Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040924b.jpg" width="353">
Volatile orders for aircraft &amp; parts dominated the durable goods figures again in August as a 35.1% m/m decline followed a 37.3% July surge. This pulled total durable goods orders down 0.5% last month following a 1.8% jump in July that was little revised. Consensus expectations had been for no change in total August orders. Less aircraft durable orders were quite strong, up 2.5% (11.3% y/y) following a 0.4% decline in July. 
Commercial aircraft orders retraced nearly all of the doubling of bookings in July.
The volatility in aircraft orders pulled total nondefense capital goods orders down 7.4%. Less aircraft, capital goods orders still fell 0.5% (11.2% y/y), the fourth monthly decline in the last five.
Orders for computers &amp; electronic products recouped most of a 4.3% decline in July with a 4.1% (+4.3% y/y) August rise. Computer orders only gained back 0.8% (0.3% y/y) of the 5.2% July plunge but orders for communications equipment added 6.8% (1.3% y/y) to the 5.3% July strength. Orders for electrical equipment, appliance &amp; components rose 1.8% (9.2% y/y) after a 6.7% spike in July. Machinery orders were unchanged (17.5% y/y) following moderate gains in the prior three months.
&quot;The Software Patent Experiment&quot; from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.phil.frb.org/files/br/brq304rh.pdf"> here</a>.
During the last ten years there has been an 80% correlation between the y/y change in real nonresidential fixed investment in equipment &amp; software and the change in orders for nondefense capital goods. The correlation with shipments has been 93%.
Shipments of durable goods jumped 1.7% (13.4% y/y) following a 0.4% July rise. Shipments excluding the transportation sector, which were pumped by the motor vehicle and the aircraft sectors, rose 0.7% (+14.9% y/y).
Durable inventories rose 0.6% (5.1% y/y) following an upwardly revised 1.1% July spike.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED0101.HTM"> NAICS Classification</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>
</tr>
</thead>
<tbody>
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<td class="firstcol">Durable Goods Orders</td>
<td>-0.5%</td>
<td>1.8%</td>
<td>11.7%</td>
<td>2.6%</td>
<td>-1.7%</td>
<td>-10.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non-defense Capital Goods</td>
<td>-7.4%</td>
<td>9.3%</td>
<td>13.0%</td>
<td>5.6%</td>
<td>-7.2%</td>
<td>-15.5%</td>
</tr>
</tbody>
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Volatile orders for aircraft & parts dominated the durable goods figures again in August as a 35.1% m/m decline followed a 37.3% July surge. This pulled total durable goods orders down 0.5% last month following a 1.8% jump in July [...]

U.S. Durable Goods Orders Down: Aircraft Orders Quite Volatile

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040924b.jpg" width="353">
Volatile orders for aircraft &amp; parts dominated the durable goods figures again in August as a 35.1% m/m decline followed a 37.3% July surge. This pulled total durable goods orders down 0.5% last month following a 1.8% jump in July that was little revised. Consensus expectations had been for no change in total August orders. Less aircraft durable orders were quite strong, up 2.5% (11.3% y/y) following a 0.4% decline in July. 
Commercial aircraft orders retraced nearly all of the doubling of bookings in July.
The volatility in aircraft orders pulled total nondefense capital goods orders down 7.4%. Less aircraft, capital goods orders still fell 0.5% (11.2% y/y), the fourth monthly decline in the last five.
Orders for computers &amp; electronic products recouped most of a 4.3% decline in July with a 4.1% (+4.3% y/y) August rise. Computer orders only gained back 0.8% (0.3% y/y) of the 5.2% July plunge but orders for communications equipment added 6.8% (1.3% y/y) to the 5.3% July strength. Orders for electrical equipment, appliance &amp; components rose 1.8% (9.2% y/y) after a 6.7% spike in July. Machinery orders were unchanged (17.5% y/y) following moderate gains in the prior three months.
&quot;The Software Patent Experiment&quot; from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.phil.frb.org/files/br/brq304rh.pdf"> here</a>.
During the last ten years there has been an 80% correlation between the y/y change in real nonresidential fixed investment in equipment &amp; software and the change in orders for nondefense capital goods. The correlation with shipments has been 93%.
Shipments of durable goods jumped 1.7% (13.4% y/y) following a 0.4% July rise. Shipments excluding the transportation sector, which were pumped by the motor vehicle and the aircraft sectors, rose 0.7% (+14.9% y/y).
Durable inventories rose 0.6% (5.1% y/y) following an upwardly revised 1.1% July spike.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED0101.HTM"> NAICS Classification</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>
</tr>
</thead>
<tbody>
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<td class="firstcol">Durable Goods Orders</td>
<td>-0.5%</td>
<td>1.8%</td>
<td>11.7%</td>
<td>2.6%</td>
<td>-1.7%</td>
<td>-10.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non-defense Capital Goods</td>
<td>-7.4%</td>
<td>9.3%</td>
<td>13.0%</td>
<td>5.6%</td>
<td>-7.2%</td>
<td>-15.5%</td>
</tr>
</tbody>
</table>
Mass Layoffs Plunge 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 24, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040924a.jpg" width="353">
Mass layoffs in the US as reported to the Bureau of Labor Statistics plunged 61.4% in August to the lowest level since August 2000. The decline, however, followed sharp increases in the prior two months.
The number of firms reporting mass layoffs in August fell to 809 from 2,094 in July.
These layoffs generated 69,033 (-48.4% y/y) initial claims for unemployment insurance, down a sharp 72.8% m/m.
Since the series inception in 1995 there has been a (negative) 45% correlation between the number of initial claims generated by mass layoffs and the one month change in non-farm payrolls.
The Mass Layoff Statistics (MLS) program collects reports on mass layoff actions that result in workers being separated from their jobs. Monthly mass layoff numbers are from establishments which have at least 50 initial claims for unemployment insurance (UI) filed against them during a 5-week period. Extended mass layoff numbers (issued quarterly) are from a subset of such establishments--where private sector non-farm employers indicate that 50 or more workers were separated from their jobs for at least 31 days.
Creative destruction and heightened job uncertainty are explored in this paper from the Federal Reserve Bank of Philadelphia titled <a href="http://www.phil.frb.org/files/br/brq304ln.pdf"> &quot;CEOs, Clerks, Computers, and the Rise of Competition in the Late 20th Century.&quot;</a>

