Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081017e.jpg" align="left" border="0" height="265" width="353">
The tertiary index fell in August after two months of
stability. The Yr/Yr percentage change in the index is hovering in
negative territory and has just taken a weaker position with this
report.
The index is still in the top 10% of its range but then the
service index usually does rise. Setbacks to it are uncommon. The
weakness in the tertiary index is another red flag for the slowing in
the Japanese economy.
The declines in the tertiary index in this period already
rival the drops in the previous recession period from 2000-2003.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col"> Up to
date Japan Industry Survey</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"></td>
<td colspan="3">Recent Months</td>
<td colspan="3">Moving Averages</td>
<td colspan="3">Extremes; Range</td>
</tr>
<tr class="grey3">
<td class="firstcol"></td>
<td>Aug-2008</td>
<td>Jul-2008</td>
<td>Jun-2008</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Max</td>
<td>Min</td>
<td>%-Tile</td>
</tr>
<tr>
<td class="firstcol">Tertiary</td>
<td>109.1</td>
<td>110.6</td>
<td>109.3</td>
<td>109.7</td>
<td>109.8</td>
<td>109.9</td>
<td>110.9</td>
<td>92.0</td>
<td>90.5%</td>
</tr>
<tr class="grey1">
<td colspan="10" class="firstcol">Ranges,
Max, Min since 1993</td>
</tr>
</tbody>
</table>
</body></html>

The tertiary index fell in August after two months of stability. The Yr/Yr percentage change in the index is hovering in negative territory and has just taken a weaker position with this report. The index is still in the top 10% of [...]

Japan’s Service Sector Index Gets Erratic

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081017c.jpg" width="353">
We got our first glimpse of consumer&#39;s reaction to the unfolding crises in the credit markets. The University of Michigan&#39;s mid-October reading of consumer sentiment collapsed by 18.2% from the September level, to 57.5. The latest level was the lowest for the series since June which in turn was the lowest since early 1980. The drop was a record m/m decline for the index which dates back to the late 1970s. Consensus had expected a lesser decline to 65.0.
During the last ten years there has been a 47% correlation between the level of sentiment and the three-month change in real consumer spending.
The current conditions index led the collapse with 21.5% decline. The view of current personal finances gave back all of a September improvement and fell 26.7% while index of buying conditions for large household goods fell 17.8% m/m, down 38.0% y/y.
The expectations component of consumer sentiment aided the m/m decline in the total with a 15.6% drop. Expectations for business conditions during the next year collapsed by 26.2%. Expectations for conditions during the next five years fell 13.3%.The expected change in personal finances also fell 12.5%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081017d.jpg" width="353">
The mean expected rate of inflation during the next year held steady at 4.6% with lower oil prices. It was as high as 7.0% in May. The expected inflation rate during the next five years fell to 2.9%, the lowest level since 2003.
The opinion of government policy, which apparently influences economic expectations, fell sharply from September (-41.5% y/y). Only five percent of respondents thought that a good job was being done by government, the least since 5%.
The University of Michigan survey is not seasonally adjusted.The reading is based on telephone interviews with about 500 households at month-end; the mid-month results are based on about 300 interviews. The summary indexes are in Haver&#39;s USECON database, with details in the proprietary UMSCA database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">Mid-October</th>
<th scope="col">September</th>
<th scope="col">October y/y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>57.5</td>
<td>70.3</td>
<td>-28.9%</td>
<td>85.6</td>
<td>87.3</td>
<td>88.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>58.9</td>
<td>75.0</td>
<td>-39.7</td>
<td>101.2</td>
<td>105.1</td>
<td>105.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>56.7</td>
<td>67.2</td>
<td>-19.1</td>
<td>75.6</td>
<td>75.9</td>
<td>77.4</td>
</tr>
</tbody>
</table>
</body>
</html>

We got our first glimpse of consumer's reaction to the unfolding crises in the credit markets. The University of Michigan's mid-October reading of consumer sentiment collapsed by 18.2% from the September level, to 57.5. The latest [...]

