Sandy Batten

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Manufacturers' new orders for durable goods rose 2.5% m/m (15.7% y/y) in November versus and upwardly revised 0.1% m/m gain in October (initially reported as a 0.5% m/m decline). The Action Economics Forecast Survey was expecting a 1.5% m/m increase.

The sharp November increase was led by a 6.5% m/m (19.4% y/y) rebound in transportation orders after having declined in three of the previous four months. Excluding transportation orders, the remainder rose 0.8% m/m (14.1% y/y), the ninth consecutive monthly increase. Orders for motor vehicles and parts increased 1.0% m/m on top of a 5.8% m/m jump in October. Orders for aircraft and parts surged 23.8% m/m in November after having declined in three of the previous four months. Orders for nondefense aircraft jumped 34.1% m/m while orders for defense aircraft rose a more modest 3.0% m/m. Across the other major sectors, orders for primary metals, fabricated metal products, and computers and electronic products rose in November while orders for machinery and electrical equipment fell.

Durable goods shipments rose 0.7% m/m (11.8% y/y) in November, their third consecutive monthly increase and again led by transportation, following a 1.7% m/m gain in October (revised up from 1.5%). Shipments excluding transportation gained 0.5% m/m after a 0.9% monthly increase in October. Shipments excluding defense increased 0.7% m/m on to of a 1.6% rise in October. This report now contains an advance reading on shipments of nondurable goods. They increased 0.5% m/m (17.5% y/y) in November on top of a 2.3% rise in October and a 1.3% increase in September. Shipments in all manufacturing industries increased 0.6% m/m (14.6% y/y) in November following an unrevised 2.0% m/m gain in October.

Also in the report are key readings on capital goods shipments and orders. The shipments figures provide a dependable reading on the course of business spending on equipment in the national accounts. Core (that is, excluding defense and aircraft) capital goods shipments increased 0.3% m/m (10.9% y/y) in November following a 0.4% gain in October. The October/November average is 6.4% annualized above the Q2 average, pointing to another quarter of solid business spending on equipment. Core capital goods orders slipped 0.1% m/m (12.8% y/y) in November, their first monthly decline in nine months.

Unfilled orders for durable goods rose 0.7% m/m (6.2% y/y) in November versus an upwardly revised 0.3% (previously 0.2%) in October. Unfilled orders are not calculated for nondurable goods. Manufacturing inventories increased 0.7% m/m (9.1% y/y) in November, reflecting a 0.6% m/m rise in durable goods inventories and a 0.7% m/m gain in nondurable goods inventories.

The durable goods and nondurable goods data are available in Haver's **USECON** database. The Action Economics consensus forecast figure is in the **AS1REPNA** database.

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- November gain in orders led by a rebound in transportation after two monthly declines.
- Meaningful upward revision to October orders.
- Core capital goods shipments up 6.5% AR in October/November from Q2.

U.S. Durable Goods Orders Up Sharply in November

Carol Stone, CBE

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Initial claims for unemployment insurance were steady at 205,000 in the week ended December 18 (-74.5% y/y); the prior week was marginally revised from 206,000 reported initially. The Action Economics Forecast Survey expected 200,000 claims for the latest week. The 4-week moving average rose to 206,250 in the week ended December 18 from 203,500 the week before. The recent range near 200,000 is back to the amount for about two years before the pandemic started in the spring of 2020; then claims jump dramatically to almost 6 million in just two weeks.

Initial claims for the federal Pandemic Unemployment Assistance (PUA) program in the December 18 week fell to 1,550 (-99.6% y/y) from 1,852 in the prior week. This program expired on September 4. These claims averaged 107,756 per week during August, the last full month of the program. The PUA program provided benefits to individuals who are not eligible for regular state unemployment insurance benefits, such as the self-employed. Given the brief history of this program, these and other COVID-related series are not seasonally adjusted.

Continued weeks claims for regular state unemployment insurance decreased to 1.859 million (-65.8% y/y) during the week ended December 11 from 1.867 million in the prior week; that was revised from 1.845 million. The insured unemployment rate was steady at 1.4%; just before the pandemic struck in March 2020, the rate was hovering at 1.2%.

In the week ended December 4, continued weeks claimed in the Pandemic Assistance Program (PUA) program dropped from 194,189 to 133,763 (-98.6% y/y). This number of continued weeks claimed compares to 4.896 million in the last week of the program, September 4. Continued weeks claimed for Pandemic Emergency Unemployment Compensation (PEUC) fell to 116,134 increased to 116,434 in the December 4 week from 136,413 in the prior week and below the 3,644,555 claims during the last week of the program on September 4. This program covered people who had exhausted their state unemployment insurance benefits.

