Tom Moeller

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090729a.jpg">
The recent improvement in factory sector activity stuttered last month as June durable goods orders fell. The 2.5% decline reversed nearly all of the increases during the prior two months. Moreover, the May increase was revised weaker. Consensus expectations had been for a lesser 0.6% drop. That&#39;s not to say that the recent improvement in factory sector orders was totally reversed last month. Most of the latest decline was due to lower orders for aircraft. On a three-month basis durable goods orders less the transportation sector overall have risen at a 7.2% annual rate.
Perhaps setting the stage for an orders rebound is the lower level of factory inventories. Inventories of durable goods fell for the sixth consecutive month. The 0.9% decline (-4.3% y/y) followed a 1.1% May decline that was deeper than reported initially. Notable, though, has been the vigor of the recent cutback of unwanted inventories On a three-month basis, decumulation of durable goods inventories continued last month at a near-record 12.3% annual rate. Decumulation of inventories has been notable across industries, but especially so in the metals, machinery and motor vehicle sectors. <img align="right" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090729b.jpg">
Lower new orders for transportation equipment paced last month&#39;s decline in the total. The 12.8% m/m decline followed a 2.7% gain during May. Notably weak were orders for commercial aircraft which fell 38.5% (-61.0% y/y), reversing all of the strong gain during May. In addition, orders for motor vehicles &amp; parts fell 1.0% (-31.8% y/y) following the 8.7% May decline, prompted by lower sales. Adding to this weakness was a 2.5% decline in orders for computers &amp; electronic products (-15.1% y/y) which returned them to the lowest level since January. Computer orders slipped just 1.2% (-17.3% y/y) after a strong May but orders for communications equipment fell a hard 10.8% (-26.2% y/y) to their lowest level since late-2005. Moving the other way were machinery orders which posted a 4.4% increase (-26.3% y/y) after a firm May gain. Orders for primary metals were even stronger as they posted an 8.9% increase but that nevertheless left them off by nearly one-half from their year ago level. Electrical equipment orders were up just 0.9% (-31.1% y/y) following large declines during May and April.<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090729c.jpg">
The recent improvement in the capital goods sector indeed stuttered last month. Orders for nondefense capital goods fell 3.4% as aircraft orders plunged. Conversely, orders excluding aircraft rose for a second month. The 1.4% increase followed a stronger May gain and that was enough to raise orders to their highest level this year. During the last ten years there has been an 80% correlation between the y/y change in nondefense capital goods orders and the change in equipment &amp; software spending in the GDP accounts. The correlation of the GDP figure with capital goods shipments is, as one would expect, a larger 92%.
Despite the improvement in orders, shipments of durable goods continued to languish. Shipments of durable goods slipped 0.2% (-21.0% y/y) last month and have fallen in each month since February of last year. That y/y decline in shipments has been accompanied by a 21.9% y/y drop in industrial production of durable goods which has shown little or no sign of turning around. During the last ten years, there has been an 80% correlation between the change in shipments of durable goods and the change in durables industrial production.
The durable goods figures are available in Haver&#39;s USECON database.
Monetary Policy in the 2008--2009 Recession from the Federal Reserve Bank of Richmond is available <a href="http://www.richmondfed.org/publications/research/economic_quarterly/2009/spring/pdf/hetzel2.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED0101.HTM">NAICS Classification</a> (%)</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Durable Goods Orders</td>
<td>-2.5</td>
<td>1.3</td>
<td>-26.8</td>
<td>-5.8</td>
<td>1.4</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Excluding Transportation</td>
<td>1.1</td>
<td>0.8</td>
<td>-24.1</td>
<td>-1.2</td>
<td>-0.3</td>
<td>9.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>-3.4</td>
<td>9.1</td>
<td>-28.8</td>
<td>-6.8</td>
<td>3.5</td>
<td>9.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>1.4</td>
<td>4.3</td>
<td>-22.8</td>
<td>-0.3</td>
<td>-2.7</td>
<td>10.7</td>
</tr>
</tbody>
</table>
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The recent improvement in factory sector activity stuttered last month as June durable goods orders fell. The 2.5% decline reversed nearly all of the increases during the prior two months. Moreover, the May increase was revised [...]

U.S. Durable Goods Orders Decline Led By Aircraft & Computers; Lower Inventories May Set Stage for Rebound

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090729a.jpg" align="left" border="0">
The recent improvement in factory sector activity stuttered
last month as June durable goods orders fell. The 2.5% decline reversed
nearly all of the increases during the prior two months. Moreover, the
May increase was revised weaker. Consensus expectations had been for a
lesser 0.6% drop. That's not to say that the recent improvement in
factory sector orders was totally reversed last month. Most of the
latest decline was due to lower orders for aircraft. On a three-month
basis durable goods orders less the transportation sector overall have
risen at a 7.2% annual rate.
Perhaps setting the stage for an orders rebound is the lower
level of factory inventories. Inventories of durable goods fell for the
sixth consecutive month. The 0.9% decline (-4.3% y/y) followed a 1.1%
May decline that was deeper than reported initially. Notable, though,
has been the vigor of the recent cutback of unwanted inventories
On a three-month basis, decumulation of durable goods
inventories continued last month at a near-record 12.3% annual rate.
Decumulation of inventories has been notable across industries, but
especially so in the metals, machinery and motor vehicle sectors. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090729b.jpg" align="right" border="0">
Lower new orders for transportation equipment paced last
month's decline in the total. The 12.8% m/m decline followed a 2.7%
gain during May. Notably weak were orders for commercial aircraft which
fell 38.5% (-61.0% y/y), reversing all of the strong gain during May.
In addition, orders for motor vehicles &amp; parts fell 1.0%
(-31.8% y/y) following the 8.7% May decline, prompted by lower sales.
Adding to this weakness was a 2.5% decline in orders for computers
&amp; electronic products (-15.1% y/y) which returned them to the
lowest level since January. Computer orders slipped just 1.2% (-17.3%
y/y) after a strong May but orders for communications equipment fell a
hard 10.8% (-26.2% y/y) to their lowest level since late-2005. Moving
the other way were machinery orders which posted a 4.4% increase
(-26.3% y/y) after a firm May gain. Orders for primary metals were even
stronger as they posted an 8.9% increase but that nevertheless left
them off by nearly one-half from their year ago level. Electrical
equipment orders were up just 0.9% (-31.1% y/y) following large
declines during May and April.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090729c.jpg" align="left" border="0">
The recent improvement in the capital goods sector indeed
stuttered last month. Orders for nondefense capital goods fell 3.4% as
aircraft orders plunged. Conversely, orders excluding aircraft rose for
a second month. The 1.4% increase followed a stronger May gain and that
was enough to raise orders to their highest level this year. During the
last ten years there has been an 80% correlation between the y/y change
in nondefense capital goods orders and the change in equipment
&amp; software spending in the GDP accounts. The correlation of the
GDP figure with capital goods shipments is, as one would expect, a
larger 92%.
Despite the improvement in orders, shipments of durable goods
continued to languish. Shipments of durable goods slipped 0.2% (-21.0%
y/y) last month and have fallen in each month since February of last
year. That y/y decline in shipments has been accompanied by a 21.9% y/y
drop in industrial production of durable goods which has shown little
or no sign of turning around. During the last ten years, there has been
an 80% correlation between the change in shipments of durable goods and
the change in durables industrial production.
The durable goods figures are available in Haver's USECON
database.
Monetary Policy in the 2008--2009 Recession from
the Federal Reserve Bank of Richmond is available <a href="http://www.richmondfed.org/publications/research/economic_quarterly/2009/spring/pdf/hetzel2.pdf">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED0101.HTM">NAICS
Classification</a> (%)</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Durable Goods Orders</td>
<td>-2.5</td>
<td>1.3</td>
<td>-26.8</td>
<td>-5.8</td>
<td>1.4</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Excluding Transportation</td>
<td>1.1</td>
<td>0.8</td>
<td>-24.1</td>
<td>-1.2</td>
<td>-0.3</td>
<td>9.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>-3.4</td>
<td>9.1</td>
<td>-28.8</td>
<td>-6.8</td>
<td>3.5</td>
<td>9.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>1.4</td>
<td>4.3</td>
<td>-22.8</td>
<td>-0.3</td>
<td>-2.7</td>
<td>10.7</td>
</tr>
</tbody>
</table>
Japan Retail Sales Remain Sour
 
by <a href="/comment/Brusca.html">Robert
Brusca</a> July 29, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090729d.jpg" align="left" border="0" height="265" width="353">
Japan retail sales fell in June but June caps a three-month
period in which sales have expanded. Still, in the quarter-to-date
Japan&#8217;s retail sales are falling but only slightly. 
 

