Tom Moeller

U.S. September sales of light vehicles reversed their August rise and fell 8.9%, according to the Autodata Corporation. The sales rate of 12.50M units fell back to its July level, which was the lowest sales rates since 1992. Sales for [...]

U.S. Light Vehicle Sales Backpedal

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081001i.jpg" align="left" border="0" height="265" width="353">
The PMI details for the e-Zone and the UK makes for dismal
reading. After a widespread but small rebound in August the various
indices all are lower in September. All readings are below the 50% mark
except for Greece. The overall EMU reading resides in the bottom 13% of
its range of values since early 2000. Germany is relatively stronger in
its 30th percentile, awhile France resides in
its 4th percentile. The UK is at its weakest
point for that same period.
Slow growth and financial turmoil have been slow to grip the
e-Zone or at least slow to be revealed. Overnight VDMA&#8217;s engineering
orders for Germany posted another drop and the UK services sector came
up dead flat in Q3. Surprisingly retail sales in Germany rose sharply
after two months of drops and auto sales in France rose. Overall the
EMU unemployment rate did edge up although Germany has continued to
show the number of unemployed still dropping.
There is little in the way of truly mixed data for Europe. For
the most part it is simply weak and getting weaker. The spots of
strength in the data today seem to be counter point anomalies. With so
much weakness elsewhere in key reports as well as in the day&#8217;s MFG
report from Markit, EMU seems clearly and firmly on the path to
economic contraction. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> NTC MFG
Indices</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>Percentile*</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro Area</td>
<td>44.97</td>
<td>47.55</td>
<td>47.38</td>
<td>46.63</td>
<td>48.40</td>
<td>50.37</td>
<td>12.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>47.36</td>
<td>49.68</td>
<td>50.90</td>
<td>49.31</td>
<td>51.28</td>
<td>52.55</td>
<td>30.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>42.97</td>
<td>45.79</td>
<td>47.05</td>
<td>45.27</td>
<td>47.94</td>
<td>50.35</td>
<td>4.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>44.42</td>
<td>46.77</td>
<td>45.32</td>
<td>45.50</td>
<td>46.62</td>
<td>48.67</td>
<td>7.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>38.32</td>
<td>42.40</td>
<td>39.20</td>
<td>39.97</td>
<td>41.59</td>
<td>45.19</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Austria</td>
<td>46.01</td>
<td>48.61</td>
<td>46.97</td>
<td>47.20</td>
<td>48.26</td>
<td>50.87</td>
<td>17.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Greece</td>
<td>50.79</td>
<td>52.46</td>
<td>51.63</td>
<td>51.63</td>
<td>52.81</td>
<td>52.97</td>
<td>33.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Ireland</td>
<td>43.70</td>
<td>44.88</td>
<td>43.39</td>
<td>43.99</td>
<td>44.43</td>
<td>46.91</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Netherlands</td>
<td>48.30</td>
<td>49.82</td>
<td>47.99</td>
<td>48.70</td>
<td>50.02</td>
<td>51.94</td>
<td>33.6%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">European
Union</td>
</tr>
<tr class="odd">
<td class="firstcol">UK</td>
<td>40.97</td>
<td>45.33</td>
<td>44.11</td>
<td>43.47</td>
<td>45.95</td>
<td>49.05</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">*Percentile
is over range since
March 2000</td>
</tr>
</tbody>
</table>
</body></html>

The PMI details for the e-Zone and the UK makes for dismal reading. After a widespread but small rebound in August the various indices all are lower in September. All readings are below the 50% mark except for Greece. The overall EMU [...]

Very Weak Results for MFG: Europe is Going DOWN!

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081001h.jpg" align="left" border="0" height="265" width="353">
Japan&#8217;s tankan survey is very weak and showing a continuing
slide across the various size-class of respondents as well as across
industries. It is the LARGE company module of this survey that tends to
get the headlines. But the survey itself is rife with weakness even
outside of the big-company survey. 
 

