Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070829b.jpg" width="353">
Swedish consumers and business leaders are maintaining extraordinary levels of confidence this summer, although the National Institute for Economic Research monthly survey results did ease a bit for August, reported today. The total &quot;economic tendency&quot; measure stands at 112.3, where the long-run average since 1996 equals 100. The August figure is 3.4 points less than July&#39;s 115.7. A recent high is 116.9 in April, and the all-time high was 118.2 in March 2000, at the peak of the tech boom.
Both the consumer and the business surveys have shared in the recent strength. Consumer confidence had a positive balance in August of 19.7%. It was 21.3% in July and its recent high was 23% in April. There are two divisions of this index, the &quot;macro&quot; and the &quot;micro&quot;. The questions in the macro set include opinions on the overall economy for the coming year and on the unemployment rate. The micro questions ask about the current condition and prospects for personal finances and about whether respondents believe this is a good time to make major purchases and if they plan to increase major purchases in coming months. As we see, people&#39;s views of the macro economy swing widely, but they see their personal situation in a pretty steady light. So the currently less buoyant readings on the &quot;micro&quot; indicator don&#39;t suggest a weak consumer outlook, but one instead that sees the wider economy as relatively strong.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070829c.jpg" width="353">
The industry survey also sees much of the economy doing well. Traditional manufacturing looks at first to be an exception with a mere +5 reading, but the industry detail shows strength in key products Sweden is known for: machinery, electrical equipment and transportation equipment. Other European producers of these items have also seen good demand recently. Swedish retailing and service industries have been steady at a high level. The real standout is construction. Its August reading of 47% ties with June as the all-time high. No individual industry gauge is a record, but all show favorable results simultaneously, producing the strength in the overall indicator: order books are expanding, the volume of construction produced and anticipated is large and the number of employees is increasing at almost the largest number of firms ever.
So participants in the Swedish economy appear optimistic presently. Its stock market reflects this, with stock prices up 30% in the last few weeks from a year ago. This is similar to German stocks, which have gains of 33%. Both stock markets are less ebullient than they were back in July, but given the upheaval in other nations&#39; stock markets, such backtracking is hardly surprising. What is impressive is the sustained and widespread favorable outlook for Sweden.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070829d.jpg" width="353">
Data on Sweden are in Haver&#39;s NORDIC database. The share prices come from the MSCI databases, which consist of the Morgan Stanley Capital International indexes. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">SWEDEN (% Bal, ex as noted)</th>
<th scope="col">Aug 2007</th>
<th scope="col">July 2007</th>
<th scope="col">June 2007</th>
<th scope="col">Year Ago</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Economic Tendency (100=long run avg.)</td>
<td>112.3</td>
<td>115.7</td>
<td>114.7</td>
<td>109.3</td>
<td>109.4</td>
<td>101.8</td>
<td>102.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Confidence</td>
<td>19.7</td>
<td>21.3</td>
<td>21.0</td>
<td>16.0</td>
<td>17.1</td>
<td>10.5</td>
<td>8.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Micro Questions</td>
<td>14.7</td>
<td>17.2</td>
<td>15.9</td>
<td>15.9</td>
<td>14.9</td>
<td>14.5</td>
<td>12.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Macro Questions</td>
<td>24.9</td>
<td>26.4</td>
<td>27.0</td>
<td>8.0</td>
<td>11.5</td>
<td>-10.7</td>
<td>-12.5</td>
</tr>
<tr>
<td colspan="8">Business Tendency:</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>5</td>
<td>9</td>
<td>8</td>
<td>5</td>
<td>4</td>
<td>-6</td>
<td>2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Construction</td>
<td>47</td>
<td>45</td>
<td>47</td>
<td>20</td>
<td>22</td>
<td>9</td>
<td>-20</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Retail Trade</td>
<td>30</td>
<td>26</td>
<td>21</td>
<td>24</td>
<td>28</td>
<td>8</td>
<td>2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Services</td>
<td>42</td>
<td>44</td>
<td>40</td>
<td>38</td>
<td>37</td>
<td>33</td>
<td>23</td>
</tr>
</tbody>
</table>
</body>
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Swedish consumers and business leaders are maintaining extraordinary levels of confidence this summer, although the National Institute for Economic Research monthly survey results did ease a bit for August, reported today. The total [...]

