Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081020f.jpg" align="left" border="0" height="265" width="353">
China's
real Gross Domestic Product in the third quarter of this year, just
released, was 9% over the third quarter of last year.&nbsp; The
increase was below consensus and was the fifth quarter in a row in
which the rate of increase declined, as can be seen in the first
chart.&nbsp; Last year China's economy grew by 11.6%.&nbsp; So
far this year the economy is growing 9.9% over the corresponding period
of&nbsp; 2007.&nbsp; With the outlook for continued slowing of
the economy, the growth for this year as a whole is unlikely to be that
high.&nbsp;&nbsp;
The only sector to show growth
increasing this year is the primary sector that includes farming,
forestry, animal husbandry and fishing.&nbsp; This is the smallest
sector of the economy and the one with the lowest growth
rate.&nbsp; The secondary sector that includes mining and
quarrying, manufacturing, production and supply of electricity, water
and gas, is the largest sector and has experienced the sharpest
deceleration in growth in the economy in the current year
.&nbsp;&nbsp;
The tertiary sector that includes all industries not included
in the
primary or secondary sectors, experienced a slightly smaller
deceleration in growth.&nbsp; The second chart shows the year to
date growth in the total economy and in the three sectors.&nbsp;
The third chart shows the relative magnitudes of the three sectors
in&nbsp; nominal terms (billions of yuan).

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081020h.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081020g.jpg" border="0" height="265" width="312">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">CHINA
&nbsp;</th>
<th scope="col">Q3 08</th>
<th scope="col">Q2&nbsp; 08&nbsp;</th>
<th scope="col">Q1&nbsp; 08&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP Y/Y % Change</td>
<td>9.0</td>
<td>10.1</td>
<td>10.6</td>
<td>11.6</td>
<td>10.7</td>
<td>9.9</td>
</tr>
<tr class="odd">
<td class="firstcol">GDP (YTD %)</td>
<td>9.9</td>
<td>10.4</td>
<td>10.6</td>
<td>11.9*</td>
<td>11.6*</td>
<td>10.4*</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Primary
Industry&nbsp; (YTD %)</td>
<td>4.5</td>
<td>3.5</td>
<td>2.8</td>
<td>3.7*</td>
<td>5.0*</td>
<td>5.2*</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Secondary
Industry (YTD %)&nbsp;&nbsp;&nbsp;</td>
<td>10.5</td>
<td>11.3</td>
<td>11.5</td>
<td>13.4*</td>
<td>13.0*</td>
<td>11.7*</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Tertiary
Industry (YTD %)</td>
<td>10.3</td>
<td>10.5</td>
<td>10.9</td>
<td>12.6*</td>
<td>12.1*</td>
<td>10.5*</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Primary
Industry&nbsp; (Billion Yuan)</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>2891</td>
<td>2470</td>
<td>2272</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Secondary
Industry (Billion Yuan)</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>12138</td>
<td>10200</td>
<td>8621</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Tertiary
Industry (Billion Yuan)</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>9633</td>
<td>8270</td>
<td>7340</td>
</tr>
<tr class="odd">
<td colspan="7" class="firstcol">*These are Q4 to Q4 changes.</td>
</tr>
</tbody>
</table>

</body></html>

China's real Gross Domestic Product in the third quarter of this year, just released, was 9% over the third quarter of last year. The increase was below consensus and was the fifth quarter in a row in which the rate of increase [...]

China's Real GDP Continues to Slow

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081020j.jpg" align="left" border="0" height="265" width="353">
French order performance and trends are clear and are clearly
negative. The momentum is not as clearly building a head of steam as in
some countries, however. But, on the other hand, all recent views of
order trends are lower at some disturbing pace. While the 3-month pace
at -6.9% is better than the 6-month pace of -18.5%, the 3-month pace is
still negative and the quarter-to-date growth rate is still severe at
-7.4%.
But, for France as for Italy and others, the foreign sector is
even weaker. For foreign orders we see a 3-month decline at a pace of
-5.6% that compares to a -25% pace over 6 months.
The quarter-to-date growth rate of -11.5% shows a slightly
accelerated negative growth rate compared to the three-month pace and a
rate roughly comparable to the Yr/Yr pace of -13.2%.
What these statistics remind us, is that the various economies
are seeing withering orders (planned economic activity) and the pace of
the disruption to expected activity is still somewhat uneven - but the
view remains one of economies that are contracting. Overall, the growth
rates are weakened and are worrisome. These are not minor pull-backs
nor do they seem to be one-off declines. These are negative growth
rates of such magnitude that the persistence of these declines and the
threat to overall growth is quite clear. Central banks have gotten the
message.
As of today Germany announced it was working on a stimulus
package for its economy. This is after it has assembled a bank bailout
package. At one time &#8211; even a few short weeks ago - Germany insisted
that it did not require either.
Things change. And sometimes they change rapidly. 


