Carol Stone, CBE

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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/071026f.jpg" width="353">
Spain&#39;s National Institute of Statistics reported Q3 labor force data today. Their formal term is &quot;Economically Active Population Survey&quot; or EAPS. Employment in this survey rose 143,300 from Q2 to 20.511 million workers, up 3.1% from a year ago. There were notable gains in services, up 4.2% from Q3 2006, and construction, up 4.9%. Employment in industry (mining and manufacturing) is falling off gradually and stood a 3.26 million in Q3 compared to a peak of 3.32 million in Q4 2006. That sector had shown vigorous growth from 1997 through 2003 and has been basically on a plateau since then, so the current reductions would not seem to be a sign of weakness. Construction employment, in contrast, has been growing rapidly since 1997, an average rate of 7.5%; the 4.9% in Q3 is actually the &quot;slowest&quot; since Q4 2005. The service sector, too, has shown vigor, with growth at nearly a 5% pace since 1995.
The Q3 unemployment rate was steady at 8.0%. There was a modest rise in the number of people unemployed, 32,000 from Q1 and 26,000 from a year ago. Unemployment has been restrained, however, in view of a notable advance in the number of economically active population. This rose 175,000 in Q3 and is up 3.0% from Q3 2006. The participation rate stands at a record 59.1% of the population over age 16, up 0.2% from Q2 and 0.7% from a year ago.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071026g.jpg" width="353">
Since 2005, the Spanish labor force data have been distinctive in breaking out Spanish nationals and foreign nationals explicitly. Immigrant workers are important in many countries, and it is really worthwhile to have the Spanish statisticians compile this information. Foreign nationals constitute just under 14% of employment in Spain, 2.846 million of the total 20.511 million; their working numbers grew 328,400 in Q3 from the year earlier, 13.0%. They have a high participation rate, 76.2% in Q3, but one assumes that they come to Spain from their home country in order to seek out job opportunities. Not all are successful; their unemployment rate is 11.8%, higher than the year-ago 10.8%, but off from a recent high in Q1 of 12.6%. The participation rate among Spaniards is 57.0%; this is also up 0.2% from Q2. Their unemployment rate is 7.4%; their employment grew 286,500 over the last year, 1.6%. These series by citizenship group are too short still to do much for any precise econometric analysis, but the differential pattern of the two groups may already be helping describe forces on wages and factors that will affect the further expansion of Spanish industry and markets.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071026h.jpg" width="353">
All of these data are in Haver&#39;s SPAIN database, as well as G10. The SPAIN database includes &quot;country-sourced&quot; data. In G10, Haver combines summary data for a number of major countries. Our analysts compile some select ratios and conduct seasonal adjustment on some series where it seems warranted. In that database, Spain&#39;s employment is seen to be up 91,600 from Q2, and the unemployment rate up 0.2% to 8.2%.</div>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">SPAIN: &quot;EAPS&quot; Data, NSA</th>
<th scope="col">Q3 2007</th>
<th scope="col">Q2 2007</th>
<th scope="col">Year Ago</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">Total Employment, Millions</td>
<td>20.51</td>
<td>20.37</td>
<td>19.90</td>
<td>19.75</td>
<td>18.97</td>
<td>17.97</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Yr/Yr % Chg</td>
<td>3.1</td>
<td>3.4</td>
<td>3.7</td>
<td>4.1</td>
<td>5.6</td>
<td>3.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate (%)</td>
<td>8.0</td>
<td>8.0</td>
<td>8.2</td>
<td>8.5</td>
<td>9.1</td>
<td>11.0</td>
</tr>
<tr>
<td class="firstcol">Spanish Nationals, Millions</td>
<td>17.66</td>
<td>17.61</td>
<td>17.38</td>
<td>17.29</td>
<td>16.90</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Participation Rate (%)</td>
<td>57.0</td>
<td>56.8</td>
<td>56.4</td>
<td>56.3</td>
<td>55.7</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Foreign Nationals, Millions</td>
<td>2.84</td>
<td>2.75</td>
<td>2.52</td>
<td>2.46</td>
<td>2.07</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Participation Rate (%)</td>
<td>76.2</td>
<td>76.0</td>
<td>77.1</td>
<td>77.1</td>
<td>75.5</td>
<td>--</td>
</tr>
</tbody>
</table>
</body>
</html>

Spain's National Institute of Statistics reported Q3 labor force data today. Their formal term is "Economically Active Population Survey" or EAPS. Employment in this survey rose 143,300 from Q2 to 20.511 million workers, up 3.1% from [...]