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF10/@EF1001/@EF1001.HTM"> Mass Layoffs</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>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Number of Events: All Industries</td>
<td>809</td>
<td>2,094</td>
<td>-35.7%</td>
<td>18,963</td>
<td>20,277</td>
<td>21,467</td>
</tr>
<tr>
<td class="firstcol">Numbers of Persons Filing Initial Unemployment Insurance Claim: All Industries</td>
<td>69,033</td>
<td>253,929</td>
<td>-48.4%</td>
<td>1,888,926</td>
<td>2,245,051</td>
<td>2,514,862</td>
</tr>
</tbody>
</table>
U.S. Existing Home Sales Fell A Second Month 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 24, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040924c.jpg" width="353">
Existing single family home sales fell 2.7% in August to 6.54M following an unrevised 2.9% drop in July. Consensus expectations had been for a lesser decline to 6.72M.
The figures reflect closings of home sales in earlier months.
Sales fell across the nation except in the Northeast where they were unchanged m/m (+1/4% y/y).
The median price of an existing home fell slightly for the second month to $190,100 (+7.3% y/y).
The latest release from the National Association of Realtors is available <a href="http://www.realtor.org/rmodaily.nsf/pages/News2004092401"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E905/@E90501/@E90501.HTM"> Existing Home Sales (000, AR)</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>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Existing Single-Family</td>
<td>&nbsp;6,540</td>
<td>&nbsp;6,720</td>
<td>2.3%</td>
<td>6,098</td>
<td>5,593</td>
<td>5,290</td>
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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/040923e.jpg" width="353">
Today, Statistics New Zealand published that nation&#39;s second quarter current account. As with South Africa yesterday, there was notable deterioration. In New Zealand, though, both trade and income balances contributed to the larger deficit. At NZ$2,074 million, the current account had only the third deficit larger than NZ$2.0 billion in the 17-year history of this balance of payments compilation.
The balance on goods and services trade, often in sizable surplus, shrank to nearly zero in Q2. A surge in goods imports of 11.5% was the main force, illustrated in the first graph; the country&#39;s separate trade data indicate that, as in many other countries, &quot;mineral fuels&quot; imports were up sharply. At the same time, exports of goods were far from weak, with a gain of 7.3% (quarterly percent changes), extending their recovery for a third quarter.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040923f.jpg" width="353">
Another major factor in New Zealand&#39;s current account is the balance on income and transfers. This deficit of $2.1 billion in Q2 is the largest ever. Foreign investment is important in New Zealand, and its expansion last year is now leading to more outflows of investment income this year, as seen in the second graph. 