Over 12-months retail sales are off by about 3%, led by
declines in fabric and apparel and the rest of retail which dropped by
4.2%. Auto sales are only off by 0.5% Yr/Yr. Food and beverage sales
are off by 1.2%. Sales at department stores and supermarkets slipped
6.7% on the year, and after those figures are adjusted for the number
of stores (same-store sales), sales posted their 15th straight monthly
decline, according to METI. 
 

This is hardly a robust picture of activity yet today the MoF
upgraded its assessment of Japan&#8217;s economy for the first time in five
years. The Ministry of Economy, Trade and Industry said. The
government's massive stimulus measures, which include tax-cut programs
such as incentives to buy new cars, may help to boost retail sales in
the future. For now the consumer is in the doldrums and spending habits
remain subdued. Leading indicators for Japan have not turned the corner
to signal positive trends yet. 
 
 


Japan Retail Sales Trends
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jun-09</td>
<td>May-09</td>
<td>Apr-09</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Yr-Ago</td>
<td>Q-to-Date</td>
</tr>
<tr>
<td class="firstcol">Total SA</td>
<td>-0.3%</td>
<td>0.1%</td>
<td>0.7%</td>
<td>2.1%</td>
<td>-1.6%</td>
<td>-2.9%</td>
<td>1.2%</td>
<td>-0.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Not
seasonally adjusted</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Total: Nominal</td>
<td>-0.5%</td>
<td>0.5%</td>
<td>0.3%</td>
<td>1.1%</td>
<td>-0.8%</td>
<td>-3.0%</td>
<td>0.7%</td>
<td>-0.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Motor Vehicles</td>
<td>-1.9%</td>
<td>-4.1%</td>
<td>7.5%</td>
<td>4.7%</td>
<td>-5.7%</td>
<td>-0.5%</td>
<td>-3.2%</td>
<td>3.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Food&amp;
Beverage</td>
<td>-1.4%</td>
<td>2.0%</td>
<td>-1.0%</td>
<td>-2.0%</td>
<td>-3.7%</td>
<td>-1.2%</td>
<td>14.8%</td>
<td>-1.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Fabric
apparel&amp; access</td>
<td>-4.5%</td>
<td>1.4%</td>
<td>1.5%</td>
<td>-6.5%</td>
<td>-1.0%</td>
<td>-5.7%</td>
<td>-6.6%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Rest of Retail</td>
<td>1.1%</td>
<td>0.4%</td>
<td>-0.7%</td>
<td>3.5%</td>
<td>2.3%</td>
<td>-4.2%</td>
<td>-5.0%</td>
<td>-1.9%</td>
</tr>
</tbody>
</table>
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U.S. Durable Goods Orders DeclineLed By Aircraft & Computers; Lower Inventories May Set Stage for Rebound

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090728e.jpg" width="353">
According to the Conference Board, consumer confidence fell slightly during July for the second consecutive monthly decline. Despite these shortfalls, however, confidence remained up sharply from the February low. The Conference Board data can be found in Haver&#39;s CBDB database.
During the last ten years there has been an 86% correlation between the level of consumer confidence and the y/y change in real consumer spending.
Consumers&#39; assessment of the current economic conditions fell the hardest last month and remained near the recent low. It remained off by almost two-thirds from a year earlier. Jobs were seen as hard to get by an increased 48.1% of respondents and jobs were seen as plentiful by 3.6% which was near the series&#39; low. Business conditions were seen as good by just 9.1% and that was near the 1991 low. Consumers who thought business conditions were bad rose slightly to 46.3%, still near the highest since 1983.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090728f.jpg" width="353">
The decline in the expectations component of confidence lagged just slightly with a 5.3% m/m decline. Still, the index remained near the highest level since late 2007. The percentage of respondents expecting business conditions to improve fell to 18.0% though that remained near the highest level since 2004. A much reduced 18.9% expected conditions to worsen. Only 15.0% of respondents expected any economic improvement to generate more jobs, more than double the percentage at the recent low.
Expectations for the inflation rate in twelve months fell back to 5.5%. That&#39;s down from last year&#39;s high of 7.7%. Interest rates in twelve months were expected by 51.9% to be higher while 16.6% expected rates to fall. A greatly increased 31.5% of respondents expected stock prices to rise.
Consumers certainly plan to manage their spending plans cautiously. Just 2.1% plan to buy a home during the next six months while 25.4% plan to buy a major appliance. That&#39;s versus 30.9% who did back in 2007. Only 4.5% plan to buy an automobile, versus 6.0% in 2007.
The Federal Reserve Board announced that it will soon begin a statistical study of household finances to update data collected at the outset of the economic downturn that began in late 2007.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Conference Board &nbsp;(SA, 1985=100)</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y %</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Confidence Index</td>
<td>46.6</td>
<td>49.3</td>
<td>-10.2</td>
<td>57.9</td>
<td>103.4</td>
<td>105.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Present Situation</td>
<td>23.4</td>
<td>25.0</td>
<td>-64.4</td>
<td>69.9</td>
<td>128.8</td>
<td>130.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>62.0</td>
<td>65.5</td>
<td>45.2</td>
<td>50.0</td>
<td>86.4</td>
<td>89.7</td>
</tr>
</tbody>
</table>
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According to the Conference Board, consumer confidence fell slightly during July for the second consecutive monthly decline. Despite these shortfalls, however, confidence remained up sharply from the February low. The Conference Board [...]

U.S. Consumer Confidence Slips For A Second Month

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090728d.jpg" align="left" border="0" height="265" width="353">
Confidence is UP! Consumer confidence in
Italy is at its highest since November 2007. Still since January 1992
the reading stand is at the 40th to 41st percentile of its range and in
terms of the ranking among all previous observations. This it is some
10 percentage points below its middle position in terms of range or
ranking percentiles. Ranking percentiles position a reading in a queue
of values while range percentiles position the reading in a range
bounded by the high and low readings. Both readings have some merit. 
 

Past 12 month - Rating the past twelve
months, the overall situation is rates as a -68 which puts it in the
55th percentile in terms of rankings. Prices trends at -48 are the
worst in this period by either range of ranking methods. 
 

The expected future - Looking ahead the
next twelve months overall situation is assigned a value of +2 leaving
it in the top 92nd percentile by ranking, but only the 65th percentile
according to the position of the reading in its range. Obviously among
all rankings this reading is relatively strong but there must be a
strong reading that lies at a much, much higher level to depress the
range reading so much. That would be a reading from June 2001, as from
April to Sept of 2001 readings on this score soared then dipped back to
a more normal range. Unemployment readings are still elevated at a +8
reading. That leaves the reading in the moderated 55th percentile by
range but at a much higher 94th percentile by ranking. Those two
readings tell us that the unemployment reading is rarely higher than
this but it has spiked much higher in the past. The response to the
household budget situation remains weak by any measure at a +1. 
 

Current/Future comparisons - Households
assess their current and future situations as about to be much improved
in the next twelve months with their range and ranking percentile
readings rising from a bottom quarter or third position currently to a
50% to two-thirds position in the outlook. Current savings are
considered high, future savings are expected to be low. Similarly,
major purchase environment was construed as middling over the past
12-months abut is expected to improve sharply to top 4% or better in
the future. 
 

Summing up - On balance these responses by
Italian households show a clear disappointment with past trends. In
that respect the expected future improvement is harder to read. Some of
the future readings are more middling some are strong. It is still not
clear if consumers simply are optimistic that things will improve from
the dregs of the last 12 months or if things are expected to improved
to true strong readings. As current conditions improve we will monitor
these future readings and see if they continue to show the strength
that some of the categories currently exhibit. If much better
conditions are expected then as the current readings improve the future
readings should remain high. If the future is simply expected to be
&#8216;normal&#8217; as the current situation normalizes the expectations readings
in the survey will recede to a region of boredom. 