Spain Employment Up 3.1% from Year Ago; Spanish Workers and Immigrants Both Gain

Tom Moeller

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<img align="left" class="large" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071026a.jpg">
The Conference Board indicated that its index of help-wanted advertising did rise slightly last month but only to 24 from 23 in August. The figures are near the record low for the series which dates back to the 1950s.
The index had shown slight improvement during the third quarter but it has since dissipated.
During the last ten years there has been a 57% correlation between the level of help-wanted advertising and the three month change in non-farm payrolls.
The proportion of labor markets with rising want-ads improved to 57% from a low 16% in August.
In most regions of the country the index of help-wanted advertising remained low or fell further in September with the exception of the South where moderate improvement occurred. 
The Conference Board surveys help-wanted advertising volume in 51 major newspapers across the country every month.
The latest help wanted report from the Conference Board is available <a href="http://www.conference-board.org/economics/helpwanted.cfm">here</a>.
Recent Financial Developments and the U.S. Economic Outlook also from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2007/el2007-26-27.pdf"> here</a>. 

<img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071026b.jpg"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071026c.jpg" class="small">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/CBDB/@C3/@C3.HTM">Conference Board</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">September 2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">National Help Wanted Index</td>
<td>24</td>
<td>23</td>
<td>29</td>
</tr>
</tbody>
</table>
</body>
</html>

The Conference Board indicated that its index of help-wanted advertising did rise slightly last month but only to 24 from 23 in August. The figures are near the record low for the series which dates back to the 1950s. The index had [...]

U.S. Help-Wanted Advertising Remained Low

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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/071026d.jpg" width="353">
The University of Michigan&#39;s full- month reading of consumer sentiment for October fell 3.0% to 80.9. That roughly doubled the 1.7% decline reported for early October; it followed no change in September and a huge 7.7% drop in August. The decline was worse than Consensus expectations, which called for the number to be unchanged from the preliminary October figure of 82.0.
Both major sub-indexes shared in the erosion. Current conditions was lowered from its preliminary value of 98.2 to 97.6 and expectations from 71.6 to 70.1.
By income category, the added decline in overall sentiment reversed the early month pattern: families with greater than $50,000 per year in income had reported a reduction of -16.8% y/y, but it is now down &quot;only&quot; 15.1% while sentiment amongst families with income less than $50,000 per year trimmed some of its earlier m/m recovery and now shows a sizable 11.5% y/y decline.
By age group, it sentiment amongst folks in the 35-54 bracket eroded from the preliminary -17.1% y/y to -17.6%. Younger persons cut their initial assessment from +5.6% y/y to +2.3%.
Expectations about personal finances actually improved a bit from the earlier reading and are now flat with September&#39;s value; interestingly, there are now equal increases in the proportion of survey participants who expect better times ahead for themselves and in those who expect worse times. Expectations for business conditions during the next year fell for the sixth month this year out of ten. Expectations about business conditions out five years remain unattractive, with a decrease in those looking for &quot;good times&quot; and an increase in those expecting &quot;bad times&quot;.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071026e.jpg" width="353">
The view of the current economic conditions improved due to a slight increase in the view of current personal finances, a conclusion that is unchanged from the preliminary October survey. However, the perspective of current buying conditions turned from up slightly m/m to down slightly.
The assessment of government policy in October recovered the declines during the prior two months. This is not because more people see government doing a &quot;good&quot; job, but that fewer people see it doing a &quot;poor&quot; job; they apparently shifted to an &quot;only fair&quot; assessment.
The University of Michigan survey is not seasonally adjusted.The reading is based on telephone interviews with about 500 households at month-end. The summary indexes are in Haver&#39;s USECON database, with details in the proprietary UMSCA database.
Safety, Soundness, and The Evolution of U.S. Banking Industry from the Federal Reserve Bank of Atlanta can be found <a href="http://www.frbatlanta.org/filelegacydocs/erq107_DeYoung.pdf"> here</a>.
Corporate Access to External Financing from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2007/el2007-31.pdf"> here</a>.</div>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">October (Final)</th>
<th scope="col">October (Prelim.)</th>
<th scope="col">September</th>
<th scope="col">October&nbsp; 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 Sentiment</td>
<td>80.9</td>
<td>82.0</td>
<td>83.4</td>
<td>-13.6% </td>
<td>87.3</td>
<td>88.5</td>
<td>95.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>97.6</td>
<td>98.2</td>
<td>97.9</td>
<td>-9.0%</td>
<td>105.1</td>
<td>105.9</td>
<td>105.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Expectations</td>
<td>70.1</td>
<td>71.6</td>
<td>74.1</td>
<td>-17.3%</td>
<td>75.9</td>
<td>77.4</td>
<td>88.5</td>
</tr>
</tbody>
</table>
</body>
</html>

The University of Michigan's full- month reading of consumer sentiment for October fell 3.0% to 80.9. That roughly doubled the 1.7% decline reported for early October; it followed no change in September and a huge 7.7% drop in August. [...]

