Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041012a.jpg" width="353">
The September Small Business Optimism Index published by the National Federation of Independent Business (NFIB) rose 1.6% and recouped some of the prior month&#39;s 2.8% decline. The index remained 2.2% below last December&#39;s peak level.
During the last ten years there has been a 74% correlation between the level of the NFIB index and the two quarter change in real GDP.
The percentage of firms expecting the economy to improve rose to 36% from 32% in August but also remained well below last year&#39;s high.
The percent of firms planning to raise employment dropped back to 14% from last month&#39;s 2004 high. During the last ten years there has been a 63% correlation between these hiring plans and the three month growth in nonfarm payrolls.
The percentage of firms raising average selling prices fell to 19% from 21% in August.
About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S7/@S7.HTM"> Nat&#39;l Federation of Independent Business</a></th>
<th scope="col">Sept</th>
<th scope="col">Aug</th>
<th scope="col"> Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Small Business Optimism Index (1986=100)</td>
<td>104.5</td>
<td>102.9</td>
<td>2.6%</td>
<td>101.3</td>
<td>101.2</td>
<td>98.4</td>
</tr>
</tbody>
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</body>
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The September Small Business Optimism Index published by the National Federation of Independent Business (NFIB) rose 1.6% and recouped some of the prior month's 2.8% decline. The index remained 2.2% below last December's peak level. [...]

Small Business Optimism Rebounded

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041012a.jpg" width="353">
The September Small Business Optimism Index published by the National Federation of Independent Business (NFIB) rose 1.6% and recouped some of the prior month&#39;s 2.8% decline. The index remained 2.2% below last December&#39;s peak level.
During the last ten years there has been a 74% correlation between the level of the NFIB index and the two quarter change in real GDP.
The percentage of firms expecting the economy to improve rose to 36% from 32% in August but also remained well below last year&#39;s high.
The percent of firms planning to raise employment dropped back to 14% from last month&#39;s 2004 high. During the last ten years there has been a 63% correlation between these hiring plans and the three month growth in nonfarm payrolls.
The percentage of firms raising average selling prices fell to 19% from 21% in August.
About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S7/@S7.HTM"> Nat&#39;l Federation of Independent Business</a></th>
<th scope="col">Sept</th>
<th scope="col">Aug</th>
<th scope="col"> Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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</thead>
<tbody>
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<td class="firstcol">Small Business Optimism Index (1986=100)</td>
<td>104.5</td>
<td>102.9</td>
<td>2.6%</td>
<td>101.3</td>
<td>101.2</td>
<td>98.4</td>
</tr>
</tbody>
</table>
U.S. Chain Store Sales Recovered Further 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 12, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041012b.jpg" width="353">
Chain store sales recovered another 0.5% last week following the prior week&#39;s 0.3% gain, according to the International Council of Shopping Centers (ICSC)-UBS.
The two gains pulled sales so far in October almost even with the September average which, battered by Hurricanes, fell 0.7% versusAugust.
During the last ten years there has been a 60% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart. 

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<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM"> ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">10/09/04</th>
<th scope="col">10/02/04</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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</thead>
<tbody>
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<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>437.3</td>
<td>435.0</td>
<td>3.7%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041011c.jpg" width="353">
Singapore showed a decline at an annual rate of 2.3% in its seasonally adjusted Gross Domestic Product in the third quarter according to an advanced estimate. The consensus had expected a slowing of the rate of activity from the nearly 12% increases in the first two quarters of this year, but hardly a decline.
Most measures of Singapore&#39;s GDP change are highly erratic. The annual rate of change in the seasonally adjusted data is shown in the attached chart. Since Singapore has been publishing seasonally adjusted data only since the beginning of 2000, we have added the seasonally adjusted series that is computed by Haver Analytics which has a longer history.
Looking at the year over year changes in the nonseasonally adjusted data, we find that GDP was 7.70% above a year earlier in the third quarter, compared with a 12.55% increase in the second quarter and 7.48% in the first quarter.. For the year as a whole, it still seems likely that growth will average close to 8%. Expectations for growth in 2005 have, however, been lowered to 5%. Construction, which showed a 5.12% decline in second quarter from a year earlier, showed a 9.89% year over year decline in the third quarter. The services industries in the third quarter were 7.2% above a year earlier, compared with an 11.5% increase in the second quarter and a 6.29% in the first quarter, while manufacturing in the third quarter rose 12.50% over a year earlier, down from the second quarter&#39;s rise of 20.65%, but above the first quarter increase of 10.98%.
Singapore publishes advanced estimates of seasonally and nonseasonally adjusted gross domestic product and nonseasonally adjusted estimates of the manufacturing, construction and service industries. The advance estimates are based on data for the first two months of the quarter. Preliminary estimates, based on data for the three months of the quarter, are released about a month later.