Mid-October Michigan Consumer Sentiment Tanks With Stock Market

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081017a.jpg" width="353">
Housing starts fell 6.3% m/m last month to 817,000 units (SAAR). That followed an 8.1% decline during August which was deeper than reported initially. The latest level was the lowest since 921,000 starts during January 1991. Consensus expectations had been for 874,000 starts.
During September, starts of single-family homes fell by 12.0% to 544,000 units, their lowest level since late-1981. Since their peak in early 2006, single-family starts are down by roughly two-thirds. Permits to build these single family homes also fell 3.8% (-38.9% y/y) to 532,000, their lowest since the recession during 1982.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081017b.jpg" width="353">
Starts during 2Q fell by 7.2% from 1Q and that decline was accompanied by a 0.5 percentage point subtraction from real GDP growth. In 3Q, single-family starts fell 10.9% from the 2Q average. These new figures suggest that housing this quarter will even more of drag on GDP. During the last ten years there has been an 84% correlation between the q/q change in single-family starts and the contribution to quarterly GDP growth.
Multi-family starts in September recouped just a bit of their earlier declines with a 7.5% increase. Nonetheless, 3Q starts fell 20.7% from 2Q after that period&#39;s 7.5%.
By region, August starts of single-family units in the Northeast fell 4.8% (-23.4% y/y) to a new low. In the Midwest starts fell an even harder 24.1% (-43.3% y/y). In the South single family starts fell 6.3% (-42.3% y/y) while in the West starts dropped 17.7% (-45.5% y/y) and erased all of the prior months&#39; gains.
Housing Busts and Household Mobility from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/staff_reports/sr350.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Housing Starts (000s, SAAR)</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>817</td>
<td>872</td>
<td>949</td>
<td>-31.1%</td>
<td>1,341</td>
<td>1,812</td>
<td>2,073</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>544</td>
<td>618</td>
<td>644</td>
<td>-41.9</td>
<td>1,034</td>
<td>1,474</td>
<td>1,719</td>
</tr>
<tr>
<td class="firstcol">Multi-Family</td>
<td>273</td>
<td>254</td>
<td>305</td>
<td>9.6</td>
<td>307</td>
<td>338</td>
<td>354</td>
</tr>
<tr class="odd">
<td class="firstcol">Building Permits</td>
<td>786</td>
<td>857</td>
<td>937</td>
<td>-38.4</td>
<td>1,389</td>
<td>1,844</td>
<td>2,160</td>
</tr>
</tbody>
</table>
</body>
</html>

Housing starts fell 6.3% m/m last month to 817,000 units (SAAR). That followed an 8.1% decline during August which was deeper than reported initially. The latest level was the lowest since 921,000 starts during January 1991. Consensus [...]