In the week ended December 4 the total number of all state, federal, PUA and PEUC continued claims was 2.138 million, down from 2.458 million the week before. These figures are not seasonally adjusted.

The state insured rates of unemployment in regular programs continue to vary. In the week ending December 4, the highest insured unemployment rates were in Alaska (3.12%), California (2.45%), New Jersey (2.41%), Minnesota (2.18%) and Hawaii (1.94%). The lowest rates were in South Dakota (0.32%), Alabama (0.33), Nebraska (0.39%), Kansas (0.42%) and New Hampshire (0.43%) Other state insured rates of unemployment in regular programs included Pennsylvania (1.62%), New York (1.76%), Texas (0.94%), and Florida (0.58%). These state rates are not seasonally adjusted.

Data on weekly unemployment claims going back to 1967 are contained in Haver's **WEEKLY** database, and they are summarized monthly in **USECON**. Data for individual states are in **REGIONW**. The expectations figure is from the Action Economics Forecast Survey and is in the **AS1REPNA** database.

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- Initial claims steady, back in pre-pandemic range.
- Continued claims in regular programs also approach pre-pandemic amounts.
- Insured jobless rate 1.4%, near pre-pandemic 1.2% level.

U.S. Initial Unemployment Insurance Claims Unchanged

Tom Moeller

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Personal consumption expenditures rose 0.6% (13.5% y/y) during November after surging 1.4% in October, revised from 1.3%. A 0.6% rise had been expected in the Action Economics Forecast Survey. Adjusted for price inflation, spending held steady (7.4% y/y) after rising 0.7% in October.

Real spending on durable goods declined 1.0% in November (+7.7% y/y) led by a 2.4% fall (-2.3% y/y) in spending on autos, while furniture & appliance purchases eased 0.7% (+7.5% y/y). Real purchases of recreational goods & vehicles weakened 0.6% (+13.8% y/y). Real nondurable goods fell 0.6% (+8.1% y/y), reflecting a 2.3% decline (+17.8% y/y) in clothing outlays. Real gasoline & oil spending weakened 1.2% (+12.9% y/y), while food & beverage expenditures held steady (+4.8% y/y). Real outlays on services posted a 0.5% November gain (7.1% y/y) after two months of 0.4% increase. Real recreation services outlays surged 1.2% (27.4% y/y) while spending at hotels and restaurants rose 0.6% (27.2% y/y). Real health care outlays edged 0.3% higher (3.3% y/y) while housing & utilities spending rose 0.6% (1.7% y/y) in November. Real transportation service outlays held steady (29.1% y/y) after rising 0.5% in October.

The PCE chain price index rose 0.6% last month (5.7% y/y) following a 0.7% gain. The price index excluding food and energy rose 0.5% in November raising the y/y increase to 4.7%, the strongest gain since February 1989. Durable goods prices rose 0.4% (9.7% y/y) owing to a 1.7% surge (20.6% y/y) in motor vehicle prices. Nondurable goods prices gained 1.2% (7.9% y/y) for the second straight month reflecting a 5.8% rise in gasoline prices (56.7% y/y). The services price index rose 0.5% (4.3% y/y), the quickest increase since March of this year. Energy prices overall jumped 3.6% (34.0% y/y), the sixth straight month of strong increase. Food & beverage prices rose 0.7% (5.6% y/y).

Personal income rose 0.4% (7.4% y/y) in November. A 0.4% rise had been expected. Wages & salaries rose 0.5% last month (8.9% y/y) and rental income strengthened 1.0% (5.9% y/y). Earnings on assets improved 0.3% (2.6% y/y) as dividend income increased 0.2% (3.1% y/y) and interest income rose 0.3% (2.3% y/y). Proprietors earnings declined 0.3% (+9.7% y/y). Disposable personal income increased 0.4% (5.8% y/y) in November for the second straight month. Adjusted for price inflation, disposable income declined 0.2% (0.0% y/y), down for the fourth straight month.

The personal savings rate fell to 6.9% in November from 7.1% in October. It was down from a high of 33.8% in April of last year. The level of personal savings fell 2.8% last month and has fallen 44.2% during the last twelve months.

The personal income and consumption figures are available in Haver's **USECON** database with detail in the **USNA** database. The Action Economics figures are in the **AS1REPNA** database.

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- Spending slowdown includes fewer durable goods outlays.
- Core price inflation remains strong.
- Wage & salary growth moderates.

U.S. Personal Spending & Income Growth Slow

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New single-family home sales rose 12.4% in November (-14.0% y/y) to 744,000 (SAAR) from 662,000 in October, revised from 745,000. Sales remained below the January peak of 993,000. The Action Economics Forecast Survey expected 775,000 sales in November.