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col></colgroup>
<thead><tr><th colspan="8" scope="col"> French Orders</th>

</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar exept m/m</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>Jun-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Quarter-2-Date</td>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>-7.2%</td>
<td>4.3%</td>
<td>1.4%</td>
<td>-6.9%</td>
<td>-18.5%</td>
<td>-7.8%</td>
<td>-7.4%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>-7.5%</td>
<td>3.4%</td>
<td>3.1%</td>
<td>-5.6%</td>
<td>-25.1%</td>
<td>-13.2%</td>
<td>-11.5%</td>
</tr>
</tbody>
</table>
</body></html>

French order performance and trends are clear and are clearly negative. The momentum is not as clearly building a head of steam as in some countries, however. But, on the other hand, all recent views of order trends are lower at some [...]

French Orders Continue to Slide Sharply

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081020i.jpg" align="left" border="0" height="265" width="353">
Consumer goods inflation has broken lower in Germany. But for capital goods and
intermediate goods, inflation forces are lingering. Headline PPI
inflation has spurted by 7.8% over three months, a far cry from the 2%
limit on consumer prices. The 0.4% headline PPI rise in prices in
September offsets most of the 0.5% decline in August.
For ex-energy prices the rise in September was a thin
0.1%. Over three months, however, the inflation rate is a still
troubling 4.3% and the sequential growth rates show a ramping up of
ex-energy inflation for 12 months to 6 months to 3 months.
Still, Jurgen Stark, a former Bundesbank member and currently
an executive of the ECB says that, "We are seeing that due to the
weakening in growth and the probability of very flat growth in 2009,
the inflation rate will also probably fall somewhat more strongly than
we had earlier expected."
Policy makers are looking at inflation and its trends very
differently these days. They are setting performance and trends aside
because oil prices have dropped so suddenly and economic growth has
dimmed so quickly. Apparently, few policymakers give much credence to
the notion that the OPEC meeting this week could re-boost oil prices in
a way to light a new fire under inflation. Central banks have gotten,
instead, to the point of being so worried about (or sure of) coming
economic weakness and its impact on prices that they are losing their
fear of inflation near term. This is very significant especially for a
central bank like the ECB that only has an inflation mandate &#8211; no
growth mandate. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">Germany PPI
</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">%m/m</td>
<td colspan="5">%-SAAR</td>
</tr>
<tr class="grey3">
<td class="firstcol"></td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-moY-Ago</td>
<td>IN Q3</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>0.4%</td>
<td>-0.5%</td>
<td>2.0%</td>
<td>7.8%</td>
<td>10.1%</td>
<td>8.3%</td>
<td>1.5%</td>
<td>11.7%</td>
</tr>
<tr>
<td class="firstcol">Ex Energy</td>
<td>0.1%</td>
<td>0.2%</td>
<td>0.8%</td>
<td>4.3%</td>
<td>3.9%</td>
<td>3.5%</td>
<td>2.5%</td>
<td>5.3%</td>
</tr>
</tbody>
</table>
</body></html>

Consumer goods inflation has broken lower in Germany. But for capital goods and intermediate goods, inflation forces are lingering. Headline PPI inflation has spurted by 7.8% over three months, a far cry from the 2% limit on consumer [...]