U.S. Housing Starts Fell Further in September

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081017a.jpg" align="left" border="0" height="265" width="353">
Housing starts fell 6.3% m/m last month to 817,000 units
(SAAR). That followed an 8.1% decline during August which was deeper
than reported initially. The latest level was the lowest since 921,000
starts during January 1991. Consensus expectations had been
for 874,000 starts.
During September, starts of single-family homes fell by 12.0%
to 544,000 units, their lowest level since late-1981. Since their peak
in early 2006, single-family starts are down by roughly two-thirds.
Permits to build these single family homes also fell 3.8% (-38.9% y/y)
to 532,000, their lowest since the recession during 1982.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081017b.jpg" align="right" border="0" height="265" width="353">
Starts during 2Q fell by 7.2% from 1Q and that
decline was accompanied by a 0.5 percentage point subtraction from real
GDP growth. In 3Q, single-family starts fell 10.9% from the 2Q average.
These new figures suggest that housing this quarter will even more of
drag on GDP. During the last ten years there has been an 84%
correlation between the q/q change in single-family starts and the
contribution to quarterly GDP growth.
Multi-family starts in September recouped just a bit of their
earlier declines with a 7.5% increase. Nonetheless, 3Q starts fell
20.7% from 2Q after that period's 7.5%.
By region, August starts of single-family units in the
Northeast fell 4.8% (-23.4% y/y) to a new low. In the Midwest starts
fell an even harder 24.1% (-43.3% y/y). In the South single family
starts fell 6.3% (-42.3% y/y) while in the West starts dropped 17.7%
(-45.5% y/y) and erased all of the prior months' gains.
Housing Busts and Household Mobility from
the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/staff_reports/sr350.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Housing
Starts (000s, SAAR)</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>817</td>
<td>872</td>
<td>949</td>
<td>-31.1%</td>
<td>1,341</td>
<td>1,812</td>
<td>2,073</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>544</td>
<td>618</td>
<td>644</td>
<td>-41.9</td>
<td>1,034</td>
<td>1,474</td>
<td>1,719</td>
</tr>
<tr>
<td class="firstcol">Multi-Family</td>
<td>273</td>
<td>254</td>
<td>305</td>
<td>9.6</td>
<td>307</td>
<td>338</td>
<td>354</td>
</tr>
<tr class="odd">
<td class="firstcol">Building Permits</td>
<td>786</td>
<td>857</td>
<td>937</td>
<td>-38.4</td>
<td>1,389</td>
<td>1,844</td>
<td>2,160</td>
</tr>
</tbody>
</table>
Mid-October Michigan Consumer
Sentiment Tanks With Stock Market 
by <a href="/comment/Moeller.html">Tom
Moeller</a> October 17, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081017c.jpg" align="left" border="0" height="265" width="353">
We got our first glimpse of consumer's reaction to the
unfolding crises in the credit markets. The University of Michigan's
mid-October reading of consumer sentiment collapsed by 18.2% from the
September level, to 57.5. The latest level was the lowest for the
series since June which in turn was the lowest since early 1980. The
drop was a record m/m decline for the index which dates back to the
late 1970s. Consensus had expected a lesser decline to 65.0.
During the last ten years there has been a 47% correlation
between the level of sentiment and the three-month change in real
consumer spending.
The current conditions index led the collapse with 21.5%
decline. The view of current personal finances gave back all of a
September improvement and fell 26.7% while index of buying conditions
for large household goods fell 17.8% m/m, down 38.0% y/y.
The expectations component of consumer sentiment aided the m/m
decline in the total with a 15.6% drop. Expectations for business