By region, November sales in the West rose 53.2% (14.2% y/y) to 242,000. Rising by 15.6% (8.8% y/y) to 37,000 were sales in the Northeast. Sales in the South gained 2.7% (-21.2% y/y) to 412,000. Offsetting these increases, sales in the Midwest fell 25.4% (-44.8% y/y) to 53,000.

The median price of a new home rose 2.0% (18.8% y/y) in November to a record $416,900. The average sales price of a new home edged 0.7% higher (21.6% y/y) to a record $481,700. These sales price data are not seasonally adjusted.

The supply of new homes for sale fell to 6.5 months in November from 7.1 months in October. This compares with a low of 3.5 months averaged from August through October of last year. The median number of months a new home stayed on the market rose slightly to 2.7 from the record low of 2.5 months in October. These figures date back to January 1975.

New home sales activity and prices are available in Haver's **USECON** database. The consensus expectation figure from Action Economics is available in the **AS1REPNA** database.

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- Sales are highest since April.
- Strengthening is pronounced in West.
- Median sales price increases to record.

U.S. New Home Sales Surge in November

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The Chicago Fed National Activity Index (CFNAI) fell to 0.37 during November from 0.75 in October, revised from 0.76. The index is constructed by the Federal Reserve Bank of Chicago.

The index's three-month moving average of 0.37 was the highest since July. During the last 10 years, there has been a 75% correlation between the change in the Chicago Fed Index and quarterly growth in real GDP.

The Production & Income component led last month's decline with a weakening to 0.21 from 0.42 in October. The Personal Consumption & Housing reading weakened to -0.05 last month from 0.04 in October. The Employment, Unemployment & Hours component moved down to 0.18 from 0.23. The Sales, Orders & Inventories index slipped to 0.03 from 0.06.

The CFNAI diffusion index, which measures the breadth of movement in the component series, improved to 0.35 in November from 0.18 in October. Fifty-three of the 85 component series contributed positively to the overall index and 32 made negative contributions.

The CFNAI is a weighted average of 85 monthly indicators of national economic activity. It is constructed to have an average value of zero and a standard deviation of one. Since economic activity tends toward trend growth rate over time, a positive index reading corresponds to growth above trend and a negative index reading corresponds to growth below trend. The CFNAI was constructed using data available as of October 25, 2021. Fifty of the 85 indicators had been published at that time. For all missing data, estimates were used in constructing the index.

These figures are available in Haver's **SURVEYS** database.

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- Index reverses half of prior month's gain.
- Production & personal consumption lead downturn.
- Trend continues to improve.

Chicago Fed National Activity Index Declines in November

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Real GDP growth in Q3 2021 was revised up slightly to 2.3% q/q SAAR in the third estimate from 2.1% in the second estimate and 2.0% in the advance estimate, still down markedly from the 6.7% increase in Q2. The Action Economics Forecast Survey had looked for no revision in this estimate for Q3. Compared to a year ago, GDP grew 4.9% in Q3, the same as in the second estimate and also in the advance report.

The lofty 4.3% q/q (not annualized) increase in corporate profits was revised down to a still-solid 3.4% gain and were up 19.7% y/y, revised down slightly from 20.7% in the first estimate. Profits from domestic nonfinancial industries were revised down while profits from abroad were revised up, extending their first quarterly gain in three quarters.

Personal consumption expenditures were revised up to a 2.0% q/q SAAR increase in the third estimate from 1.7% in the second and 1.6% in the advance report. Still, this was a significant slowdown from the 12.0% gain in Q2 and so remained the major factor behind the Q2 slowdown in overall GDP growth.

Business nonresidential fixed investment was revised up to 1.7% q/q SAAR from 1.5% in the second estimate. This reflected upward revisions to structures and spending on equipment (both smaller declines than previously reported) and another downward revision to spending on intellectual property products (+9.1 from +9.3%). The initially reported decline in inventories was revised slightly smaller such that their contribution to overall GDP growth was revised up marginally to 2.20%-points from 2.13%-points in the second estimate. The 8.3% q/q SAAR decline in residential investment reported in the second estimate was revised up to a 7.7% decline, the same pace of decline as in the advance report.

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The drop in exports in Q3 was revised even larger to -5.3% q/q SAAR from -3.0% q/q in the second estimate. The rise in imports was revised down to 4.7% from 5.8%. As a result the trade deficit was revised slightly wider, and it subtracted a little more from overall GDP growth than previously estimated (-1.26%-points versus -1.16%-points).

Government outlays growth was unrevised at 0.9% q/q SAAR but the drop in Federal government expenditures was revised deeper to -5.1% from -4.9% while the rise in spending by state and local governments was revised up to 4.9% from 4.7%.