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<th scope="col" class="firstcol">SINGAPORE GDP (Millions of 1995 Singapore Dollars)</th>
<th scope="col">3Q 04</th>
<th scope="col">2Q 04&nbsp;&nbsp;</th>
<th scope="col">1Q&nbsp; 04</th>
<th scope="col">3Q(%)</th>
<th scope="col">2Q(%)</th>
<th scope="col">1Q(%)&nbsp;</th>
<th scope="col">2003(%)</th>
<th scope="col">&nbsp;2002(%)</th>
<th scope="col">2001(%)</th>
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<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>Q/Q</td>
<td>Q/Q</td>
<td>Q/Q</td>
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
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<tr>
<td class="firstcol">Gross Domestic Product (SA)</td>
<td>44582</td>
<td>44842</td>
<td>43599</td>
<td>-.058</td>
<td>2.85</td>
<td>2.64</td>
<td>1.06</td>
<td>2.11</td>
<td>-1.23</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>Annual Rate</td>
<td>Annual Rate</td>
<td>Annual Rate</td>
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>-2.30</td>
<td>11.90</td>
<td>11.20</td>
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>Y/Y</td>
<td>Y/Y</td>
<td>Y/Y</td>
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Gross Domestic Product (NSA)</td>
<td>44729</td>
<td>44366</td>
<td>43432</td>
<td>7.70</td>
<td>12.55</td>
<td>7.48</td>
<td>1.09</td>
<td>3.29</td>
<td>-2.37</td>
</tr>
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<td class="firstcol">&nbsp;Manufacturing</td>
<td>11575</td>
<td>11406</td>
<td>10566</td>
<td>12.50</td>
<td>20.65</td>
<td>10.98</td>
<td>2.85</td>
<td>7.70</td>
<td>-11.52</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Construction</td>
<td>2005</td>
<td>2000</td>
<td>2142</td>
<td>-9.89</td>
<td>-5.12</td>
<td>1.04</td>
<td>-10.75</td>
<td>-9.21</td>
<td>-3.21</td>
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<tr class="odd">
<td class="firstcol">&nbsp;Services</td>
<td>28392</td>
<td>28244</td>
<td>27745</td>
<td>7.20</td>
<td>11.59</td>
<td>6.29</td>
<td>1.03</td>
<td>2.62</td>
<td>2.08</td>
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Singapore showed a decline at an annual rate of 2.3% in its seasonally adjusted Gross Domestic Product in the third quarter according to an advanced estimate. The consensus had expected a slowing of the rate of activity from the [...]