<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">Jul-09</th>
<th scope="col">Jun-09</th>
<th scope="col">May-09</th>
<th scope="col">Apr-09</th>
<th scope="col">Percentile</th>
<th scope="col">Rank</th>
<th scope="col">percentile</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Consumer Confidence</td>
<td>107.5</td>
<td>105.4</td>
<td>104.9</td>
<td>104.9</td>
<td>41.3</td>
<td>126</td>
<td>40.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Last 12 months</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">OVERALL SITUATION</td>
<td>-68</td>
<td>-68</td>
<td>-73</td>
<td>-74</td>
<td>63.2</td>
<td>93</td>
<td>55.9%</td>
</tr>
<tr>
<td class="firstcol">PRICE TRENDS</td>
<td>-48</td>
<td>-40.5</td>
<td>-45</td>
<td>-43</td>
<td>0.0</td>
<td>211</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Next 12months</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">OVERALL SITUATION</td>
<td>2</td>
<td>-8</td>
<td>-17</td>
<td>-26</td>
<td>65.1</td>
<td>16</td>
<td>92.4%</td>
</tr>
<tr>
<td class="firstcol">PRICE TRENDS</td>
<td>1.5</td>
<td>8.5</td>
<td>10</td>
<td>9.5</td>
<td>3.1</td>
<td>112</td>
<td>46.9%</td>
</tr>
<tr>
<td class="firstcol">UNEMPLOYMENT</td>
<td>8</td>
<td>15</td>
<td>17</td>
<td>21</td>
<td>55.9</td>
<td>11</td>
<td>94.8%</td>
</tr>
<tr>
<td class="firstcol">HOUSEHOLD BUDGET</td>
<td>1</td>
<td>0</td>
<td>5</td>
<td>1</td>
<td>17.0</td>
<td>199</td>
<td>5.7%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="8">HOUSEHOLD FIN SITUATION</td>
</tr>
<tr>
<td class="firstcol">Last 12 months</td>
<td>-40</td>
<td>-37</td>
<td>-34</td>
<td>-37</td>
<td>32.7</td>
<td>155</td>
<td>26.5%</td>
</tr>
<tr>
<td class="firstcol">Next12 months</td>
<td>-2</td>
<td>-4</td>
<td>-5</td>
<td>-11</td>
<td>67.3</td>
<td>91</td>
<td>56.9%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="8">HOUSEHOLD SAVINGS</td>
</tr>
<tr>
<td class="firstcol">Current</td>
<td>60</td>
<td>60</td>
<td>59</td>
<td>60</td>
<td>72.7</td>
<td>13</td>
<td>93.8%</td>
</tr>
<tr>
<td class="firstcol">Future</td>
<td>-30</td>
<td>-25</td>
<td>-29</td>
<td>-29</td>
<td>38.3</td>
<td>170</td>
<td>19.4%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="8">MAJOR
Purchases</td>
</tr>
<tr>
<td class="firstcol">Current</td>
<td>-40</td>
<td>-39</td>
<td>-43</td>
<td>-41</td>
<td>42.1</td>
<td>99</td>
<td>53.1%</td>
</tr>
<tr>
<td class="firstcol">Future</td>
<td>4</td>
<td>3</td>
<td>1</td>
<td>3</td>
<td>96.8</td>
<td>3</td>
<td>98.6%</td>
</tr>
<tr class="firstcol" colspan="8">
Total number of months: 211
</tr>
</tbody>
</table>
</body></html>

Confidence is UP! Consumer confidence in Italy is at its highest since November 2007. Still since January 1992 the reading stand is at the 40th to 41st percentile of its range and in terms of the ranking among all previous [...]

Italy's Recovery In Confidence Continues... Still A Ways To Go

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090728c.jpg" width="353">
Signs that the worst of the downtrend in the U.S. economy may have passed helped stabilize the earlier weakness in the oil market. The pump price for regular gasoline increased last week to an average $2.50 per gallon, though that still was down nineteen cents from last month&#39;s high. The increase added to the eighty cent (55%) rise from the December low. At $1.87 per gallon in the cash market, gasoline prices yesterday continued to rally off the early-July low of $1.60. The figures are reported by the U.S. Department of Energy and can be found in Haver&#39;s WEEKLY &amp; DAILY databases.
Crude oil prices also recovered last week. Light sweet crude oil prices (WTI) increased to $64.99 per barrel, up $3.72 from the low. Yesterday the spot market price for light sweet crude oil recovered further to $68.38 per barrel. Prices had reached a daily high of $72.68 earlier in July.
Natural gas prices rose slightly for the second week. Last week&#39;s average price of $3.49 per mmbtu (-64.8% y/y) was down by three-quarters from the high reached in early-July of last year of $13.19/mmbtu.
Financial Stress: What Is It, How Can It Be Measured, and Why Does It Matter? from the Federal Reserve Bank of Kansas City can be found <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/pdf/09q2hakkio_keeton.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">07/27/09</th>
<th scope="col">07/20/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per Gallon, Regular)</td>
<td>2.50</td>
<td>2.46</td>
<td>-36.7%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; ($ per bbl.)</td>
<td>64.99</td>
<td>61.27</td>
<td>-48.5%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
</body>
</html>

Signs that the worst of the downtrend in the U.S. economy may have passed helped stabilize the earlier weakness in the oil market. The pump price for regular gasoline increased last week to an average $2.50 per gallon, though that [...]

Gasoline Prices Stabilize With The Rise In Crude Oil Costs

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090728a.jpg" align="right" border="0" height="265" width="353">The
declines
in home prices are moderating. That's the message from May's 0.2%
seasonally adjusted decline in the S&amp;P/Case-Shiller
Home Price Composite Index of twenty metro-markets. The moderation
eased the y/y drop to 17.1% but prices still were
down by nearly one-third since the peak in May 2006. The May decline in
prices was less than the expected 17.9% y/y drop, and not seasonally
adjusted, prices even posted an increase of 0.5% for the month.
The
Case-Shiller index of 20 U.S. cities and their surrounding areas is
value-weighted. A greater index weight is assigned to more expensive
homes and the series dates back only to 2001. The
S&amp;P/Case-Shiller home price series can be found in Haver's USECON
database and the city data highlighted below is in the REGIONAL
database. Here is a <a href="http://www2.standardandpoors.com/spf/pdf/index/CSHomePrice_Release_063055.pdf">link</a>
to the latest press release from Standard &amp; Poor's. An overview
of the S&amp;P/Case-Shiller home price series can be found <a href="http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,1,0,0,0,0,0.html">here</a>.
pThe
Case-Shiller composite index of home prices in 10 metropolitan
areas, which has a longer history and dates back to 1987, also fell a
lessened 0.2% last month and was down 16.8% year-to-year. This measure
also was down by nearly one-third since the 2006 peak.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090728b.jpg" align="left" border="0" height="265" width="353">Less
Weak Regions:&nbsp;&nbsp; Home prices in some areas
of the country have firmed lately though they remain down year-to-year.&nbsp;
In Cleveland, Ohio prices rose for the second month
(-6.2% y/y) and in Dallas prices rose slightly m/m as well (-4.2% y/y).
Prices ticked up 0.3% in Denver (-4.6% y/y).&nbsp; Boston prices
also ticked higher during the month (-7.2% y/y) and in Chicago home
prices rose slightly (-17.5% y/y). In New York prices slipped m/m
(-12.2% y/y) and are off roughly 20% from their 2006 peak. In
Charlotte, North Carolina prices also continued down but just
moderately (-10.1% y/y.).Weakest Regions: Home
prices in Phoenix, Nevada were quite weak and fell another 1.7% m/m
(-34.2% y/y. Home prices in Las Vegas, Nevada continued their rapid
rate of decline with a 3.1% m/m drop (-32.0% y/y, and also were down by
roughly one-half from their peak. Home prices in Miami again fell a
hard 1.1% (-25.1% y/y while home prices in Los Angeles continued to
fall sharply (-19.8% y/y). In Tampa, the rate of monthly price decline
slowed slightly to just 0.5% but prices still were off 20.8% y/y. In
Detroit, the monthly rate of price decline also eased considerably
(-24.5% y/y) but prices were off by early one-half from the
peak.&nbsp;In San Francisco prices rose 0.7%, but remained off
26.1% y/y.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090728g.jpg" align="right" border="0" height="265" width="353">Released
last week was the
House Price Index (HPH) from the
Federal Housing and Finance Agency (FHFA). The index rose 0.9% from
April for just the third monthly increase since 2005. Year-to-year,
that was enough to lessen the decline in the nationwide average of home
prices to 5.6% from its worst reading of -8.9% last November. The FHFA
uses data provided by Fannie Mae and Freddie Mac. The series differs
from Case-Shiller in that it is not value-weighted, it covers a greater
area and it has a shorter history.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">S&amp;P/Case-Shiller
Home Price Index (SA, Jan 00 = 100)</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">20 City Composite
Index</td>
<td>140.05</td>
<td>140.28</td>
<td>-17.1%</td>
<td>-15.8%</td>
<td>-3.8%</td>
<td>7.6%</td>
</tr>
</tbody>
</table>