German PPI Pressure Still Lingers

Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081020e.jpg" align="left" border="0" height="265" width="353">
The National Association of Home Builders indicated that its
October Housing Market Index (HMI) fell to a record low of
14. The index is compiled from survey questions asking
builders to rate market conditions as &#8220;good&#8221;, &#8220;fair&#8221;, &#8220;poor&#8221; or &#8220;very
high&#8221; to &#8220;very low&#8221;. Numerical equivalent
results over 50 indicate a predominance of &#8220;good&#8221; readings.
Since 1990, the year-to-year change in this index has had a
correlation of 72% with the year-to-year percentage change in new
single-family home sales. As a result, the latest HMI index at best
indicates a bottoming of the housing market's troubles.
The Home Builders Association indicated that its sub-index of
present sales conditions also fell to a record low of 14. That was down
from last year's average level of 27 and 2006's average of 45.
Builders&#8217; expectations for sales six months also plumbed a new
series' low at 19. The &#8220;traffic of
prospective buyers also fell to a new low.
Each of the country's regions showed deterioration in the
index; however, in the South and in the West conditions, fell to new
low.
The NAHB has compiled the Housing Market Index since 1985.
The results, along with other housing and remodeling
indexes from NAHB Economics, are included in Haver&#8217;s SURVEYS
database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat'l
Association of Home Builders</a></th>
<th scope="col">October</th>
<th scope="col">September
&nbsp;</th>
<th scope="col">&nbsp;October '07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Housing Market Index</td>
<td>14</td>
<td>17</td>
<td>19</td>
<td>27</td>
<td>42</td>
<td>67</td>
</tr>
</tbody>
</table>
</body></html>

The National Association of Home Builders indicated that its October Housing Market Index (HMI) fell to a record low of 14. The index is compiled from survey questions asking builders to rate market conditions as “good”, “fair”, [...]

U.S. Home Builders' Survey Plumbed A New Low

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081020c.jpg" width="353">
The composite index of leading economic indicators, reported by the Conference Board, increased 0.3% last month. The rise came after a revised August decline of 0.9% which was nearly double that reported initially. Despite the increase, the six-month percent change remained negative at -2.5% which was modestly improved from the low of -4.7% figure last October.
Last month&#39;s increase reflected sharp gains in the money supply, consumer expectations, the interest rate yield curve and the vendor performance components. Lower building permits, lower stock prices, higher claims for unemployment insurance and shorter weekly hours worked offset these gains with large negative contributions.
The breadth of one-month increase amongst the leaders&#39; 10 components jumped to 60% but over a six-month period the breadth of gain amongst the components remained at its cycle low of 20%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081020d.jpg" width="353">
The leading index is based on actual reports for eight economic data series. The Conference Board initially estimates two series, orders for consumer goods and orders for capital goods.
The coincident indicators fell 0.5% after a revised no change during August. Half of the components rose and half fell for the second month, yet over six months only a quarter rose. Over the last ten years there has been an 86% correlation between the y/y changes in the coincident indicators and real GDP.
The lagging index reversed the August increase and fell 0.2% as the average duration of unemployment fell sharply. The ratio of coincident to lagging indicators (a measure of economic excess) fell further to its lowest level since 1982.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.
This morning&#39;s testimony by Fed Chairman Ben S. Bernanke is available <a href="http:/www.federalreserve.gov/newsevents/testimony/bernanke20081020a.htm">here</a>.

<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/BCI/BCI.HTM">Business Cycle Indicators</a> (%)</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">June, 6 Month % (AR)</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>0.3</td>
<td>-0.9</td>
<td>-0.7</td>
<td>-2.5</td>
<td>-0.4%</td>
<td>1.3%</td>
<td>2.7%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>-0.5</td>
<td>0.0</td>
<td>-0.2</td>
<td>-1.7</td>
<td>1.7%</td>
<td>2.4%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.2</td>
<td>0.2</td>
<td>0.5</td>
<td>0.4</td>
<td>2.9%</td>
<td>3.1%</td>
<td>3.1%</td>
</tr>
</tbody>
</table>


</html>

The composite index of leading economic indicators, reported by the Conference Board, increased 0.3% last month. The rise came after a revised August decline of 0.9% which was nearly double that reported initially. Despite the [...]