Gross Domestic Product in Singapore Declines 2.3% in Third Quarter

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041011b.jpg" width="353">
Consumer credit outstanding fell $2.4B in August following an $11.2B spike in July. Year-to-year growth in consumer credit of roughly 4% was depressed as individuals shifted borrowing to lower interest rate, home equity lines of credit. 
In August, revolving credit outstanding fell $3.4B (1.8% y/y) and usage of nonrevolving credit was up a modest $0.9B (4.8% y/y). Total consumer credit accounts for just 15% of total credit owed by individuals. 
According to the Federal Reserve&#39;s broader Flow of Funds Accounts, total credit owed by individuals surged 8.8% y/y through 2Q04. The strength was driven by 11.9% growth in mortgage debt on nonfarm homes (55% of individuals&#39; total liabilities) and also by 7.0% growth in mortgage debt excl. homes (12% of individuals&#39; total). &quot;Other liabilities&quot; rose 7.8% y/y and are 16% of individuals&#39; liabilities. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041011a.jpg" width="353">
The ratio of individuals&#39; assets to liabilities was 2.27 in 2Q versus 2.31 last year and a peak of 3.38 in 1999. Since 1999, assets rose at a 1.6% annual rate while liabilities surged at a 9.2% annual rate per year.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E103/@E10308/@E10308.HTM">Consumer Credit Outstanding</a></th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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<td class="firstcol">Total</td>
<td>$-2.4B</td>
<td>$11.2B</td>
<td>3.7%</td>
<td>4.3%</td>
<td>4.2%</td>
<td>8.0%</td>
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<tr>
<td class="firstcol">&nbsp; Revolving</td>
<td>$-3.4B</td>
<td>$5.6B</td>
<td>1.8%</td>
<td>2.1%</td>
<td>1.4%</td>
<td>6.6%</td>
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<tr class="odd">
<td class="firstcol">&nbsp; Nonrevolving</td>
<td>$0.9B</td>
<td>$5.7B</td>
<td>4.8%</td>
<td>5.6%</td>
<td>5.9%</td>
<td>9.0%</td>
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Consumer credit outstanding fell $2.4B in August following an $11.2B spike in July. Year-to-year growth in consumer credit of roughly 4% was depressed as individuals shifted borrowing to lower interest rate, home equity lines of [...]

Consumer Credit Usage Weak But Total Liabilities Strong

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/041008b.jpg" width="353">
The current inflation picture differs widely among various countries, as is highlighted among the four that reported September CPI data just today. Two that have modest uptrends in consumer prices, the Czech Republic and Lithuania, are at the same time experiencing firming in their price movements compared with the last year or two. In contrast, countries where current inflation looks higher, Brazil and Slovakia, are actually seeing some slowing from the pace that prevailed in 2002 and 2003.
In two countries where we examined CPI components, it appears that administered prices might be at least partially responsible for the divergent behaviors. In the Czech Republic, alcohol and tobacco barely moved last year, but lurched ahead this year in April and May, so that item is now 4.0% above a year ago. In neighboring Slovakia, the opposite development has occurred; alcohol and tobacco jumped 16.0% during 2003, but this year is only running 1.8% above its year-earlier level. A strong rise in post and telecommunications in the Czech Republic is also lifting the present price trend. Education expenses in both countries have accelerated this year.
One pattern that is common to both of these Central European nations is cheaper clothing costs. In the Czech Republic, these prices are down 3.9% from a year ago, following a 4.6% drop during 2003. In Slovakia, clothing costs are up just 0.1% from September 2003, but are slower than last year&#39;s overall rise of 2.0%. Prices of home furnishings are falling outright in both countries.
In recent months, observers have tended to interpret inflation developments largely by what is occurring in world energy markets. While energy costs are certainly important in every country, our discussion here highlights the significant roles of other quite diverse factors, which ought not to be forgotten in assessing inflation prospects. 

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<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">CPI, 12-Mo. % Changes</th>
<th scope="col">Sept 2004</th>
<th scope="col">Aug 2004</th>
<th scope="col">July 2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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</thead>
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<td class="firstcol">Czech Republic</td>
<td>3.0</td>
<td>3.4</td>
<td>3.2</td>
<td>1.0</td>
<td>0.6</td>
<td>4.1</td>
</tr>
<tr>
<td class="firstcol">Slovakia</td>
<td>6.6</td>
<td>7.2</td>
<td>8.5</td>
<td>9.2</td>
<td>3.4</td>
<td>6.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Lithuania</td>
<td>3.2</td>
<td>2.3</td>
<td>1.9</td>
<td>-1.3</td>
<td>-1.0</td>
<td>2.0</td>
</tr>
<tr>
<td class="firstcol">Brazil</td>
<td>6.7</td>
<td>7.2</td>
<td>6.8</td>
<td>9.3</td>
<td>12.5</td>
<td>7.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Memo: US</td>
<td>--</td>
<td>2.7</td>
<td>3.0</td>
<td>1.9</td>
<td>2.4</td>
<td>1.6</td>
</tr>
</tbody>
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The current inflation picture differs widely among various countries, as is highlighted among the four that reported September CPI data just today. Two that have modest uptrends in consumer prices, the Czech Republic and Lithuania, [...]