</body></html>

The declines in home prices are moderating. That's the message from May's 0.2% seasonally adjusted decline in the S&P/Case-Shiller Home Price Composite Index of twenty metro-markets. The moderation eased the y/y drop to 17.1% but [...]

Case-Shiller Home Price Index Decline Eases

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090728a.jpg" align="right" border="0" height="265" width="353">The
declines
in home prices are moderating. That's the message from May's 0.2%
seasonally adjusted decline in the S&amp;P/Case-Shiller
Home Price Composite Index of twenty metro-markets. The moderation
eased the y/y drop to 17.1% but prices still were
down by nearly one-third since the peak in May 2006. The May decline in
prices was less than the expected 17.9% y/y drop, and not seasonally
adjusted, prices even posted an increase of 0.5% for the month.
The
Case-Shiller index of 20 U.S. cities and their surrounding areas is
value-weighted. A greater index weight is assigned to more expensive
homes and the series dates back only to 2001. The
S&amp;P/Case-Shiller home price series can be found in Haver's USECON
database and the city data highlighted below is in the REGIONAL
database. Here is a <a href="http://www2.standardandpoors.com/spf/pdf/index/CSHomePrice_Release_063055.pdf">link</a>
to the latest press release from Standard &amp; Poor's. An overview
of the S&amp;P/Case-Shiller home price series can be found <a href="http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,1,0,0,0,0,0.html">here</a>.
pThe
Case-Shiller composite index of home prices in 10 metropolitan
areas, which has a longer history and dates back to 1987, also fell a
lessened 0.2% last month and was down 16.8% year-to-year. This measure
also was down by nearly one-third since the 2006 peak.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090728b.jpg" align="left" border="0" height="265" width="353">Less
Weak Regions:&nbsp;&nbsp; Home prices in some areas
of the country have firmed lately though they remain down year-to-year.&nbsp;
In Cleveland, Ohio prices rose for the second month
(-6.2% y/y) and in Dallas prices rose slightly m/m as well (-4.2% y/y).
Prices ticked up 0.3% in Denver (-4.6% y/y).&nbsp; Boston prices
also ticked higher during the month (-7.2% y/y) and in Chicago home
prices rose slightly (-17.5% y/y). In New York prices slipped m/m
(-12.2% y/y) and are off roughly 20% from their 2006 peak. In
Charlotte, North Carolina prices also continued down but just
moderately (-10.1% y/y.).
Weakest Regions: Home
prices in Phoenix, Nevada were quite weak and fell another 1.7% m/m
(-34.2% y/y. Home prices in Las Vegas, Nevada continued their rapid
rate of decline with a 3.1% m/m drop (-32.0% y/y, and also were down by
roughly one-half from their peak. Home prices in Miami again fell a
hard 1.1% (-25.1% y/y while home prices in Los Angeles continued to
fall sharply (-19.8% y/y). In Tampa, the rate of monthly price decline
slowed slightly to just 0.5% but prices still were off 20.8% y/y. In
Detroit, the monthly rate of price decline also eased considerably
(-24.5% y/y) but prices were off by early one-half from the
peak.&nbsp;In San Francisco prices rose 0.7%, but remained off
26.1% y/y.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090728g.jpg" align="right" border="0" height="265" width="353">Released
last week was the
House Price Index (HPH) from the
Federal Housing and Finance Agency (FHFA). The index rose 0.9% from
April for just the third monthly increase since 2005. Year-to-year,
that was enough to lessen the decline in the nationwide average of home
prices to 5.6% from its worst reading of -8.9% last November. The FHFA
uses data provided by Fannie Mae and Freddie Mac. The series differs
from Case-Shiller in that it is not value-weighted, it covers a greater
area and it has a shorter history.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">S&amp;P/Case-Shiller
Home Price Index (SA, Jan 00 = 100)</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">20 City Composite
Index</td>
<td>140.05</td>
<td>140.28</td>
<td>-17.1%</td>
<td>-15.8%</td>
<td>-3.8%</td>
<td>7.6%</td>
</tr>
</tbody>
</table>


Gasoline Prices Stabilize With The
Rise In Crude Oil Costs 
by <a href="/comment/Moeller.html">Tom
Moeller</a> July 28, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090728c.jpg" align="left" border="0" height="265" width="353">
Signs that the worst of the downtrend in the U.S. economy may
have passed helped stabilize the earlier weakness in the oil market.
The pump price for regular gasoline increased last
week to an average $2.50 per gallon, though that still was down
nineteen cents from last month's high. The increase added to the eighty
cent (55%) rise from the December low. At $1.87 per gallon in the cash
market, gasoline prices yesterday continued to rally off the early-July
low of $1.60. The figures are reported by the U.S. Department of Energy
and can be found in Haver's WEEKLY &amp; DAILY databases.
Crude oil prices also recovered last week.
Light sweet crude oil prices (WTI) increased to $64.99 per barrel, up
$3.72 from the low. Yesterday the spot market price for light sweet
crude oil recovered further to $68.38 per barrel. Prices had reached a
daily high of $72.68 earlier in July.
Natural gas prices rose slightly for the second week. Last
week's average price of $3.49 per mmbtu (-64.8% y/y) was down by
three-quarters from the high reached in early-July of last year of
$13.19/mmbtu.
Financial Stress: What Is It, How Can It Be
Measured, and Why Does It Matter? from the Federal
Reserve Bank of Kansas City can be found <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/pdf/09q2hakkio_keeton.pdf">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly
Prices</a></th>
<th scope="col">07/27/09</th>
<th scope="col">07/20/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per
Gallon, Regular)</td>
<td>2.50</td>
<td>2.46</td>
<td>-36.7%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil,
WTI&nbsp; ($ per bbl.)</td>
<td>64.99</td>
<td>61.27</td>
<td>-48.5%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
Italy's Recovery In Confidence
Continues... Still A Ways To Go 
by <a href="/comment/Brusca.html">Robert
Brusca</a> July 28, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090728d.jpg" align="left" border="0" height="265" width="353">
Confidence is UP! Consumer confidence in
Italy is at its highest since November 2007. Still since January 1992
the reading stand is at the 40th to 41st percentile of its range and in
terms of the ranking among all previous observations. This it is some
10 percentage points below its middle position in terms of range or
ranking percentiles. Ranking percentiles position a reading in a queue
of values while range percentiles position the reading in a range
bounded by the high and low readings. Both readings have some merit. 
 

Past 12 month - Rating the past twelve
months, the overall situation is rates as a -68 which puts it in the
55th percentile in terms of rankings. Prices trends at -48 are the
worst in this period by either range of ranking methods. 
 

The expected future - Looking ahead the
next twelve months overall situation is assigned a value of +2 leaving
it in the top 92nd percentile by ranking, but only the 65th percentile
according to the position of the reading in its range. Obviously among
all rankings this reading is relatively strong but there must be a
strong reading that lies at a much, much higher level to depress the
range reading so much. That would be a reading from June 2001, as from
April to Sept of 2001 readings on this score soared then dipped back to
a more normal range. Unemployment readings are still elevated at a +8
reading. That leaves the reading in the moderated 55th percentile by
range but at a much higher 94th percentile by ranking. Those two
readings tell us that the unemployment reading is rarely higher than
this but it has spiked much higher in the past. The response to the
household budget situation remains weak by any measure at a +1. 
 