Inflation as measured by the indexes in this report remained elevated and was revised up slightly in the third estimate. The GDP price index increased 6.0% q/q SAAR in the third estimate, up from 5.9% in the second estimate and 5.7% in the advance report. The revised Q3 reading was the second highest since Q4 1981, surpassed only by the 6.1% rise in Q2. The 5.3% q/q gain in the PCE price index was not revised in this estimate. However, the 4.5% q/q increase in the core PCE price index was revised up slightly to 4.6%. The increase in prices of nonresidential fixed investment was not revised at a 4.3% q/q increase while the rise in prices of residential investment was revised up to a 14.8% q/q gain from 14.4%. This was the third consecutive quarter in which prices of residential investment posted double-digit increases. The rise in export prices was revised down slightly while the gain in import prices were revised up slightly. Prices paid by governments rose an upwardly revised 6.1% from 6.0% in the second estimate and 5.4% in the advance report.

The GDP figures can be found in Haver's **USECON** and **USNA** databases. **USNA** contains virtually all of the Bureau of Economic Analysis' detail in the national accounts. Both databases include tables of the newly published not seasonally adjusted data. The Action Economics consensus estimates can be found in **AS1REPNA**.

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- GDP growth revised up to 2.3% q/q SAAR from 2.1%.
- Upward revision to consumption with offsetting small revisions elsewhere.
- Price inflation revised up to second fastest quarterly rate in 40 years.
- Rise in Q3 corporate profits revised down to a still-solid 3.4% q/q from 4.3%.

U.S. Q3 GDP Growth Revised Up in Third Estimate

Winnie Tapasanun

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Existing home sales rose 1.9% m/m (-2.0% y/y) to 6.460 million units (SAAR) in November after unrevised rises of 0.8% to 6.340 million in October and 7.0% to 6.290 million in September, according to the National Association of Realtors (NAR). November existing home sales were at the highest level since January, up 11.8% from a May low. The Action Economics Forecast Survey expected a rise in sales to 6.53 million units in November. These data are compiled when existing home sales close.

Existing single-family home sales rose 1.6% (-2.2% y/y) to 5.750 million units in November after a 1.3% increase to 5.660 million in October. That was the third successive m/m rise to the highest level since January. Sales of condos and co-ops rebounded 4.4% (0.0% y/y) to 710,000, the highest level since July, after a 2.9% decline to 680,000.

Sales patterns mostly improved last month. Sales in the South advanced 2.9% (1.1% y/y) to 2.850 million in November after holding steady at 2.770 million in October. Sales in the West rose 2.3% (-3.6% y/y) to 1.330 million, the highest level since February, following a 0.8% decline to 1.300 million. Sales in the Midwest grew 0.7% (-0.7% y/y) to 1.520 million, a 10-month high, on top of a 4.9% gain to 1.510 million. However, sales in the Northeast were unchanged (-11.6% y/y) at 760,000 in November after a 1.3% October drop.

The median price of an existing home increased 0.3% (13.9% y/y) to $353,900 in November, a three-month high, after a 0.4% rebound to $352,700 in October. Prices in the South rose 1.7% (18.4% y/y) to $318,900, a record high, after having recovered 2.7% to $313,600. In the Midwest, prices were up 0.2% (9.0% y/y) to $260,100 following four consecutive m/m drops. In contrast, prices in the Northeast fell 1.7% (+4.7% y/y) to $372,500 after a 2.1% drop to $379,100, registering the fifth straight m/m fall to the lowest level since March. In the West, prices held steady (+8.4% y/y) at $507,200 after a 0.2% October rise. The price data are not seasonally adjusted.

The number of existing homes on the market dropped 9.8% (NSA) in November to 1.110 million units (-13.3% y/y), the lowest level since March, after a 2.4% decline to 1.230 million in October. The supply of homes on the market fell to 2.1 months in November, an eight-month low, from 2.3 months in October. That was well below the high of 4.6 months in May 2020 but above the all-time low of 1.9 months reached last December. These figures date back to January 1999.

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

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- Sales increase for the fifth time in six months.
- November regional sales patterns are mostly positive.
- Median price at a three-month high; price in the South at a record high.

U.S. Existing Home Sales Rise in November to a 10-Month High

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The Mortgage Bankers Association's Loan Applications Index slipped 0.6% (-33.9% y/y) in the week ended December 17 following a 4.0% decline in the prior week. Applications for loans to purchase a house fell 3.3% (-8.6% y/y) after a 0.7% rise. Applications for loans to refinance gained 2.2% (-42.4% y/y) following a 6.4% decline in the prior week.

The share of applications for refinancing rose to 65.2% last week, the most in three months. The adjustable-rate mortgage (ARM) share of activity held w/w at 4.3%.