conditions during the next year collapsed by 26.2%. Expectations for
conditions during the next five years fell 13.3%.The expected change in
personal finances also fell 12.5%.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081017d.jpg" align="right" border="0" height="265" width="353">
The mean expected rate of inflation during the next year held
steady at 4.6% with lower oil prices. It was as high as 7.0% in May.
The expected inflation rate during the next five years fell to 2.9%,
the lowest level since 2003.
The opinion of government policy, which apparently influences
economic expectations, fell sharply from September (-41.5% y/y). Only
five percent of respondents thought that a good job was being done by
government, the least since 5%.
The University of Michigan survey is not seasonally
adjusted.The reading is based on telephone interviews with about 500
households at month-end; the mid-month results are based on about 300
interviews. The summary indexes are in Haver's USECON database,
with details in the proprietary UMSCA database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University
of Michigan</a></th>
<th scope="col">Mid-October</th>
<th scope="col">September</th>
<th scope="col">October y/y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>57.5</td>
<td>70.3</td>
<td>-28.9%</td>
<td>85.6</td>
<td>87.3</td>
<td>88.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>58.9</td>
<td>75.0</td>
<td>-39.7</td>
<td>101.2</td>
<td>105.1</td>
<td>105.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>56.7</td>
<td>67.2</td>
<td>-19.1</td>
<td>75.6</td>
<td>75.9</td>
<td>77.4</td>
</tr>
</tbody>
</table>
Japan's Service Sector Index Gets
Erratic 
by <a href="/comment/Brusca.html">Robert
Brusca</a> October 17, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081017e.jpg" align="left" border="0" height="265" width="353">
The tertiary index fell in August after two months of
stability. The Yr/Yr percentage change in the index is hovering in
negative territory and has just taken a weaker position with this
report.
The index is still in the top 10% of its range but then the
service index usually does rise. Setbacks to it are uncommon. The
weakness in the tertiary index is another red flag for the slowing in
the Japanese economy.
The declines in the tertiary index in this period already
rival the drops in the previous recession period from 2000-2003.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup><thead><tr>
<th colspan="10" scope="col"> Up to
date Japan Industry Survey</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"></td>
<td colspan="3">Recent Months</td>
<td colspan="3">Moving Averages</td>
<td colspan="3">Extremes; Range</td>
</tr>
<tr class="grey3">
<td class="firstcol"></td>
<td>Aug-2008</td>
<td>Jul-2008</td>
<td>Jun-2008</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Max</td>
<td>Min</td>
<td>%-Tile</td>
</tr>
<tr>
<td class="firstcol">Tertiary</td>
<td>109.1</td>
<td>110.6</td>
<td>109.3</td>
<td>109.7</td>
<td>109.8</td>
<td>109.9</td>
<td>110.9</td>
<td>92.0</td>
<td>90.5%</td>
</tr>
<tr class="grey1">
<td colspan="10" class="firstcol">Ranges,
Max, Min since 1993</td>
</tr>
</tbody>
</table>
Italy New Orders 
by <a href="/comment/Brusca.html">Robert
Brusca</a> October 17, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081017f.jpg" align="left" border="0" height="265" width="353">
Italian orders have fallen in August after several months of
gains. Foreign orders are much weaker than domestic orders in Italy.
Foreign orders have dropped in six of the past seven months. Domestic
orders are down in just two of those seven months.
Still, over that period, starting in February of 2008
overall orders are lower. The international sector is dragging Italy&#8217;s
industrial sector into decline. Over this period industrial sales have
fallen by 4%, not even annualized.