September CPI Trends Diverge Among Four Central Europe, Latin American Countries

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041008a.jpg" width="353">
Nonfarm payrolls grew 96,000 last month following a downwardly revised 128,000 August increase. Consensus expectations had been for a 150,000 job gain in September.
The four hurricanes which struck the US during August and September were estimated to not have had a significant effect on job growth. Jobs lost due to severe weather were offset by hiring for recovery efforts. 
The employment report from the Bureau of Labor Statistics indicated that &quot;At the national level, the severe weather appears to have held down employment growth, but not enough to change materially the Bureau&#39;s assessment of the employment situation in September.&quot; 
Factory sector payrolls fell by 18,000 (+0.1% y/y), the first monthly decline since June. A moderate 0.1% (-1.7% y/y) fall in nondurable industries hiring reflected sharp declines in textile mills (-6.4% y/y) and apparel (-5.7% y/y), offset by gains elsewhere. Hiring in durable goods industries was down broadly, 0.1% m/m, but up 1.2% y/y. Construction sector hiring grew a modest 4,000 (2.6% y/y).
Hiring in private service producing industries rose a modest 72,000 (1.6% y/y). Jobs in the financial sector rose another 28,000 m/m (1.1% y/y). Hiring in professional &amp; business services grew 34,000 (3.0% y/y) and temporary help services jobs grew 33,000 (9.6% y/y).
The index of aggregate hours worked (employment times hours worked) in September rose 0.1% (2.4% y/y) for the second consecutive month and in the third quarter grew 3.2% (AR) from 2Q.
Average hourly earnings rose 0.2% (2.4% y/y).
From the separate household survey, the unemployment rate held steady at 5.4%. Employment fell 201,000 (+1.3% y/y) but the labor force also fell by 221,000 (+0.6% y/y), the second consecutive down month, as the labor force participation rate slipped to 65.9%. The Labor Department indicated that &quot;In the household survey, people who miss work for weather-related events are counted as employed whether or not they are paid for the time off.&quot;<a name="content"> </a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB01/@EB01.HTM"> Employment</a></th>
<th scope="col"> Sept</th>
<th scope="col">Aug</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>96,000</td>
<td>128,000</td>
<td>1.3%</td>
<td>-0.3%</td>
<td>-1.1%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>18,000</td>
<td>4,000</td>
<td>0.1%</td>
<td>-4.8%</td>
<td>-7.2%</td>
<td>-4.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.8</td>
<td>33.8</td>
<td>33.6</td>
<td>33.7</td>
<td>33.8</td>
<td>34.0</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.2%</td>
<td>0.3%</td>
<td>2.4%</td>
<td>2.7%</td>
<td>2.9%</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>5.4%</td>
<td>5.4%</td>
<td>6.1%</td>
<td>6.0%</td>
<td>5.8%</td>
<td>4.8%</td>
</tr>
</tbody>
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Nonfarm payrolls grew 96,000 last month following a downwardly revised 128,000 August increase. Consensus expectations had been for a 150,000 job gain in September. The four hurricanes which struck the US during August and September [...]