Current/Future comparisons - Households
assess their current and future situations as about to be much improved
in the next twelve months with their range and ranking percentile
readings rising from a bottom quarter or third position currently to a
50% to two-thirds position in the outlook. Current savings are
considered high, future savings are expected to be low. Similarly,
major purchase environment was construed as middling over the past
12-months abut is expected to improve sharply to top 4% or better in
the future. 
 

Summing up - On balance these responses by
Italian households show a clear disappointment with past trends. In
that respect the expected future improvement is harder to read. Some of
the future readings are more middling some are strong. It is still not
clear if consumers simply are optimistic that things will improve from
the dregs of the last 12 months or if things are expected to improved
to true strong readings. As current conditions improve we will monitor
these future readings and see if they continue to show the strength
that some of the categories currently exhibit. If much better
conditions are expected then as the current readings improve the future
readings should remain high. If the future is simply expected to be
&#8216;normal&#8217; as the current situation normalizes the expectations readings
in the survey will recede to a region of boredom. 


Total number of months: 211
<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">Jul-09</th>
<th scope="col">Jun-09</th>
<th scope="col">May-09</th>
<th scope="col">Apr-09</th>
<th scope="col">Percentile</th>
<th scope="col">Rank</th>
<th scope="col">percentile</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Consumer Confidence</td>
<td>107.5</td>
<td>105.4</td>
<td>104.9</td>
<td>104.9</td>
<td>41.3</td>
<td>126</td>
<td>40.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Last 12 months</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">OVERALL SITUATION</td>
<td>-68</td>
<td>-68</td>
<td>-73</td>
<td>-74</td>
<td>63.2</td>
<td>93</td>
<td>55.9%</td>
</tr>
<tr>
<td class="firstcol">PRICE TRENDS</td>
<td>-48</td>
<td>-40.5</td>
<td>-45</td>
<td>-43</td>
<td>0.0</td>
<td>211</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Next 12months</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">OVERALL SITUATION</td>
<td>2</td>
<td>-8</td>
<td>-17</td>
<td>-26</td>
<td>65.1</td>
<td>16</td>
<td>92.4%</td>
</tr>
<tr>
<td class="firstcol">PRICE TRENDS</td>
<td>1.5</td>
<td>8.5</td>
<td>10</td>
<td>9.5</td>
<td>3.1</td>
<td>112</td>
<td>46.9%</td>
</tr>
<tr>
<td class="firstcol">UNEMPLOYMENT</td>
<td>8</td>
<td>15</td>
<td>17</td>
<td>21</td>
<td>55.9</td>
<td>11</td>
<td>94.8%</td>
</tr>
<tr>
<td class="firstcol">HOUSEHOLD BUDGET</td>
<td>1</td>
<td>0</td>
<td>5</td>
<td>1</td>
<td>17.0</td>
<td>199</td>
<td>5.7%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="8">HOUSEHOLD
FIN SITUATION</td>
</tr>
<tr>
<td class="firstcol">Last 12 months</td>
<td>-40</td>
<td>-37</td>
<td>-34</td>
<td>-37</td>
<td>32.7</td>
<td>155</td>
<td>26.5%</td>
</tr>
<tr>
<td class="firstcol">Next12 months</td>
<td>-2</td>
<td>-4</td>
<td>-5</td>
<td>-11</td>
<td>67.3</td>
<td>91</td>
<td>56.9%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="8">HOUSEHOLD
SAVINGS</td>
</tr>
<tr>
<td class="firstcol">Current</td>
<td>60</td>
<td>60</td>
<td>59</td>
<td>60</td>
<td>72.7</td>
<td>13</td>
<td>93.8%</td>
</tr>
<tr>
<td class="firstcol">Future</td>
<td>-30</td>
<td>-25</td>
<td>-29</td>
<td>-29</td>
<td>38.3</td>
<td>170</td>
<td>19.4%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="8">MAJOR
Purchases</td>
</tr>
<tr>
<td class="firstcol">Current</td>
<td>-40</td>
<td>-39</td>
<td>-43</td>
<td>-41</td>
<td>42.1</td>
<td>99</td>
<td>53.1%</td>
</tr>
<tr>
<td class="firstcol">Future</td>
<td>4</td>
<td>3</td>
<td>1</td>
<td>3</td>
<td>96.8</td>
<td>3</td>
<td>98.6%</td>
</tr>
<tr class="firstcol" colspan="8">
</tr>
</tbody>
</table>
</body></html>

Case-Shiller Home Price IndexDecline Eases

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090727c.jpg" align="right" border="0" height="265" width="353">BANKS,
MONEY, CREDIT- A number of reports are in the news today
about banking sector issues in lending. With the EMU money and credit
measures just out it&#8217;s an appropriate time to survey the background for
lending. The German Zew survey of lending institutions in Germany finds
that larger companies are having the harder time getting credit. Mutual
and cooperative style banks in Germany have been feeding credit more
easily to smaller institutions there. 

Outside EMU liquidity is expanding - The
table and charts at the top of this presentation reveal several the
trends. While UK money supply has boomed and busted, its rate of
monetary expansion remains the highest among this group of countries
and is still barely below its previous recent peak pace in 2006. The US
M2 pace spurted in 2008 and has since been locked in an erratic
declining growth rate phase. Japan&#8217;s money growth hit its low point in
2006 and has since been in a very gradual accelerating trend that
recently seems to have flattened out its growth. Japan is still the
weakest trend, however.
Special circumstances- In the UK there is a
push on to funnel credit to smaller businesses and that seems to be
working. In Japan there may be demand side pressures at work as the
corporate services price index fell sharply hinting at another round of
deflation in Japan. If that takes hold lending in Japan will suffer but
mostly from demand side weakness. 
ECB is tighter: Europe shows money supply
growth peaking in later 2007/early 2008 then steadily decelerating.
This is for a period when the rest of the countries were pushing out
liquidity at a faster pace. Despite its rate cuts, ECB liquidity in the
hands of the public has been consistently squeezed. Europe has its
lowest money supply growth since 2004, but it was last persistently
weaker than this back in 2001. Despite all its rhetoric about easing
and easy money, the ECB has been tightening its monetary grip in
quantity terms. 
Various horizons: The sequential growth
rates for money supply and for credit (in EMU) in the table above make
the point. Only EMU has one year money and credit growth so much weaker
than the annual rates over two years and three years. For the US, UK
and Japan over the recent one year money growth is stronger compared to
those earlier horizons. But over six months and three months the US and
the UK are seeing weaker money growth than over the longer the periods
as is EMU (same goes for credit in EMU). Only Japan is showing stronger
money growth more recently.
Real balances: Real balances turn the
tables on many of these trends. In terms of real balances Europe&#8217;s
growth in money is as strong - or stronger - than in the US and the UK
over the less than one year horizons. Japan&#8217;s growth is the strongest
of all over three-and &#8211;six months. But the better growth in real
balances in Europe is not having the desired impact on credit as
residential &#8216;real&#8217; credit growth has slowed to a crawl while overall
loan growth is shrinking in real terms. 
Risks still loom: Despite the fact that
some lending spreads are back to more of a normal configuration the
banking sector is having lingering troubles. We know that housing
credit issues like foreclosures usually lag the cycle. Traditionally
banks are still involved in dealing with credit hangovers even as the
economy improves. But in this instance the degree of economic and
credit improvement is not even in train. We are talking about less
weakness and better economic signals not of economic growth- at least
not yet. While there are some signs of economic and financial
stabilization the credit quality and lending scene has continued to
deteriorate. So even as we get more optimistic over the results of
recent economic indictors we must remain cognizant- as the central
banks do &#8211; that the banking sector is still in the midst of its big
chill. Financial stocks may have recovered from their deathbed
valuations and a few banks may have posted large corporate earnings for
a quarter, but for the sector at large, substantial risks still loom
and some cases the adverse pressures are getting worse.
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8">Look at Global and Euro
Liquidity Trends</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">Saar-all</td>
<td colspan="3">Euro Measures (E13): Money
&amp; Credit</td>
<td colspan="3">G-10 Major Markets: Money</td>
<td>Memo</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>&#8364;&#8364;-Supply M2</td>
<td>Credit: Resid</td>
<td>Loans</td>
<td>$US M2</td>
<td>&#163;&#163;UK M4</td>
<td>&#165;&#165;Jpn M2+Cds</td>
<td>OIL:WTI</td>
</tr>
<tr class="grey2">
<td class="firstcol">3-MO</td>
<td>2.9%</td>
<td>1.0%</td>
<td>0.0%</td>
<td>1.7%</td>
<td>-3.7%</td>
<td>3.3%</td>
<td>355.2%</td>
</tr>
<tr class="grey2">
<td class="firstcol">6-MO</td>
<td>2.9%</td>
<td>1.2%</td>
<td>0.4%</td>
<td>5.4%</td>
<td>6.1%</td>
<td>3.7%</td>
<td>162.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">12-MO</td>
<td>5.8%</td>
<td>4.1%</td>
<td>1.8%</td>
<td>9.0%</td>
<td>13.1%</td>
<td>2.5%</td>
<td>-47.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">2Yr</td>
<td>8.1%</td>
<td>7.7%</td>
<td>5.8%</td>
<td>7.6%</td>
<td>12.3%</td>
<td>2.3%</td>
<td>1.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">3Yr</td>
<td>8.7%</td>
<td>8.9%</td>
<td>7.4%</td>
<td>7.0%</td>
<td>12.5%</td>
<td>2.1%</td>
<td>-0.6%</td>
</tr>
<tr class="grey1">
<td class="firstcol" colspan="8">Real Balances: deflated by
Own CPI. Oil deflated by US CPI</td>
</tr>
<tr class="grey2">
<td class="firstcol">3-MO</td>
<td>2.0%</td>
<td>0.2%</td>
<td>-0.9%</td>
<td>-1.6%</td>
<td>-5.8%</td>
<td>5.4%</td>
<td>340.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">6-MO</td>
<td>2.5%</td>
<td>0.9%</td>
<td>0.1%</td>
<td>2.6%</td>
<td>3.7%</td>
<td>5.4%</td>
<td>155.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">12-MO</td>
<td>5.9%</td>
<td>4.2%</td>
<td>2.0%</td>
<td>10.3%</td>
<td>11.1%</td>
<td>4.1%</td>
<td>-47.1%</td>
</tr>
<tr class="grey2">
<td class="firstcol">2Yr</td>
<td>6.1%</td>
<td>5.7%</td>
<td>3.8%</td>
<td>5.8%</td>
<td>9.2%</td>
<td>2.1%</td>
<td>0.1%</td>
</tr>
<tr class="grey2">
<td class="firstcol">3Yr</td>
<td>6.7%</td>
<td>6.9%</td>
<td>5.4%</td>
<td>4.9%</td>
<td>9.5%</td>
<td>2.1%</td>
<td>-2.6%</td>
</tr>
<tr class="grey1">
<td class="firstcol" colspan="8">Japan CPI for June is an estimate;
it uses the May value to produce the real balance figure.</td>
</tr>
</tbody>
</table>