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr> <th colspan="7" scope="col">Italy
Orders </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Saar exept m/m</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>Jun08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
</tr>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-0.3%</td>
<td>2.7%</td>
<td>0.7%</td>
<td>13.2%</td>
<td>-1.4%</td>
<td>1.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign</td>
<td>-3.4%</td>
<td>-0.7%</td>
<td>1.2%</td>
<td>-11.3%</td>
<td>-14.3%</td>
<td>-7.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic</td>
<td>1.2%</td>
<td>4.6%</td>
<td>0.5%</td>
<td>28.2%</td>
<td>5.9%</td>
<td>5.9%</td>
</tr>
<tr>
<td class="firstcol">Memo</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Sales</td>
<td>-3.0%</td>
<td>-2.7%</td>
<td>3.1%</td>
<td>-10.4%</td>
<td>-7.9%</td>
<td>-7.1%</td>
</tr>
</tbody>
</table>
</body></html>

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081016g.jpg" align="left" border="0" height="265" width="353">
The German Chamber of Industry and Commerce survey (DIHK)
shows a steady if not rapid deterioration in the current assessment and
in the expectations for the period ahead. Economic
conditions slipped from a reading of +24 in Q2 to +17 in Q4 dropping
their standing to the 69th percentile from the 80th
percentile previously. Business
expectations dropped from +6 to -9 as the percentile standing fell to
the 41st percentile from the 76th
percentile, a sharp drop off and a move away from a nice position above
the range midpoint to substantially below it.
Investment intentions have also crossed into negative
territory, dropping from +6 to -2. But in terms of the percentile
standing, the drop off is not as severe as the percentile fall from the
78th to the 60th
percentile still leaves a firm reading in place not one that is below
average. A modest negative
number is still above the mid-point response for German firms&#8217; capital
spending intentions. Hiring intentions also fell to a negative reading
from +6 in Q2 2008 to -3 in Q4 2008. Similarly the percentile ranking
fell from the 86th to the 66th
percentile for hiring plans.
The survey was conducted in late September and early October
so some of the worst of the recent financial markets events were
probably not taken into consideration in the survey. However in mid and
late September the stock market was extremely choppy and volatile. It
is unclear how much of this affected respondent expectations and
assessments.
In the survey German firms also expressed more concerns about
foreign growth and with that diminished expectations for German exports.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">DIHK-Balance
of Economic Opinion </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Net Balance Readings</td>
<td colspan="3">Change</td>
<td>Range Q4'91</td>
<td>Percentile</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Q4-08</td>
<td>Q2-08</td>
<td>Q1-08</td>
<td>Yr Ago</td>
<td>2-Yr</td>
<td>3-Yr</td>
<td>Q4-08</td>
<td>Q2-08</td>
</tr>
<tr>
<td class="firstcol">Economic Conditions</td>
<td>17</td>
<td>24</td>
<td>30</td>
<td>-14</td>
<td>-7</td>
<td>17</td>
<td>69.4</td>
<td>80.6</td>
</tr>
<tr class="grey1">
<td class="firstcol">Business Expectations</td>
<td>-9</td>
<td>6</td>
<td>10</td>
<td>-24</td>
<td>-18</td>
<td>-12</td>
<td>41.1</td>
<td>67.9</td>
</tr>
<tr>
<td class="firstcol">Export Expectations</td>
<td>14</td>
<td>26</td>
<td>36</td>
<td>-25</td>
<td>-21</td>
<td>-18</td>
<td>54.8</td>
<td>74.2</td>
</tr>
<tr class="grey1">
<td class="firstcol">Investment Intentions</td>
<td>-2</td>
<td>6</td>
<td>9</td>
<td>-15</td>
<td>-9</td>
<td>4</td>
<td>60.9</td>
<td>78.3</td>
</tr>
<tr>
<td class="firstcol">Hiring Intentions</td>
<td>-3</td>
<td>6</td>
<td>7</td>
<td>-12</td>
<td>-3</td>
<td>11</td>
<td>66.7</td>
<td>86.7</td>
</tr>
</tbody>
</table>
</body></html>