<table border="0" cellspacing="0" width="100%">
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<tr>
<th scope="col" class="firstcol">Seasonally Adjusted, Million NZ$</th>
<th scope="col">Q2 2004</th>
<th scope="col">Q1 2004</th>
<th scope="col">Q4 2003</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">Current Account Balance </td>
<td>-2074</td>
<td>-1520</td>
<td>-1225</td>
<td>-5624</td>
<td>-3949</td>
<td>-2962</td>
</tr>
<tr>
<td class="firstcol">Balance on Goods &amp; Services</td>
<td>+30</td>
<td>+267</td>
<td>+161</td>
<td>+842</td>
<td>+2168</td>
<td>+3716</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports of Goods -- %Chg</td>
<td>7.3%</td>
<td>5.8%</td>
<td>2.9%</td>
<td>-7.6%</td>
<td>-5.4%</td>
<td>11.1%</td>
</tr>
<tr>
<td class="firstcol">Imports of Goods -- %Chg</td>
<td>11.5%</td>
<td>3.0%</td>
<td>0.7%</td>
<td>-1.9%</td>
<td>1.8%</td>
<td>4.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Balance on Income &amp; Current Transfers</td>
<td>-2104</td>
<td>-1786</td>
<td>-1386</td>
<td>-6466</td>
<td>-6117</td>
<td>-6677</td>
</tr>
</tbody>
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Today, Statistics New Zealand published that nation's second quarter current account. As with South Africa yesterday, there was notable deterioration. In New Zealand, though, both trade and income balances contributed to the larger [...]

New Zealand Current Account Deteriorates in Q2

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040923d.jpg" width="353">
The Chicago Fed National Activity Index (CFNAI) fell last month to 0.19 following a sharp improvement in July.
The three-month moving average of the CFNAI also fell to its lowest level of the year.
A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth.
During the last twenty years there has been a 74% correlation between the level of the CFNAI and q/q growth in real GDP.
The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production and income, the labor market, personal consumption and housing, manufacturing and trade sales, and inventories &amp; orders.
A recent speech by Fed Governor Edward M. Gramlich titled &quot;Oil Shocks and Monetary Policy&quot; is available <a href="http://www.federalreserve.gov/boarddocs/speeches/2004/20040916/default.htm"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM"> Chicago Fed</a></th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">Aug &#39;03</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>0.19</td>
<td>0.53</td>
<td>-0.44</td>
<td>-0.11</td>
<td>-0.40</td>
<td>-1.19</td>
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The Chicago Fed National Activity Index (CFNAI) fell last month to 0.19 following a sharp improvement in July. The three-month moving average of the CFNAI also fell to its lowest level of the year. A zero value of the CFNAI indicates [...]

Chicago Fed Nat'l Activity Index Lower in August

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040923c.jpg" width="353">
The Conference Board reported that the Composite Index of Leading Economic Indicators for August fell 0.3%, the third consecutive monthly decline. A 0.1% decline had been the Consensus expectation and July&#39;s decline was unrevised.
Among the 10 components only 30% rose over a one month span. A narrowing of the yield curve and lower building permits had the largest negative influences. Over a six month span 70% of the leaders rose.
The leading index is based on eight previously reported economic data series. Two series, orders for consumer goods and orders for capital goods, are estimated.
A 1997 article from the Federal Reserve Bank of St. Louis titled &quot;Strengthening the Case for the Yield Curve as a Predictor of U.S. Recessions&quot; can be found <a href="http://research.stlouisfed.org/publications/review/97/03/9703md.pdf"> here</a>.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040923b.jpg" width="353">
The coincident indicators rose 0.2% and has not declined m/m since April of last year. During the last ten years there has been an 82% correlation between the six month growth in the coincident indicators and two quarter growth in real GDP.
The lagging indicators fell 0.1% and the ratio of the coincident to the lagging indicators, a measure of how the economy is performing relative to its excess, rose for the first month in three.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM"> Business Cycle Indicators</a></th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">6-Month Growth</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">Leading</td>
<td>-0.3%</td>
<td>-0.3%</td>
<td>2.8%</td>
<td>1.3%</td>
<td>2.2%</td>
<td>-0.8%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.4%</td>
<td>0.4%</td>
<td>-0.5%</td>
<td>-0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.1%</td>
<td>0.6%</td>
<td>-1.3%</td>
<td>-2.2%</td>
<td>-2.8%</td>
<td>-1.4%</td>
</tr>
</tbody>
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The Conference Board reported that the Composite Index of Leading Economic Indicators for August fell 0.3%, the third consecutive monthly decline. A 0.1% decline had been the Consensus expectation and July's decline was unrevised. [...]

Leading Indicators Down Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040923a.jpg" width="353">
Initial claims for unemployment insurance jumped 14,000 last week to 350,000 after an upwardly revised 18,000 gain the prior week. Consensus expectations had been for 335,000 claims.
The US Labor Department indicated that last week&#39;s claims number primarily reflected hurricanes Charley &amp; Frances. Hurricane Ivan has yet to be reflected in the claims figures.
The latest figure is for the September survey period for nonfarm payrolls and initial claims were 17,000 (5.1%) higher than in the August period.
The 4-week moving average of initial claims was stable at 341,000 (-15.5% y/y). During the last ten years there has been an 81% (negative) correlation between the monthly average of initial claims and the y/y change in payroll employment.
Continuing claims for unemployment insurance rose 5,000 following a deepened 9,000 decline the week prior.
The insured rate of unemployment remained at 2.3%, where it has hovered since the end of April.
&quot;Labor&#39;s Share&quot; from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/net/20040801/cover.pdf"> here</a>.