Michigan Consumer Sentiment Added To Decline in Early October

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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/071026d.jpg" width="353">
The University of Michigan&#39;s full- month reading of consumer sentiment for October fell 3.0% to 80.9. That roughly doubled the 1.7% decline reported for early October; it followed no change in September and a huge 7.7% drop in August. The decline was worse than Consensus expectations, which called for the number to be unchanged from the preliminary October figure of 82.0.
Both major sub-indexes shared in the erosion. Current conditions was lowered from its preliminary value of 98.2 to 97.6 and expectations from 71.6 to 70.1.
By income category, the added decline in overall sentiment reversed the early month pattern: families with greater than $50,000 per year in income had reported a reduction of -16.8% y/y, but it is now down &quot;only&quot; 15.1% while sentiment amongst families with income less than $50,000 per year trimmed some of its earlier m/m recovery and now shows a sizable 11.5% y/y decline.
By age group, it sentiment amongst folks in the 35-54 bracket eroded from the preliminary -17.1% y/y to -17.6%. Younger persons cut their initial assessment from +5.6% y/y to +2.3%.
Expectations about personal finances actually improved a bit from the earlier reading and are now flat with September&#39;s value; interestingly, there are now equal increases in the proportion of survey participants who expect better times ahead for themselves and in those who expect worse times. Expectations for business conditions during the next year fell for the sixth month this year out of ten. Expectations about business conditions out five years remain unattractive, with a decrease in those looking for &quot;good times&quot; and an increase in those expecting &quot;bad times&quot;.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071026e.jpg" width="353">
The view of the current economic conditions improved due to a slight increase in the view of current personal finances, a conclusion that is unchanged from the preliminary October survey. However, the perspective of current buying conditions turned from up slightly m/m to down slightly.
The assessment of government policy in October recovered the declines during the prior two months. This is not because more people see government doing a &quot;good&quot; job, but that fewer people see it doing a &quot;poor&quot; job; they apparently shifted to an &quot;only fair&quot; assessment.
The University of Michigan survey is not seasonally adjusted.The reading is based on telephone interviews with about 500 households at month-end. The summary indexes are in Haver&#39;s USECON database, with details in the proprietary UMSCA database.
Safety, Soundness, and The Evolution of U.S. Banking Industry from the Federal Reserve Bank of Atlanta can be found <a href="http://www.frbatlanta.org/filelegacydocs/erq107_DeYoung.pdf"> here</a>.
Corporate Access to External Financing from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2007/el2007-31.pdf"> here</a>.</div>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">October (Final)</th>
<th scope="col">October (Prelim.)</th>
<th scope="col">September</th>
<th scope="col">October&nbsp; 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 Sentiment</td>
<td>80.9</td>
<td>82.0</td>
<td>83.4</td>
<td>-13.6% </td>
<td>87.3</td>
<td>88.5</td>
<td>95.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>97.6</td>
<td>98.2</td>
<td>97.9</td>
<td>-9.0%</td>
<td>105.1</td>
<td>105.9</td>
<td>105.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Expectations</td>
<td>70.1</td>
<td>71.6</td>
<td>74.1</td>
<td>-17.3%</td>
<td>75.9</td>
<td>77.4</td>
<td>88.5</td>
</tr>
</tbody>
</table>
U.S. Help-Wanted Advertising Remained Low 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 26, 2007


<img align="left" class="large" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071026a.jpg">
The Conference Board indicated that its index of help-wanted advertising did rise slightly last month but only to 24 from 23 in August. The figures are near the record low for the series which dates back to the 1950s.
The index had shown slight improvement during the third quarter but it has since dissipated.
During the last ten years there has been a 57% correlation between the level of help-wanted advertising and the three month change in non-farm payrolls.
The proportion of labor markets with rising want-ads improved to 57% from a low 16% in August.
In most regions of the country the index of help-wanted advertising remained low or fell further in September with the exception of the South where moderate improvement occurred. 
The Conference Board surveys help-wanted advertising volume in 51 major newspapers across the country every month.
The latest help wanted report from the Conference Board is available <a href="http://www.conference-board.org/economics/helpwanted.cfm">here</a>.
Recent Financial Developments and the U.S. Economic Outlook also from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2007/el2007-26-27.pdf"> here</a>. 