The German Chamber of Industry and Commerce survey (DIHK) shows a steady if not rapid deterioration in the current assessment and in the expectations for the period ahead. Economic conditions slipped from a reading of +24 in Q2 to +17 [...]

German Firms Cut Back Their Assessment and Expectations

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/081016e.jpg" width="313">
Initial claims for unemployment insurance fell 16,000 in the week ended last Saturday to 461,000 from the prior week&#39;s 477,000.The four-week moving average barely changed from 482,500 to 483,250 (+50.2% y/y). The Labor Department estimates that 12,000 claims in the latest week were due to Hurricane Ike in Texas, less than the hurricane effects the two weeks before of 17,000 (10/4) and 45,000 (9/27).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081016f.jpg" width="313">
Continuing claims for unemployment insurance during the October 4 week rose 40,000 following an upwardly revised 68,000 increase during the prior period. The four-week average of claims rose to 3,632,000, the highest level since July 2003. Continuing claims provide some indication of workers&#39; ability to find employment and they lag the initial claims figures by one week.
Claims under the new &quot;EUC&quot; program, Emergency Unemployment Compensation, enacted during the summer, reached 1,345,375 in the September 27 week, up 278,298 from September 20. These people have exhausted all regular benefits and are granted an additional 13 weeks while they continue to job-hunt.
The insured rate of unemployment edged up to 2.8% in the October 4 week, a cycle high and the highest since exactly the same week in 2003. The high in that recessionary period was 3.0%, reached in late June 2003.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">10/11/08</th>
<th scope="col">10/04/08</th>
<th scope="col">09/27/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>461</td>
<td>&nbsp;477</td>
<td>499</td>
<td>36.4%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,711</td>
<td>3,671</td>
<td>45.6</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
</body>
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Initial claims for unemployment insurance fell 16,000 in the week ended last Saturday to 461,000 from the prior week's 477,000.The four-week moving average barely changed from 482,500 to 483,250 (+50.2% y/y). The Labor Department [...]

U.S. Weekly Initial Jobless Insurance Claims Fell But Still Near Cycle High

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081016d.jpg" align="left" border="0" height="265" width="353">
US industrial output, an index of real output, is off by 2.8%
in September but the drop is exaggerated by the impact of two
hurricanes and a job action at aircraft manufacturer Boeing. The
Federal Reserve Board reported that the disruptions from the hurricanes
contributed about 2.25 percentage points to the decline while the
Boeing strike contributed 0.5 percentage point. 
 

The drop is beginning to look like the drops IP made in the
last recession. Declines in output are widespread in September. 
 

For the quarter which is now complete based on preliminary
data the drop in output is at a rate of -6%, a substantial pace of
decline for a quarter (saar). Consumer goods output is down at a -6%
pace with consumer goods ex-auto output down at a pace of -8.2% and
consumer energy off at a -12.6% pace. In this framework auto output
rose in September but fell in the quarter at a pace of -5%. The
consumer vehicle sector is not what is leading us lower. 
 

The business sector is leading us lower. The business sector
saw a sharper decline with business equipment output off by -8.4% saar
led by a whopping decline of -41% (saar) for transportation. Materials
output was off at a pace of -6%. 
 