Confidence Measures in Sweden Hover Near All-Time Highs

Robert Brusca

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070829a.jpg" width="353">
A look at global money and credit trends should be somewhat reassuring to those worried about the recent stock market downturn. Evidence shows that year/year money growth in countries/regions all around the globe had been quite plentiful coming into this period of financial market stress. 
 In the UK M4 growth has hovered at a 13% pace. 
 In the Euro area money supply has accelerated to over 11%. 
 In Japan money growth edged higher to 2.5%. 
 In the US growth had flattened at 6%. 
Among major countries only the US shows a clear pattern of sequential growth rates becoming weaker (significantly weaker at that) as the pace of growth stepped down in its rate steadily from 3 years to 2 years, and from that to one year, then to six months and then to three months - with the three-month pace at just 3.6%. That is too low to fuel what has been strong nominal GDP growth in Q2 in the US (these figures are all through July 2007). But money generally acts with a lag on the real sector so it&#146;s hard to blame the market problems on a slowing in money growth that occurs only in the US.
In the Euro area in particular, credit to residents and loan growth have remained strong and along with money (M2) have slightly accelerated through July despite some tepid steps by the ECB to hike rates.
On balance, there is no sense of there being deficient liquidity among this grouping of major global money centers. The liquidity problems markets now face are all of their own making, not due to the actions of the central banks.
The lesser ease of transactability is a function of the uncertainty over the value of some key assets in this system - that is far different from it being a quantity problem. There is no quantity problem. What there is, is a quality and an informational problem.
Until there is a way to clearly identify the troubled assets and to establish within reasonable grounds their true market value, markets and certain asset classes in particular &#150; as well those who own them - will continue to suffer this liquidity problem of their own making. It&#146;s a micro- not a macro-liquidity problem. Don&#146;t blame the central banks.
Central banks rightly worry about the other sort of liquidity problem right now - have they made too much? The levels of the growth rates in the table below sure argue for the answer &#145;yes&#146; to that question everywhere but in Japan &#150; there, of course, there are special things in play. Unfortunately this is the wrong time for central banks to be taking up this fight.
Only the Fed seems to have taken action to date to squeeze some of the excess liquidity from the market. And with that, markets now are begging for the Fed to re-inject what it has taken out (or, more correctly, slowed down its injecting).
It&#146;s a curious time for markets and central bankers alike.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Look at Global and Euro Liquidity Trends
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">SAARl</td>
<td colspan="3">Euro Measures (E13): Money &amp; Credit</td>
<td colspan="3">G-10 Major Markets: Money</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&#128;-Supply M2</td>
<td>Credit: Res</td>
<td>Loans</td>
<td>$US M2</td>
<td>&pound;UK M4</td>
<td>&yen;Japan M2+CDs</td>
</tr>
<tr>
<td class="firstcol">3-MO</td>
<td>11.4%</td>
<td>12.8%</td>
<td>11.6%</td>
<td>3.6%</td>
<td>13.1%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">6-MO</td>
<td>11.0%</td>
<td>12.7%</td>
<td>11.3%</td>
<td>5.6%</td>
<td>13.6%</td>
<td>2.0%</td>
</tr>
<tr>
<td class="firstcol">12-MO</td>
<td>10.6%</td>
<td>11.6%</td>
<td>10.7%</td>
<td>6.1%</td>
<td>13.0%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">2Yr</td>
<td>6.2%</td>
<td>11.5%</td>
<td>10.8%</td>
<td>5.4%</td>
<td>13.0%</td>
<td>1.4%</td>
</tr>
<tr>
<td class="firstcol">3Yr</td>
<td>13.9%</td>
<td>16.3%</td>
<td>15.4%</td>
<td>7.5%</td>
<td>19.0%</td>
<td>2.2%</td>
</tr>
</tbody>
</table>


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A look at global money and credit trends should be somewhat reassuring to those worried about the recent stock market downturn. Evidence shows that year/year money growth in countries/regions all around the globe had been quite [...]