The effective interest rate on a 30-year mortgage eased to 3.39% last week from 3.41% in the prior week. The effective rate on a 15-year rate mortgage edged up to 2.67%. The effective rate for a 30-year Jumbo mortgage loan eased to 3.39% last week, while the rate on a 5-year adjustable-rate loan increased to 2.90%. The last two series date back only to January 2011, while the others begin in January 1990.

Applications for fixed-rate loans slipped 0.6% (-34.9% y/y) last week, after a 4.4% decline in the prior week. Applications for adjustable-rate mortgages eased 0.2% (+18.2% y/y) following a 7.6% rise in the previous week.

The average size of a mortgage loans was $348,200 in the week ending December 17 compared to $342,100 in the week prior. The average size of loans for purchase was $416,200 in the latest week versus $406,800 one week earlier. The average size of refinanced loans rose to $311,900, up from $3000 in the prior week.

This survey covers over 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks, and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver's **SURVEYW** database.

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- Purchase applications decline as refinancings increase.
- 30-year mortgage rate slips.
- Purchase loan size increases.

U.S. Mortgage Applications Edge Lower As Rates Ease

Blue Chip forecasters expect US to lead aggressive policy rate cuts over coming year—apart from Japan

Ratio of job openings to the number unemployed in the US now below pre-pandemic level

U.S. layoffs not showing as much cooling in labor markets as unemployment rate

While goods prices have moderated, service price inflation remains elevated and sticky

Since Jan 2023, BCEI US outlook has improved, worsened for Japan and the euro area

Persistent negative US economic surprises leading to big rate-cut expectations

Germany is Euro area weakling

Flash PMIs show good start to Q3 in US; loss of momentum in the euro area

Chinese economy on downtrend could threaten global economy

Working age population labor force participation near all-time high as retirements increase

Blue Chip forecasters look for widespread policy rate cuts just ahead

Flash June PMIs point to a widespread slowdown apart from the US

Announcement of snap French election is causing concern across Europe

The UK economy’s post-pandemic under-performance relative to its pre-pandemic trend

US Beveridge Curve back to near pre-pandemic levels

Negative economic surprises in the US but positive in Europe, especially the UK

Latest PMIs show US losing momentum while RoW is gaining momentum

Sticky services prices behind sticky overall PCE inflation

Flash April PMIs point to slower growth in the US but a pickup in Europe and Japan

Outlook strengthens for US while it weakens for other major economies

Crude petroleum prices are having a big impact on inflation expectations

Inflation surprising to upside in the US; by contrast to the downside in the euro area

 Gross Domestic Income is catching up with GDP

FOMC expects GDP growth above trend over the next three years

US core CPI inflation has begun to reaccelerate

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The NFIB Small Business Optimism Index declined to 91.2 during August after rising to 93.7 in July, according to the Small Business Economic Trends survey conducted by the National Federation of Independent Business. The index held steady y/y but has improved from a March low of 88.5. Eight of the 10 index components declined last month. The NFIB Small Business Uncertainty Index increased to 92 in August. It remained higher than its recent low of 65 in November 2023.

The outlook for business conditions in the next six months deteriorated in the latest survey. The net balance of respondents expecting the economy to improve fell to -13% in August from -7% in July but remained higher than a record-low of -61% in June 2022. Expected real sales fell to a net -18% in August, a five-month low. The latest reading as increased from a low of -29% in July 2022. A steady net -16% of respondents reported higher nominal sales in the past three months, down from the most recent positive reading of 1% in May 2022.

Plans to make capital outlays increased to 24% in August following three straight months at 23%. This reading was up from its recent low of 20% in March but remained below a high of 31% in October 2021. Plans to expand business fell to 4% in August after rising to 5% in July and holding at 4% for the prior four consecutive months. Expected credit conditions deteriorated to -8% in August, after three consecutive months at -7, and remained below its high six months ago.

On the labor front, 56% of respondents reported few or no qualified workers to fill job openings in August, up from 49% in July and the highest percentage since September of last year. These readings were below a high of 61% in May 2022. A net 13% planned to increase employment in August, below the most recent high of 18% in November of last year and a peak of 32% in August 2021.

Overall earnings trends deteriorated sharply last month to the weakest reading since March 2020, falling to -37% in August from -30% in July.

On the pricing front, the net percent raising their average selling prices declined to 20% in August, down from 22% in July and below a high of 66% in March of 2022. The percentage planning to raise prices edged higher to 25% in August from 24% in July but remained well below a high of 52% in March 2022.