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<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM"> Unemployment Insurance (000s)</a></th>
<th scope="col"> 09/18/04</th>
<th scope="col"> 09/11/04</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">Initial Claims</td>
<td>350</td>
<td>336</td>
<td>-9.6%</td>
<td>399</td>
<td>403</td>
<td>403</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,883</td>
<td>-19.2%</td>
<td>3,516</td>
<td>3,564</td>
<td>2974</td>
</tr>
</tbody>
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Initial claims for unemployment insurance jumped 14,000 last week to 350,000 after an upwardly revised 18,000 gain the prior week. Consensus expectations had been for 335,000 claims. The US Labor Department indicated that last week's [...]

Hurricanes Lifted Claims for Jobless Insurance

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040923a.jpg" width="353">
Initial claims for unemployment insurance jumped 14,000 last week to 350,000 after an upwardly revised 18,000 gain the prior week. Consensus expectations had been for 335,000 claims.
The US Labor Department indicated that last week&#39;s claims number primarily reflected hurricanes Charley &amp; Frances. Hurricane Ivan has yet to be reflected in the claims figures.
The latest figure is for the September survey period for nonfarm payrolls and initial claims were 17,000 (5.1%) higher than in the August period.
The 4-week moving average of initial claims was stable at 341,000 (-15.5% y/y). During the last ten years there has been an 81% (negative) correlation between the monthly average of initial claims and the y/y change in payroll employment.
Continuing claims for unemployment insurance rose 5,000 following a deepened 9,000 decline the week prior.
The insured rate of unemployment remained at 2.3%, where it has hovered since the end of April.
&quot;Labor&#39;s Share&quot; from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/net/20040801/cover.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/WEEKLY/@W5/@W507/@W507.HTM"> Unemployment Insurance (000s)</a></th>
<th scope="col"> 09/18/04</th>
<th scope="col"> 09/11/04</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">Initial Claims</td>
<td>350</td>
<td>336</td>
<td>-9.6%</td>
<td>399</td>
<td>403</td>
<td>403</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,883</td>
<td>-19.2%</td>
<td>3,516</td>
<td>3,564</td>
<td>2974</td>
</tr>
</tbody>
</table>
Leading Indicators Down Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 23, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040923c.jpg" width="353">
The Conference Board reported that the Composite Index of Leading Economic Indicators for August fell 0.3%, the third consecutive monthly decline. A 0.1% decline had been the Consensus expectation and July&#39;s decline was unrevised.
Among the 10 components only 30% rose over a one month span. A narrowing of the yield curve and lower building permits had the largest negative influences. Over a six month span 70% of the leaders rose.
The leading index is based on eight previously reported economic data series. Two series, orders for consumer goods and orders for capital goods, are estimated.
A 1997 article from the Federal Reserve Bank of St. Louis titled &quot;Strengthening the Case for the Yield Curve as a Predictor of U.S. Recessions&quot; can be found <a href="http://research.stlouisfed.org/publications/review/97/03/9703md.pdf"> here</a>.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040923b.jpg" width="353">
The coincident indicators rose 0.2% and has not declined m/m since April of last year. During the last ten years there has been an 82% correlation between the six month growth in the coincident indicators and two quarter growth in real GDP.
The lagging indicators fell 0.1% and the ratio of the coincident to the lagging indicators, a measure of how the economy is performing relative to its excess, rose for the first month in three.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<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/BCI/BCI.HTM"> Business Cycle Indicators</a></th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">6-Month Growth</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">Leading</td>
<td>-0.3%</td>
<td>-0.3%</td>
<td>2.8%</td>
<td>1.3%</td>
<td>2.2%</td>
<td>-0.8%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.4%</td>
<td>0.4%</td>
<td>-0.5%</td>
<td>-0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.1%</td>
<td>0.6%</td>
<td>-1.3%</td>
<td>-2.2%</td>
<td>-2.8%</td>
<td>-1.4%</td>
</tr>
</tbody>
</table>
Chicago Fed Nat'l Activity Index Lower in August 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 23, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040923d.jpg" width="353">
The Chicago Fed National Activity Index (CFNAI) fell last month to 0.19 following a sharp improvement in July.
The three-month moving average of the CFNAI also fell to its lowest level of the year.
A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth.
During the last twenty years there has been a 74% correlation between the level of the CFNAI and q/q growth in real GDP.
The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production and income, the labor market, personal consumption and housing, manufacturing and trade sales, and inventories &amp; orders.