World Liquidity

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070829b.jpg" width="353">
Swedish consumers and business leaders are maintaining extraordinary levels of confidence this summer, although the National Institute for Economic Research monthly survey results did ease a bit for August, reported today. The total &quot;economic tendency&quot; measure stands at 112.3, where the long-run average since 1996 equals 100. The August figure is 3.4 points less than July&#39;s 115.7. A recent high is 116.9 in April, and the all-time high was 118.2 in March 2000, at the peak of the tech boom.
Both the consumer and the business surveys have shared in the recent strength. Consumer confidence had a positive balance in August of 19.7%. It was 21.3% in July and its recent high was 23% in April. There are two divisions of this index, the &quot;macro&quot; and the &quot;micro&quot;. The questions in the macro set include opinions on the overall economy for the coming year and on the unemployment rate. The micro questions ask about the current condition and prospects for personal finances and about whether respondents believe this is a good time to make major purchases and if they plan to increase major purchases in coming months. As we see, people&#39;s views of the macro economy swing widely, but they see their personal situation in a pretty steady light. So the currently less buoyant readings on the &quot;micro&quot; indicator don&#39;t suggest a weak consumer outlook, but one instead that sees the wider economy as relatively strong.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070829c.jpg" width="353">
The industry survey also sees much of the economy doing well. Traditional manufacturing looks at first to be an exception with a mere +5 reading, but the industry detail shows strength in key products Sweden is known for: machinery, electrical equipment and transportation equipment. Other European producers of these items have also seen good demand recently. Swedish retailing and service industries have been steady at a high level. The real standout is construction. Its August reading of 47% ties with June as the all-time high. No individual industry gauge is a record, but all show favorable results simultaneously, producing the strength in the overall indicator: order books are expanding, the volume of construction produced and anticipated is large and the number of employees is increasing at almost the largest number of firms ever.
So participants in the Swedish economy appear optimistic presently. Its stock market reflects this, with stock prices up 30% in the last few weeks from a year ago. This is similar to German stocks, which have gains of 33%. Both stock markets are less ebullient than they were back in July, but given the upheaval in other nations&#39; stock markets, such backtracking is hardly surprising. What is impressive is the sustained and widespread favorable outlook for Sweden.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070829d.jpg" width="353">
Data on Sweden are in Haver&#39;s NORDIC database. The share prices come from the MSCI databases, which consist of the Morgan Stanley Capital International indexes. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">SWEDEN (% Bal, ex as noted)</th>
<th scope="col">Aug 2007</th>
<th scope="col">July 2007</th>
<th scope="col">June 2007</th>
<th scope="col">Year Ago</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Economic Tendency (100=long run avg.)</td>
<td>112.3</td>
<td>115.7</td>
<td>114.7</td>
<td>109.3</td>
<td>109.4</td>
<td>101.8</td>
<td>102.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Confidence</td>
<td>19.7</td>
<td>21.3</td>
<td>21.0</td>
<td>16.0</td>
<td>17.1</td>
<td>10.5</td>
<td>8.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Micro Questions</td>
<td>14.7</td>
<td>17.2</td>
<td>15.9</td>
<td>15.9</td>
<td>14.9</td>
<td>14.5</td>
<td>12.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Macro Questions</td>
<td>24.9</td>
<td>26.4</td>
<td>27.0</td>
<td>8.0</td>
<td>11.5</td>
<td>-10.7</td>
<td>-12.5</td>
</tr>
<tr>
<td colspan="8">Business Tendency:</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>5</td>
<td>9</td>
<td>8</td>
<td>5</td>
<td>4</td>
<td>-6</td>
<td>2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Construction</td>
<td>47</td>
<td>45</td>
<td>47</td>
<td>20</td>
<td>22</td>
<td>9</td>
<td>-20</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Retail Trade</td>
<td>30</td>
<td>26</td>
<td>21</td>
<td>24</td>
<td>28</td>
<td>8</td>
<td>2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Services</td>
<td>42</td>
<td>44</td>
<td>40</td>
<td>38</td>
<td>37</td>
<td>33</td>
<td>23</td>
</tr>
</tbody>
</table>
World Liquidity 
by <a href="/comment/Brusca.html">Robert Brusca</a> August 29, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070829a.jpg" width="353">
A look at global money and credit trends should be somewhat reassuring to those worried about the recent stock market downturn. Evidence shows that year/year money growth in countries/regions all around the globe had been quite plentiful coming into this period of financial market stress. 
 In the UK M4 growth has hovered at a 13% pace. 
 In the Euro area money supply has accelerated to over 11%. 
 In Japan money growth edged higher to 2.5%. 
 In the US growth had flattened at 6%. 
Among major countries only the US shows a clear pattern of sequential growth rates becoming weaker (significantly weaker at that) as the pace of growth stepped down in its rate steadily from 3 years to 2 years, and from that to one year, then to six months and then to three months - with the three-month pace at just 3.6%. That is too low to fuel what has been strong nominal GDP growth in Q2 in the US (these figures are all through July 2007). But money generally acts with a lag on the real sector so it&#146;s hard to blame the market problems on a slowing in money growth that occurs only in the US.
In the Euro area in particular, credit to residents and loan growth have remained strong and along with money (M2) have slightly accelerated through July despite some tepid steps by the ECB to hike rates.
On balance, there is no sense of there being deficient liquidity among this grouping of major global money centers. The liquidity problems markets now face are all of their own making, not due to the actions of the central banks.
The lesser ease of transactability is a function of the uncertainty over the value of some key assets in this system - that is far different from it being a quantity problem. There is no quantity problem. What there is, is a quality and an informational problem.
Until there is a way to clearly identify the troubled assets and to establish within reasonable grounds their true market value, markets and certain asset classes in particular &#150; as well those who own them - will continue to suffer this liquidity problem of their own making. It&#146;s a micro- not a macro-liquidity problem. Don&#146;t blame the central banks.
Central banks rightly worry about the other sort of liquidity problem right now - have they made too much? The levels of the growth rates in the table below sure argue for the answer &#145;yes&#146; to that question everywhere but in Japan &#150; there, of course, there are special things in play. Unfortunately this is the wrong time for central banks to be taking up this fight.
Only the Fed seems to have taken action to date to squeeze some of the excess liquidity from the market. And with that, markets now are begging for the Fed to re-inject what it has taken out (or, more correctly, slowed down its injecting).
It&#146;s a curious time for markets and central bankers alike.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Look at Global and Euro Liquidity Trends
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">SAARl</td>
<td colspan="3">Euro Measures (E13): Money &amp; Credit</td>
<td colspan="3">G-10 Major Markets: Money</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&#128;-Supply M2</td>
<td>Credit: Residential</td>
<td>Loans</td>
<td>$US M2</td>
<td>&pound;UK M4</td>
<td>&yen;Japan M2+CDs</td>
</tr>
<tr>
<td class="firstcol">3-MO</td>
<td>11.4%</td>
<td>12.8%</td>
<td>11.6%</td>
<td>3.6%</td>
<td>13.1%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">6-MO</td>
<td>11.0%</td>
<td>12.7%</td>
<td>11.3%</td>
<td>5.6%</td>
<td>13.6%</td>
<td>2.0%</td>
</tr>
<tr>
<td class="firstcol">12-MO</td>
<td>10.6%</td>
<td>11.6%</td>
<td>10.7%</td>
<td>6.1%</td>
<td>13.0%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">2Yr</td>
<td>6.2%</td>
<td>11.5%</td>
<td>10.8%</td>
<td>5.4%</td>
<td>13.0%</td>
<td>1.4%</td>
</tr>
<tr>
<td class="firstcol">3Yr</td>
<td>13.9%</td>
<td>16.3%</td>
<td>15.4%</td>
<td>7.5%</td>
<td>19.0%</td>
<td>2.2%</td>
</tr>
</tbody>
</table>