Wage inflation held steady as a net 33% of respondents raised compensation during the last three months, the same as in July but below 38% reported in the June survey. Compensation peaked at 50% in January 2022. A net 20% of firms planned to raise worker compensation in the next three months, up from 18% in July but below a high of 32% in October 2022.

Inflation continued to be the single most important issue facing small businesses, as reported by 24% of NFIB members in August. The quality of labor was the second most important concern as reported by 21% of members. Other major concerns were taxes, 13%, the cost of labor, 9%, and government requirements, 8%.

According to the Small Business Administration, there are 33 million small businesses in the United States, which employ 62 million workers. The NFIB surveys anywhere from 500 to 2000 respondents each month and the typical firm employs 10 people and reports gross sales of about $500,000 a year. The NFIB figures can be found in Haver’s **SURVEYS** database.

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- Expectations for economy & sales decline.
- Employment plans weaken but job openings surge.
- Prices ease but expectations edge higher.

U.S. NFIB Small Business Optimism Index Backpedals in August

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Retail gasoline prices for all grades weakened to $3.36 per gallon (-14.7% y/y) in the week ended September 9 from $3.41 per gallon in the previous week. Prices were below the late-April high of $3.79 per gallon and at the lowest level since the second week of February. They also were below the all-time high of $5.11 in the week ended June 13, 2022. Prices are increased, however, versus the low of $3.18 per gallon in the third week of December. Retail prices for on-highway diesel fuel declined to $3.56 per gallon (-21.7% y/y) last week compared to $3.63 in the prior week. These prices reached a high of $4.63 per gallon in the third week of September of last year.

The average price of West Texas Intermediate crude oil weakened to $69.33 per barrel (-20.5% y/y) in the week ended September 6 from $75.97 per barrel in the prior week. Prices roughly equaled the lowest level since the last week of June 2023 and were lower than the $91.45 high in the last week of September 2023. They peaked at $142.46 per barrel in the week of July 4, 2008. Yesterday, the price of West Texas Intermediate crude oil was $68.71 per barrel. The price of European Brent crude oil fell to $75.25 per barrel (-17.6% y/y) in the week ended September 6 compared to $80.83 in the prior week. The price of Brent has recently ranged from a low of $73.55 in the week ended June 30, 2023 to a high of $127.40 in the week ended June 10, 2022. Yesterday, the price was $72.37 per barrel.

Natural gas prices averaged $2.04/mmbtu (-19.0% y/y) in the week ended September 6 compared to $1.90 in the prior week. Prices recently touched a high of $2.73/mmbtu in the second week of June and they remained above their low of $1.40/mmbtu in the second week of March. Prices reached a high of $9.56/mmbtu averaged in the last week of August 2022. Yesterday, the price of natural gas was $2.03/mmbtu.

Gasoline demand increased 0.9% y/y in the four weeks ended August 30 after improving 1.1% y/y in the four weeks ended August 23. Demand for all petroleum products weakened 1.6% y/y in the last four weeks after falling 2.9% y/y in the previous period. Crude oil input to refineries rose 0.3% y/y in the four weeks ended August 30 after a 0.4% y/y decline during the previous four-week period.

Gasoline inventories rose 2.1% y/y in the week of August 30 after rising 0.5% y/y in the prior week. Inventories of residual fuel oil fell 2.3% y/y after declining 1.9% y/y in the previous week. Crude oil inventories, including the Strategic Petroleum Reserve, rose 4.0% y/y in the week of August 30, the same as during the prior week.

Measured in days’ supply, gasoline inventories were 24.0 days in the week ended August 30 following 23.9 days one week earlier. The recent low was 23.4 days in the week of June 30, 2023. Crude oil inventories fell to 25.0 days in the week of August 30. These compare to a recent high of 31.9 days in the week of March 3, 2023 and a low of 25.0 days in the week of September 1, 2023.

These data are reported by the Energy Information Administration of the U. S. Department of Energy. The price and supply/demand data can be found in Haver’s **WEEKLY** and **USENERGY** databases.

- Gasoline prices fall to seven-month low.
- Crude oil prices decline sharply.
- Natural gas prices rise slightly.

U.S. Gasoline & Crude Oil Prices Decline in Latest Week

Robert Brusca

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Inflation of the European Monetary Union in August rose by 0.2% compared with 0.3% gain in July and a 0.2% rise in June. The three-month inflation rate at 2.5%, however, is part of a slow progression higher that compares to a 2.2% annual rate over six months and a 2.1% annual rate over 12 months, a moderate but clear accelerating pattern.