The Large company survey shows manufacturing, nonmanufaturing
and the total industry indices at their range lows since early 2004.
Large company industry readings all are at sample period lows except
for construction and personal services (each in the lower 35% of their
respective ranges) and for Restaurants &amp; Hotels that are still
very weak in the bottom 2.6% of their range.
The current period manufacturing index has an outright
negative reading of -3. For nonmanufacturing the reading is a +1. The
total industry reading is 0.
The outlook responses are at sample period lows for all sized
classes of companies. In short it is a very weak Tankan that is both
weak overall and across the board. Weakness is taking no prisoners.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Tankan
Results Large Enterprises</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="4">Readings</td>
<td colspan="2">Averages</td>
<td>PERCENTILES</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Q3-08</td>
<td>Q2-08</td>
<td>Q1-08</td>
<td>Q4-07</td>
<td>1-Y Avg</td>
<td>Since Q3'03</td>
<td>Since Q1'04</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG</td>
<td>-3.0</td>
<td>5.0</td>
<td>11.0</td>
<td>19.0</td>
<td>1.0</td>
<td>17.8</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">NonMFG</td>
<td>1.0</td>
<td>10.0</td>
<td>12.0</td>
<td>16.0</td>
<td>5.5</td>
<td>16.4</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Industry</td>
<td>0.0</td>
<td>7.0</td>
<td>12.0</td>
<td>17.0</td>
<td>3.5</td>
<td>17.1</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Construction</td>
<td>-7.0</td>
<td>-1.0</td>
<td>-9.0</td>
<td>-2.0</td>
<td>-4.0</td>
<td>-1.4</td>
<td>35.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Real Estate</td>
<td>5.0</td>
<td>22.0</td>
<td>21.0</td>
<td>37.0</td>
<td>13.5</td>
<td>36.1</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Wholesale</td>
<td>11.0</td>
<td>12.0</td>
<td>14.0</td>
<td>12.0</td>
<td>11.5</td>
<td>18.6</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail</td>
<td>-5.0</td>
<td>0.0</td>
<td>0.0</td>
<td>4.0</td>
<td>-2.5</td>
<td>8.1</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Transportation</td>
<td>6.0</td>
<td>16.0</td>
<td>17.0</td>
<td>14.0</td>
<td>11.0</td>
<td>16.8</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Services 4 Biz</td>
<td>4.0</td>
<td>20.0</td>
<td>22.0</td>
<td>31.0</td>
<td>12.0</td>
<td>24.5</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Service</td>
<td>6.0</td>
<td>10.0</td>
<td>13.0</td>
<td>19.0</td>
<td>8.0</td>
<td>12.2</td>
<td>35.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Restaurants &amp; Hotels</td>
<td>-13.0</td>
<td>-14.0</td>
<td>-3.0</td>
<td>12.0</td>
<td>-13.5</td>
<td>7.6</td>
<td>2.6%</td>
</tr>
<tr class="grey3">
<td colspan="8" class="firstcol">Forecast</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Q4-08</td>
<td>Q3-08</td>
<td>Q2-08</td>
<td>Q1-08</td>
<td>1-Y Avg</td>
<td>Since Q3'03</td>
<td>Since Q1'04</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG-Outlook</td>
<td>-4.0</td>
<td>4.0</td>
<td>7.0</td>
<td>15.0</td>
<td>5.5</td>
<td>16.0</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">NonMFG-Outlook</td>
<td>-1.0</td>
<td>8.0</td>
<td>13.0</td>
<td>15.0</td>
<td>8.8</td>
<td>16.4</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">All Industry-Outlook</td>
<td>-2.0</td>
<td>6.0</td>
<td>10.0</td>
<td>16.0</td>
<td>7.5</td>
<td>16.1</td>
<td>0.0%</td>
</tr>
<tr class="grey3">
<td colspan="8" class="firstcol">Tankan
Results Medium
Enterprises</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Q3-08</td>
<td>Q2-08</td>
<td>Q1-08</td>
<td>1-Y Avg</td>
<td>1-Y Avg</td>
<td>Since Q3'03</td>
<td>Since Q1'04</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG</td>
<td>-8.0</td>
<td>-2.0</td>
<td>5.0</td>
<td>1.3</td>
<td>1.3</td>
<td>8.8</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">NonMFG</td>
<td>-12.0</td>
<td>-5.0</td>
<td>-3.0</td>
<td>-4.5</td>
<td>-4.5</td>
<td>1.2</td>
<td>0.0%</td>
</tr>
<tr class="grey3">
<td colspan="8" class="firstcol">Forecast</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Q4-08</td>
<td>Q3-08</td>
<td>Q2-08</td>
<td>Q1-08</td>
<td>1-Y Avg</td>
<td>Since Q3'03</td>
<td>Since Q1'04</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG-Outlook</td>
<td>-12.0</td>
<td>-5.0</td>
<td>-1.0</td>
<td>6.0</td>
<td>-3.0</td>
<td>6.4</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">NonMFG-Outlook</td>
<td>-17.0</td>
<td>-10.0</td>
<td>-6.0</td>
<td>-3.0</td>
<td>-9.0</td>
<td>0.1</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">All Industry-Outlook</td>
<td>-15.0</td>
<td>-9.0</td>
<td>-4.0</td>
<td>0.0</td>
<td>-7.0</td>
<td>2.6</td>
<td>0.0%</td>
</tr>
<tr class="grey3">
<td colspan="8" class="firstcol">Tankan
Results Small
Enterprises</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Q4-08</td>
<td>Q3-08</td>
<td>Q2-08</td>
<td>Q1-08</td>
<td>1-Y Avg</td>
<td>Since Q3'03</td>
<td>Since Q1'04</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG</td>
<td>-17.0</td>
<td>-10.0</td>
<td>-6.0</td>
<td>-13.5</td>
<td>-13.5</td>
<td>1.8</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">NonMFG</td>
<td>-24.0</td>
<td>-20.0</td>
<td>-15.0</td>
<td>-22.0</td>
<td>-22.0</td>
<td>-10.8</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Industry</td>
<td>-24.0</td>
<td>-20.0</td>
<td>-15.0</td>
<td>-22.0</td>
<td>-22.0</td>
<td>-10.8</td>
<td>0.0%</td>
</tr>
<tr class="grey3">
<td colspan="8" class="firstcol">Forecast</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Q4-08</td>
<td>Q3-08</td>
<td>Q2-08</td>
<td>Q1-08</td>
<td>1-Y Avg</td>
<td>Since Q3'03</td>
<td>Since Q1'04</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG-Outlook</td>
<td>-25.0</td>
<td>-15.0</td>
<td>-9.0</td>
<td>-3.0</td>
<td>-13.0</td>
<td>0.1</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">NonMFG-Outlook</td>
<td>-31.0</td>
<td>-27.0</td>
<td>-21.0</td>
<td>-17.0</td>
<td>-24.0</td>
<td>-14.1</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">All Industry-Outlook</td>
<td>-29.0</td>
<td>-22.0</td>
<td>-17.0</td>
<td>-12.0</td>
<td>-20.0</td>
<td>-8.9</td>
<td>0.0%</td>
</tr>
</tbody>
</table>
</body></html>