Rise in U.S. Leading Indicators The Largest Since Last Year

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081020a.jpg" width="353">
Coincident with the recent turmoil in the financial market, last week the Philadelphia Federal Reserve Bank reported that its October Index of General Business conditions in the manufacturing sector fell to -37.5 its lowest level since 2001. The m/m deterioration in the index from a level of +3.8 in September was a record for the series. A reading of -10 had been expected for this month.
During the last ten years there has been a 61% correlation between the level of the Philadelphia Fed Business Conditions Index and the three-month growth in factory sector industrial production. There has been a 43% correlation with q/q growth in real GDP.
The Philadelphia Fed constructs a diffusion index for total business activity and each of the sub-indexes. The business conditions index reflects a separate survey question.
Amongst the sub-indexes, the new orders index led this month&#39;s weakness with a 36.1 point m/m drop to its lowest level since the recession of 1990. Unfilled orders fell 17.3 points to the lowest level since early 1996. The shipments index also fell sharply by 21.4 points to its lowest level since 2001. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081020b.jpg" width="353">
The employment index fell a sharp 17.5 points to the lowest level since the recession year of 2001. Twenty eight percent of respondents expected to reduce employment levels, the highest since 2001, while only 10.2% expected to raise them. During the last ten years there has been a 79% correlation between the index level and the m/m change in manufacturing sector payrolls.
The prices paid index fell out of bed. The 24.3 point drop followed a 26.0 decline during September and left the index level at its lowest since 2003. Month-to-month declines of these magnitudes rival those during the mid-1970s. During the last ten years there has been a 67% correlation between the prices paid index and the three-month growth in the intermediate goods PPI. There has been an 82% correlation with the change in core intermediate goods prices.
The separate index of expected business conditions in six months also fell by the largest amount, m/m, since the 1970s. The expectations index for new orders turned negative for second time this year and for shipments the index was at its lowest since 1979. The expectations index for employment fell 31.7 points to the lowest level since 1990. The expected prices paid figure fell a sharp 27.2 points to its lowest level since 2001.
The latest Business Outlook Survey from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2008/bos1008.cfm">here</a>.
The Geography of Research and Development Activity in the U.S. from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/research-and-data/publications/business-review/2008/q3/brq308_geography-of-research.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">Philadelphia Fed (%)</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">October &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>-37.5</td>
<td>3.8</td>
<td>6.0</td>
<td>5.1</td>
<td>8.1</td>
<td>11.5</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>7.2</td>
<td>&nbsp;31.5</td>
<td>&nbsp;25.8</td>
<td>26.4</td>
<td>36.6</td>
<td>40.1</td>
</tr>
</tbody>
</table>
</body>
</html>

Coincident with the recent turmoil in the financial market, last week the Philadelphia Federal Reserve Bank reported that its October Index of General Business conditions in the manufacturing sector fell to -37.5 its lowest level [...]

Philadelphia Fed Index Lowest Since 2001

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081017f.jpg" align="left" border="0" height="265" width="353">
Italian orders have fallen in August after several months of
gains. Foreign orders are much weaker than domestic orders in Italy.
Foreign orders have dropped in six of the past seven months. Domestic
orders are down in just two of those seven months.
Still, over that period, starting in February of 2008
overall orders are lower. The international sector is dragging Italy&#8217;s
industrial sector into decline. Over this period industrial sales have
fallen by 4%, not even annualized.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="7" scope="col">Italy Orders </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Saar exept m/m</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>Jun08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
</tr>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-0.3%</td>
<td>2.7%</td>
<td>0.7%</td>
<td>13.2%</td>
<td>-1.4%</td>
<td>1.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign</td>
<td>-3.4%</td>
<td>-0.7%</td>
<td>1.2%</td>
<td>-11.3%</td>
<td>-14.3%</td>
<td>-7.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic</td>
<td>1.2%</td>
<td>4.6%</td>
<td>0.5%</td>
<td>28.2%</td>
<td>5.9%</td>
<td>5.9%</td>
</tr>
<tr>
<td class="firstcol">Memo</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Sales</td>
<td>-3.0%</td>
<td>-2.7%</td>
<td>3.1%</td>
<td>-10.4%</td>
<td>-7.9%</td>
<td>-7.1%</td>
</tr>
</tbody>
</table>
</body></html>

Italian orders have fallen in August after several months of gains. Foreign orders are much weaker than domestic orders in Italy. Foreign orders have dropped in six of the past seven months. Domestic orders are down in just two of [...]

Italy New Orders

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

US economy expected to outperform other major economies in 2025

Only modest evidence of AI-related surge in US productivity growth

Previous Trump tariffs fading. A boost from new tariffs ahead?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

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The **Industrial Materials Price Index** from the Foundation for International Business and Economic Research (FIBER) increased 0.6% (0.4% y/y) during the last four-week period after rising 1.6% in the prior four weeks.