The weakness in the industrial sector clearly is widespread.
The slowing in US exports will hit the sector hard. Manufacturing has
been shedding jobs but at a slower pace than it has in most recessions.
It looks like the pace of job losses in MFG is about to pick up. That
in turn that will send waves of repercussions throughout the economy as
a vicious circle of job cuts is likely to ensue since workers that lose
jobs also are consumers that lose income. As that happens spending
drops and that leads to more job cuts. It is vicious circle time: Not
Miller time. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">Industrial
Production </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Monthly Pct. Changes</td>
<td colspan="3">At Annual Rates of Change</td>
<td>SAAR</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Month-to-month Pct. Change</td>
<td>3-Month</td>
<td>6-Month</td>
<td>Year/Year</td>
<td>08-Q3</td>
</tr>
<tr class="odd">
<td class="firstcol">Industrial Output</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>%Change</td>
<td>%Change</td>
<td>%Change</td>
<td>Pct Change</td>
</tr>
<tr>
<td class="firstcol">All
Prod&amp;Materials</td>
<td>-2.8%</td>
<td>-0.9%</td>
<td>-0.1%</td>
<td>-15.1%</td>
<td>-8.4%</td>
<td>-4.5%</td>
<td>-6.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">All
Products</td>
<td>-2.3%</td>
<td>-1.1%</td>
<td>-0.2%</td>
<td>-14.1%</td>
<td>-7.9%</td>
<td>-4.9%</td>
<td>-5.9%</td>
</tr>
<tr>
<td class="firstcol">Final Products</td>
<td>-2.5%</td>
<td>-1.2%</td>
<td>-0.2%</td>
<td>-15.6%</td>
<td>-8.5%</td>
<td>-4.9%</td>
<td>-5.8%</td>
</tr>
<tr class="grey1">
<td colspan="8" class="firstcol">Manufacturing only</td>
</tr>
<tr>
<td class="firstcol">MFG - NAICS</td>
<td>-2.7%</td>
<td>-1.0%</td>
<td>0.0%</td>
<td>-14.4%</td>
<td>-8.6%</td>
<td>-4.8%</td>
<td>-5.8%</td>
</tr>
<tr>
<td class="firstcol">MFG-Durables</td>
<td>-2.4%</td>
<td>-1.5%</td>
<td>0.3%</td>
<td>-14.2%</td>
<td>-9.2%</td>
<td>-4.6%</td>
<td>-4.8%</td>
</tr>
<tr class="grey1">
<td class="firstcol">MFG-Nondurables</td>
<td>-2.9%</td>
<td>-0.4%</td>
<td>-0.4%</td>
<td>-14.4%</td>
<td>-7.9%</td>
<td>-4.9%</td>
<td>-7.0%</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods</td>
<td>-1.3%</td>
<td>-1.7%</td>
<td>-0.3%</td>
<td>-13.1%</td>
<td>-6.9%</td>
<td>-5.0%</td>
<td>-6.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Durables</td>
<td>-0.7%</td>
<td>-6.2%</td>
<td>1.1%</td>
<td>-23.1%</td>
<td>-13.1%</td>
<td>-11.7%</td>
<td>-6.7%</td>
</tr>
<tr>
<td class="firstcol">Automotive Prod.</td>
<td>1.7%</td>
<td>-10.9%</td>
<td>1.9%</td>
<td>-30.6%</td>
<td>-17.3%</td>
<td>-15.2%</td>
<td>-5.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Ex. Automotive Prod.</td>
<td>-2.7%</td>
<td>-1.7%</td>
<td>0.4%</td>
<td>-15.9%</td>
<td>-9.0%</td>
<td>-8.1%</td>
<td>-8.2%</td>
</tr>
<tr>
<td class="firstcol">Nondurables</td>
<td>-1.6%</td>
<td>-0.6%</td>
<td>-0.5%</td>
<td>-10.6%</td>
<td>-5.5%</td>
<td>-3.1%</td>
<td>-5.7%</td>
</tr>
<tr class="grey1">
<td class="firstcol">NonEnergy</td>
<td>-0.4%</td>
<td>0.0%</td>
<td>-0.5%</td>
<td>-3.7%</td>
<td>-2.4%</td>
<td>-1.7%</td>
<td>-2.5%</td>
</tr>
<tr>
<td class="firstcol">Cons Energy</td>
<td>-4.4%</td>
<td>-1.6%</td>
<td>-0.5%</td>
<td>-25.8%</td>
<td>-12.2%</td>
<td>-5.9%</td>
<td>-12.6%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Business Equip.</td>
<td>-7.0%</td>
<td>-0.2%</td>
<td>0.0%</td>
<td>-28.7%</td>
<td>-16.5%</td>
<td>-7.0%</td>
<td>-8.4%</td>
</tr>
<tr>
<td class="firstcol">Transportation</td>
<td>-33.6%</td>
<td>-4.5%</td>
<td>0.2%</td>
<td>-145.6%</td>
<td>-72.9%</td>
<td>-38.2%</td>
<td>-41.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Computer &amp; Office Eqpt</td>
<td>0.9%</td>
<td>0.6%</td>
<td>0.1%</td>
<td>6.4%</td>
<td>6.7%</td>
<td>15.6%</td>
<td>4.2%</td>
</tr>
<tr>
<td class="firstcol">Ex. Tech.&amp; T-port</td>
<td>-9.2%</td>
<td>0.4%</td>
<td>-0.3%</td>
<td>-36.6%</td>
<td>-21.7%</td>
<td>-10.4%</td>
<td>-11.5%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Materials</td>
<td>-3.4%</td>
<td>-0.8%</td>
<td>0.2%</td>
<td>-16.0%</td>
<td>-9.0%</td>
<td>-3.8%</td>
<td>-6.0%</td>
</tr>
<tr>
<td class="firstcol">Durables</td>
<td>-1.0%</td>
<td>-1.0%</td>
<td>0.2%</td>
<td>-7.6%</td>
<td>-5.2%</td>
<td>-1.8%</td>
<td>-3.3%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Nondurables excl
Energy</td>
<td>-3.3%</td>
<td>-0.3%</td>
<td>-0.6%</td>
<td>-16.6%</td>
<td>-9.4%</td>
<td>-6.6%</td>
<td>-7.8%</td>
</tr>
<tr>
<td class="firstcol">Energy</td>
<td>-6.2%</td>
<td>-0.9%</td>
<td>0.8%</td>
<td>-25.0%</td>
<td>-13.2%</td>
<td>-4.1%</td>
<td>-7.8%</td>
</tr>
</tbody>
</table>
</body></html>