U.S. Job Creation Disappointing in September, Hurricane Effects Small

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041007b.jpg" width="353">
Labor markets in Australia continue to look prosperous, based on data reported today for September. We last reported on them four months ago; employment in May had ticked down, but the unemployment rate was also at its lowest in 23 years. Over the winter in Australia, job growth resumed. The number employed gained 16,000 in July and 63,000 in September, with mild dips in intervening months. Employment is now 237,000 larger than its level in September 2003, a gain of 2.5%, the largest year-on-year percentage increase since May 2003. The unemployment rate stood at 5.6% in September and has hovered since May just above its low then of 5.5%.
In our prior commentary, published on June 10, we described an &quot;employment rate&quot;, that is, the percentage of the working-age population that is employed; this is a ratio we calculated using Haver&#39;s DLXVG3 software. In September it was 60.1%, up from 59.8% in August and from just barely under 60% in May. The September value is only the sixth in the 27-year history of the data which actually exceeds 60%. Similar rates are provided by government statistics bureaus in a number of other countries, and they look remarkably similar. Australia&#39;s 60% is something of a central value; it is almost exactly equal to a June reading in the UK of 59.9%, and it is higher than the recent 57.5% in Italy, but somewhat lower than 62.5% in the US and in Canada.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Australia Labor Force Survey</th>
<th scope="col">Sept 2004</th>
<th scope="col">Aug 2004</th>
<th scope="col">Jul 2004</th>
<th scope="col">Year Ago</th>
December/December
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr>
<td class="firstcol">Employment: Change, Thous</td>
<td>+63</td>
<td>-9</td>
<td>+16</td>
<td>+237</td>
<td>+153</td>
<td>+282</td>
<td>+81</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Yr/Yr % Change</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>2.5</td>
<td>1.6</td>
<td>3.0</td>
<td>0.9</td>
</tr>
<tr>
<td class="firstcol">&quot;Employment Rate&quot;*, %</td>
<td>60.1</td>
<td>59.8</td>
<td>59.9</td>
<td>59.6</td>
<td>59.8**</td>
<td>59.4**</td>
<td>59.1**</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate, %</td>
<td>5.6</td>
<td>5.7</td>
<td>5.7</td>
<td>5.9</td>
<td>6.0**</td>
<td>6.4**</td>
<td>6.8**</td>
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Labor markets in Australia continue to look prosperous, based on data reported today for September. We last reported on them four months ago; employment in May had ticked down, but the unemployment rate was also at its lowest in 23 [...]

More Jobs in Australia; Unemployment Still Low

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

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

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

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The Conference Board's Index of Consumer Confidence declined 1.3% (-7.8% y/y) to 97.4 in August after increasing 3.7%, revised from 2.1%, in July and falling an unrevised 3.3% in June. An August reading of 96.5 had been expected in the Action Economics Forecast Survey. The index remained 13.7% below its November peak.

The Expectations Index declined 1.6% (-13.3% y/y) this month after rising 8.7% in July, revised from 6.4%, and falling 5.0% in June. The Present Situation index fell 1.2% (-2.5% y/y) after easing 0.2% in July, revised from down 1.1% and falling 1.8% in June.

The percentage of respondents assessing business conditions as “good” rose to 22.0% in August after holding steady at 20.5% in July. The index reached its highest level since October. The percentage assessing conditions as “bad” edged higher to 14.2% after falling to 13.6% in July. The appraisal of labor market conditions eased as 29.7% described “jobs plentiful” versus 29.9% in July. Jobs were viewed as “hard to get” by 20.0% of respondents this month, up from 18.9% in July. This measure has risen from 11.0% in January 2024. The labor market differential calculated by Haver Analytics (the percentage of consumers who think jobs are plentiful minus the percentage who believe that jobs are currently hard to get) fell to 9.7% compared to 11.0% in July and 12.2% in June. This measure remained below a high of 47.1% in March 2022. This series has a 60% correlation with the unemployment rate over the last ten years.

Expectations for business conditions improved this month as an increased 19.5% of respondents expect conditions to improve over the next six months, after 19.0% did so in July, while 21.9% expect them to worsen, after falling to 22.7% in July. On employment, 17.9% expect the number of jobs to increase over the next six months versus 18.0% in July. The percentage expecting the number of jobs to decline in the next six months rose to 26.8% after falling to 25.1% in July. A lessened 18.3% of respondents expect income to increase in six months, down from 18.7% in July. That remained off a high of 20.7% in November and compares to 12.6% who expect income to decrease, up from 11.8% in July.