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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070828g.jpg" width="353">
The results of the IFO August survey of the opinions of industrialists, wholesalers and retail traders show that while business is slightly more confident about the current situation, it is somewhat less confident about the six month&#39;s outlook. Optimist on the outlook exceeded pessimist by 3.3%, down from 5.9% in July. The opinions of the business community, however, are much less pessimistic than those of the financial community, as revealed in last week&#39;s ZEW survey, that showed an excess of pessimists of 6.9% in August, down from an excess of optimists of 10.4% in July regarding the six month&#39;s outlook. The first chart compares the opinions of the business and financial communities. In general, the opinions of the financial community are much more volatile than those of the business community.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070828h.jpg" width="353">
The IFO presents business expectations in terms of an index with a base year of 2000 as well as the percent balances of optimists over pessimists. The index for the entire period of its existence from January 1991 to the present is shown in the second chart, compared with the 1991-2006 average of the series. Although the expectations index has declined from 101.7 in July to 100.4 in August it is still significantly above the average.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">GERMAN BUSINESS CONFIDENCE (IFO)&nbsp;</th>
<th scope="col">Aug 07</th>
<th scope="col">Jul 07&nbsp;</th>
<th scope="col">Aug 06&nbsp;</th>
<th scope="col">M/M Chg&nbsp;</th>
<th scope="col">Y/Y Chg&nbsp;</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Current Situation</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Index 2000=100</td>
<td>111.5</td>
<td>111.3</td>
<td>108.8</td>
<td>0.2</td>
<td>2.7</td>
<td>108.4</td>
<td>94.7</td>
<td>93.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Percent Balance</td>
<td>18.6</td>
<td>18.3</td>
<td>13.3</td>
<td>0.3</td>
<td>5.3</td>
<td>12.5</td>
<td>-14.2</td>
<td>-17.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Expectations</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Index 2000=100</td>
<td>100.4</td>
<td>101.7</td>
<td>101.6</td>
<td>-1.3</td>
<td>-1.2</td>
<td>102.7</td>
<td>96.3</td>
<td>97.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Percent Balance</td>
<td>3.3</td>
<td>5.9</td>
<td>5.5</td>
<td>-2.6</td>
<td>-2.2</td>
<td>7.9</td>
<td>-5.1</td>
<td>-2.0</td>
</tr>
</tbody>
</table>
</body>
</html>

The results of the IFO August survey of the opinions of industrialists, wholesalers and retail traders show that while business is slightly more confident about the current situation, it is somewhat less confident about the six [...]

German Business Types less Pessimistic about the Outlook than Financial Types

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070828f.jpg" width="353">
In France home construction is being stimulated by new tax rules. The new fiscal incentives allow home-buyers to deduct 40% of their mortgage interest payments from taxable income during the first year of contracts signed after May 6 and 20% during the four following years. This accounts for the jump in starts in May (up by 34.2% over April) and for April&#39;s nearly 30% drop from March as demand was depressed until after the new rule took effect. This incentive should allow developers to reduce stocks of unsold units built up in 1Q. The incentives will offset rising short- and long-term interest rates. Developers surveyed in July said buyers&#39; financing had improved recently and expected this trend to continue in the near term, according to the national statistics institute Insee. The outlook for housing starts, based on permits on hand, has stabilized after a marked erosion since the start of the year. The new rule seems to play a large role in the timing of activity in French housing so far this year. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
French Housing Starts
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jul-07</td>
<td>Jun-07</td>
<td>May-07</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
</tr>
<tr>
<td class="firstcol">Starts</td>
<td>2.7%</td>
<td>4.6%</td>
<td>34.3%</td>
<td>333.2%</td>
<td>66.4%</td>
<td>30.1%</td>
</tr>
<tr>
<td class="firstcol">Permits</td>
<td>1.9%</td>
<td>-3.8%</td>
<td>11.6%</td>
<td>43.0%</td>
<td>6.0%</td>
<td>-1.3%</td>
</tr>
<tr class="odd">
<td colspan="7">3-Mo average</td>
</tr>
<tr>
<td class="firstcol">Starts</td>
<td>11.8%</td>
<td>-0.3%</td>
<td>8.3%</td>
<td>112.7%</td>
<td>45.5%</td>
<td>15.0%</td>
</tr>
<tr>
<td class="firstcol">Permits</td>
<td>2.9%</td>
<td>-6.2%</td>
<td>1.9%</td>
<td>-6.4%</td>
<td>11.5%</td>
<td>0.1%</td>
</tr>
</tbody>
</table>
</body>
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In France home construction is being stimulated by new tax rules. The new fiscal incentives allow home-buyers to deduct 40% of their mortgage interest payments from taxable income during the first year of contracts signed after May 6 [...]

