Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071009a.jpg" width="353">
For the second straight week, the International Council of Shopping Centers (ICSC)-UBS reported that chain store sales showed roughly no change from the prior period. That followed declines of roughly 1.0% during each of the prior two consecutive weeks.
The average level of chain store sales during September fell 0.8% versus the August average. That average had risen 0.1% from July. Retail sales for September will be published by the Commerce Department this coming Friday.
During the last ten years there has been a 45% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
The leading indicator of chain store sales from ICSC-UBS fell 0.8% (-0.2% y/y) after a 0.2% decline during the prior week.
Changing Productivity Trends from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2007/el2007-25.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">10/06/07</th>
<th scope="col">09/29/07</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>475.3</td>
<td>475.5</td>
<td>2.1%</td>
<td>3.3%</td>
<td>3.6%</td>
<td>4.7%</td>
</tr>
</tbody>
</table>


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For the second straight week, the International Council of Shopping Centers (ICSC)-UBS reported that chain store sales showed roughly no change from the prior period. That followed declines of roughly 1.0% during each of the prior two [...]

Weekly U.S. Chain Store Sales Roughly Unchanged: Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071009c.jpg" width="353">
During September, small business optimism rose 1.0% from August after a 1.3% decline during that month. The level during September was 11% below the peak reached back in 2004, according to the National Federation of Independent Business (NFIB).
During the last ten years there has been a 70% correlation between the level of the NFIB index and the two quarter change in real GDP.
The percentage of firms indicating that credit was more difficult to get rose to 9%, nearly double the recent low.
Financial Stability and the Federal Reserve is a speech delivered this weekend by Federal Reserve Board GovernorKevin Warsh and it is available <a href="http://www.federalreserve.gov/newsevents/speech/warsh20071005a.htm"> here</a>.
Internal Risk Models and the Estimation of Default Probabilities from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2007/el2007-29.pdf"> here</a>.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071009b.jpg" width="353">
Respondents expecting the economy improved slightly to 2% and the percentage with one or more job openings was stable at 25%. During the last ten years there has been a 71% correlation between the NFIB percentage and the y/y change in nonfarm payrolls.
The percent planning to raise capital expenditures remained at a reduced 29%, down from the 2005 average of 32%..The percentage of firms planning to raise average selling prices fell to 21%, the lowest level since late 2005. The percentage of firms actually raising prices also fell to 9%, nearly its lowest level since 2004. During the last ten years there has been a 60% correlation between the change in the producer price index and the level of the NFIB price index.
About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S7/@S7.HTM">Nat&#39;l Federation of Independent Business</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Small Business Optimism Index (1986=100)</td>
<td>97.3</td>
<td>96.3</td>
<td>-2.1%</td>
<td>98.9</td>
<td>101.6</td>
<td>104.6</td>
</tr>
</tbody>
</table>


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During September, small business optimism rose 1.0% from August after a 1.3% decline during that month. The level during September was 11% below the peak reached back in 2004, according to the National Federation of Independent [...]