**Country level trends**
The four largest countries in the monetary union also are exhibiting patterns that suggest or that outright demonstrate, inflation acceleration at least based on headline measures. Germany is the largest monetary union economy and is a slight exception with a 2.2% inflation rate over three months, down from 2.5% over six months but up from 2.1% over 12 months. France demonstrates inflation rising from 2.2% over 12 months to a pace of 2.4% over six months to a strong 3.6% over three months. In Italy, inflation transitions from a low 1.3% over 12 months to a 3% pace over six months, to another strong pace of 3.7% over three months. Spain is the true exception with inflation well behaved across most of the cohorts at 2.3% over 12 months, an elevated pace but not by much, especially when compared to a 0.7% pace over six months that only ticks up to a 0.8% annual rate over three months.

**Monthly results by country**
The inflation process among these four large countries is still somewhat mercurial as August showed declines in inflation in Germany and Italy on a month-to-month basis while Spain's inflation was flat. On the face of it, this is good news; however, July brought an increase in prices of 0.8% month-to-month in Italy, 0.5% in Germany, 0.4% in France with a moderate 0.2% gain in Spain. So whatever the three-month pace is, it's the product of some fairly erratic monthly numbers and therefore not yet something that we can consider to be very reliable.

**Core inflation**
Core inflation is a different story. Here we get core or at least an ex-energy reading from Germany, Italy, and Spain. The August readings are contained with German ex-energy inflation up by 0.2%, Italian core inflation up by 0.1% and Spain’s core inflation up by 0.3%. These are decelerations from stronger gains in July across the board. And two of these three countries also had larger increases in June than they had in August. Looking at the progression of core inflation for Germany, the 12-month ex-energy rate is 2.5%, the six-month pace is 2.6%, and the three-month pace is 2.4%; all pretty steady stuff. Italy shows core inflation at 2.4% over six months and 12 months that moves up to 3.1% over three months. Spain shows core inflation at 2.7% over 12 months, up to 2.8% over six months and up to 4.3% over three months.

The performance of Brent oil prices explains the headline/core difference as oil prices fell over these progressively longer periods; over shorter periods oil prices have fallen faster tending to push headline inflation down faster over these short horizons contributing to the illusion of inflation deceleration. Even so, deceleration is not a pattern that is detectable in headline inflation for these countries.

The bottoms line here is that core inflation is still stuck and too high and that is too much evidence of inflation accelerating even in the face of easing oil prices for monetary policy to seek further accommodation.

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As we peruse the inflation trends, we find they are accompanied by output trends that are erratic even more than they are weak. Median output among the early reporting EMU members in July shows a gain of 1.0% compared to a gain of 0.4% in June. These contrast to a 0.5% drop in May. Median output among this group falls by 3.7% annualized over three months, rises by 1.5% annualized over six months, and falls by 0.9% over 12 months. And output is falling on the median measure in the quarter-to-date (early in Q3). Still, we also see output trends accelerate more than they decelerate across countries in June and July with a proportion of about 60% accelerating to 40% not accelerating.  Over three months, that full period shows acceleration in only about one third of reporters; output accelerates in half the reporters over six months and for two-thirds of them over 12 months.

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**Mixed, as well as, mixed-up trends**
On balance, the performance of inflation and industrial output in the EMU is mixed. Over three months the output trend is especially hard to pin down with declines of 26.5%, 18.3% and 17% annualized for some reporters juxtaposed to increases of 23.7% annualized, 18.4% annualized and 11.1% annualized- and, of course, more. In such a mixed constellation of growth rates, it is hard to discern trend. However, Portugal, the Netherlands, France and Germany, each reporter shows declines in each of the broader sequential periods- they also show deterioration is worsening. Belgium, Finland and Ireland, a decidedly smaller class of economy, all show persistent IP expansion and acceleration. The quarter-to-date shows declines outnumber increases across EMU members by two-to-one. Still, a lot of these trends are rooted in sharp declines logged in July. The gyrating three-month growth rates also are important contributors to growth results over six months and 12 months. When three-month growth rates are turbulent, they tend to impart their turbulence across the timeline.

For now there is more weakening in this report that I would like to see, but it also is still a mixed report. PMI data remind us that while manufacturing has been weak there has been countervailing strength in services to support growth. The failure of inflation data to clearly fall into line and weaken also is suggestive of a more mixed real sector economic performance. With such data trends in progress, central banks are likely to continue to play the waiting game.

Europe

Core Inflation in Key EMU Members: Mostly Above Target and Not Falling

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Consumer credit outstanding strengthened $25.5 billion (1.9% y/y) in July after rising $5.2 billion in June, revised from $8.9 billion, and increasing $11.7 billion in May, revised from $13.9 billion. It was the largest runup in loan balances since November 2022. A $10.2 billion increase had been expected in the Action Economics Forecast Survey. The ratio of consumer credit outstanding to disposable personal income stood basically unchanged at 24.3% in July, a ratio that has drifted lover the last two years.