Japan’s tankan survey is very weak and showing a continuing slide across the various size-class of respondents as well as across industries. It is the LARGE company module of this survey that tends to get the headlines. But the survey [...]

Japan Tankan is Tankin'

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081001f.jpg" width="353">
The value of construction put in place was unchanged during August but the decline in July was revised doubled to 1.4%. The decline for August compared to expectations for a slight, 0.5% drop.
Year-to-year, the decline in construction activity remained steady at a -5.9% pace, and the level of activity so far this year has been roughly stable.
The value of nonresidential building activity led the weakness in building activity during August. It fell 0.8% after a downwardly revised 1.1% drop during July. Several categories posted m/m declines, notably transportation which fell 2.1% (+3.9% y/y). Commercial construction fell 0.6% (-4.9% y/y) while spending on health care facilities drpped again, during August by 0.8% (+4.9% y/y). Office construction continued firm and increased 1.0% (10.6% y/y). Lodging spending rose another 2.1% (29.3% y/y) while spending on multi-retail building rose 2.7% (2.1% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081001g.jpg" width="353">
Residential building activity steadied after many months of sharp decline. The steadiness was due to a 9.8% (-8.4% y/y) jump in spending on home improvements. Single-family construction dropped another 4.2% (-41.1% y/y) and that level is off by two-thirds from its peak in early 2006. Building activity on multi-family units fell 4.2% (-4.3% y/y).
During the last twenty years there has been an 84% correlation between the q/q change in the value of residential building and its contribution to growth in real GDP.
Public construction continued firm and rose 0.8% (7.7% y/y). The value of construction spending on highways &amp; streets recovered 3.9% (7.3% y/y). (The value of construction on highways &amp; streets is roughly one third of the value of total public construction spending.) Building activity of office space was quite firm and rose 2.0% (24.7% y/y). Spending on health care facilities rose 7.3% (3.6% y/y).
The more detailed categories of construction represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.

<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/@E9/@E907/@E907.HTM">Construction</a> (%)</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>0.0</td>
<td>-1.4</td>
<td>-5.9</td>
<td>-2.7</td>
<td>6.3</td>
<td>11.2</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>-0.3</td>
<td>-2.4</td>
<td>-10.5</td>
<td>-6.9</td>
<td>5.5</td>
<td>12.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>0.3</td>
<td>-3.9</td>
<td>-28.4</td>
<td>-19.8</td>
<td>1.0</td>
<td>14.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-0.8</td>
<td>-1.1</td>
<td>13.0</td>
<td>19.6</td>
<td>16.2</td>
<td>7.8</td>
</tr>
<tr>
<td class="firstcol">Public</td>
<td>0.8</td>
<td>1.3</td>
<td>7.7</td>
<td>12.3</td>
<td>9.3</td>
<td>6.2</td>
</tr>
</tbody>
</table>
</body>
</html>

The value of construction put in place was unchanged during August but the decline in July was revised doubled to 1.4%. The decline for August compared to expectations for a slight, 0.5% drop. Year-to-year, the decline in construction [...]

