.2% last month. The gain matched Consensus forecasts, but the 0.3% rise in prices less food and energy exceeded the 0.2% expectation.
The CPI for &quot;core&quot; commodities rose for the first month in three, up 0.2%. The increase wholly reflected a rise in used motor vehicle prices. New vehicle prices fell 0.2% (-1.1% y/y). Household furnishings &amp; operations prices were unchanged (-0.2% y/y) as were apparel prices (-0.7% y/y).
Services prices less energy rose a moderate 0.3%. Shelter prices, up 0.4% (3.0% y/y), health care services, up 0.3% (5.0% y/y), and education &amp; communication prices, up 0.4% (1.7% y/y) all were relatively firm. Public transportation prices fell 1.1% (-2.8% y/y), the second consecutive down month.
Gasoline prices last month ticked up a modest 0.1% (+9.4% y/y) but in October have risen another 6.4% on average and were $2.04/gallon last week. Fuel oil prices were strong again with a 1.9% (23.9% y/y) rise. Natural gas prices fell 1.0% (+3.0% y/y) though they have recouped all of that decline in October.
The chained CPI, which adjusts for shifts in the mix of consumer purchases rose a firm 0.3%. It is similar to the PCE price deflator. The core chain price measure rose for the first time since April.

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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/@E8/@E801/@E80101/@E80101.HTM"> Consumer Price Index</a></th>
<th scope="col"> Sept</th>
<th scope="col"> Aug</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total&nbsp;</td>
<td>0.2%</td>
<td>0.1%</td>
<td>2.5%</td>
<td>2.3%</td>
<td>1.6%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.3%</td>
<td>0.1%</td>
<td>2.0%</td>
<td>1.5%</td>
<td>2.3%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>0.2%</td>
<td>-0.1%</td>
<td>-0.5%</td>
<td>-2.0%</td>
<td>-1.1%</td>
<td>0.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.3%</td>
<td>0.1%</td>
<td>3.0%</td>
<td>2.9%</td>
<td>3.8%</td>
<td>3.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>-0.4%</td>
<td>-0.3%</td>
<td>6.7%</td>
<td>12.2%</td>
<td>-5.8%</td>
<td>3.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food</td>
<td>0.0%</td>
<td>0.1%</td>
<td>3.4%</td>
<td>2.1%</td>
<td>1.8%</td>
<td>3.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM"> Chained CPI: Total (NSA)</a></td>
<td>0.3%</td>
<td>0.0%</td>
<td>2.1%</td>
<td>1.9%</td>
<td>1.3%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.4%</td>
<td>0.0%</td>
<td>1.6%</td>
<td>1.1%</td>
<td>1.9%</td>
<td>&nbsp;2.0%</td>
</tr>
</tbody>
</table>
Housing Starts Down More Than Expected 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 19, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041019c.jpg" width="353">
Housing starts fell 6.0% last month to 1.898M following an upwardly revised 1.8% August rise.Consensus expectations had been for 1.95M starts in September.
Single-family starts fell a sharp 8.2% m/m. but the year to date single family average 6.2% above last year. Multi-family starts rose 4.7% following an upwardly revised 5.6% August gain.
Housing starts in the Northeast fell a hard 26.9% (-21.0% y/y) and were off m/m throughout the rest on the country
Building permits rose 1.8% m/m and gained back some of the prior month&#39;s 4.7% decline.
&quot;House Prices and Fundamental Value&quot; from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2004/el2004-27.pdf"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM"> Housing Starts (000s, AR)</a></th>
<th scope="col"> Sept</th>
<th scope="col"> Aug</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>1,898</td>
<td>2,020</td>
<td>-1.2%</td>
<td>1,853</td>
<td>1,710</td>
<td>1,601</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,540</td>
<td>1,678</td>
<td>0.2%</td>
<td>1,505</td>
<td>1,363</td>
<td>1,272</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>358</td>
<td>342</td>
<td>-7.0%</td>
<td>348</td>
<td>347</td>
<td>330</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>2,005</td>
<td>1,969</td>
<td>3.2%</td>
<td>1,889</td>
<td>1,749</td>
<td>1,637</td>
</tr>
</tbody>
</table>
Housing Market Index Recovered 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 19, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041019a.jpg" width="353">
The Composite Housing Market Index from the National Association of Home Builders (NAHB) recovered in October from the prior month&#39;s decline to 72, the highest level in a year.
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions as good than poor.
The index of current single family home sales also surged to its highest in a year and the index of expected sales in six months jumped the highest level since 1999.
The index of traffic of prospective buyers rose to 54 and that was above the year to date average.
Visit the National Association of Home Builders using this <a href="http://www.nahb.org">link</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM"> Nat&#39;l Association of Home Builders</a></th>
<th scope="col"> Oct</th>
<th scope="col">Sept</th>
<th scope="col"> Oct &#39;03</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Housing Market Index</td>
<td>72</td>
<td>67</td>
<td>72</td>
<td>64</td>
<td>61</td>
<td>56</td>
</tr>
</tbody>
</table>
U.S. Chain Store Sales Slipped 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 19, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041019b.jpg" width="353">
Chain store sales slipped 0.2% last week after two weeks of respectable gain, according to the International Council of Shopping Centers (ICSC)-UBS.
The decline dropped sales so far in October 0.1% below the September average which, battered by Hurricanes, fell 0.7% versusAugust.
During the last ten years there has been a 60% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart. 