Revolving credit outstanding, which includes credit cards, rose $10.6 billion in July (6.6% y/y) following a $0.4 billion decline in June and an $8.5 billion May rise. Revolving credit outstanding held by depository institutions rose 7.2% y/y, down from a high of 17.0% y/y growth in August 2022. Revolving credit held by finance companies fell 8.3% y/y while revolving credit held by credit unions rose 6.3% y/y in July, below the 16.4% y/y peak in February 2022.

Nonrevolving credit outstanding increased $14.8 billion (0.3% y/y) in July after increasing $5.6 billion in June and rising $3.2 billion in May. Nonrevolving credit held by banks fell a lessened 1.8% y/y while finance company credit rose 3.8% y/y. Credit union nonrevolving balances was fairly steady y/y, off from 20.3% y/y growth in January 2023. Federal government balances rose 0.2% y/y to $1.49 trillion.

The value of student loans outstanding totaled $1.75 trillion at the end of June, down 0.9% y/y, and there was $1.56 trillion in motor vehicle loans at the end of June, up 1.8% from a year earlier.

The consumer credit figures from the Federal Reserve Board are break-adjusted and calculated by Haver Analytics. The breaks in the series in 2005, 2010 and 2015 are the result of the incorporation of data from the Census and the Survey of Finance Companies, as well as changes in the seasonal adjustment methodology. The consumer credit data are available in Haver’s **USECON** database. The Action Economics forecast figures are contained in the **AS1REPNA** database.

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- Revolving credit outstanding rebounds.
- Nonrevolving credit gain almost triples.

U.S. Consumer Credit Usage Surges in July

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Wholesale trade inventories increased 0.2% (0.4% y/y) during July after holding steady in June, revised from 0.2%, and an unrevised 0.5% May gain. The increase compared to a 0.3% rise expected in the Informa Global Markets Survey and compared to a 0.3% gain in the advance report issued two weeks ago.

Durable goods inventories edged 0.1% higher last month (2.6% y/y) following a 0.2% decline. Machinery inventories, the largest sector, fell 0.3% (+12.0% y/y) while motor vehicles & parts, the second largest grouping, edged 0.1% higher (11.8% y/y). Electrical equipment inventories rose 0.5% (-4.0% y/y). Inventories of nondurable goods increased 0.5% (-3.2% y/y) following a 0.4% rise. Drug inventories, which make up a quarter of nondurable inventories, rose 2.5% (4.4% y/y). Grocery inventories, the second largest category, eased 0.6% (-2.3% y/y). Petroleum inventories dropped 1.7% (-9.1% y/y). Apparel inventories edged 0.1% higher (-15.1% y/y) and chemical inventories weakened 0.5% (-8.8% y/y).

Sales at the wholesale level strengthened 1.1% (2.9% y/y) in July after a 0.3% June decline, revised from -0.6%. A 0.2% July rise had been expected in the Action Economics Forecast Survey.

Durable goods sales increased 0.5% in July (3.2% y/y) after a 0.6% increase. Sales of electrical equipment, the largest sector, rose 0.2% (9.7% y/y), the same as in June. Professional and commercial equipment sales, which includes computers, jumped 1.2% (6.0% y/y), while vehicle sales rose 0.4% (5.4% y/y). Nondurable product sales improved 1.6% (2.6% y/y) after declining 1.6% in June. Petroleum product sales, the largest category, rose 3.9% (1.3% y/y). Drug store sales jumped 1.5% (9.3% y/y) while grocery store sales gained 0.3% (2.8% y/y). Sales of apparel jumped 2.5% (3.7% y/y) while chemical sales declined 0.9% (-2.9% y/y). Paper sales rose 0.9% (-2.1% y/y).

The inventory-to-sales (I/S) ratio at the wholesale level eased to 1.35 in July from 1.36 in June and has been moving sideways for the last year.

The I/S ratio for durable goods was minimally changed at 1.80. The machinery ratio declined to 3.09 while motor vehicles rose to 1.89. The I/S ratio for nondurable goods eased to 0.94, down from 1.01 early last year. The petroleum industry I/S ratio slipped to 0.32, and the drug industry moved up to 1.02. Apparel's I/S ratio of 2.19 stood below its 2.67 level one year earlier.

The wholesale trade figures are available in Haver's **USECON** database. The expectations figure for inventories is contained in the **MMSAMER** database. Expectations for sales are from the **AS1REPNA** database.

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- Inventory gain extends trend of moderate accumulation.
- Jump in sales concentrates in nondurables.
- Inventory-to-sales ratio continues sideways movement.

U.S. Wholesale Inventories Rise Modestly in July While Sales Surge

Economy in Brief: 2021

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