A recent speech by Fed Governor Edward M. Gramlich titled &quot;Oil Shocks and Monetary Policy&quot; is available <a href="http://www.federalreserve.gov/boarddocs/speeches/2004/20040916/default.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM"> Chicago Fed</a></th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">Aug &#39;03</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>0.19</td>
<td>0.53</td>
<td>-0.44</td>
<td>-0.11</td>
<td>-0.40</td>
<td>-1.19</td>
</tr>
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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040922c.jpg" width="353">
South Africa experienced its largest current account deficit ever and its first trade deficit in 22 years in the second quarter. Data reported today by the Reserve Bank of South Africa show the current account deficit at 49.3 billion Rand, equal to 3.8% of GDP. The trade accounts had a deficit of 5.5 billion Rand, the first since the second quarter of 1982. Gold is, of course, a major element in South Africa&#39;s exports, and the trade deficit excluding gold was 38.1 billion Rand. Trade deficits on this basis are frequent, but this was still the largest of those by far, compared with the previous record 25.0 billion Rand in Q4 1998.
South Africa also generally runs deficits in the services and income accounts, so such deficits in Q2 are not surprising. Transfers, however, were much more negative than normal as well, adding notably to the total current account shortfall.
The negative trade performance was not the fault of exports. These grew 8.1% in Q2, and those excluding gold were stronger still, with a 9.5% gain. But imports surged 18.6%. Commentary from the Reserve Bank of South Africa indicates that petroleum was the main culprit. The South African navy also acquired a new ship, an individual transaction large enough to impact the nation&#39;s overall trade picture, at least for this quarter.
At the same time, the accompanying capital flow data show that such a large current account was more than covered by portfolio and &quot;other&quot; net investment flows. Moreover, the trade deficit didn&#39;t seem to impart much harm to South Africa GDP. It grew 3.9% (annual rate) in Q2, faster than the 3.1% in Q1. A large component of that growth came in inventory; private consumption and capital investment also expanded. So this one-quarter plunge in the current account balance doesn&#39;t appear to suggest any fundamental deterioration in South Africa&#39;s general economic health. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Seasonally Adjusted Annual Rates -- Billions.Rand</th>
<th scope="col">Q2 2004</th>
<th scope="col">Q1 2004</th>
<th scope="col">Q4 2003</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">Current Account Balance </td>
<td>-49.3</td>
<td>-14.4</td>
<td>-22.1</td>
<td>-10.1</td>
<td>+6.7</td>
<td>+0.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % of GDP</td>
<td>-3.8</td>
<td>-1.1</td>
<td>-1.8</td>
<td>-0.8</td>
<td>+0.6</td>
<td>+0.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports -- % Chg</td>
<td>9.5</td>
<td>5.1</td>
<td>-5.4</td>
<td>-10.6</td>
<td>21.8</td>
<td>21.1</td>
</tr>
<tr>
<td class="firstcol">Imports -- % Chg</td>
<td>18.6</td>
<td>1.3</td>
<td>2.0</td>
<td>-6.4</td>
<td>26.9</td>
<td>16.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Balance on Goods</td>
<td>-5.5</td>
<td>+21.0</td>
<td>+14.3</td>
<td>+28.6</td>
<td>+48.9</td>
<td>+43.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; ex Net Gold Exports</td>
<td>-38.1</td>
<td>-12.5</td>
<td>-21.6</td>
<td>+6.7</td>
<td>+5.8</td>
<td>+14.0</td>
</tr>
</tbody>
</table>
</body>
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South Africa experienced its largest current account deficit ever and its first trade deficit in 22 years in the second quarter. Data reported today by the Reserve Bank of South Africa show the current account deficit at 49.3 billion [...]

South Africa Current Account Has Record Deficit in Q2

Reaccelerating goods price inflation along with sticky services inflation clouds the outlook

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

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

Our global data offering is unparalleled in terms of coverage, quality, and organization. We offer 290+ databases from 2500 government and private sources, a wealth of key survey and forecast data covering the world’s economies, and a robust offering of archive databases that drive machine learning for big data applications.

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Andrew Cates

**The US labour market**
The latest data highlight a growing sense of fragility in the US labour market. The unemployment rate, while still relatively low by historical standards, has been edging higher through the course of this year. More telling, however, is the signal from this week’s consumer confidence survey from Conference Board and specifically the labour market differential — the gap between the share of consumers saying jobs are plentiful versus those saying jobs are hard to get. That balance has narrowed sharply, moving back toward levels historically associated with softer labour demand and rising unemployment.