<img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071026b.jpg"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071026c.jpg" class="small">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/CBDB/@C3/@C3.HTM">Conference Board</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">September 2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">National Help Wanted Index</td>
<td>24</td>
<td>23</td>
<td>29</td>
</tr>
</tbody>
</table>
Spain Employment Up 3.1% from Year Ago; Spanish Workers and Immigrants Both Gain 
by <a href="/comment/Stone.html">Carol Stone</a> October 26, 2007


<div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071026f.jpg" width="353">
Spain&#39;s National Institute of Statistics reported Q3 labor force data today. Their formal term is &quot;Economically Active Population Survey&quot; or EAPS. Employment in this survey rose 143,300 from Q2 to 20.511 million workers, up 3.1% from a year ago. There were notable gains in services, up 4.2% from Q3 2006, and construction, up 4.9%. Employment in industry (mining and manufacturing) is falling off gradually and stood a 3.26 million in Q3 compared to a peak of 3.32 million in Q4 2006. That sector had shown vigorous growth from 1997 through 2003 and has been basically on a plateau since then, so the current reductions would not seem to be a sign of weakness. Construction employment, in contrast, has been growing rapidly since 1997, an average rate of 7.5%; the 4.9% in Q3 is actually the &quot;slowest&quot; since Q4 2005. The service sector, too, has shown vigor, with growth at nearly a 5% pace since 1995.
The Q3 unemployment rate was steady at 8.0%. There was a modest rise in the number of people unemployed, 32,000 from Q1 and 26,000 from a year ago. Unemployment has been restrained, however, in view of a notable advance in the number of economically active population. This rose 175,000 in Q3 and is up 3.0% from Q3 2006. The participation rate stands at a record 59.1% of the population over age 16, up 0.2% from Q2 and 0.7% from a year ago.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071026g.jpg" width="353">
Since 2005, the Spanish labor force data have been distinctive in breaking out Spanish nationals and foreign nationals explicitly. Immigrant workers are important in many countries, and it is really worthwhile to have the Spanish statisticians compile this information. Foreign nationals constitute just under 14% of employment in Spain, 2.846 million of the total 20.511 million; their working numbers grew 328,400 in Q3 from the year earlier, 13.0%. They have a high participation rate, 76.2% in Q3, but one assumes that they come to Spain from their home country in order to seek out job opportunities. Not all are successful; their unemployment rate is 11.8%, higher than the year-ago 10.8%, but off from a recent high in Q1 of 12.6%. The participation rate among Spaniards is 57.0%; this is also up 0.2% from Q2. Their unemployment rate is 7.4%; their employment grew 286,500 over the last year, 1.6%. These series by citizenship group are too short still to do much for any precise econometric analysis, but the differential pattern of the two groups may already be helping describe forces on wages and factors that will affect the further expansion of Spanish industry and markets.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071026h.jpg" width="353">
All of these data are in Haver&#39;s SPAIN database, as well as G10. The SPAIN database includes &quot;country-sourced&quot; data. In G10, Haver combines summary data for a number of major countries. Our analysts compile some select ratios and conduct seasonal adjustment on some series where it seems warranted. In that database, Spain&#39;s employment is seen to be up 91,600 from Q2, and the unemployment rate up 0.2% to 8.2%.</div>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">SPAIN: &quot;EAPS&quot; Data, NSA</th>
<th scope="col">Q3 2007</th>
<th scope="col">Q2 2007</th>
<th scope="col">Year Ago</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">Total Employment, Millions</td>
<td>20.51</td>
<td>20.37</td>
<td>19.90</td>
<td>19.75</td>
<td>18.97</td>
<td>17.97</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Yr/Yr % Chg</td>
<td>3.1</td>
<td>3.4</td>
<td>3.7</td>
<td>4.1</td>
<td>5.6</td>
<td>3.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate (%)</td>
<td>8.0</td>
<td>8.0</td>
<td>8.2</td>
<td>8.5</td>
<td>9.1</td>
<td>11.0</td>
</tr>
<tr>
<td class="firstcol">Spanish Nationals, Millions</td>
<td>17.66</td>
<td>17.61</td>
<td>17.38</td>
<td>17.29</td>
<td>16.90</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Participation Rate (%)</td>