</body></html>

BANKS, MONEY, CREDIT- A number of reports are in the news today about banking sector issues in lending. With the EMU money and credit measures just out it’s an appropriate time to survey the background for lending. The German Zew [...]

Tight Money Isn’t Funny: EMU Money Growth Continues To Decelerate

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

US productivity growth has been significantly faster than in other major economies

Consumers' short-term US inflation expectations still elevated while longer-term expectations of financial markets are steady

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

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

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Texas manufacturing activity weak, according to the Texas Manufacturing Outlook Survey conducted by the Federal Reserve Bank of Dallas. The General Business Activity index of -5.0 in October compared to September’s -8.7, staying well under its high of +14.1 in January. It has been negative in all but one month since January. Eighteen of respondents reported improved business activity in October while a lessened 23.4% reported a worsening. The Future Business Activity index fell to 7.0 this month, its lowest level since May. The data were collected October 14-22 from 73 manufacturing firms.

The production index held steady this month at 5.2 after falling from 21.3 in July. A lessened 24.0% of respondents reported increasing production as a lessened 18.8% reported it lower. The employment index improved to 2.0 in October from -3.4 as a greater 17.7% of respondents reported higher employment for the month and a lesser 15.7% reported lower. The hours worked measure, however, weakened to -5.5 from +3.4. It was the lowest reading since June. The shipments reading declined to 5.8 after falling to 6.7. The growth rate of new orders remained negative at -3.7 after falling to -6.4 in September. The unfilled orders measure also remained negative at -6.4 after falling to -8.4 in September. The capital expenditures index weakened sharply to 4.8 after falling to 13.3 in September. It was the lowest level since May.

Inflation indicators weakened this month. The index for prices received for finished goods declined to 7.7 after weakening to 11.7 in September. It was the lowest reading since March and below a June high of 26.1. A lessened 16.0% of respondents reported raising prices this month while a little-changed 8.3% reported lower prices. The index of prices paid for raw materials fell to a nine-month low of 33.4. The wages & benefits index of 14.2 this month compared to 15.9 in September and has been trending lower since a high of 55.0 in March 2022. A slightly higher 17.0% of respondents reported an increase while a greater 2.8% reported a decline in wages & benefits.

The Future Manufacturing Activity Index declined to -7.0 in October. It reflected a much smaller expected gain in production, shipments & new orders. Expected new orders growth reversed five months of increase. Expected employment edged higher after falling sharply in September while expected hours-worked also improved moderately. The future wages & benefits reading reversed its September decline and has improved sharply from a May low. The future capital spending reading reversed earlier declines and rose to the highest level since January.

Each index is calculated by subtracting the percentage reporting a decrease in activity from the percentage reporting an increase. When all firms report rising activity, an index will register 100. An index will register -100 when all firms report a decrease. An index will be zero when the number of firms reporting an increase equals the number reporting a decrease. Data for the Texas Manufacturing Outlook, conducted by the Federal Reserve Bank of Dallas, can be found in Haver's **SURVEYS** database.

**Monetary Policy Report: Using Rules for Benchmarking** from the Federal Reserve  Bank of Philadelphia is available [here](https://www.philadelphiafed.org/-/media/FRBP/Assets/Economy/Reports/Monetary-Policy-Reports/MPR250923-using-rules-for-benchmarking.pdf).

251027C1.jpg

251027D1.jpg

- Current Conditions Survey is negative for eighth month in last nine.
- Production, new orders, shipments & employment stay sluggish.
- Wages & benefits weaken; prices ease.

Texas Manufacturing Activity Index Remains Negative; Expectations Deteriorate in October

251027E.jpg

Consumer confidence in Finland slipped in October. The -7.6 reading was a slip from -6.6 in September, bringing it back to its August level of -7.6. The 12-month average for confidence is -7.9; the 12-month low is -9, so there hasn't been a lot of change in consumer confidence over the past year. Confidence currently is relatively firm compared to its recent range in its 12-month average even though it is slightly below that average. The queue ranking for the October level is at its 23.9 percentile, putting it in the lower quarter of its rank of data; one year ago, consumer confidence ranked in its 26th percentile. There's been a modest improvement in confidence over the past year. The rankings are executed over data back to 2002, a ranking over a period of roughly 23 years.

**Macro and micro trends**
The microeconomic indicator for Finnish consumer confidence improved slightly in October, rising to 22.4 from September’s 21.8. At 22.4, it is slightly below its 12-month average, and it has a ranking of only its 11.2 percentile, which is a slippage compared to a 22-percentile standing one year ago. The macro indicator for consumer confidence slipped to -21.7 in October from -20.5 in September; it is slightly above its 12-month low at -23.3 and almost exactly on its 12-month average. The ranking for the macro indicator is in its 22nd percentile, nearly identical to what it was one year ago.

**Some details**
In terms of the rankings, the Finnish consumer confidence survey is dominated by extremely low rankings. Most of them are lower 25th percentile or even lower; however, the index has some redeeming qualities. Among them is the fact that unemployment in Finland, although it deteriorated slightly in October to -30.1 from -27.8 in September, has only a 22.8% standing and it's lower than it was a year ago. People's perception of the personal threat of unemployment fell significantly in October to -17.1 from -12.5. in September; the ranking for that measure is in its 7.7 percentile, a very low ranking and is an improvement from the 17-percentile standing of one-year ago. Despite the weakness in the economy and the difficulties consumers are having in their assessments of confidence, they don't have any kind of fear and certainly not a growing fear of unemployment. That clearly is a silver lining in what we could regard as the dark cloud that dominates this report.