**Miscellaneous** group prices increased 1.7% (9.7% y/y) in the latest four week period. The price of tallow (used in the soap industry) jumped 10.6% (15.7% y/y) in four weeks. Framing lumber prices gained 5.8% (37.6% y/y) but natural rubber prices fell 2.9% (+13.0% y/y) in four weeks.

Prices in the **Metals** group strengthened 1.4% (-2.9% y/y) over the most recent four weeks. Zinc prices jumped 4.0% (-4.6% y/y) and tin prices rose 2.7% (0.4% y/y). Aluminum prices increased 2.4% (8.4% y/y) over four weeks while steel scrap prices gained 1.8% (-11.2% y/y). Lead prices rose 0.4% (-8.7% y/y) and copper scrap prices fell 1.8% (+0.2% y/y) during the last four week period.

Prices in the **Textile** group edged 0.3% higher (1.6% y/y) during the last four weeks. Cotton prices rose 0.8% in that same period and 2.5% y/y. Burlap costs improved 2.0% in four weeks and 11.4% y/y.

**Crude Oil & Benzene** group prices weakened 2.4% (-13.8% y/y) in the latest four week period. The cost of West Texas Intermediate crude oil fell 9.2% to $67.27 per barrel and remained 18.0% lower y/y. It fell 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, strengthened 6.2% (-31.7% y/y). Excluding crude oil, the industrial commodity price index rose 1.3% (1.6% y/y) during the last 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.

**Summer of ’25: The Data** from N.Y. Federal Reserve President & CEO John C. Williams is available [here](https://www.newyorkfed.org/newsevents/speeches/2025/wil250716).

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- Prices movement by category is mixed.
- Lumber & metals prices strengthen.
- Crude oil prices decline.

FIBER: Industrial Commodities Prices Continue to 	Rise in Latest Four Weeks

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Total housing starts increased 4.6% (-0.5% y/y) in June to 1.321 million units (SAAR) after falling a little-revised 9.7% in May to 1.263 million, revised from 1.256 million, and rising 3.2% in April to 1.398 million, revised from 1.392, according to the U.S. Census Bureau. Total starts in June were 27.4% below their peak of 1.820 million units reached in April 2022. The Action Economics Forecast Survey expected 1.30 million starts in June.

Single-family starts in June fell 4.6% (-10.0% y/y) to 883,000 after declining 2.3% in May to 926,000, revised from 924,000, and holding steady at 948,000 in April, revised from 920,000. Multi-family starts rebounded 30.0% in June (26.6% y/y) to 438,000 after declining 25.1% in May to 337,000, revised from 332,000, and increasing 10.6% to 450,000 in April, revised from 472,000.

All of the increase in starts last month was due to a 73.3% surge (52.9% y/y) in the Northeast to 182,000 units, following a decline of 42.6% in May. Offsetting this increase, starts in the South weakened 0.7% (-9.0% y/y) to 674,000 after falling 9.0% in May. Starts in the West declined 1.4% (-1.7% y/y) to 286,000 after rising 22.4% in May. Housing starts in the Midwest declined 5.3% (+1.7% y/y) to 179,000 after falling 18.5% in May.

Building permits improved 0.2% (-4.4% y/y) last month to 1.397 million after falling 2.0% in May and declining 4.0% in April. Single-family permits fell 3.7% (-8.4% y/y) in June to 866,000 after weakening 2.6% in May. Multi-family permits rose 7.3% (+2.9% y/y) after easing 0.8% in May. Building permits fell 11.4% (-7.6% y/y) in the Northeast and in the West, permits fell 5.1% (-9.2% y/y). In the South, building permits rose 4.4% (-4.2% y/y), while in the Midwest, building permits held steady (+4.1% y/y).

The housing starts and building permits figures can be found in Haver’s **USECON** database. The expectations figure is contained in the **AS1REPNA** database.

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- Increase recovers half of prior month’s drop.
- Multi-family starts surge but single-family starts fall.
- Building permits rise negligibly after two months of decline.

U.S. Housing Starts Rebound in June

250718E.jpg

No one will be critical of Japan’s efforts to free itself of its torpor into disinflation and deflation that it suffered for many years. The Bank of Japan struggled long and hard to remove the contraction in prices from its economy since falling prices can have a pernicious effect on growth and investment. Japan still faces challenges: it has a contracting population and faces dealing with tariff demands from the United States as negotiations on that front continue to drag and have become harder to settle than Japan had expected. Despite the current inflation overshoot, on data back to January 2011, Japan’s to-date inflation is only averaging 1%; that is still well below its 2% target and ample reason for the Bank of Japan to continue to move carefully to corral inflation especially if inflation has stopped accelerating – as it seems to have done. Against this background, we look at Japan’s CPI report.