250828Z1.jpg

**Goods and services inflation** 
Haver’s breakdown of goods and services CPI inflation in the advanced economies highlights where fresh risks are emerging. Goods inflation, which had been receding sharply after the pandemic supply shocks, has recently shown signs of firming again. Some of this probably reflects the impact of US tariff policies, which are raising import costs and putting renewed upward pressure on traded goods prices. While services inflation remains the more stubborn component in most advanced economies, the risk is that tariffs could reintroduce stickiness into goods prices, slowing the overall disinflation process.

250828Z2.jpg

**China, Europe and US trade policy**
A consequence of US tariff policies has been a sharp contraction in Chinese exports to the US market, with much of the surplus redirected elsewhere. Europe in particular has recorded near double-digit import growth in recent months, raising concerns that Beijing is deflecting its industrial overcapacity problem rather than resolving it, effectively transferring the pressure onto trading partners. China’s authorities, however, have begun to push back, introducing measures to curb excess supply and rein in so-called “involution,” including clampdowns on price wars across several industries.

250828Z3.jpg

**China’s excess capacity and Europe**
A closer look at Europe–China trade shows that electric vehicles remain a key flashpoint. Import volumes from China have continued to rise even as per-unit prices fall sharply from a year ago —evidence suggesting that industrial overcapacity persists, with low-cost Chinese EVs increasingly challenging European automakers. The surge has carried on despite EU tariffs of up to 45% on battery EVs, as Chinese producers have adapted by pushing plug-in hybrids and expanding onshore production in Europe to bypass duties and defend market share.

250828Z4.jpg

**Wage growth in the US and Europe** 
Turning back to inflation dynamics, the UK stands out for its persistent wage pressures. While posted wage growth has cooled across the US and euro area, the UK measure has remained elevated at around 6% year-on-year, well above pre-pandemic norms. This stickiness reflects a still-tight labour market in key service sectors, even as broader activity has slowed and unemployment has edged higher. For the Bank of England, it underscores the dilemma: headline inflation is easing, but underlying pay growth risks keeping services inflation uncomfortably high, complicating the timing and scale of policy easing.

250828Z5.jpg

**The UK economy**
The UK’s net international investment position has deteriorated noticeably in recent years, with both direct investment and portfolio flows showing persistent weakness. The latest data underline how net FDI has turned increasingly negative, while the portfolio investment balance has also eroded, leaving the UK more reliant on volatile short-term funding sources. This deterioration comes against a backdrop of heightened investor unease about the riskiness of UK debt markets, where elevated gilt yields and rising debt-servicing costs have amplified concerns over fiscal sustainability. Taken together, these trends underscore the vulnerability of the UK’s external position at a time when global capital is arguably proving more selective and risk sensitive.

250828Z6.jpg

Global markets have continued to rally into late summer, buoyed by AI optimism, dovish signals from central bankers at Jackson Hole, and expectations of easier policy ahead. Yet beneath the surface, risks to the world economy are accumulating. In the US, labour market indicators point to softening conditions (chart 1), while tariff-driven pressures are beginning to push goods prices higher (chart 2). Global trade flows are being reshaped by US policy, with China’s excess capacity increasingly diverted toward Europe, most visibly through surging exports of electric vehicles (EVs) (charts 3 and 4). At the same time, wage growth remains stubbornly elevated in the UK, complicating disinflation (chart 5), while concerns are mounting over the country’s external vulnerabilities as net FDI and portfolio positions weaken against the backdrop of jittery debt markets (chart 6). Together, these dynamics highlight the tension between buoyant market performance and a global economy still grappling with structural fragilities.

Charts of the Week: Riskbusters

250828N8.jpg

250828C8.jpg

Real GDP grew 3.3% (SAAR) during the second quarter of 2025, revised from a 3.0% gain reported initially. The increase followed an unrevised 0.5% decline in Q1. A 3.1% rise had been expected in the Action Economics Forecast Survey. Growth during the last four quarters of 2.1% compared to 2.0% y/y in Q1, and remained below its most recent high of 3.2% in Q4 2023.

After-tax corporate profits without IVA & CCA adjustment increased 1.4% (7.0% y/y) last quarter after easing 0.8% in Q1. Before-tax earnings with IVA & CCA rose 1.7% (4.3% y/y) after falling 2.3% in Q1. Financial sector earnings rose 1.4% (15.3% y/y) after rising 2.3% in Q1. Nonfinancial corporate profits rose 2.2% (2.5% y/y) after falling 2.5% in Q1. Earnings from abroad eased 0.7% (-0.4% y/y) following a 7.3% Q1 decline.

Foreign trade balance improvement added 4.95 percentage points to growth last quarter after subtracting 4.61 percentage points in Q1. Imports fell 29.8% (+1.3% y/y) after surging 38.0% in Q1. Exports declined 1.3% (+2.0% y/y) after improving 0.4% in Q1. Inventories subtracted 3.29 percentage points from growth after adding 2.59 percentage point to Q1 growth.