U.S. Construction Spending in August Unchanged M/M, Down 5.9% Y/Y

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081001d.jpg" width="353">
The Institute for Supply Management reported that it&#39;s Composite Index of Manufacturing Sector Activity plunged to its lowest level since the end of the 2001 recession. The decline to 43.5 in September from an August reading of 49.9 by far exceeded Consensus expectations for a roughly unchanged level of 49.5. The break-even level for this measure of factory sector activity is 50.
During the last twenty years there has been a 64% correlation between the level of the Composite Index and the three-month growth in factory sector industrial production.
It is appropriate to correlate the ISM index level with factory sector growth because the ISM index is a diffusion index. It measures growth by using all of the positive changes in activity added to one half of the zero change in activity measures.
The production sub-series led the decline in the composite index with an 11.3 point drop to 40.8, the lowest level since early 1991.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081001e.jpg" width="353">
The new orders index followed closely and fell 9.5 points to 38.8. The new export orders sub-series held up, comparatively, and fell 5 points to a break-even level of 50. During the last ten years there has been a 53% correlation between the index and the q/q change in real exports of goods in the GDP accounts.
The employment index fell 7.9 points to 41.8, the lowest reading since early 2003. During the last twenty years there has been a 67% correlation between the level of the ISM employment index and the three-month growth in factory sector employment.
The inventories series fell to 43.4 and that reversed most of the August increase. Suppler deliveries rose slightly while order backlogs declined to their lowest level since early 2001.
Prices paid fell sharply, again. The index fell 23.5 points to 53.5 which was its lowest level since early 2007. That further reflected the recent decline in oil prices. During the last twenty years there has been a 79% correlation between the price index and the three-month change in the PPI for intermediate goods.
The Big Mac: A Global-to-Local Look at Pricing from the Federal Reserve Bank of Dallas is available <a href="http://dallasfed.org/research/eclett/2008/el0809.html">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/SURVEYS/@S2/@S201/@S201.HTM">ISM Mfg</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">September &#39;07</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">Composite Index</td>
<td>43.5</td>
<td>49.9</td>
<td>50.5</td>
<td>51.1</td>
<td>53.1</td>
<td>54.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>38.8</td>
<td>48.3</td>
<td>53.6</td>
<td>54.3</td>
<td>55.4</td>
<td>57.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Employment Index</td>
<td>41.8</td>
<td>49.7</td>
<td>51.5</td>
<td>50.5</td>
<td>51.7</td>
<td>53.6</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>53.5</td>
<td>77.0</td>
<td>59.0</td>
<td>64.6</td>
<td>65.0</td>
<td>66.4</td>
</tr>
</tbody>
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The Institute for Supply Management reported that it's Composite Index of Manufacturing Sector Activity plunged to its lowest level since the end of the 2001 recession. The decline to 43.5 in September from an August reading of 49.9 [...]

ISM Index Plunged to Recession Level

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081001c.jpg" width="353">
Job cut announcements rose 7.2% to 95,094 in September reversing half of their August decline, according to the Challenger, Grey &amp; Christmas survey.
The three-month level layoffs also increased to 95,714 and was near the highest level since early 2006.
The rise in layoffs last month was led by a huge 25,221 rise in the computer industry and a 8,288 rise in the apparel industry. Declines in layoffs were registered in the automotive, electronics and in the industrial goods industries. Layoffs also fell in insurance industry and in the telecommunication businesses
During the last ten years there has been a 76% (inverse) correlation between the three-month moving average of announced job cuts and the three-month change payroll employment.
Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.
Challenger also reported that announced hiring plans fell m/m and they were down 2.6% y/y.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</a></th>
<th scope="col">September</th>
<th scope="col">August</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>
<td class="firstcol">Announced Job Cuts</td>
<td>95,094</td>
<td>88,736</td>
<td>32.6%</td>
<td>768,264</td>
<td>839,822</td>
<td>1,072,054</td>
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Job cut announcements rose 7.2% to 95,094 in September reversing half of their August decline, according to the Challenger, Grey & Christmas survey. The three-month level layoffs also increased to 95,714 and was near the highest level [...]

U.S. Challenger Layoffs Back Up

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081001a.jpg" align="left" border="0" height="265" width="353">
The payroll processor ADP released its National Employment
Report for September. Private nonfarm payrolls were indicated to have
fallen 8,000 after a downwardly revised 37,000 decline during August.
The U.S. Bureau of Labor Statistics will report on
September payroll employment this Friday.
Last month, the 37,000 worker decline in ADP's measure of private
nonfarm payrolls was accompanied by a 101,000 worker decline in the BLS
measure of private sector payrolls.
According to ADP and Macro Advisers, the correlation between
the monthly percentage change in the ADP estimate and that in the BLS
data is 0.90.
Goods producing payrolls fell by 72,000 (-2.8% y/y). The
largest decline was amongst medium sized payrolls which fell 40,000
(-3.1% y/y) followed by a 16,000 (-1.5% y/y) drop in small sized
payrolls. Large payrolls fell 16,000 (-4.6% y/y).<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081001b.jpg" align="right" border="0" height="265" width="353">
Employment in the service producing industry offset that
weakness and rose by 64,000 (1.0% y/y). Small payrolls rose 44,000
(1.5% y/y) while medium sized payrolls increased 10,000 (1.0% y/y).
Large service producing payrolls rose by 10,000 (-0.2% y/y), the most
for any month since last November.
ADP compiled the estimate from its database of individual
companies' payroll information. Macroeconomic Advisers, LLC, the St.
Louis economic consulting firm, developed the methodology for
transforming the raw data into an economic indicator.
The ADP National Employment Report data is maintained in
Haver's 
USECON database;
historical data go back to December 2000. The figures in this report
cover only private sector jobs and exclude employment in the public
sector, which rose an average 11,083 during the last twelve months.