The expected rate of price inflation over the next twelve months rose to 6.2% in August after falling to 5.7% in July. These remain up from a low of 5.0% in November. Interest rates are expected to rise this year by an increased 54.0% of respondents, and this remained up from a 45.5% November 2024 low. The percentage of respondents expecting equity prices to increase over the next twelve months fell to 47.4%, but remained up from a low of 37.6% in April and the most since January, while the percentage expecting a decline in stock prices rose to 30.3% after declining to 28.1% in July.

The percentage of respondents planning to buy a home held steady at 5.7% this month after falling from 6.1% in June. Plans to purchase an automobile rose to 12.0% this month, up from a low of 10.6% in April.

The Consumer Confidence data are available in Haver’s **CBDB** database. The total indexes, which are indexed to 1985=100, appear in **USECON**, and market expectations are in **AS1REPNA**.

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- Monthly decline is slight, level remains up sharply from April low.
- Expectations and present situation readings decline.
- Inflation expectations rise after falling for two months.

U.S. Consumer Confidence Weakens in August; Inflation Expectations Rise

Sandy Batten

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Durable goods orders fell 2.8% m/m (+3.3% y/y) in July on top of a slightly downwardly revised 9.4% monthly decline in June (previous -9.3% m/m). A 4.0% m/m decline had been expected by the Action Economics Forecast Survey. Once again, plummeting nondefense aircraft orders were the key factor behind the overall decline in July. Excluding nondefense aircraft orders, the remaining orders rose 0.2% m/m in July after a 0.3% m/m decline in June.

Orders excluding transportation increased by a solid 1.1% m/m (+3.8% y/y) in July following a 0.3% monthly gain in June. The July monthly increase matched the September 2024 gain as the largest in more than two years. Orders for nondefense aircraft plunged 32.7% m/m in July, on top of a 52.7% monthly decline in June. Apart from the plunge in aircraft orders, orders in other major groups posted solid increases. Orders for motor vehicles increased 0.3%, their third consecutive monthly gain. Orders for primary metals jumped 1.5% m/m, the largest monthly gain since April 2024. Fabricated metals orders rose 0.7% m/m after a 0.1% monthly decline in June. Machinery orders soared 1.8% m/m, the largest monthly increase since January. Orders for computers and electronic equipment increased 0.6% m/m. Orders for electrical equipment and appliances jumped 2.0% m/m, the largest increase since last December.

The capital spending data in this report augured a solid beginning for Q3 business spending on equipment. Shipments of core capital goods (nondefense capital goods shipments excluding aircraft) are a reliable coincident indicator of business spending on equipment in the national accounts. They increased 0.7% m/m in July, the largest monthly gain since April 2023, and are up more than 4% annualized in July from the Q2 average. Moreover, core capital goods orders rebounded in July, jumping 1.1% m/m after a 0.6% monthly decline in June.

Total manufacturing shipments increased 0.8% m/m (+1.8% y/y) in July following a 0.6% monthly increase in June. Shipments of durable goods rose a solid 1.4% m/m (+3.6% y/y), the largest monthly gain since May 2023. Excluding shipments of transportation goods, remaining shipments increased 1.0% m/m in July, the largest monthly increase since January 2023. Gains were widespread across major sectors with each one reporting an increase in July. Transportation shipments rose 2.3% m/m, led by a 15.5% monthly jump in shipments of nondefense aircraft and parts. Shipments of computers rose 4.5% m/m, their first monthly gain in three months. Shipments of nondurable goods edged up 0.2% m/m (-0.1% y/y), their third consecutive monthly increase.

Unfilled durable goods orders were unchanged in July from June (+7.0% y/y). Inventories of all manufactured goods increased 0.3% m/m in July (+1.4% y/y), the largest monthly gain since last December. Inventories of durable goods rose 0.3% m/m (+1.8% y/y), their fifth consecutive monthly increase. Motor vehicle inventories jumped 0.8% m/m, their largest monthly increase since October 2023. Aircraft inventories slipped 0.2% m/m, their third consecutive monthly decline. Inventories of nondurable goods increased 0.2% m/m in July (+0.8% y/y), the same monthly gain as in June.