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<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM"> ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">10/16/04</th>
<th scope="col">10/09/04</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>436.4</td>
<td>437.3</td>
<td>3.4%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
</tr>
</tbody>
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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041018d.jpg" width="353">
The improvement in economic activity in Japan is beginning to be seen in employment. Regular employment in all firms with 30 or more employees dipped slightly in August from July, but it was 0.21% over August of a year ago and was the fifth month to show a year over year increase. While employment in all industries excluding services has fared worse than the service sector, employment in these industries has also shown improvement in that the year over year percent changes are becoming less negative. The first chart shows the year over year percent changes in employment of firms with 30 or more employees in all industries and in all industries excluding services.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041018c.jpg" width="353">
While employment shows a slightly improving trend, wages show no clear trend as can be seen in the second chart that shows the year over year changes in the nominal cash earnings of employees in those same firms that employ 30 or more employees.
Rising employment bodes well for household income, but the lackluster wage trend suggest caution in interpreting the labor statistics.

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<th scope="col" class="firstcol">Index of Regular Employees in Firms with 30 or more employees (2000=100)</th>
<th scope="col">Aug 04</th>
<th scope="col">Aug 04 Y/Y</th>
<th scope="col">Jul 04 Y/Y</th>
<th scope="col">Jun 04 Y/Y</th>
<th scope="col">May 04 Y/Y</th>
<th scope="col">Apr 04 Y/Y</th>
<th scope="col">2003&nbsp;</th>
<th scope="col">&nbsp;2002&nbsp;</th>
<th scope="col">&nbsp; 2001&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">All surveyed industries</td>
<td>96.8</td>
<td>0.21</td>
<td>0.31</td>
<td>0.21</td>
<td>0.21</td>
<td>0.21</td>
<td>96.3</td>
<td>97.6</td>
<td>99.0</td>
</tr>
<tr>
<td class="firstcol">All surveyed industries ex services</td>
<td>91.4</td>
<td>-0.87</td>
<td>-0.97</td>
<td>-0.97</td>
<td>-0.97</td>
<td>-1.08</td>
<td>92.2</td>
<td>94.6</td>
<td>97.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Index of Cash Earning-All surveyed industries (2000=100)</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Real (SA)</td>
<td>96.7</td>
<td>&nbsp;0.94</td>
<td>-0.75</td>
<td>-2.94</td>
<td>-0.20</td>
<td>1.21</td>
<td>98.7</td>
<td>98.7</td>
<td>100.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Real (NSA)</td>
<td>82.1</td>
<td>0.86</td>
<td>-0.78</td>
<td>-3.00</td>
<td>0.25</td>
<td>1.26</td>
<td>98.7</td>
<td>98.7</td>
<td>100.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nominal (NSA)</td>
<td>80.1</td>
<td>0.63</td>
<td>-0.97</td>
<td>-3.00</td>
<td>-0.26</td>
<td>0.64</td>
<td>96.3</td>
<td>96.4</td>
<td>99.3</td>
</tr>
</tbody>
</table>
</body>
</html>

The improvement in economic activity in Japan is beginning to be seen in employment. Regular employment in all firms with 30 or more employees dipped slightly in August from July, but it was 0.21% over August of a year ago and was the [...]