The full ADP National Employment Report can be found <a href="http://www.adpemploymentreport.com/pdf/final_report_september_08.pdf" title="blocked::http://www.adpemploymentreport.com/PDF/FINAL_Report_june_09.pdf">here</a>,
and the ADP methodology is explained <a href="http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf" title="blocked::http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB25/@EB25.HTM">LAXEPA@USECON</a></th>
<th scope="col">September</th>
<th scope="col">August</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>
<td class="firstcol">Nonfarm Private Payroll
Employment (m/m Chg.)</td>
<td>-8,000</td>
<td>-37,000</td>
<td>0.3%</td>
<td>1.1%</td>
<td>1.7%</td>
<td>1.8%</td>
</tr>
</tbody>
</table>
</body></html>

The payroll processor ADP released its National Employment Report for September. Private nonfarm payrolls were indicated to have fallen 8,000 after a downwardly revised 37,000 decline during August. The U.S. Bureau of Labor Statistics [...]

ADP Report: Payroll Employment Decline Moderated

The payroll processor ADP released its National Employment Report for September. Private nonfarm payrolls were indicated to have fallen 8,000 after a downwardly revised 37,000 decline during August

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

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

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Durable goods orders fell 9.3% (+10.9% y/y) in during June after rising 16.5% in May, revised from 16.4%. Orders in April fell 6.6%. A 10.0% decline had been expected in the Action Economics Forecast Survey.

The decline reflected a near-halving of orders for commercial aircraft which pulled total transportation equipment orders down 22.4% (+30.5% y/y). Orders excluding transportation rose 0.2% last month (2.2% y/y) after a 0.6% rise in May. Orders for computers & electronic products rose 0.6% (4.8% y/y) after rising 1.7% in May. Orders for machinery gained 0.4% (3.2% y/y) for the second straight month while electrical equipment, appliances & components orders inched 0.1% higher (4.7% y/y) following a 0.8% May rise. Primary metals orders gained 0.6% (-0.5% y/y) in June following a 0.7% gain and fabricated metals orders rose 0.2% (3.2% y/y) after surging 1.1% in May. Defense aircraft orders rose 9.1% (7.4% y/y) after a 10.2% May decline.

Total shipments increased 0.4% (1.8% y/y) in June following a 0.2% May rise. Shipments of durable goods industries rose 0.5% (2.9% y/y) in June after improving 0.2% in May. Transportation equipment shipments rose 0.8% (4.2% y/y) and machinery shipments gained 1.0% (1.5% y/y). Computer & electronic product shipments edged 0.1% higher (6.3% y/y) and electrical equipment & appliance & components shipments rose 0.7% (4.9% y/y). Primary metals shipments gained 0.6% (2.5% y/y) while fabricated metals shipments rose 0.2% (1.9% y/y). Shipments of nondurable goods 	rose 0.4% (0.6% y/y) following a 0.1% gain.

Unfilled orders for all manufactured products jumped 1.0% (7.1% y/y) in June after a 3.4% May rise. Excluding transportation, unfilled orders rose 0.1% (0.8% y/y), the same as in May. Backlogs of durable goods rose 1.0% (7.1% y/y) in June, reflecting a 1.6% jump (11.4% y/y) in transportation equipment, led by a 2.1% rise (14.7% y/y) in nondefense aircraft. Machinery backlogs eased 0.1% (-1.8% y/y) in June. Electrical equipment, appliances & component backlogs rose 0.1% (1.0% y/y). Order backlogs of computers & electronic products eased 0.1% (-0.2% y/y), off slightly for the third straight month.

Inventories of all manufactured products rose 0.2% (1.1% y/y) in June following a 0.1% gain in May and a 0.1% April decline. Durable goods inventories rose 0.2% (1.5% y/y) for the second straight month. Inventories of machinery gained 0.4% (2.3% y/y) while computer & electronic product inventories rose 0.1% (0.3% y/y) for the second straight month. Transportation inventories eased 0.1% (+1.6% y/y).

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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- Orders excluding transportation weaken.
- Shipments strengthen.
- Unfilled orders surge, led by aircraft; inventories increase slightly.