Small Business Optimism Reduced by Credit Problems

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071009c.jpg" width="353">
During September, small business optimism rose 1.0% from August after a 1.3% decline during that month. The level during September was 11% below the peak reached back in 2004, according to the National Federation of Independent Business (NFIB).
During the last ten years there has been a 70% correlation between the level of the NFIB index and the two quarter change in real GDP.
The percentage of firms indicating that credit was more difficult to get rose to 9%, nearly double the recent low.
Financial Stability and the Federal Reserve is a speech delivered this weekend by Federal Reserve Board GovernorKevin Warsh and it is available <a href="http://www.federalreserve.gov/newsevents/speech/warsh20071005a.htm"> here</a>.
Internal Risk Models and the Estimation of Default Probabilities from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2007/el2007-29.pdf"> here</a>.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071009b.jpg" width="353">
Respondents expecting the economy improved slightly to 2% and the percentage with one or more job openings was stable at 25%. During the last ten years there has been a 71% correlation between the NFIB percentage and the y/y change in nonfarm payrolls.
The percent planning to raise capital expenditures remained at a reduced 29%, down from the 2005 average of 32%..The percentage of firms planning to raise average selling prices fell to 21%, the lowest level since late 2005. The percentage of firms actually raising prices also fell to 9%, nearly its lowest level since 2004. During the last ten years there has been a 60% correlation between the change in the producer price index and the level of the NFIB price index.
About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S7/@S7.HTM">Nat&#39;l Federation of Independent Business</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Small Business Optimism Index (1986=100)</td>
<td>97.3</td>
<td>96.3</td>
<td>-2.1%</td>
<td>98.9</td>
<td>101.6</td>
<td>104.6</td>
</tr>
</tbody>
</table>
Weekly U.S. Chain Store Sales Roughly Unchanged: Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 9, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071009a.jpg" width="353">
For the second straight week, the International Council of Shopping Centers (ICSC)-UBS reported that chain store sales showed roughly no change from the prior period. That followed declines of roughly 1.0% during each of the prior two consecutive weeks.
The average level of chain store sales during September fell 0.8% versus the August average. That average had risen 0.1% from July. Retail sales for September will be published by the Commerce Department this coming Friday.
During the last ten years there has been a 45% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
The leading indicator of chain store sales from ICSC-UBS fell 0.8% (-0.2% y/y) after a 0.2% decline during the prior week.
Changing Productivity Trends from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2007/el2007-25.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/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">10/06/07</th>
<th scope="col">09/29/07</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>475.3</td>
<td>475.5</td>
<td>2.1%</td>
<td>3.3%</td>
<td>3.6%</td>
<td>4.7%</td>
</tr>
</tbody>
</table>
Japan's Economy Watcher’s Index Drops for Sixth Month in a Row 
by <a href="/comment/Brusca.html">Robert Brusca</a> October 9, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071009d.jpg" width="353">
Economy watchers index at five year low. 
Japan&#146;s economy watcher&#146;s index fell again for the six month running and extending a drop from a local peak reached back in March of 2006. The current future and employment indexes all are trending lower.The current economy watchers index and the employment components are at their five-year lows. The future index stands in the bottom 20% of its five-year range.
Japan&#146;s economy continues to emit irregular signals despite ongoing statements of optimism from the BOJ.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th colspan=8 scope="col">Key Japanese Surveys</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="4">Raw readings of each survey</td>
<td colspan="3">Percent of 5Yr range*</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Aug-07</td>
<td>Jul-07</td>
<td>Jun-07</td>
<td>May-07</td>
<td>Aug-07</td>
<td>Jul-07</td>
<td>Jun-07</td>
</tr>
<tr>
<td class="firstcol" colspan=8>Diffusion</td>

</tr>
<tr class="odd">
<td class="firstcol">Economy Watchers</td>
<td>44.1</td>
<td>44.7</td>
<td>46.0</td>
<td>46.8</td>
<td>0.0%</td>
<td>3.8%</td>
<td>25.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Employment</td>
<td>48.3</td>
<td>51.2</td>
<td>51.2</td>
<td>50.7</td>
<td>0.0%</td>
<td>4.0%</td>
<td>27.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Future</td>
<td>46.5</td>
<td>46.7</td>
<td>48.4</td>
<td>50.0</td>
<td>19.8%</td>
<td>21.4%</td>
<td>34.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">NTC MFG</td>
<td>49.6</td>
<td>49.0</td>
<td>50.4</td>
<td>51.4</td>
<td>6.7%</td>
<td>0.0%</td>
<td>0.9%</td>
</tr>
<tr>
<td class="firstcol" colspan=8>Econ Trends (Teikoku&#39;/50 neutral/weighted diffusion)</td>

</tr>
<tr class="odd">
<td class="firstcol">MFG</td>
<td>44.2</td>
<td>44.5</td>
<td>44.6</td>
<td>45.2</td>
<td>55.7%</td>
<td>63.2%</td>
<td>69.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail</td>
<td>38.3</td>
<td>37.9</td>
<td>39.2</td>
<td>39.6</td>
<td>39.6%</td>
<td>37.0%</td>
<td>52.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Wholesale</td>
<td>41.2</td>
<td>41.3</td>
<td>42.1</td>
<td>42.8</td>
<td>51.1%</td>
<td>56.6%</td>
<td>68.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>47.3</td>
<td>47.6</td>
<td>48.6</td>
<td>49.1</td>
<td>67.9%</td>
<td>74.0%</td>
<td>83.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Construction</td>
<td>36.3</td>
<td>36.6</td>
<td>36.8</td>
<td>37.7</td>
<td>68.2%</td>
<td>71.9%</td>
<td>77.5%</td>
</tr>
<tr class="grey1">
<td class="firstcol" colspan=8>100 is high; zero is low</td>