French Housing Starts Jump

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070828c.jpg" width="353">
The International Council of Shopping Centers (ICSC)-UBS survey reported that chain store sales increased 0.3% last week and made up the 0.3% decline during the week prior. 
Chain store sales this month are 0.2% ahead of the July average of sales which rose 0.4% from June. 
During the last ten years there has been a 45% correlation between the y/y change in chain store sales and the change in non-auto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070828d.jpg" width="353">
The leading indicator of chain store sales from ICSC-UBS fell 0.8% from prior week (1.0% y/y). 
Gasoline prices for regular, on average fell four cents last week to $2.75 per gallon (-3.4% y/y).
The average gas price so far in August is 6.0% lower than in July and prices have fallen 14.6% from their peak during May of $3.22 per gallon.
The market price for regular gasoline in N.Y. harbor rose yesterday to $2.07 (17.3% y/y) 3 above the July average.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a>&nbsp;</th>
<th scope="col">09/04/07&nbsp;</th>
<th scope="col">08/18/06&nbsp;</th>
<th scope="col">Y/Y&nbsp;</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales&nbsp;</td>
<td>483.4</td>
<td>482.0&nbsp;</td>
<td>2.5%&nbsp;</td>
<td>3.3%&nbsp;</td>
<td>3.6%</td>
<td>4.7%</td>
</tr>
</tbody>
</table>


</html>

The International Council of Shopping Centers (ICSC)-UBS survey reported that chain store sales increased 0.3% last week and made up the 0.3% decline during the week prior. Chain store sales this month are 0.2% ahead of the July [...]

U.S. Weekly Chain Store Sales Up, Gasoline Prices Down

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070828a.jpg" width="353">
Consumer confidence in August fell according to the Conference Board Survey by 6.2%. The decline retraced all of the July increase of 6.3%. Confidence fell to the lowest level in a year.<div align="left"> 
The present conditions reading similarly fell a hard 5.8%, retracing all of the 6.5% July rise. The percentage of respondents who viewed business conditions as good fell and the percentage who viewed jobs as plentiful fell as well.</div><div align="left"> <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070828b.jpg" width="353">
The expectations index also retraced all of the July rise with a 6.6% drop. Plans to buy major appliances fell to the lowest since late last year and plans to buy carpet also dropped. </div><div align="left"> 
The expected inflation rate in twelve months remained at 5.1%, equal to expectations during all of last year for inflation in twelve months.</div>

<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">August</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Confidence Index</td>
<td>105.0</td>
<td>111.9</td>
<td>4.8%</td>
<td>105.9</td>
<td>100.3</td>
<td>96.1</td>
</tr>
<tr>
<td class="firstcol">Present Conditions</td>
<td>130.3</td>
<td>138.3</td>
<td>5.2%</td>
<td>130.2</td>
<td>116.1</td>
<td>94.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Expectations</td>
<td>88.2</td>
<td>94.4</td>
<td>4.5%</td>
<td>89.7</td>
<td>89.7</td>
<td>96.9</td>
</tr>
</tbody>
</table>
</body>
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Consumer confidence in August fell according to the Conference Board Survey by 6.2%. The decline retraced all of the July increase of 6.3%. Confidence fell to the lowest level in a year. The present conditions reading similarly fell a [...]

Consumer Confidence Fell

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070828g.jpg" width="353">
The results of the IFO August survey of the opinions of industrialists, wholesalers and retail traders show that while business is slightly more confident about the current situation, it is somewhat less confident about the six month&#39;s outlook. Optimist on the outlook exceeded pessimist by 3.3%, down from 5.9% in July. The opinions of the business community, however, are much less pessimistic than those of the financial community, as revealed in last week&#39;s ZEW survey, that showed an excess of pessimists of 6.9% in August, down from an excess of optimists of 10.4% in July regarding the six month&#39;s outlook. The first chart compares the opinions of the business and financial communities. In general, the opinions of the financial community are much more volatile than those of the business community.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070828h.jpg" width="353">
The IFO presents business expectations in terms of an index with a base year of 2000 as well as the percent balances of optimists over pessimists. The index for the entire period of its existence from January 1991 to the present is shown in the second chart, compared with the 1991-2006 average of the series. Although the expectations index has declined from 101.7 in July to 100.4 in August it is still significantly above the average.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">GERMAN BUSINESS CONFIDENCE (IFO)&nbsp;</th>
<th scope="col">Aug 07</th>
<th scope="col">Jul 07&nbsp;</th>
<th scope="col">Aug 06&nbsp;</th>
<th scope="col">M/M Chg&nbsp;</th>
<th scope="col">Y/Y Chg&nbsp;</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Current Situation</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Index 2000=100</td>
<td>111.5</td>
<td>111.3</td>
<td>108.8</td>
<td>0.2</td>
<td>2.7</td>
<td>108.4</td>
<td>94.7</td>
<td>93.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Percent Balance</td>
<td>18.6</td>
<td>18.3</td>
<td>13.3</td>
<td>0.3</td>
<td>5.3</td>
<td>12.5</td>
<td>-14.2</td>
<td>-17.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Expectations</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Index 2000=100</td>
<td>100.4</td>
<td>101.7</td>
<td>101.6</td>
<td>-1.3</td>
<td>-1.2</td>
<td>102.7</td>
<td>96.3</td>
<td>97.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Percent Balance</td>
<td>3.3</td>
<td>5.9</td>
<td>5.5</td>
<td>-2.6</td>
<td>-2.2</td>
<td>7.9</td>
<td>-5.1</td>
<td>-2.0</td>
</tr>
</tbody>
</table>
French Housing Starts Jump  
by <a href="/comment/Brusca.html">Robert Brusca</a> August 28, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070828f.jpg" width="353">
In France home construction is being stimulated by new tax rules. The new fiscal incentives allow home-buyers to deduct 40% of their mortgage interest payments from taxable income during the first year of contracts signed after May 6 and 20% during the four following years. This accounts for the jump in starts in May (up by 34.2% over April) and for April&#39;s nearly 30% drop from March as demand was depressed until after the new rule took effect. This incentive should allow developers to reduce stocks of unsold units built up in 1Q. The incentives will offset rising short- and long-term interest rates. Developers surveyed in July said buyers&#39; financing had improved recently and expected this trend to continue in the near term, according to the national statistics institute Insee. The outlook for housing starts, based on permits on hand, has stabilized after a marked erosion since the start of the year. The new rule seems to play a large role in the timing of activity in French housing so far this year. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
French Housing Starts
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jul-07</td>
<td>Jun-07</td>
<td>May-07</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
</tr>
<tr>
<td class="firstcol">Starts</td>
<td>2.7%</td>
<td>4.6%</td>
<td>34.3%</td>
<td>333.2%</td>
<td>66.4%</td>
<td>30.1%</td>
</tr>
<tr>
<td class="firstcol">Permits</td>
<td>1.9%</td>
<td>-3.8%</td>
<td>11.6%</td>
<td>43.0%</td>
<td>6.0%</td>
<td>-1.3%</td>
</tr>
<tr class="odd">
<td colspan="7">3-Mo average</td>
</tr>
<tr>
<td class="firstcol">Starts</td>
<td>11.8%</td>
<td>-0.3%</td>
<td>8.3%</td>
<td>112.7%</td>
<td>45.5%</td>
<td>15.0%</td>
</tr>
<tr>
<td class="firstcol">Permits</td>
<td>2.9%</td>
<td>-6.2%</td>
<td>1.9%</td>
<td>-6.4%</td>
<td>11.5%</td>
<td>0.1%</td>
</tr>
</tbody>
</table>
Consumer Confidence Fell 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 28, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070828a.jpg" width="353">
Consumer confidence in August fell according to the Conference Board Survey by 6.2%. The decline retraced all of the July increase of 6.3%. Confidence fell to the lowest level in a year.<div align="left"> 
The present conditions reading similarly fell a hard 5.8%, retracing all of the 6.5% July rise. The percentage of respondents who viewed business conditions as good fell and the percentage who viewed jobs as plentiful fell as well.</div><div align="left"> <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070828b.jpg" width="353">
The expectations index also retraced all of the July rise with a 6.6% drop. Plans to buy major appliances fell to the lowest since late last year and plans to buy carpet also dropped. </div><div align="left"> 
The expected inflation rate in twelve months remained at 5.1%, equal to expectations during all of last year for inflation in twelve months.</div>