Employment in Japan Beginning to Show Improvement: Wage Growth Still Erratic

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041018a.jpg" width="353">
Total business inventories rose 0.7% in August, the twelfth consecutive month of accumulation. During the four quarters ended in 2Q04, inventory accumulation added between 0.5 and 1.2 percentage points to real GDP growth versus subtractions in early 2003.
Retail inventories rose 0.7% in August paced by higher auto inventories (16.5% y/y). Non-auto inventories rose 0.5% after an upwardly revised uptick in July.
Wholesale inventories rose 0.9%. During the last ten years there has been a 62% correlation between the y/y change in wholesale inventories and the change in imports of merchandise.
Overall business sales rose 0.7% (+10.9% y/y) following an upwardly revised 0.9% June increase.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041018b.jpg" width="353">
The ratio of inventories-to-sales fell to 1.31, well below the 1.37 averaged last 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/@ED06/@ED0601/@ED0601.HTM"> Business Inventories</a></th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.7%</td>
<td>1.0%</td>
<td>7.7%</td>
<td>1.9%</td>
<td>1.5%</td>
<td>-4.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.7%</td>
<td>0.7%</td>
<td>9.1%</td>
<td>4.9%</td>
<td>6.0%</td>
<td>-2.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Autos</td>
<td>0.5%</td>
<td>0.1%</td>
<td>5.5%</td>
<td>3.0%</td>
<td>2.6%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>0.9%</td>
<td>1.5%</td>
<td>9.8%</td>
<td>2.2%</td>
<td>0.4%</td>
<td>-4.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.5%</td>
<td>1.0%</td>
<td>4.8%</td>
<td>-1.3%</td>
<td>-1.8%</td>
<td>-6.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

Total business inventories rose 0.7% in August, the twelfth consecutive month of accumulation. During the four quarters ended in 2Q04, inventory accumulation added between 0.5 and 1.2 percentage points to real GDP growth versus [...]

U.S. Inventories Accumulate Further

Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041015i.jpg" width="353">
Yesterday here, we described how factors other than trade are impacting the Japanese current account position. Services and incomes were highly influential in the recent Japanese balance of payments performance. But in our desire to highlight often overlooked elements in these developments, we can&#39;t fail to take note of the very obvious ones: the recent rapid rise in petroleum prices does make oil imports a major force in many nations&#39; current account trends.
Today&#39;s case in point is France, which reported its balance of payments for August. It is dominated by trade, and in the last few months, trade has been dominated by oil imports. The French current account gapped to a &#128;1.5 billion deficit in the month as trade in goods pushed from near balance in July to a &#128;2.0 billion deficit. Both exports and imports contributed to this adverse move: exports fell &#128;1.2 billion and imports increased almost &#128;800 million.
France&#39;s current account behavior is unique in including a substantial outflow of current transfer payments every month, lately on the order of &#128;1.5 - 2.0 billion. Despite this, until about a year ago, it has run a fairly consistent current account surplus. Trade has generally had its own modest surplus while services and income together have been more noticeably positive. Most of these trends are still in place. But rising energy imports are putting constant pressure on other trade accounts, while non-energy imports are moving ahead and exports are going up and down erratically. This unsure trade and current account scenario illustrates some of the rationale for the present tension among the world&#39;s traders and diplomats.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Millions of Euros, Seasonally Adjusted</th>
<th scope="col">Aug 2004</th>
<th scope="col">Jul 2004</th>
<th scope="col">Jun 2004</th>
<th scope="col">Aug 2003</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Current Account Balance</td>
<td>-1,486</td>
<td>-765</td>
<td>-512</td>
<td>+811</td>
<td>+403</td>
<td>+1,281</td>
<td>+2,003</td>
</tr>
<tr>
<td class="firstcol">Goods Balance</td>
<td>-2,027</td>
<td>-21</td>
<td>-237</td>
<td>+643</td>
<td>+131</td>
<td>+664</td>
<td>+329</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports</td>
<td>27,334</td>
<td>28,561</td>
<td>28,636</td>
<td>+8.8%</td>
<td>-1.9%</td>
<td>-0.9%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Imports</td>
<td>29,361</td>
<td>28,582</td>
<td>28,874</td>
<td>+19.6%</td>
<td>7.7%</td>
<td>5.4%</td>
<td>-15.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Balance: All Other*</td>
<td>+216</td>
<td>+46</td>
<td>-755</td>
<td>+399</td>
<td>+273</td>
<td>+616</td>
<td>+1673</td>
</tr>
</tbody>
</table>
</body>
</html>

Yesterday here, we described how factors other than trade are impacting the Japanese current account position. Services and incomes were highly influential in the recent Japanese balance of payments performance. But in our desire to [...]