Real final sales to domestic purchasers grew 1.6% (2.4% y/y), revised from 1.1%, in Q2 after rising 1.5% in Q1. Personal consumption expenditures rose 1.6% (2.4% y/y), revised from 1.4%, following a 0.5% gain. Durable goods spending rose 2.6% (4.6% y/y) after falling 3.7% in Q1. Motor vehicle purchases strengthened 11.7% (6.7% y/y) after declining 11.2% in Q1. Spending on home furnishings & appliances weakened 2.1% (+3.5% y/y) following a 1.5% rise. Recreational goods & vehicle outlays fell 3.5% (+4.3% y/y) last quarter after a 0.4% Q1 gain.

Nondurable goods outlays in constant dollars rose 2.3% (3.0% y/y) following 2.1% growth in Q1. Apparel spending increased 5.4% (4.8% y/y) following a 7.0% rise. Food & beverage buying gained 0.3% (1.5% y/y) after a 1.0% increase. Gasoline & fuel oil purchases weakened 1.4% (+0.9% y/y) after gaining 3.6% in Q1.

Real spending on services increased 1.2% (1.9% y/y) after a 0.6% gain. Outlays on housing & utilities eased 0.4% (+1.1% y/y) after rising 2.9% in Q1. Health care expenditures rose 4.2% (4.8% y/y) after a 3.1% increase. Transportation outlays declined 2.9% (-0.6% y/y) after a 1.4% rise, while recreation spending rose 3.6% (0.7% y/y) following a 5.1% decline. Restaurant & hotel expenditures increased 5.1% (1.9% y/y) after falling 1.8%. Financial services expenditures rose 1.9% (2.3% y/y) following a 0.1% Q1 increase.

Business fixed investment in constant dollars increased 5.7% last quarter (4.2% y/y), revised from 1.9%, following a 10.3% surge in Q1. Expenditures on structures declined 8.9% (-3.4% y/y), after falling 2.4% in Q1. Expenditures on producers’ durable equipment increased 7.4% (7.7% y/y), revised from 4.8%, after surging 23.7% in Q1. Outlays on information processing equipment rose 10.1% (20.1% y/y), revised from 5.5%, after soaring 72.8% during Q1. Industrial equipment investment rose 6.7% (4.0% y/y) after a 4.7% rise. Transportation equipment investment surged 20.4% (6.8% y/y) after a 6.9% gain. Intellectual property product spending rose 12.8% last quarter (5.2% y/y) following a 6.0% rise.

Residential structures investment in real terms declined a little-revised 4.7% (-1.3% y/y), the fourth decline in the last five quarters.

250828O8.jpg

250828P8.jpg

Government spending eased 0.2%, revised from up 0.5% in Q2 (+1.8% y/y) after a 0.6% decline. Federal government expenditures declined 4.7% (+0.7% y/y) after falling 4.6% in Q1. National defense expenditures increased 1.4% (3.0% y/y) after declining 7.1% in Q1. State & local government spending rose 2.6% (2.5% y/y) following a 2.0% rise.

The GDP chain price index rose an unrevised and expected 2.0% last quarter (2.5% y/y) after increasing 3.8% in Q1. The PCE chain price index increased 2.0% (2.4% y/y) following a 3.7% rise. The PCE price index excluding food and energy rose 2.5% (2.7% y/y) after increasing 3.5% in Q1. The business fixed investment price index edged 0.5% lower (+1.1% y/y) after a 0.4% rise. The residential price index rose 1.1% (2.6% y/y) after a 4.1% rise while the government price index increased 3.3% (3.1% y/y) following a 4.6% rise.

The GDP data can be found in Haver’s **USECON** and **USNA** databases. **USNA** contains virtually all of the Bureau of Economic Analysis detail in the national accounts. The Action Economics consensus estimates can be found in **AS1REPNA**.

250828Q8.jpg

250828S8.jpg

- Business investment strengthens & consumer spending firms.
- U.S. business earnings reverse Q1 decline.
- Increase in price index is unrevised, remaining roughly half of Q1’s gain.

U.S. GDP Q2’25 Growth Revised Up; Profits Improve

Sandy Batten

250828J2.jpg

250828K2.jpg

The Kansas City Fed manufacturing composite index was unchanged at 1 in August from July. This was the second consecutive month that the index has been positive, indicating the manufacturing in the KC Fed district continue to inch up in August. Prior to the positive reading in July, the index had been negative for 22 consecutive months. The index’s most recent high was 31 reached in both April 2021 and October 2021. The durable manufacturing sector was mostly flat in August, while nondurable manufacturing activity declined slightly driven by printing activities and paper and chemical manufacturing. 