<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">August</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Confidence Index</td>
<td>105.0</td>
<td>111.9</td>
<td>4.8%</td>
<td>105.9</td>
<td>100.3</td>
<td>96.1</td>
</tr>
<tr>
<td class="firstcol">Present Conditions</td>
<td>130.3</td>
<td>138.3</td>
<td>5.2%</td>
<td>130.2</td>
<td>116.1</td>
<td>94.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Expectations</td>
<td>88.2</td>
<td>94.4</td>
<td>4.5%</td>
<td>89.7</td>
<td>89.7</td>
<td>96.9</td>
</tr>
</tbody>
</table>
U.S. Weekly Chain Store Sales Up, Gasoline Prices Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 28, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070828c.jpg" width="353">
The International Council of Shopping Centers (ICSC)-UBS survey reported that chain store sales increased 0.3% last week and made up the 0.3% decline during the week prior. 
Chain store sales this month are 0.2% ahead of the July average of sales which rose 0.4% from June. 
During the last ten years there has been a 45% correlation between the y/y change in chain store sales and the change in non-auto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070828d.jpg" width="353">
The leading indicator of chain store sales from ICSC-UBS fell 0.8% from prior week (1.0% y/y). 
Gasoline prices for regular, on average fell four cents last week to $2.75 per gallon (-3.4% y/y).
The average gas price so far in August is 6.0% lower than in July and prices have fallen 14.6% from their peak during May of $3.22 per gallon.
The market price for regular gasoline in N.Y. harbor rose yesterday to $2.07 (17.3% y/y) 3 above the July average.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a>&nbsp;</th>
<th scope="col">09/04/07&nbsp;</th>
<th scope="col">08/18/06&nbsp;</th>
<th scope="col">Y/Y&nbsp;</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales&nbsp;</td>
<td>483.4</td>
<td>482.0&nbsp;</td>
<td>2.5%&nbsp;</td>
<td>3.3%&nbsp;</td>
<td>3.6%</td>
<td>4.7%</td>
</tr>
</tbody>
</table>


</html>

Subdued global shipping costs not yet pointing to supply chain problems

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

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Andrew Cates

**US monetary policy**
This first chart shows that Chair Powell’s cautious tone in the aftermath of this week’s FOMC meeting led markets to scale back expectations for further near-term easing. Fed funds futures for late 2025 through mid-2026 rose slightly, signalling that investors now expect a shallower and slower easing cycle than before. While the rate cut itself confirmed the Fed’s gradual pivot toward easier policy, markets interpreted Powell’s remarks as suggesting that a December move is not guaranteed and that the central bank remains wary of declaring victory on inflation too soon.

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**The global business cycle**
The latest flash PMI surveys for October highlight a still-divergent global picture, with services-led resilience offsetting persistent manufacturing weakness. Activity remains strongest in India and the United States, both comfortably in expansion territory, while Germany has shown one of the clearest signs of improvement within the euro area after a long period of contraction. The broader euro area and UK readings point to modest but positive momentum, suggesting that growth is stabilising rather than accelerating. In contrast, France remains mired below the 50 threshold, signalling continued contraction, and Japan and Australia are treading water with only marginal gains.