U.S. Advance Durable Goods Orders Decline in June as Aircraft Bookings Plunge

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Hypnotists are just trying to get you to focus on something and concentrate on it so that you can relax and they can put you into a hypnotic trance. Right now, you want to make sure that does not happen as you watch what is going on with money supply. It is not ‘entrancing’ and ought to be followed. The chart shows you that trends - and often excesses in ‘global money supply’ growth have begun in that money center country, the United States of America. And… well… here we go again? While it's very early in the game, it looks like, after a period of monetary weakness and re-escalation, U.S. money growth is now beginning to step up in the U.S. Meanwhile, in Europe and in the United Kingdom, money growth, especially real money growth, is beginning to tail off. All this is at a time when Japan's money growth, of course, has been marching to the step of a different drummer showing regular, consistent, nominal weakness and actual declines in the real money stock to try to tame its incipient inflation.

**The Policy Zone**
We are no longer in the COVID era; or even in the post-COVID era. We are now in the post post-COVID era. And monetary policy is being made based on conditions rather than remedy perceived legacy problems in the economy from COVID. We need to make that transition in our analysis too, and ask ourselves, “What's really happening?” In the U.S., the popular dogma is to claim that central bank independence is being undercut and that Donald Trump's tariffs are going to raise the inflation rate and that the Fed is losing its battle with inflation and inflation is coming because of excessive fiscal policy and the imposition of tariffs. It's a story you can believe if you want to. There's certainly some evidence to support those points; whether they completely justify that point of view, it is still too early to say. However, clearly, money supply growth in the U.S. is ramping up. The U.S. 12-month growth rate is up to 4.5%, over six months the annualized rate hits 5.5%, and over three months the annualized rate hits 6.9%. It's hard to say that that's occurring because of Trump's tariffs. At the same time, the growth rate in real money balances - that's money supply deflated by the CPI - has boosted its growth rate from 1.8% over 12 months to a 2.9% annual rate over six months to a 4.4% annual rate over three months. Is the chase on for an inflation ‘uptick’ that will not be temporary?

**Follow the leader, or go your own way?**
It will take some time to tell if the other money center countries are going to follow the leader or not. So far it looks like ‘or not.’ Money supply growth in the European Monetary Union (EMU) is actually decelerating slightly from 2.8% over 12 months to a 1.7% pace over six months to a 1.3% pace over three months. Similarly, in the EMU the growth of real balances has slipped from 0.8% over 12 months to a 0.2% annual rate over six months to a -0.6% annual rate (contraction) over three months. So far, euro area money supply is not tagging along with the U.S. trend.

**Euro-credit trends**
Meanwhile, private credit growth in Europe has stabilized with the 12-month growth rate of 2.3% that moves up to 2.4% over six months and settles back to 2% over three months, a relatively stable performance that would seem to signal ongoing moderate growth. The growth rate of private credit, deflated for the effects of inflation, shows continued growth, and beyond that the trend is unclear. Over 12 months the growth rate is 0.3%, over six months that improves to 0.8%, and over three months it drops back to a 0.1% pace. I'm not good enough at splitting hair to be able to tell you what that trend is.

**U.K. money weakens**
In the U.K., nominal money supply growth seems to be slowing, but that isn't crystal clear, with the 3.5% annual rate over 12 months moving up to a 4.1% annual rate over six months been slipping back to 1.7% over three months. It may take a few months to be able to tell if the step down to 1.7% is real or just volatility averaging out the step up over six months. U.K. money growth does not appear to be excessive or rogue; when we look at real balances, 12-month growth is -0.4%, six-month growth is -0.1% and the three-month growth rate is -1.6%. On that profile, real money growth in the U.K. does not appear to be following the U.S. rule book either.

**Japan- dealing with its own complex issues**
We know that Japan has been off on its own for a while. Japan clearly has been fighting off a bout of inflation. But, since that development is relatively new, and the previous battle with deflation was relatively long-lived, if we think in terms of inflation averaging, Japan is still dealing with an extremely small problem. Despite the appearance of some real inflation (depending on the price index you look at to establish Japanese inflation trends), Japan's inflation overshoot in contexts is only making up for lost time.

Money growth in Japan is 0.9% over 12 months; however, it's only running at a 0.1% annualized over six months and over three months. The growth of real money balances in Japan is negative. Real balance growth rates are negative on balance over three years and two years; the 12-month growth rate for real money balances is -2.3%, over six months it is -2.2%, and over three months it is -2%. The degree of restriction has faded but faded only very marginally. The main point is that in Japan, real money balances are contracting and so there is a fight to reduce inflation going on behind the scenes and that's clearing up; you can see it in the money growth rates on the chart as well if not from the level or real interest rates. Japan is balancing complex needs.

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**Are tariffs a threat or benign?**
As we sharpen our pencils or fill in our spreadsheets with guesses at the independent variables, and try to predict the future, let's not obsess too much about the independence and credibility of central banks and put too much of the blame on developing tariff policy. I'm not prepared to argue the tariffs are unimportant. In the short run, they could create some difficult decisions for monetary policy agencies. And beyond tariffs, let’s remember that the collapse of Bretton Woods and the installation of fluctuations exchange rates also did usher in an age of higher inflation. Exchange rate changes, like tariffs, are not formally inflationary but they do change (like tariffs) relative prices. There is more discussion about inflation and exchange rates than about inflation and tariffs mostly because exchange rate fluctuations became more pronounced after 1971 while tariffs were mostly being cut in periodic multilateral rounds until recently. The absence of a literature on tariffs and inflation is an artifact of economic circumstance.