<td>57.0</td>
<td>56.8</td>
<td>56.4</td>
<td>56.3</td>
<td>55.7</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Foreign Nationals, Millions</td>
<td>2.84</td>
<td>2.75</td>
<td>2.52</td>
<td>2.46</td>
<td>2.07</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Participation Rate (%)</td>
<td>76.2</td>
<td>76.0</td>
<td>77.1</td>
<td>77.1</td>
<td>75.5</td>
<td>--</td>
</tr>
</tbody>
</table>
</body>
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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071025j.jpg" width="353">
&quot;Cost, insurance and freight&quot; is an expression to describe the value of imports. The vast majority of the time, the &quot;insurance and freight&quot; portion amounts to a statistical discrepancy, used, at least by economists, merely to distinguish definitions of each measure of imports. However, the latter item in the expression is no long a trivial matter. The Wall Street Journal on Monday and then a client query called our attention to the Baltic Exchange Freight Indexes, the world&#39;s key gauge of freight charges. These have been soaring.
On October 24, the broadest measure, the Baltic Exchange Dry Index reached 10984 (January 4, 1985 = 1000), up a whopping 20.9% just since September 24. Actually, the most recent few days have seen some moderation, but the week of October 8-12 experienced daily hikes ranging from 1.4% to 3.6% each. The index stands an incredible 177.4% ahead of a year ago.
The Baltic Dry Index is a composite of the Baltic Capesize, Baltic Panamax and Baltic Supramax Indexes. Each covers a different group of sea routes around the world, different size and weight of ship and specialization of freight. The common element in these is that all of this freight is raw materials: grain, iron ore, coal, cement and other building materials, among others. Thus, when it becomes as significant as it is presently, it becomes key because it hits at the beginning of the production chain.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071025k.jpg" width="353">
Several recent press accounts have highlighted the role of demand in China. The other day here, Louise Curley talked about the hints of some slowing in Chinese imports; their growth has tapered somewhat, particularly from neighbors Singapore and Korea. At the same time, detail reported today for September&#39;s imports show continued strength in just the raw materials that the Baltic Indexes cover. &quot;Crude materials&quot; inflows were $10.2 billion, up 36.3% from a year ago; Q3 as a whole saw 42.5% expansion. Within this category -- which excludes fuels so is not impacted by oil prices -- ferrous ores and metal scrap surged 40.9% from September 2006 to $6.2 billion; for those items, Q3 was 54.4% ahead of last year&#39;s period. The anecdotal evidence cites increasing shipments from Brazil as feeding this demand, as well as other producers. Those heavy volumes also feed the freight indexes, since ships must make longer trips and resulting port congestion means they must wait some days to unload, which also increases the cost.
The cause, some reports argue, is a shortage of ships, which, of course, have long building lead-times. By 2009, there will be a number of new freighters and container ships to bring some relief. A long time to wait.
These data are contained in Haver&#39;s BALTIC database, a proprietary database from the London-based Baltic Exchange. The Exchange is a clearinghouse of world shipping information. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Oct 24</th>
<th scope="col">Oct 23</th>
<th scope="col">Week&nbsp;Oct 19</th>
<th scope="col">Sept</th>
<th scope="col">June</th>
<th scope="col">Dec 2006</th>
<th scope="col">Year Ago</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Baltic Exchange Dry Index, 01/04/85 =1000</td>
<td>10984</td>
<td>10944</td>
<td>10752</td>
<td>8574</td>
<td>5772</td>
<td>4336</td>
<td>3978</td>
</tr>
<tr>
<td class="firstcol">Baltic Capesize Index, 03/01/99 = 1000</td>
<td>15487</td>
<td>15514</td>
<td>15361</td>
<td>11856</td>
<td>7616</td>
<td>5858</td>
<td>5404</td>
</tr>
<tr class="odd">
<td class="firstcol">China Imports, Mil.$</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>Sept &#39;06</td>
</tr>
<tr>
<td class="firstcol">Crude Materials, Inedible</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>$10212</td>
<td>$9355</td>
<td>$7954</td>
<td>$7492</td>
</tr>
<tr class="odd">
<td class="firstcol">Ferrous Ores &amp; Metal Scrap </td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>$6234</td>
<td>$5408</td>
<td>$4483</td>
<td>$4425</td>
</tr>
</tbody>
</table>
</body>
</html>