The August survey was open for a six-day period from August 20-25, 2025 and included 103 responses from plants in Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico, and western Missouri.

The ISM-adjusted index calculated by Haver Analytics rose to 51.1 (NSA) in August from 50.2 in July. This was the fifth reading above the critical 50 level that separates expansion from contraction in the past six months, a further indication of expanding manufacturing activity.

For the major component indexes, the production index was 0 in August, but this was up from -3 in July. The new orders index rose to 5 in August, its highest reading since May 2022, from 2 in July. The shipments index increased to 6 in August from 3 in July. The employment index was 0 in August, but this was up from -11 in July. Also, the average workweek index rebounded to 3 in August after having been in negative territory for the previous four months. Supplier delivery times were unchanged at 7 in August. The elevation of this index since April may indicate some incipient supply-chain disruptions from higher tariffs. In contrast, raw materials inventories fell to -7 in August from 8 in July.

On the inflation front, the prices paid for raw materials index remained elevated but fell to 43 in August from 47 in July and a local high of 51 in June. Forty-four percent of respondents reported an increase in raw materials prices in August, down from 48% in July and 53% in June, while only 4% reported a decrease, down from 5% in July and 6% in June. The prices received for finished products index increased to 21 in August from 18 in July. This index has fluctuated in a range between 17 and 21 for the past four months.

Expectations for future activity remained positive, with the composite index rising to 11 from 8, as firms anticipate an improvement in production and new orders. While expectations have been trending up over the past several months, they remain depressed relative to the recent high reading of 17 last December. Capital expenditures expectations remained in negative territory in August for the second consecutive month but edged up to -3 from -4 in July.

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.

250828L2.jpg

250828M2.jpg

- Index remained (though barely) in positive territory for the second consecutive month, indicating that manufacturing activity was inching up.
- Prior to last month, the index had been negative for 22 consecutive months.
- Positive readings across most key components.

FRB Kansas City Manufacturing Index Unchanged in August

250828F0.jpg

250828G0.jpg

The Pending Home Sales Index weakened 0.4% in July (+0.7% y/y) to 71.7 after falling an unrevised 0.8% in June and rising an unrevised 1.8% in May, according to the National Association of Realtors (NAR). The Index remained 42.7% below its most recent peak of 125.1 in October 2021. The index is a forward-looking measure of home sales based on contract signings.

The fall in pending home sales occurred as the average rate on a 30-year mortgage rose to 6.72% in July after holding steady m/m at 6.82% in June. These rates remained well above a low of 5.22% in August 2022 and more than double a record-low 2.68% in December 2020.

Pending home sales were mixed last month in the four major regions of the country. Sales in the Midwest declined 4.0% (+1.3% y/y) in July after easing 0.8% in June. Sales in the Northeast fell 0.6% both m/m and y/y, after holding steady in June. In the South, sales eased 0.1% (+1.8% y/y) following a 0.6% June decline, but sales in the West increased 3.7% (-1.9% y/y), reversing a 3.9% June drop.

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

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

- Decline adds to June weakness.
- Regional changes are mixed.


U.S. Pending Home Sales Decline in July

Kathleen Stephansen, CBE

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Initial claims for unemployment insurance declined to 229,000 during the week of August 23, after rising to 234,000 in the week of August 16, revised from 235,000. The Action Economics Forecast Survey expected 230,000 initial claims for last week. The four-week moving average of initial claims increased to 228,500 from 226,000, revised from 226,250. It was the highest level since the second week of July.

In the week ended August 16, the total number of unemployment insurance beneficiaries – also known as “continuing claims” – decreased by 7,000 to 1.954 million from 1.961 million in the prior week, revised down by 11,000 from 1.972 million. The four-week moving average rose to 1.956 million in the week ending August 16, the highest level in six weeks, and up from 1.952 million in the prior week, revised from 1.955 million.

In the week ending August 16, the insured rate of unemployment (the number of beneficiaries as a percent of covered employment) was 1.3% for the twelfth consecutive week.

The insured unemployment rate varied greatly across individual states and territories. In the week ended August 9, the highest unemployment rates were in New Jersey (2.75%), Rhode Island (2.58%), Massachusetts (2.18%), Minnesota (2.17%), California (2.11%), Washington (2.08%), District of Columbia (2.04%), and Puerto Rico (2.02%). The lowest were in South Dakota (0.28%), Florida (0.42%), and Alabama and North Carolina (both 0.47%). Rates in other notable states include Pennsylvania (1.92%), New York (1.73%), Illinois (1.72%), and Texas (1.24%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986. The expectations figure is from the Action Economics Forecast Survey in the **AS1REPNA** database.

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- Initial claims declined in latest week after a surge in the prior week.
- Continuing claims declined.
- Insured unemployment rate holds steady.

Economy in Brief: 2004

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