**The road ahead and the traffic around us**
Whatever the ‘threat’ of tariffs, the trends in money supply are more fundamental and certainly something you don't want to lose track of although many people do lose track of money supply these days. Central banks have certainly downgraded money supply. In the U.S., relevant money supply data are released much less frequently and the data we are provided with is much less thorough than it used to be. Central banks want to be known for their interest rate policy and inflation targeting. A strange desire after they have been so unsuccessful at hitting those targets over the past four years… But of course, there are policy tools to focus on: the official interest rate the central bank implements, the guidance it gives us about the future, the way that markets price themselves relative to the central bank rate which affects the way interest rates work their way into the economy… And then, of course, there is the issue of what inflation is, and what it will be, and what assumptions monetary policy makes when it evaluates itself to decide how it's going to be presented to the public by the central bank. All of this leaves a lot of room for discretion and slippage and what monetary policy really is. It puts the central bank in a position to - as always - occupy the bully pulpit and to steer the discussion in the direction they want which inevitably is the direction that justifies the kind of policy they've decided to run. Now is a good time to pull yourself out of that cycle to step back and to look objectively at what's happening with money supply and policy and to think about what happens next. Policy is not completely about politics after all. Tariffs are not the keystone to build an outlook for the future.

Global Money Supply Begins to Show Divergences; Watch the Green Line and Don’t Get Sleepy

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Sales of new single-family home sales improved 0.6% (-6.6% y/y) in June to 627,000 (SAAR) after falling 11.6% to an unrevised 623,000 in May, and rising to 705,000 in April, revised from 722,000 according to the U.S. Census Bureau. The Action Economics Forecast Survey expected sales of 650,000 in June. The sales gain occurred as the average 30-year fixed-rate mortgage held steady m/m at an average 6.82% in June, according to Freddie Mac. So far in July the 30-year mortgage rate has fallen to an average 6.71% and compares to a low of 6.18% averaged in September of last year.

By region, new home sales varied across the country last month. Sales of new homes in the Midwest rose 6.3% (9.0% y/y) to 85,000, after falling 3.6% during May. In the South, new home sales rebounded 5.1% (-4.4% y/y) to 390,000, following a 15.1% May decline. Offsetting these gains, sales of new homes in the West weakened 8.4% (-14.4% y/y) to 131,000, after declining 8.3% in May. Showing even more weakness, new home sales in the Northeast were off 27.6% last month (-34.4% y/y) to 21,000, after holding steady in May.

The median sales price of a new home declined 4.9% (-2.9% y/y) to $401,800 (NSA) in June after rising 2.3% to $422,700 in May. New home prices were 12.7% below the all-time peak of $460,300 in October 2022. The average sales price of a new home fell 2.1% (+1.1% y/y) to $501,000 in June, following a 0.4% May decline. The average price was 7.4% below a high of $541,200 in July 2022. These sales price data are not seasonally adjusted.

The number of unsold new homes on the market rose 1.2% (8.5% y/y) to 511,000 (SA) in June, after a 1.0% May increase. The seasonally adjusted months' supply of new homes for sale rose to 9.8 months in June, the highest level since September 2022, after increasing to 9.7 months in May. The latest reading remained above a low of 6.9 months in May 2023.

The median number of months a new home stayed on the market increased to 2.8 months in June, remaining above a June 2024 low of 2.1 months. The latest number stood well above its record low of 1.5 months in both September and October of 2022, but remained below a high of 5.1 months in March 2021. These figures date back to January 1975.

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

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- Small gain in sales follows sharp decline.
- Sales are mixed throughout the country.
- Median sales price is lowest since November.

U.S. New Home Sales Improve Slightly in June; Prices Decline Sharply

Winnie Tapasanun

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The Kansas City Fed manufacturing composite index inched up to 1 in July from -2 in June and -3 in May, the July 2025 Manufacturing Survey by the Federal Reserve Bank of Kansas City showed, indicating Tenth District manufacturing activity increased slightly this month. The headline index was last positive in September 2022 (with a reading of 6). The July index was up from -11 in July 2024 but well below a high of 30 in March 2022. “The increase from last month was driven by nondurable manufacturing, while durable manufacturing activity continued to fall,” the Kansas City Fed reported.

The ISM-adjusted index calculated by Haver Analytics rebounded to 50.2 (NSA) in July after a 1.3-point decline to 49.8 in June, indicating expansion in factory activity for the fourth time in five months. The latest ISM-adjusted figure was above a low of 43.7 in July 2024 but well below a record-high 68.9 in March 2022.