US industrial output, an index of real output, is off by 2.8% in September but the drop is exaggerated by the impact of two hurricanes and a job action at aircraft manufacturer Boeing. The Federal Reserve Board reported that the [...]

US IP Plunges in September and Plummets in the Quarter

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081016a.jpg" width="353">
The consumer price index (CPI-U) fell just slightly last month, according to the Bureau of Labor Statistics, after an unrevised 0.1% dip during August. Consensus expectations had been for a 0.1% uptick. The latest figure lowered the three-month rate of change to 2.6% from 7.2%.
Energy prices again moved lower, during September by 1.9%. Fuel oil prices fell hard by 5.8% (+38.2% y/y) after a 6.5% skid in August. Prices for natural gas &amp; electricity also were quite weak and they fell 3.2% (+10.9% y/y). Gasoline prices dipped just 0.6% (+31.7% y/y) but they have since moved lower this month to $3.15 from an average $3.70 last month. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081016b.jpg" width="353">
Food &amp; beverage prices rose the same, strong 0.6% as they did during August. The y/y gain of 6.0% was the fastest since early 1990. For the third straight month prices for meats poultry &amp; fish rose 1.0% and they are up at a 12.9% annual rate during that period. Prices for cereals &amp; bakery products jumped 1.1% (12.3% y/y) but prices for dairy product prices fell 0.6% (+4.9% y/y).
The CPI less food &amp; energy rose just 0.1% and the gain fell slightly short of expectations for a 0.2% increase. The three-month rate of increase fell back to 2.7% from its recent high of 3.5%.
Core goods prices reversed the August increase and fell 0.2%. The decline was led by lower prices for new &amp; used motor vehicles which were down another 0.9% (-1.6% y/y). Apparel prices fell 0.1% but the y/y increase remained positive at 1.4%. Apparel prices fell 0.4% last year. Prices for household furnishings &amp; operations rose 0.5% (1.2% y/y) and that was enough to pull the y/y gain to 1.9%, the strongest y/y increase since 2000. Tobacco prices were unchanged (6.8% y/y).<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081016c.jpg" width="353">
Core services prices were firm again and they rose 0.3%. That left the three-month growth rate at 3.2%. Medical care services prices continued firm and they rose 0.4% (3.8% y/y). Education costs also have been strong and last month rose 0.4% (6.1% y/y). Shelter prices increased 0.3% (2.4% y/y) but that was the weakest y/y gain since early-2006. Owners equivalent rent of primary residence, a measure not equivalent to other house price measures, increased 0.2% (2.4% y/y). Rents rose for the third straight month by 0.3% (3.8% y/y). Public transportation prices gave back a piece of prior months&#39; strength with a 1.0% decline (13.3% y/y). Though recreation prices rose just 0.2%, the 2.4% y/y rise compares to a 0.5% increase during all of last year.
The chained CPI, which adjusts for shifts in consumption patterns, fell 0.1%. Less food and energy, chained prices rose 0.2% for the third straight month.
Yesterday&#39;s speech by Fed Chairman Ben S. Bernanke can be found <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20081015a.htm"> here</a>.
 Fed Vice Chairman Donald L. Kohn also spoke yesterday on the Economic Outlook and his comments can be found <a href="http://www.federalreserve.gov/newsevents/speech/kohn20081015a.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a> (%)</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Total&nbsp;</td>
<td>-0.0</td>
<td>-0.1</td>
<td>4.9</td>
<td>2.9</td>
<td>3.2</td>
<td>3.4</td>
</tr>
<tr class="even">
<td class="firstcol">Total less Food &amp; Energy</td>
<td>0.1</td>
<td>0.2</td>
<td>2.5</td>
<td>2.3</td>
<td>2.5</td>
<td>2.2</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>-0.2</td>
<td>0.1</td>
<td>0.5</td>
<td>-0.4</td>
<td>0.2</td>
<td>0.5</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Services less Energy</td>
<td>0.3</td>
<td>0.2</td>
<td>3.2</td>
<td>3.4</td>
<td>3.4</td>
<td>2.8</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Energy</td>
<td>-1.9</td>
<td>-3.1</td>
<td>23.3</td>
<td>5.6</td>
<td>11.0</td>
<td>17.0</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Food &amp; Beverages</td>
<td>0.6</td>
<td>0.6</td>
<td>6.0</td>
<td>3.9</td>
<td>2.3</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a>&nbsp;</td>
<td>-0.1</td>
<td>-0.2</td>
<td>4.3 </td>
<td>2.5</td>
<td>2.9 </td>
<td>2.9</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;Total less Food &amp; Energy&nbsp;</td>
<td>0.2</td>
<td>0.2</td>
<td>2.2</td>
<td>2.0</td>
<td>2.2</td>
<td>1.9</td>
</tr>
</tbody>
</table>
</body>
</html>

The consumer price index (CPI-U) fell just slightly last month, according to the Bureau of Labor Statistics, after an unrevised 0.1% dip during August. Consensus expectations had been for a 0.1% uptick. The latest figure lowered the [...]

U.S. CPI Fell Again With Lower Gasoline Prices

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

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

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

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

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

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

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

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

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

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

**Crude Oil & Benzene** group prices weakened 2.4% (-13.8% y/y) in the latest four week period. The cost of West Texas Intermediate crude oil fell 9.2% to $67.27 per barrel and remained 18.0% lower y/y. It fell to a low of $58.50 per barrel in the second week of May. The cost of the petrol-chemical benzene, used for making plastics & synthetic fibers, strengthened 6.2% (-31.7% y/y). Excluding crude oil, the industrial commodity price index rose 1.3% (1.6% y/y) during the last four weeks.

The Foundation for International Business and Economic Research (FIBER) develops economic measurement techniques as applied to business cycles and inflation in the U.S. and other market economies. The commodity price data can be found in Haver's **DAILY**, **WEEKLY**, **USECON** and **CMDTY** databases.

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

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

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

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

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

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

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

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

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

U.S. Housing Starts Rebound in June

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

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

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

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

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

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

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

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

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

Japan

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

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

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

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

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

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

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

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

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

U.S. Retail Sales Rebound in June

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

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

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

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

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

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

Economy in Brief: 2008

Jump to:

Japan’s Service Sector Index Gets Erratic

Mid-October Michigan Consumer Sentiment Tanks With Stock Market

U.S. Housing Starts Fell Further in September

U.S. Housing Starts Fell Further in September

German Firms Cut Back Their Assessment and Expectations

U.S. Weekly Initial Jobless Insurance Claims Fell But Still Near Cycle High

US IP Plunges in September and Plummets in the Quarter

U.S. CPI Fell Again With Lower Gasoline Prices