The factory sector data are available in Haver’s **USECON** database. The Action Economics Forecast Survey is in the **AS1REPNA** database.

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- Durable goods orders fell 2.8% m/m in July on top of a 9.4% monthly drop in June.
- Once again, weak nondefense aircraft orders were the key factor; nondefense aircraft orders plunged 33% m/m in July on top of a 53% m/m decline in June.
- In contrast, orders excluding transportation rose a solid 1.1% m/m in July, their largest monthly gain since September 2024.
- Core capital goods orders rebounded, and shipments posted a solid gain.

U.S. Advance Durable Goods Orders Dragged Down Again by Aircraft in July

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U.S. house prices weakened 0.2% (+2.6% y/y) during June after easing 0.1% in May, revised from down 0.2% and falling an unrevised 0.3% in April. The annual increase is well below its recent high of 7.2% in February 2024, according to the Federal Housing Finance Agency (FHFA) House Price Index.

House price changes were mixed across the nine Census divisions of the country. Prices fell 0.8% (+5.0% y/y) in New England and 0.1% (+4.6% y/y) in the East North Central region. Prices were down 1.1% (+0.1% y/y) in the South Atlantic region, 0.4% (+3.1% y/y) in the East South Central region and 0.3% (+1.5% y/y) in the Mountain regions. Prices also eased 0.1% (+0.7% y/y) in the Pacific region, off for the fifth straight month. House price increases were logged in the middle Atlantic region where they rose 1.1% (7.2% y/y). Prices also increased 0.3% (4.3% y/y) in the West North Central region and 0.2% (1.4% y/y) in the West South Central region.

The FHFA house price index is a weighted purchase-only index that measures average price changes in repeat sales of the same property. An associated quarterly index includes refinancing the same kind of properties. The indexes are based on transactions involving conforming conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac. Only mortgage transactions on single-family properties are included. The FHFA data are available in Haver’s USECON database.

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- Prices edge lower for third straight month.
- Annual increase is near two-year low.
- Price changes are uneven amongst regions.

U.S. FHFA House Prices Continue to Decline in June

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Retail gasoline prices for all grades, on average, rose to $3.27 per gallon (-4.7% y/y) last week after rising to $3.25 one week earlier. Prices have been moving sideways for two months, but remained above their low of $3.13 in the week of December 9. The recent high was $3.79 in the week ending April 22, 2024. Their all-time high of $5.11 occurred in the week ending June 13, 2022. The retail price for on-highway diesel fuel held steady at $3.71 per gallon (+1.6% y/y) in the week of August 25 after falling from $3.75 in the second week of August. The latest diesel price stood well below a high of $4.63 in the week ending September 18, 2023 and a peak of $5.81 in the week ending June 20, 2022.

The price of West Texas Intermediate crude oil eased to $63.23 per barrel (-15.0% y/y) in the week ended August 22 from $63.31 in the prior week. The drop left prices at the lowest level since the last week of May. Prices remained above a $59.04 low in the second week of May. The cost of crude oil peaked at $120.46 in the week of June 10, 2022. Yesterday, the price was $64.80 per barrel. The price of European Brent crude of $67.82 per barrel (-14.8% y/y) in the week of August 22, compared to $67.17 in the prior week. Prices remained below a recent high of $95.61 in the week of September 29, 2023 and below a peak of $127.40 in June 2022.

Natural gas prices fell to an average $2.85/mmbtu (+39.7% y/y) in the week ended August 22, after falling to an average $2.94/mmbtu in the prior week. Prices remained well above a low of $1.40/mmbtu in the week of March 15, 2024 but below their peak of $9.56 in the week of August 26, 2022. Yesterday, the price was $2.76 per mmbtu.

Gasoline demand declined 1.2% y/y in the four weeks endng August 15, following a 1.5% y/y decline in the prior four weeks. Demand for all petroleum products rose 3.3% y/y in the four weeks ending August 15, after a 2.9% y/y increase in the previous four-week period. Crude oil input to refineries rose 4.1% y/y in the four weeks ending August 15, after a 4.2% y/y gain in the prior four weeks.