Petroleum Imports Hit French Current Account

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041015h.jpg" width="353">
The US budget deficit at $413B for FY 2004 came in slightly below the latest Congressional Budget Office estimate of $422. The latest CBO deficit estimate for FY05 is $348B.
For FY04 the deficit of $412.6B was 9.4% larger than a year earlier. According to the Fed&#39;s Flow of Funds figures, through 2Q04 the growth in outstanding liabilities of the Federal government grew 10.6% y/y versus 7.4% growth in nonfederal liabilities.
Growth in net receipts improved late in the fiscal year raising the year&#39;s growth to 5.5% versus a 3.8% decline in FY03. Individual tax receipts jumped in September, as they often do, and pulled the FY04 total up 1.9% versus a decline of 7.5% last year. Corporate tax receipts also surged in September and rose 43.7% in FY04.
Growth in Federal net expenditures for FY04 eased slightly to 6.2% versus 7.4% growth in FY03. Defense expenditures actually grew a lesser 12.7% versus 15.9% growth last year. Growth in Medicare outlays was stable at 8.0 and interest expense grew 4.8% versus a 10.5% decline during last year. Outlays for income security fell 0.4% after as 7.5% rise in FY03 and growth in education &amp; training outlays slowed to 6.8% from 16.5%.
&quot;The Budget and Economic Outlook: An Update&quot; from the Congressional Budget Office is available <a href="http://www.cbo.gov/ftpdocs/57xx/doc5773/08-24-BudgetUpdate.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E106/@E10602/@E10602.HTM"> US Government Finance</a></th>
<th scope="col">Sept</th>
<th scope="col">Aug</th>
<th scope="col">Sept &#39;03</th>
<th scope="col">FY2004</th>
<th scope="col">FY2003</th>
<th scope="col">FY2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>$24.4B</td>
<td>$-41.1B</td>
<td>$23.4B</td>
<td>$-412.6B</td>
<td>$-377.1B</td>
<td>$-157.8B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revenues</td>
<td>$207.4B</td>
<td>$137.7B</td>
<td>8.2%</td>
<td>5.5%</td>
<td>-3.8%</td>
<td>-6.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Outlays</td>
<td>$183.0B</td>
<td>$178.9B</td>
<td>8.8%</td>
<td>6.2%</td>
<td>7.4%</td>
<td>7.9%</td>
</tr>
</tbody>
</table>
</body>
</html>

The US budget deficit at $413B for FY 2004 came in slightly below the latest Congressional Budget Office estimate of $422. The latest CBO deficit estimate for FY05 is $348B. For FY04 the deficit of $412.6B was 9.4% larger than a year [...]

FY 2004 U.S. Budget Complete

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

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

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

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250822A2.jpg

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

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

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

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

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

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

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

250822C2.jpg

250822D2.jpg

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

FIBER: Industrial Commodity Prices Decline Sharply in Latest Four Weeks

Andrew Cates

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

250821Z1.jpg

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

250821Z2.jpg

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

250821Z3.jpg

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

250821Z4.jpg

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

250821Z5.jpg

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

250821Z6.jpg

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

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

Charts of the Week: Cracks Beneath The Shine

250821J8.jpg

250821K8.jpg

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

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

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

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

The number of existing homes for sale (NSA) rose 0.6% (15.7% y/y) to 1.55 million units in July. The supply of homes on the market at the current selling rate (NSA) slipped to 4.6 months, still nearly the highest level in nine years, up from a low of 1.6 months in January 2022.

The data on existing home sales, prices and affordability are compiled by the National Association of Realtors. The data on single-family home sales extend back to February 1968. Total sales and price data and regional sales can be found in Haver's **USECON** database. Regional price and affordability data and national inventory data are available in the **REALTOR** database. Mortgage interest rates can be found in the **WEEKLY** database. The expectations figure is from the Action Economics Forecast Survey, reported in the **AS1REPNA** database.

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

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

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

Sandy Batten

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

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

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

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

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

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

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

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

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

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

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

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

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

The insured unemployment rate varied greatly across individual states and territories. In the week ended August 2, the highest unemployment rates were in New Jersey (2.74%), Puerto Rico (2.62%), Rhode Island (2.52%), California (2.14%), Minnesota (2.20%) and Massachusetts (2.15%). The lowest were in South Dakota (0.27%), Florida (0.39%), North Carolina (0.47%), Kansas (0.58%), Georgia (0.59%) and Louisiana (0.61%). Rates in other notable states include Pennsylvania (1.90%), Illinois (1.72%), New York (1.73%), Texas (1.25%) and Michigan (1.17%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986. The expectations figure is from the Action Economics Forecast Survey in the **AS1REPNA** database.

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

Economy in Brief: 2004

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