"Cost, insurance and freight" is an expression to describe the value of imports. The vast majority of the time, the "insurance and freight" portion amounts to a statistical discrepancy, used, at least by economists, merely to [...]

Freight Charges Skyrocket; Baltic Indexes Surge to Records

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071025i.jpg" width="353">
Domestic inflation is the more nettlesome here&#133; 
The less than one year in duration statistics in the table below are not as meaningful for export and import prices as they are not seasonally adjusted. But overall the trends in the table and in the chart show that inflation is in pretty good shape. Nonpetroleum inflation is keeping its head down. The reference line on the chart drawn at 2% shows that only the nonpetroleum PPI and CPI prices are edging above it. History shows us that when international prices turn lower that does not translate quickly into domestic prices becoming calm. In 2001 when import prices fell sharply it took about one year before the domestic ex-energy CPI responded. 
Of course what happens with oil prices and with food prices does matter. We focus on ex energy prices mostly to rid ourselves of the volatility, but at the same time we see that it provides coherence in the relationships among domestic and international prices of various sorts. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" colspan=8>German International and Domestic Inflation Trends</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% m/m</td>
<td colspan="4">% Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">SA:</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>Yr-Ago</td>
</tr>
<tr>
<td class="firstcol">Export Prices</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>-0.1%</td>
<td>-0.4%</td>
<td>1.3%</td>
<td>1.6%</td>
<td>2.3%</td>
</tr>
<tr>
<td class="firstcol">Import Prices</td>
<td>0.6%</td>
<td>-1.3%</td>
<td>0.1%</td>
<td>-2.6%</td>
<td>3.2%</td>
<td>1.3%</td>
<td>3.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">NSA</td>
<td>&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">Exp excl Petrol</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.1%</td>
<td>0.4%</td>
<td>1.1%</td>
<td>1.5%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">Imp excl Petrol</td>
<td>-0.2%</td>
<td>-0.1%</td>
<td>-0.4%</td>
<td>-2.7%</td>
<td>-0.8%</td>
<td>-0.2%</td>
<td>4.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Memo: SA</td>
<td>&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">CPI</td>
<td>0.3%</td>
<td>0.1%</td>
<td>0.3%</td>
<td>2.5%</td>
<td>2.7%</td>
<td>2.4%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">CPI excl energy</td>
<td>0.3%</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.6%</td>
<td>2.4%</td>
<td>2.0%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">PPI</td>
<td>0.1%</td>
<td>0.2%</td>
<td>-0.1%</td>
<td>0.7%</td>
<td>1.7%</td>
<td>1.5%</td>
<td>5.1%</td>
</tr>
<tr>
<td class="firstcol">PPI excl Energy</td>
<td>0.0%</td>
<td>0.4%</td>
<td>0.1%</td>
<td>1.8%</td>
<td>2.7%</td>
<td>2.5%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>
</body>
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Domestic inflation is the more nettlesome here The less than one year in duration statistics in the table below are not as meaningful for export and import prices as they are not seasonally adjusted. But overall the trends in the [...]

Germany: Ex-Energy Inflation Trends are Turning Lower International Prices First

Robert Brusca

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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/071025h.jpg" width="353">
France&#146;s industry survey from its statistical agency INSEE remains quite firm throwing off readings that are at the top one-third or higher of their respective ranges since 1990: Business climate, production, production trends, orders and demand - the whole lot of it remains firm. While the various readings have been slipping recently, in a broader sense, they have steadied at this top one-third of range mark, at a fairly firm level.
What is a touch less firm is INSEE&#146;s assessment of the French MFG sector. A similar survey of just MFG shows the outlook for production at its 64th percentile and its trend at the 60th percentile. These are slightly weaker readings than for overall industry. The recent and likely trends for IP get stronger marks at 68Th percentile and 77TH percentiles, respectively. Orders and demand come in with readings at the 69th and 66th percentiles. On balance the French surveys for Industry and MFG remain on the firm side. MFG shows a touch more slippage than the overall.
Of course, there has been a lot of criticism from France recently over the exchange rate. A report I produced earlier in the week showed that within EMU France had gained competitiveness Vs the general EMU level but was lagging Germany by a significant amount. As the euro remains strong or becomes stronger this positioning could be a factor in how the French economy performs.
The chart at the top reminds us of two things. The first is that the French index is off peak. The second is that the Yr/Yr gain in the index has dissipated almost entirely. That suggests that there is almost no further upward momentum to the growth rate, not that the industry or MFG growth rates themselves will not remain positive.</div>

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
<th colspan=11 scope="col">INSEE Industry Survey</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td colspan="2">Since Jan 1990</td>
<td colspan="4">Since Jan 1990</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>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
</tr>
<tr>
<td class="firstcol">Climate</td>
<td>108</td>
<td>109</td>
<td>109</td>
<td>110</td>
<td>70.0</td>
<td>49</td>
<td>123</td>
<td>73</td>
<td>50</td>
<td>101</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan=11>Production</td>