Gasoline inventories rose 1.3% y/y in the week ending August 15 after a 1.8% y/y in the prior week. Residual fuel oil inventories fell 25.5% y/y in the week of August 15, after a 25.7% y/y fall in the prior week. Crude oil inventories rose 2.6% y/y in the week of August 15 after a 2.8% y/y rise in the previous week.

Measured in days’ supply, gasoline inventories stood at 24.8 days in the week of August 15, versus 25.0 days in the prior week. The recent low was 22.9 days in the week of November 8, 2024. The supply of crude oil eased to 24.6 days in the week of August 15, and remained below a high of 31.9 days in the week of March 3, 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** & **USENERGY** database.

- Gasoline prices rise.
- Crude oil prices ease.
- Natural gas prices decline.

U.S. Energy Prices Are Mixed in Latest Week

Robert Brusca

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**Low confidence**
French consumer confidence as reported by INSEE fell to 86.98 in August from 88.31 in July; the standing leaves that reading in its 21.7 percentile of data back to August 2004. This reading, which hovers between the lower 20th percentile and the 25th percentile, clearly indicates weak conditions and assessments on the part of French consumers.

**Living standards past and future are poor**
The assessment of living standards over the last 12 months weakened in August to -74.2 from an assessment of -70.8 in July. Past living standards have a percentile standing in their 17.8 percentile placing them in the lower 20th percent of their historic queue of data.

Living standards for the next 12 months, a more pertinent reading, slipped to -63.9 in August from -61.5 in July. While the negative reading isn't as deep as for the past 12 months, the ranking of that rating is even worse in its lower 4-percentile! The expected living standards over the next 12 months have been weaker only 4% of the time back to August 2004. That is certainly a worrisome development.

**Unemployment is more feared**
Unemployment expectations for the next 12 months moved up to an index value 55.6 in August from 54.2 in July and have a 73.5 percentile standing- a top 30% standing among historic data back to August 2004.

**Inflation pressures exist and are tepid**
The assessment of prices for the last 12 months weakened to -8.5 in August from -6.1 in July; the past 12 months’ assessment of prices has 43.9 percentile standing, slightly below its median for this backward-looking horizon. However, assessments of prices for the next 12 months have a -26 rating, a higher reading than -30 in July and -40 in June; that bears a standing in its 52.4 percentile, above its historic median indicating that some further inflation pressure is expected-  a bit more than normal.

**Favorability to save**
The favorability to save and the ability to save over the next 12 months had dipped slightly in August, but they have very high standings as the favorability to save has an 88.5 percentile standing and the ability to save over the next 12 months has a 96.8 percentile standing.

**Spending environment is still solid**
The environment for spending is somewhat mixed although generally quite solid and positive. The exception is the favorability to buy a car which slipped slightly in August and has a 39.7 percentile standing for that response which means that it's only less favorable to buy a car about 40% of the time. However, the favorability for home purchases and housing renovation, while both of them increased slightly in August, have standings in their 78.6 percentile and 88.5 percentile, respectively. The favorability to buy consumer durables improved in July and stayed at that reading of -4 in August; the reading corresponds to a 76.2 percentile standing which is roughly a top 25 percentile response.

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**Summing up**
These responses suggest that day-to-day activity goes along fairly well as consumers find that they are able to purchase consumer durables, houses, and to engage in renovation relatively easily. Car buying is on the expensive side. However, there are concerns about unemployment that are relatively high by historic standards and there's a moderate concern about inflation. Somewhat oddly when consumers wrap these things together, their assessment of their living standards is extremely low and much worse than these other features of living. They put their expected living standards as lower only 4% of the time! The overall household or consumer confidence indicator has a standing that is weak and it's lower between 25 percent and 20 percent of the time. These are difficult days for French consumers, or at least they see it that way.

Economy in Brief: 2004

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U.S. Job Creation Disappointing in September, Hurricane Effects Small

U.S. Job Creation Disappointing in September, Hurricane Effects Small

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