**Current inflation: June**
Japan has dispatched deflation and currently faces an inflation problem. In June, the BOJ’s preferred gauge for the CPI excluding fresh foods & energy rose 0.4% month-to-month for the second month in a row; it rose by 0.2% in April. Japan’s headline inflation rate seems to have fallen into line A traditional ‘core reading’ excluding all food & energy flies under the BOJ’s target pace. But the BOJ’s preferred inflation gauge shows a 3.4% rise over 12 months and then gains at a pace of 3.7% over both six months and three months. All of those numbers are too hot to handle.

**Line-items**
Education costs in Japan are falling sharply and sequentially. Medical care costs are deescalating too. And while food & beverage prices continue to overshoot, 2% by a wide margin, the pace of total food & beverage inflation has been falling. No broad category has steadily accelerating inflation. But the BOJ’s preferred gauge of inflation, a specialized core measure excluding energy & fresh foods, sees inflation ramping up and staying high over three months and six months.

**Diffusion/breadth**
Among the eight major categories, year-on-year inflation has accelerated compared to where it was one-year ago in four of the eight. Inflation is above the 2% benchmark for four of eight categories as well.

**Acceleration or not...**
The chart on sequential inflation for the BOJ’s preferred core gauge shows that this measure has accelerated since August or December of last year and since then has more or less marked time oscillating without any clear trend.

250718.jpg

**BOJ policy and communication**
With interest rates having been elevated, this may be the peak for inflation rates in the wake of past interest rate increases- but the BOJ moves to-date have been more about communication and signaling than about actual restraint. These sorts of determinations about the impact of policy are always preliminary and never made clear until time passes and we are able to observe how the trend unfolds. Has inflation really peaked or not?

**BOJ actions**
The BOJ has raised its policy rate in very small and careful steps with an eye to not disrupt markets. Until early 2024, the BOJ has promoted a negative policy rate coupled with policy of yield curve control. However, in early 2024 the BOJ switched the -0.1% target rate to +0.1% and then moved it up to 0.25% just after mid-year 2024, then, early in 2025, it hiked it again to 0.5%. These have been cautious step-wise moves that after three hikes leave the official rate higher by less than one percentage point. But it also reversed an eight-year period of having a negative policy rate and one coupled with yield curve control policy. The BOJ’s careful steps may owe to some learning from the Federal Reserve’s SNAFU when it announced a coming end to its policy of QE for the first time creating a ‘taper tantum.’   

**The environment**
While Japan’s economy is growing, it has logged four quarters of negative growth in the past seven quarters (Q/Q). Year-on-year growth is positive for three quarters in a row after two in a row that logged declines. The economy is not strong, but it is growing in Q1; it grew by 1.7% over the past four quarters even though the Q/Q change was -0.2%, annualized.

**Summing up**
The BOJ is taking policy steps slowly with national elections hovering in the background, keeping monetary policy out of the way of election discussions. So far, we would regard the BOJ’s anti-inflation steps as being more about communicating an end to a period of super easy policy than as a frontal-attack on rising inflation. Given that, Japan’s prices declined for many months from August 2020 to March 2020; the BOJ is being careful to try to arrest inflation increases without pummeling prices and restarting deflation. From January 2011 to September 2022, Japan had only 12 (out of 141) months of inflation above 2% on its preferred gauge. It is now on a run of 33 (well 32 out of 33) months in a row with year-on-year inflation at or above 2%. It is understandable that the BOJ is walking on eggshells when it comes to hiking rates. If its inflation requires a monetary brake, the BOJ has more to do. If inflation merely needs to be ‘reminded’ that the period of excess is over, the recent flattening of inflation could be a sign that the message has been heard. A turn lower for inflation may still be achievable without draconian monetary steps.

Japan

Japan’s Ex-Fresh-Food Ex-Energy Inflation Runs Hot

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Total retail sales increased 0.6% (3.9% y/y) during June following an unrevised 0.9% May decline and an unrevised 0.1% April easing. A 0.1% uptick had been expected in the Action Economics Forecast Survey. Sales excluding autos rose 0.5% (3.3% y/y) following a 0.2% May decline, revised from -0.3%, and an unrevised no change in April. A 0.3% rise had been expected.