In the latest survey, the new orders index rose to 2 in July, the first positive reading and the highest since July 2022, after a seven-point increase to -2 in June. Thirty percent of respondents (NSA) reported orders gains in July while 33% reported declines. The production index, however, fell to -3 this month after a 15-point rebound to 5 in June; these readings were well below a high of 35 in March 2022. The shipments index decreased to 3 in July after an 18-point jump to 8 in June; thus, having remained down from a peak of 39 in March 2022.

The raw materials inventory index rose to 8 in July following a 12-point drop to -9 in June, registering the second positive reading in three months and the highest since September 2022. These figures were above a low of -17 in July 2024 but well below a high of 28 in March 2022. The order backlog index, having remained negative since October 2022, plunged to -30 in July, the lowest reading since September 2024, after a 12-point rebound to -11 in June; these numbers were significantly below a record-high 43 in July 2021. Meanwhile, the supplier delivery time index rose to 7 in July, the highest reading since April, after rising to 5 in June; these readings remained well below a high of 51 in March 2022.

On the labor front, the employment index declined to -11 in July after an 11-point drop to -8 in June, posting the fifth negative reading in six months and the lowest in three months. The index was down from a high of 30 in May 2022. A lessened 13% of respondents (NSA) reported increases in the number of employees in July while a steady 23% reported decreases.

On the pricing front, the prices received index for finished products fell to 18 in July following a four-point increase to 21 in June. These readings, while up from a low of -5 in September 2024, remained well below a high of 50 in June 2022 and a record-high 63 in August 2021. Twenty-one percent of respondents (NSA) reported higher prices received in July while 6% reported price declines. The prices paid index for raw materials fell to 47 this month after a 17-point jump to 51 in June. These figures were up from a low of -1 in October 2023 but significantly down from a high of 72 in April 2022 and a record-high 85 in October 2021.

Expectations for future activity continued to stay positive, with activity in most categories expected to gain. The expectations index for six months ahead was at 8 in July, slightly down from 9 in June and up from 5 in May. The expectations indexes for raw materials inventories (8) and supplier delivery time (5) rose in July, while those for production (14), shipments (11), new orders (8), and employment (4) fell for the month; nevertheless, they remained in positive territory. To the negative side, the expectations indexes for new orders for exports (-8), backlog of orders (-5), and capital expenditures (-4) registered negative readings. The expectations index for raw materials prices held steady at a still-high 64 in July compared to a low of 13 in June 2023; the index for finished goods prices was unchanged at 48 vs. a low of 15 in October 2023.

The latest survey was conducted for a six-day period from July 16-21, 2025 and included 105 responses from plants in Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico, and western Missouri.

The series dates back to July 2001. The diffusion indexes are calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Data for the Kansas City Fed Survey can be found in Haver’s **SURVEYS** database.

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- July Composite Index at 1 reflects positive numbers in materials inventories (8) and new orders (2), while employment (-11) and production (-3) post negative readings.
- Price growth cools somewhat, w/ prices paid down 4 pts. to 47 and prices received down 3 pts. to 18.
- Expectations for future activity, while edging down to 8, remain in positive territory.

Kansas City Fed Manufacturing Index Rises in July; First Positive Reading Since Sept. ’22

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The National Activity Index (CFNAI), reported by the Federal Reserve Bank of Chicago, stood at -0.10 in June following a reading of -0.16 in May, revised from -0.28, and -0.41 in April, revised from -0.36.

The index's three-month moving average, which smooths out the m/m volatility in the index, fell to -0.22 last month from -0.14 in May. This reading compares to its zero value, which equals trend real GDP growth. Research at the Chicago Fed indicates that an average reading of -0.70 or below is consistent with the economy being in a recession.

The June reading reflected a negative contribution from each of the four component series. The Production & Income index of -0.01 compared to -0.06 in May and -0.19 in April. The Personal Consumption & Housing contribution of -0.01 in June compared to -0.10 in May and -0.02 in April. The Sales, Orders & Inventories index series of -0.04 in June compared to +0.01 in May and -0.18 in April. The Employment, Unemployment & Hours index weakened to -0.05 last month after contributing -0.01 in May and -0.02 in April.

The CFNAI Diffusion Index, which measures the breadth of change in the component series and is also a three-month moving average, stood at -0.37 in June compared to -0.32 in May and -0.08 in April. A reading of zero indicates that all of the indicators are growing at their long-term average. Thirty-seven of the 85 individual data series made positive contributions to the total index in June while 48 contributed negatively.

The CFNAI is a weighted average of 85 indicators of national economic activity. It is constructed to have an average value of zero and a standard deviation of one. Since economic activity tends toward trend growth rate over time, a positive index reading corresponds to growth above trend and a negative index reading corresponds to growth below trend.

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

- Latest reading improves versus May.
- Each of four components are negative.
- Three-month trend weakens.

Economy in Brief: 2008

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