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**Consumer confidence in the US and Europe** 
Consumer confidence trends have diverged across major economies in 2025. In the UK, sentiment has improved gradually, supported by easing inflation and lower interest rates. In the euro area, confidence has stabilised after a prolonged downturn, though households remain wary. By contrast, US confidence has slipped further, probably reflecting a softening labour market, slowing wage growth, and heightened concern about job security. Overall, global consumer sentiment remains fragile and uneven, suggesting that household spending could stay subdued even if price pressures recede and monetary policy becomes more accommodative.

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**Credit conditions in the euro area** 
The latest data on Euro Area M3 growth underline that monetary conditions remain mildly restrictive, even after the ECB’s recent rate reductions. Money growth has decelerated sharply over the past year, with only a limited contribution from private-sector credit and little net support from lending to government. The ECB’s Q4 Bank Lending Survey, released this week, suggests that while financing conditions are beginning to ease, credit dynamics remain weak. Banks reported a further net tightening of credit standards for firms, reflecting continued risk aversion, even as loan demand from businesses and households picked up modestly thanks to lower interest rates and improving sentiment.

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**The UK manufacturing sector**
Turning to the UK, the latest CBI Industrial Trends Survey offers little sign of improvement in manufacturing conditions. The balance of firms reporting excess stocks of finished goods has fallen further into negative territory, consistent with efforts to run down inventories amid weak demand and high uncertainty. And on that score, the share of firms citing uncertainty about demand over the next year as a constraint on capital expenditure has shifted up, highlighting persistent caution in investment planning. Together, these indicators point to a sector still struggling to regain momentum after a protracted slowdown—one where firms are prioritising cost control and liquidity preservation over expansion, despite an easing in headline inflation and gradual monetary policy support.

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**Traded goods price inflation**
The Drewry Container Index, which tracks global shipping costs for a standard 40-foot container, has fallen back in recent months from the elevated levels seen in 2024, reflecting softer global trade volumes and a partial unwinding of last year’s supply-chain pressures. Even so, concerns have re-emerged that new US tariff measures and associated logistical bottlenecks could push freight rates and producer price inflation (PPI) higher in the coming months. The final chart below illustrates how closely traded goods price inflation, represented by Haver’s aggregation of PPI inflation for advanced economies, has tended to move with swings in container shipping costs. While traded goods inflation remains subdued for now, any renewed disruptions to global shipping routes or tariff-driven frictions could quickly feed through to higher input costs—especially in manufacturing sectors reliant on long and complex supply chains.

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Global equity markets are once again flirting with record highs, buoyed by renewed optimism that the global economy can achieve a soft landing—and by persistent enthusiasm over the potential productivity gains from AI-related investment. The Federal Reserve’s decision to cut rates by 25bps this week—its second this autumn—initially reinforced expectations that global monetary policy is shifting toward a more accommodative stance. However, Chair Powell’s reminder that a further cut in December was “not inevitable” tempered that optimism and was met with some disappointment in financial markets (chart 1). Even so, the broader tone remains constructive, though it contrasts with a still-fragile macro environment. Renewed conflict in Gaza, the ongoing US government shutdown, and intensifying trade tensions have kept risk sentiment uneven and underscored the fragility of the recovery. The latest flash PMIs (chart 2) show modest global expansion led by services, while manufacturing continues to struggle. Consumer confidence (chart 3) tells a similar story: sentiment has weakened in the US as the labour market softens, stabilised in the euro area, and improved slightly in the UK. In the euro area, sluggish money and credit growth (chart 4) and the ECB’s latest bank-lending survey confirm that financial conditions remain mildly restrictive despite recent rate cuts. The UK CBI Industrial Trends Survey (chart 5) points to manufacturers reducing inventories and deferring investment plans amid demand uncertainty. Externally, the Drewry Container Index (chart 6) has fallen back from 2024’s elevated levels, signalling easing supply-chain pressures and subdued traded-goods inflation—though tariff realignments remain a potential source of friction.

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Charts of the Week: Optimism with Caveats

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Initial claims for unemployment insurance increased 11,892 during the week ended October 18 to 232,163. The increase reversed most of the earlier week’s decline of 14,839. The four-week moving average of initial claims edged up to 227,953 and have trended higher this year, after weakening late in 2024. The four- week average hit a low of 200,323 in January 2024.

Continuing claims for unemployment insurance fell to 1.947 million in the week ended October 11 from 1.928 million in the prior week. The four-week moving average edged up to 1.931 million, the highest level since early September and up 3.3% y/y, less than half the peak rate of growth in April 2023.

The insured unemployment rate varied greatly across individual states and territories. In the week ended October 11, the highest unemployment rates were in New Jersey (2.12%), Washington (1.99%), California (1.88%), Massachusetts (1.84%), District of Columbia (1.75%) and Connecticut (1.71%). The lowest were in South Dakota (0.24%), Florida (0.36%), North Carolina (0.41%), Louisiana (0.42%), Nebraska (0.48%) and Virginia (0.52%). Rates in other notable states include New York (1.46%), Illinois (1.49%), Pennsylvania (1.37%), and Texas (1.14%). These state data are not seasonally adjusted.

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

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- Rise in initial claims reverses earlier decline.
- Continuing claims jump.
- State unemployment rates vary.