The assessment of the economy now slipped to -40.1 in October from -34 in September. The economy in 12 months is not assessed to be much different than it was a month ago and its ranking in October 2025 is substantially the same as it was one year ago (about a 30-percentiel standing). The assessment of consumer prices showed a slight reduction in inflation in October; however, the ranking of inflation is elevated at a 65.2 percentile standing that's above its historic median, but it's a substantial improvement from the 83-percentile standing of one-year ago.

The environmental assessments for the month of October showed a deterioration in the favorability the timed the purchase durables at a -16.6 reading in October compared to -12 in September. The favorability of saving was unchanged at -8.3 in September and October. The favorability of a time to raise a loan balance slipped to -29.4 in October from -25.3 in September; the household financial situation slipped slightly to 22.9 from 24; and the possibility to save over the next 12 months rose to 38.2 from 34.5.  The rankings on these various metrics remained in the 12th or 13th percentiles for the purchasing, savings, and loan balance assessments. The household financial situation has a higher standing at a 27th percentile - still a nearly a bottom 25% standing. And the possibility to save over the next 12 months, while it improved in the month, has an 8-percentile standing.

Finland did not improve on the month; however, it shows trending toward better times and unemployment fears are low.

251027.jpg

Finland

Finland’s Consumer Confidence Backs Down for One Month

Tian Yong Woon

This week, attention remains on developments in Asia as US President Trump continues his regional tour. Over the weekend, his visit to Malaysia for the ASEAN–US summit saw a peace deal secured between Thailand and Cambodia, along with several trade agreements with ASEAN economies. Focus now shifts to Trump’s upcoming interactions with Japan’s new Prime Minister Takaichi and China’s President Xi in Japan and South Korea, respectively. A US–China trade deal is highly anticipated, which, if achieved, could boost market sentiment and reduce uncertainty (chart 1). Leading up to these meetings, encouraging Chinese data has emerged, including a significant improvement in industrial profits, suggesting that efforts to curb race-to-the-bottom price competition are beginning to show results (chart 2). 

In Japan, apart from the Trump–Takaichi meeting, markets will closely watch the Bank of Japan’s October monetary policy decision (chart 3). While no change in policy rates is expected, the Bank’s updated forecasts will be scrutinized. Japan’s September trade numbers were encouraging (chart 4), but much depends on the US–Japan trade relationship. Still, Japan’s stronger shipments to other economies, if sustained, could help offset potential US-related headwinds. US–India trade talks also remain in focus, with India reportedly planning to reduce purchases of Russian crude oil—a recurring point of contention (chart 5). At the same time, while India has faced reduced imports from the US due to tariffs, increased shipments to other trading partners, particularly in Asia, highlight a broader trend of trade diversification. Finally, while the ongoing AI boom continues to support exports growth across several Asian economies, the risk of overreliance on semiconductor exports deserves emphasis. Some economies would not have recorded year-to-date export growth without the current AI-driven upcycle (chart 6).

**The ASEAN and APEC summits**
Over the weekend, US President Trump arrived in Kuala Lumpur for the ASEAN–US Summit, where he oversaw the signing of a peace deal between Thailand and Cambodia. He also signed several trade agreements, including commitments by four ASEAN members to remove most—or in some cases all—tariffs on US imports, as well as deals with some members on critical minerals cooperation. While these developments are notable for ASEAN watchers, investor attention now turns to Trump’s next stops in Japan and South Korea. In Japan, focus will be on Prime Minister Takaichi’s first meeting with the US President, while in South Korea, markets will watch whether a long-anticipated US–China trade deal can take shape during the APEC summit. Recent signs of easing tensions—namely the likely suspension of Trump’s 100% tariff threats and China’s possible delay of rare earth export restrictions—could help temper regional uncertainty. This, in turn, may lift market sentiment, marking a welcome reversal from the caution seen in prior weeks (chart 1).

251027T1.jpg

**China economic data**
While awaiting key outcomes on a potential US–China trade deal, the latest Chinese data already show encouraging signs. Industrial profits for September, released earlier today, surged to 3.2% year-to-date y/y, up from August’s 0.9%, marking a continued break from the previous multi-month streak of losses (chart 2). The improvement was supported by accelerating growth in the manufacturing sector, including automobiles, suggesting that authorities’ recent clampdowns on price wars—particularly among carmakers—are beginning to bear fruit. Continued easing of such “race-to-the-bottom” pricing could also help address broader overcapacity issues in China. Looking ahead, investors are now focused on the official PMI readings scheduled for release later this week.

251027T2.jpg

**The Bank of Japan, Japan’s new Prime Minister**
Turning to Japan, attention will focus this week on the Bank of Japan’s policy decision, with markets widely expecting the central bank to keep its policy rate unchanged. Looking ahead, the path toward additional monetary tightening may become more challenging following the election of Prime Minister Takaichi, whose pro-growth stance favours accommodative policy and a shift toward inflation driven not only by cost-push but also by demand-pull factors, such as stronger wage growth. The Bank’s updated economic forecasts in its Outlook Report will also be closely watched. Beyond monetary policy, investors will look to Takaichi’s first meeting with US President Trump as Japan’s new Prime Minister, which could offer early signals on the tone of the renewed US–Japan relationship. While trade may not dominate this initial engagement, Japan’s pledged USD 550 billion investment in the US—agreed under a previous tariff deal—remains a key uncertainty. Takaichi will need to consider financing this commitment, likely through significant private-sector participation, even as she pursues fiscal expansion to support her pro-growth agenda.

251027T3.jpg

**Japan trade**
Touching further on trade, the Japanese economy recorded its first y/y export growth in months, with a 4.2% increase in September. This came despite continued declines in exports to the US, which fell 13.3% y/y—slightly less than August’s 13.7% drop (chart 4). Motor vehicle exports to the US also slowed their pace of decline, though they remained substantial at 24.2%, compared to 28.4% in August. The improvement in Japan’s overall export growth was driven by stronger shipments to other regions, including Europe and parts of Asia. By goods category, the September boost was supported by higher exports of raw materials and mineral fuels. Robust semiconductor demand, mirroring trends seen in other advanced Asian economies, also contributed to the uptick, albeit to a lesser extent.  While the September headline export figure is encouraging, Japan is far from out of the woods, as the US-Japan trade relationship may still face renewed discussions, as mentioned earlier.

251027T4.jpg

**India**
Turning to India, early estimates for September suggest that exports to the US fell by around 12% y/y. This was the first full month reflecting the impact of the new 50% US tariff on Indian imports, highlighting the sharp initial effects of the higher rate. Given that the US remains India’s largest export destination, the magnitude of this policy shift is particularly significant. A key issue in ongoing US–India trade discussions continues to be India’s purchases of Russian crude oil, which President Trump has repeatedly said India had pledged to halt or substantially reduce. Despite this, India’s overall exports still grew a robust 6.8% y/y, supported by stronger shipments to other major partners such as the UAE, China, the UK, and Germany. This illustrates the dual impact of the US tariffs: while they underscore Washington’s leverage as a critical export market, they also appear to be encouraging a reorientation and diversification of India’s trade flows away from the US.

251027T5.jpg

**Semiconductors**
Lastly, on semiconductors, robust AI demand and strong sales have continued to support growth across advanced Asian economies, but caution is warranted. The global trade environment remains fragile, and many of these economies have relied heavily—sometimes almost exclusively—on this sector for export growth. This is particularly evident in Malaysia and South Korea, where year-to-date exports would have declined without the semiconductor boost (chart 6). By contrast, Taiwan, while benefiting significantly from the semiconductor boom, has also gained from a broader electronics upcycle. Japan, too, has seen a semiconductor-driven uplift, but its more diversified export base has supported growth across a wider range of categories. While riding the semiconductor upcycle can bring substantial gains, an overconcentration in the sector—without secondary or tertiary sources of growth—poses a material risk if semiconductor demand were to weaken.

251027T6.jpg

Asia

Economic Letter from Asia: To the Summit!