</tr>
<tr>
<td class="firstcol">Recent Trend</td>
<td>9</td>
<td>6</td>
<td>11</td>
<td>17</td>
<td>65.7</td>
<td>61</td>
<td>44</td>
<td>-58</td>
<td>102</td>
<td>-6</td>
</tr>
<tr>
<td class="firstcol">Likely Trend</td>
<td>33</td>
<td>32</td>
<td>33</td>
<td>31</td>
<td>68.8</td>
<td>18</td>
<td>63</td>
<td>-33</td>
<td>96</td>
<td>7</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan=11>Orders/Demand</td>

</tr>
<tr>
<td class="firstcol">Orders &amp; Demand</td>
<td>-1</td>
<td>1</td>
<td>1</td>
<td>2</td>
<td>70.1</td>
<td>42</td>
<td>25</td>
<td>-62</td>
<td>87</td>
<td>-15</td>
</tr>
<tr>
<td class="firstcol">Fgn Orders &amp; Demand</td>
<td>4</td>
<td>10</td>
<td>8</td>
<td>6</td>
<td>69.7</td>
<td>51</td>
<td>31</td>
<td>-58</td>
<td>89</td>
<td>-11</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan=11 >Prices</td>

</tr>
<tr>
<td class="firstcol">Likely Sales Prices Trend</td>
<td>9</td>
<td>13</td>
<td>11</td>
<td>9</td>
<td>68.1</td>
<td>30</td>
<td>24</td>
<td>-23</td>
<td>47</td>
<td>0</td>
</tr>
</tbody>
</table>
</body>
</html>

Frances industry survey from its statistical agency INSEE remains quite firm throwing off readings that are at the top one-third or higher of their respective ranges since 1990: Business climate, production, production trends, orders [...]

French Biz Climate Indicator Holds Mostly Steady

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<img align="left" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071025g.jpg" width="353">
The IFO survey shows its various sectors to be well off peak. The overall index did slip again in October from +7.5 to +7.1. MFG, construction, wholesaling and services slipped on the month with only retailing getting a boost, but a big one, from -12.9 to -6.8. The all-sector index still resides at the door step of the top 20th percentile of the range. Among components only MFG is above the 80th percentile at 84.8%. Retail is the relative weakest sector at 56.4% of its range, followed by construction at 59.2% of its range. Wholesaling is at the edge of the top third of its range while the service sector is nearly in the top 25% of its range. The peaking of these indexes occurred around the end of the first quarter of this year. Retailing has hovered just short of neutral since that time. The ongoing rise in the Euro has cast a certain pall over the future.
On balance, these metrics are not bad at all. But they fall short of the strength the IFO report was exuding just a few short months ago&#133; Germany then thought it was on top of the world. And maybe it was, but the world has since rolled over, impacting Germany&#146;s relative position. /p>
The IFO Business climate index is near the top 20% of its range. The current situation is rated in the 82nd percentile (top 20 percent). But business expectations for the next six month are decidedly softer residing only in their 68th percentile.
Now all of these are above 50% and therefore above a point of neutrality. But they date from period back to 1992, a time span in which Germany did not do so well. So a finding of neutral, which would imply &#145;average&#146; for this period, would not be very reassuring. Germany needs to do better than this average.