U.S. Unemployment Insurance Claims Increase in Latest Week

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The European monetary union’s index of sentiment created by the European Commission rose sharply in October to its highest level since April 2023. There were improvements in the three of the five sector indexes reported with only construction and services unchanged in October relative to their September values.

Despite the nice step-up in the indexes in October, they are still at relatively low values. Only two sectors, construction and retailing, have readings above their 50th percentiles with construction at a 77.5 percentile standing and retailing at a 51.5 percentile standing. The service sector has a low 27.5 percentile standing, consumer confidence is at a 24.3 percentile standing, and the industrial sector is at a 35.9 percentile. Data are ranked over observations back to 1990, where feasible.

**‘Better’ is not always ‘good’**
Clearly the euro area is not performing particularly well at this time. The rankings data make that especially clear. The service sector and the industrial sector are substantially below their historic medians. The median occurs at a queue (or rank) standing at the 50-percentile mark. Consumer confidence is in the lower 25-percentile of its range for this period; services are in their 27th percentile – a low ranking for such an important job creating sector.

**The largest have the best October showing**
The four largest economies in the euro area lead the way in the month and on the broader trip to mediocrity. Germany, France, and Italy each rise by one percentage point or more in October. More broadly, Italy and Spain are the only two ‘large economies’ with percentile standings above their respective 50th percentiles: Spain is at a 55.3 percentile standing, Italy at a 50.9 percentile standing. The largest two economies in the monetary union, Germany and France, respectively, have standings at the 19th percentile for Germany in the 33rd percentile for France.

**Granular performance of the Euro Area**
In October only one large economy backtracked compared to September and that's Spain; its hard decline of 0.9% came after its index rose by 2.9% in September. Among the remaining 14 economies, seven of them showed declines in October and seven of them showed increases. The pickup and performance for the monetary union in October is substantially on the back of the larger economies that are doing better while these smaller monetary union members are clearly mixed.

**Standings**
In terms of standings, the smaller monetary union economies show 5 of 14 with standings above their 50th percentile. These are Portugal at 51.5%, Cyprus at 56.2%, Lithuania at 64.4%, Greece at 71.1%, and Malta at a strong 89.1%.

**Summing up**
It is a good month statistically for the euro area. However, the gains are not widespread, and the sector performance is still mixed. But this is the strongest level for the EU sentiment index since April 2023, and that is something.

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Europe

EU Indexes Show Improvement in EMU in October; Index Last Higher in April 2023

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At today’s meeting of the Federal Open Market Committee, the target range for the Fed funds rate was reduced to 3.75%-to-4.00% from 4.00%-to-4.25%. It was the lowest range since December 2022. The current range compares to a high of 5.25%-to-5.50% in mid-September 2024. Today’s target range matched expectations in the Action Economics Forecast Survey. The action was supported by all but two FOMC members; one preferred to lower the target range by 50 basis points and another preferred no cut.

The following statement was released after today’s meeting: “Available indicators suggest that economic activity has been expanding at a moderate pace. Job gains have slowed this year, and the unemployment rate has edged up but remained low through August; more recent indicators are consistent with these developments. Inflation has moved up since earlier in the year and remains somewhat elevated.”

“The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months.”

“The Committee decided to conclude the reduction of its aggregate securities holdings on December 1. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.”

U.S. economic figures can be found in Haver’s **USECON** database & interest rate data are in the **WEEKLY** & **DAILY** databases.

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- FOMC lowers funds rate target by quarter point for second time this year.
- The decision was approved by all but two FOMC voters.
- Asset purchases to end.

FOMC Reduces Fed Funds Rate Target as Expected

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The Pending Home Sales Index from the National Association of Realtors (NAR) remained unchanged last month (-0.9% y/y) at 74.8 following a 4.2% August increase, revised from 4.0%, after easing an unrevised 0.3% in July. So far in 2025 sales have risen 1.1%, but the index remained 40.2% below its most recent peak of 125.1 in October 2021. The index is a forward-looking measure of home sales based on contract signings.

Steady pending home sales occurred as the average rate on a 30-year mortgage fell to 6.35%	 in September after declining to 6.59% in August. It has weakened to an average 6.28% so far in October. These rates are down from a high of 7.04% in the third week of January, but remain well above a low of 5.22% in August 2022 and more than double a record low 2.68% in December 2020.

Pending home sales were mixed last month in the four major regions of the country. Pending home sales in the Northeast increased 3.1% (0.5% y/y) after falling 1.1% in August. In the South, sales improved 1.1% (0.9% y/y) after increasing 3.2%. Moving lower, sales in the Midwest declined 3.4% (-1.5% y/y) after rising 8.7% in August. Sales in the West eased 0.2% last month (-5.3% y/y) after a 5.0% August improvement.

The pending home sales index measures sales at the time the contract for the purchase of an existing home is signed, similar to the Census Bureau's new home sales data. In contrast, the National Association of Realtors' existing home sales data are recorded when the sale is closed, which is usually a couple of months after the sales contract has been signed. In developing the pending home sales index, the NAR found that the level of monthly sales contract activity leads the level of closed existing home sales by about two months.

The series dates back to 2001 and are available in Haver's **PREALTOR** database. Weekly mortgage interest rates from the Mortgage Bankers Association can be found in the **WEEKLY** database.

- Sales remain at highest level since March.
- Year-to-year date sales rise modestly.
- Regional changes are mixed.


Economy in Brief: August 2007

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