Sales in the retail control group, which excludes autos, building materials, gasoline and food services, rose 0.5% (4.0% y/y) in June after gaining 0.2% in May, revised from 0.4%, and minimally revised 0.2% April decline. These sales are used in the construction of personal consumption expenditures in the NIPA accounts. These sales rose 3.2% (AR) last quarter following a 3.7% Q1 rise.

Light vehicle sales increased 1.2% (6.5% y/y) in June after declines of 3.8% and 0.7% in the prior two months. This compares to a 0.3% June decline (2.6% y/y) in unit sales of motor vehicles last month which followed an 8.8% May slump. Gasoline station sales eased lightly (-4.4% y/y) during June after a 1.3% drop during May. Gasoline prices held steady (-7.6% y/y) last month. Sales of building materials & garden equipment rose 0.9% (-1.1% y/y) after a 2.7% decline during May.

Apparel store sales increased 0.9% (3.9% y/y) during June following a 0.3% gain. General merchandise store sales rose 0.5% (3.2% y/y) after they edged 0.1% higher in May, but department store sales declined 0.8% (-3.6% y/y) following a 0.3% dip. Nonstore retail sales increased 0.4% (4.5% y/y) following a 0.6% gain. Sporting goods & hobby shop sales improved 0.2% (1.6% y/y) after strengthening 1.0% in May. To the downside, furniture & home furnishings store sales slipped 0.1% (+4.5% y/y) after declining 0.6% in May. Electronics & appliance store sales also eased 0.1% (-0.2% y/y) following a 0.3% May decline.

In the nondiscretionary sales sector, food & beverage store sales rose 0.5% (2.5% y/y) last month following a 0.5% decline in May. Health & personal care store sales also rose 0.5% (8.3% y/y) after easing 0.1% in May.

Restaurant & drinking establishment sales increased 0.6% (6.6% y/y) in June following a 0.1% slip during May.

Retail sales data can be found in Haver’s **USECON** database. The expectations figures are from the Action Economic Forecast Survey in **AS1REPNA**.

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- Increase led by surge in sales excluding autos.
- Nonauto sales also improve.
- Sales in the control group (used to estimate PCE) strengthen.

U.S. Retail Sales Rebound in June

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The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo rose 3.1% to 33 (-19.5% y/y) during July after falling 5.9% to 32 in June. The reading matched expectations in the Informa Global Markets Survey. The NAHB figures are seasonally adjusted. During the last ten years, there has been a 72% correlation between the y/y change in the home builders index and the y/y change in housing starts.

The index of present sales conditions in the housing market rose 2.9% (-21.7% y/y) to 36 following two straight months of decline. The index for conditions in the next six months increased 7.5% (-10.4% y/y) to 43 following three consecutive monthly declines.

Home builders reported that the traffic of prospective buyers reading fell 4.8% to 20 (-25.9% y/y), the lowest level since December 2024.

Amongst the regional indexes, the index for the Midwest gained 12.8% both m/m and y/y while the index for the West rose 13.6% (-32.4% y/y). The index for the Northeast improved 9.1% (2.1% y/y) but the index for the South fell 3.3% (-32.6% y/y).

The NAHB has compiled the Housing Market Index since 1985. It reflects survey questions asking builders to rate market conditions as "good," "fair," "poor" or "very high" to "very low." The figure is thus a diffusion index with numerical results six over 50 indicating a predominance of "good" readings. The weights assigned to the individual index components are .5920 for single-family detached sales, present time, .1358 for single-family detached sales, next months and .2722 for traffic of prospective buyers. The results are included in Haver’s **SURVEYS** database. The expectations figure is available in Haver's **MMSAMER** database.

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- Increase follows two months of decline.
- Two of three components rise.
- Regional indexes are mixed.

Economy in Brief: 2008

Jump to:

China's Real GDP Continues to Slow

French Orders Continue to Slide Sharply

German PPI Pressure Still Lingers

U.S. Home Builders' Survey Plumbed A New Low

Rise in U.S. Leading Indicators The Largest Since Last Year

Philadelphia Fed Index Lowest Since 2001

Philadelphia Fed Index Lowest Since 2001

Italy New Orders