Risks&#133; The hunter: captured by the game?The clear risk and problem at the moment is the ongoing rise of the euro. Some continue to warn of this current circumstance as putting the dollar at risk to a larger correction. We prefer to point out that the dollar cannot fall unless something else can rise. And the rise of the euro is already crimping German growth and its outlook along with that for other less competitive EMU members.
Let&#146;s remember that since the early 1970s it is the countries where prices and exchange rates went up not down that had the biggest troubles: OPEC (with rising oil prices) and then Japan with the rising yen and still lingering traces of deflation. We wonder if the real risk here is that the euro might rise, more than that the dollar might fall.
The dollar is already at a relative low point and at some point, if it moves lower, buying interest in dollars will develop. But Germany&#146;s economy will be hurt by a much stronger euro and that will prove a more troublesome issue for Germany and for the rest of the export oriented Europe. Whatever, they say, the cross border but within Euro area transactions (intra-union same currency exports and imports) are still vulnerable to international competition especially when the euro becomes overvalued. Germans may speak with the same currency as the French and Italians but their true language and culture is at least as different as is it is to that of Americans and Japanese. Cheap dollars or yen can get over any language barrier or common currency hurdle in a hurry. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr><th scope="col" colspan="9">Summary of IFO Sector Diffusion readings</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">CLIMATE Sum</td>
<td>Current</td>
<td>Last Mo</td>
<td colspan="6">Since Jan 1991*</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Oct-07</td>
<td>Sep-07</td>
<td>Average</td>
<td>Median</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>% Range</td>
</tr>
<tr>
<td class="firstcol">All Sectors</td>
<td>7.1</td>
<td>7.5</td>
<td>-8.7</td>
<td>-9.5</td>
<td>16.6</td>
<td>-30.6</td>
<td>47.2</td>
<td>79.9%</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>17.9</td>
<td>18.1</td>
<td>-0.9</td>
<td>0.3</td>
<td>27.5</td>
<td>-35.5</td>
<td>63.0</td>
<td>84.8%</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>-20.5</td>
<td>-20.8</td>
<td>-29.5</td>
<td>-32.2</td>
<td>0.3</td>
<td>-50.7</td>
<td>51.0</td>
<td>59.2%</td>
</tr>
<tr>
<td class="firstcol">Wholesale</td>
<td>2.3</td>
<td>10.7</td>
<td>-14.8</td>
<td>-16.5</td>
<td>23.4</td>
<td>-39.5</td>
<td>62.9</td>
<td>66.5%</td>
</tr>
<tr>
<td class="firstcol">Retail</td>
<td>-6.8</td>
<td>-12.9</td>
<td>-15.3</td>
<td>-14.8</td>
<td>19.0</td>
<td>-40.2</td>
<td>59.2</td>
<td>56.4%</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>17.2</td>
<td>20.8</td>
<td>8.7</td>
<td>8.2</td>
<td>28.5</td>
<td>-15.7</td>
<td>44.2</td>
<td>74.4%</td>
</tr>
<tr class="grey1">
<td colspan="9" class="firstcol">* May 2001 for Services</td>

</tr>
</tbody>
</table>
</body>
</html>

The IFO survey shows its various sectors to be well off peak. The overall index did slip again in October from +7.5 to +7.1. MFG, construction, wholesaling and services slipped on the month with only retailing getting a boost, but a [...]

IFO Survey Shows Weakness is Still in Train...but at Moderate Pace

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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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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.

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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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- 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

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Germany's factory orders declined for the third straight month in July. Real new orders fell 2.9% month-on-month in July, against expectations for a small increase. The drop was sharper than a 0.2% decrease in June; foreign orders declined 3.1% in July, as orders from the euro area contracted 3.8%, and orders from outside the euro area fell by 2.8%. These metrics suggest that demand both inside and outside the euro area remains weak. Domestic orders dropped 2.5% in July, an exact offset to their gain in June. When ranked on growth rates over the last 30 years, all three sector growth rates are below their medians (below a ranking of 50%). However, when ranked on the real index number level, total orders rank at their 55.6 percentile, foreign orders rank at their 79.5 percentile and domestic orders rank at their 15.2 percentile. All-in-all it’s an unimpressive report.

**Orders sequentially and QTD:** Sequential trends are ambivalent but still clearly weak. Sequential growth rates do not show a clear acceleration/deceleration pattern. But for total, foreign and domestic real orders, both 3-month and 12-month growth rates are negative (one exception: foreign orders over 12 months). Domestic orders show negative growth over 6 months as well. Quarter-to-date growth rates are negative for all sectors.

**Sales trends:** Real sales are mixed in July, rising 0.9% overall on declines in two sectors: consumer durables and intermediate goods. Sector sales mostly maintain growth as manufacturing sales are positive based on growth rates over 12 months, 6 months, and 3 months. Consumer goods and intermediate goods sales show deceleration and ongoing contraction. Consumer durable goods and intermediate goods show QTD declines. On the manufacturing & mining to total, manufacturing and capital goods show index standings above their respective 50% on 30 years of data. That also shows above-median growth rates on annual data along with consumer goods and consumer nondurable goods.

**Industrial confidence:** Industrial confidence measures for Germany, France, Italy, and Spain, the four largest EMU members, show improved (but still net negative readings) in July compared to June. Over three months and six months, Germany and Italy show some improvement; France still shows steady deterioration. Spain shows improvement over 3 months and it is only slight improvement. The queue standings for the industrial reading over 30 years of data show Spain with an above-median reading in July. Germany and France are exceptionally weak and Italy has been weaker only 26% of the time based on the queue standing measure. Not only are German orders and demand weak and faltering but the broad EU Commission measures of industrial confidence show broadly weak readings for the largest economies in the EMU.

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Germany

German Factory Orders Plunge on Domestic Weakness

Andrew Cates

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

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

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

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

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

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

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

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Charts of the Week: A Few Cuts More

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

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

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

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

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

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

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

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

U.S. ISM Services PMI Increases in August

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

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

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

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

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

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

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

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

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