251024l4.jpg

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The Consumer Price Index increased 0.3% in September after rising 0.4% in August and 0.2% in July. The increase fell short of the 0.4% gain expected in the Action Economics Forecast Survey. Nevertheless, the 3.0% y/y increase in the headline CPI was the strongest since January and up from 2.3% in April. The CPI excluding food & energy increased 0.2% in September after 0.3% gains in both August and July. A 0.3% increase had been expected. The 3.0% y/y rise compared to 3.1% in August, up from 2.8% gains from March through May.

Energy prices rose 1.5% (2.8% y/y) last month after increasing 0.7% in August. Gasoline prices strengthened 4.1% (-0.5% y/y) after rising 1.9% in August. Fuel oil prices improved 0.6% (4.1% y/y) after easing 0.3% in August. Natural gas prices fell 1.2% (+11.7% y/y) following a 1.6% decline, and electricity prices eased 0.5% (+5.1% y/y) after a 0.2% August gain.

Food prices rose 0.2% (3.1% y/y) last month increasing 0.5% in August. Egg prices declined 4.7% (-1.3% y/y), after holding steady. Meat, poultry & fish prices strengthened 0.8% (6.0% y/y) after strengthening 1.1%, while dairy product prices fell 0.5% (+0.7% y/y), after edging 0.1% higher in August. Cereal & bakery product costs increased 0.7% (1.6% y/y) following a 0.1% gain while fruit & vegetable prices held steady (+1.3% y/y), after rising 1.6% in August. Nonalcoholic beverage prices increased 0.7% (5.3% y/y) in September after rising 0.6% in August.

Goods prices less food and energy rose 0.2% in September after a 0.3% increase. The 1.5% y/y price rise compared to a 1.9% y/y decline in both July and August of 2024. Appliance prices rose 0.8% (1.3% y/y), after gaining 0.4%. Home furnishings prices rose 0.2% (3.0% y/y) after a 0.1% improvement in August. Recreation product costs increased 0.4% (0.8% y/y) in last month, after holding steady. Apparel prices increased 0.7% (-0.1% y/y) in September after rising 0.5%. Education & communication product costs declined 0.8% (-4.0% y/y), the third straight month of decline. Medical care goods prices eased 0.1% (NSA, +0.7% y/y) after falling 0.3% in August. Prices of used cars and trucks fell 0.4% (+5.1% y/y) last month, after rising 1.0% in August, while new vehicle costs rose 0.2% (0.8% y/y) after a 0.3% increase.

Services prices less energy increased 0.2% in September (3.5% y/y) after rising 0.3% in August. Shelter prices (35.5% of the CPI) rose 0.2% (3.6% y/y) for the third month in the last four, as owners’ equivalent rent of primary residences edged 0.1% higher (3.8% y/y) after a 0.4% gain. The cost of lodging away from home strengthened 1.3% in September (-0.1% y/y), after a 2.3% increase. Rents of primary residences gained 0.2% (3.4% y/y) in September after two months of 0.3% gain. Transportation service prices rose 0.3% (2.5% y/y) after jumping 1.0% and the cost of motor vehicle insurance fell 0.4% (+3.1% y/y) in September, after holding steady. Public transportation costs surged 1.6% (1.8% y/y) after rising 3.6% during August. The cost of medical services rose 0.3% (3.9% y/y) after slipping 0.1%, and the cost of recreation services rose 0.4% (4.4% y/y) after falling 0.2% in August. Education & communication services prices edged up 0.1% (1.1% y/y) as they did in August.

The Consumer Price figures can be found in Haver's **USECON** database. The expectations figure is contained in the **AS1REPNA** database.




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- Monthly gains in total & core price indexes ease.
- Year-to-year comparisons edge higher.
- Core goods prices remain firm, but core services inflation eases.


U.S. Consumer Price Inflation Moderates in September

Andrew Cates

**AI bubble concerns**
Valuation concerns around AI-related stocks have intensified in recent weeks, and this chart provides some clear context for why. The Technology sector is trading at a price-to-sales ratio of nearly 10 — far higher than any other sector in the S&P 500 — and well above its own historical averages. By contrast, sectors such as Energy, Health, and Consumer Staples are clustered around a far more modest ratio of 1–2. This extreme dispersion highlights how much investor optimism — or speculation — has concentrated in technology and AI-linked companies. For many in financial markets, this pattern echoes previous episodes of overvaluation, raising fears that the current AI enthusiasm may be starting to resemble bubble dynamics rather than simply reflecting future earnings potential.


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**Non-US equity markets and macro data surprises** 
By contrast, outside the US the picture looks more old-fashioned: equity swings have hugged the macro tape. The Dow Jones Global ex-US index’s 90-day moves track closely with the G10 “growth surprise minus inflation surprise” gauge. When growth data beat expectations, ex-US markets tend to rise; when inflation surprises on the upside, they falter. That pattern implies fundamentals—not narrative—have been doing the heavy lifting abroad, with macro impulses (real activity up, inflation pressure down) explaining far more of the equity gyrations than theme-driven factors.


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**Oil prices and interest rates**
One often overlooked reason for why the global economy has out-performed expectations in recent months concerns oil prices. Brent crude has drifted lower for much of the past year, and the chart below shows it moving broadly in step with the decline in US 2-year yield. Cheaper crude acts like a tax cut for consumers and energy-intensive firms, easing headline inflation and cushioning real incomes just as tariff noise has picked up. The softer energy bill has also reduced second-round cost pressures, helping inflation cool without a collapse in demand. In short, calmer oil prices have quietly underwritten the “soft-landing” mix: steadier growth with disinflation, and a bit more room for central banks to ease.


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**China’s credit growth** 
Another overlooked prop for global growth has been China’s quiet turn in credit. The next chart shows a modest but clear positive credit impulse (the change in the flow of China’s social financing), which—alongside this week’s Q3 GDP upside surprise—has arguably given a lift to sentiment on global growth. As Beijing eased financing constraints and nudged bank lending and bond issuance higher, Citigroup’s EM-weighted economic surprise index has also moved back into positive territory. That said, the impact has been uneven. The credit surge has done little so far to revive China’s ailing property market, which remains a key drag on domestic demand and a key source of uncertainty for the global economic outlook.


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**US wage inflation**
With official government data delayed by the shutdown, investors have been paying closer attention to private-sector sources to gauge inflation and labor market trends. These wage inflation figures in the chart below from the Indeed Hiring Lab are a case in point. Posted wage growth has continued to ease steadily, slipping from its post-pandemic highs above 8% to just over 2% y/y. This softening in wage pressures reinforces the message from the previous oil-price chart: inflation concerns are ebbing.


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**UK inflation** 
Turning to the UK, this week’s CPI inflation data for September came in softer than expected, helped by weaker food and energy inflation. That’s welcome—but the mix was less comforting beneath the surface. As the chart below shows, services CPI inflation remains stubbornly elevated. At the same time, PPI output price inflation has turned higher again, hinting at a rebuild in upstream cost momentum. Together, sticky services inflation and a re-firming producer-price pulse temper the headline good news and argue for caution about how quickly UK inflation can glide back to the BoE’s 2% target.


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Financial markets have been caught between conflicting crosscurrents in recent days. On the one hand, risk sentiment has been weighed down by mounting concerns over US lenders and broader credit conditions, renewed tariff worries, the ongoing government shutdown, and growing unease about a potential AI-driven valuation bubble (chart 1). On the other, expectations have strengthened that major central banks will continue to ease policy in the face of softer growth and moderating inflation, fueling hopes of a soft landing (chart 2). Supporting that view, oil prices have declined off easing geopolitical tensions in the Middle East (chart 3), and China’s credit impulse—together with stronger-than-expected GDP—has provided a quiet but important lift to global growth momentum (chart 4), even if property market weakness persists. US wage growth also continues to cool according to some private sector surveys (chart 5), helping to ease inflation concerns, while in the UK, softer headline inflation has been welcomed, though sticky services CPI and rising producer prices have tempered the good news (chart 6). Taken together, the macro narrative is one of lingering risks offset by moderating inflation pressures and easing hopes—an uneasy equilibrium that has left financial markets more volatile but still resilient.

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Economy in Brief: July 2009

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