</tr>
</tbody>
</table>
August Trade in Goods: a Dip in Germany's Surplus and a Small Improvement in France's Deficit 
by <a href="/comment/Curley.html">Louise Curley</a> October 9, 2007


<img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071009e.jpg"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071009h.jpg">
The balance of trade in goods in France improved from a deficit of 3.2 billion euros in July to 2.8 billion euros in August. In Germany, the surplus on trade in goods declined to 15.3 billion euros from 16.5 billion euros in July. Since month-to-month changes in the balance of trade in goods tend to be erratic, we calculated six-month averages (using the &quot;advance functions&quot; button) to get a better idea of the trends in the two balances. On this basis, the trend in France&#39;s balance of trade in goods appears to be still toward greater deficits, while the trend in Germany suggests that the recent rise in surpluses may be decelerating, as can be seen in the first chart.
The rise in the Euro that began in late 2005 has led to a reduction in the portion of exports to the United States as can be seen in the second and third charts. These charts show the dollar value of the euro (scale inverted) and the portion of French and German exports to the United States. The relationship between the exchange rate and portion of exports appears to be closer in Germany than in France, but both show that an increase in the euro tends to dampen the portion of exports to the U. S. However, since exports to the US are a relatively small part of total exports in both countries, the impact on total exports has been small. The U. S. accounted for about 7% of total French exports in 2006. For Germany, the corresponding figure was about 9%. By far the most important buyers of French and German exports are other members of the Euro Area who are unaffected by changes in the currency. Over the past three years, between 40 and 45% of France&#39;s exports of goods and between 50 and 53% of Germany&#39;s exports of goods went to other members of the Euro Area, as shown in the fourth chart.
<img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071009g.jpg"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071009f.jpg">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">TRADE IN GOODS--FRANCE AND GERMANY (Billions Euros)</th>
<th scope="col">Aug 07</th>
<th scope="col">Jul&nbsp; &nbsp; 07&nbsp;</th>
<th scope="col">Aug&nbsp; 06&nbsp;</th>
<th scope="col">M/M Chg&nbsp;</th>
<th scope="col">Y/Y Chg&nbsp;</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">FRANCE Balance</td>
<td>-2.8</td>
<td>-3.2</td>
<td>-3.0</td>
<td>0.4</td>
<td>0.2</td>
<td>-27.6</td>
<td>-22.7</td>
<td>-5.0</td>
</tr>
<tr>
<td class="firstcol">Total Exports</td>
<td>34.7</td>
<td>34.0</td>
<td>32.5</td>
<td>2.0</td>
<td>6.6</td>
<td>389.6</td>
<td>357.5</td>
<td>340.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports to Euro Area</td>
<td>17.2</td>
<td>16.9</td>
<td>16.9</td>
<td>1.7</td>
<td>1.6</td>
<td>194.4</td>
<td>180.7</td>
<td>173.9</td>
</tr>
<tr>
<td class="firstcol">Exports to US</td>
<td>2.1</td>
<td>2.2</td>
<td>2.1</td>
<td>-3.2</td>
<td>-1.8</td>
<td>26.4</td>
<td>25.1</td>
<td>23.0</td>
</tr>
<tr class="odd">
<td class="firstcol">GERMANY&nbsp; Balance</td>
<td>15.3</td>
<td>16.5</td>
<td>12.1</td>
<td>-1.2</td>
<td>3.2</td>
<td>162.2</td>
<td>157.8</td>
<td>154.0</td>
</tr>
<tr>
<td class="firstcol">Total Exports&nbsp;</td>
<td>82.7</td>
<td>80.3</td>
<td>73.7</td>
<td>2.0</td>
<td>12.4</td>
<td>893.8</td>
<td>783.7</td>
<td>726.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports to Euro Area</td>
<td>22.6</td>
<td>22.1</td>
<td>21.8</td>
<td>-3.2</td>
<td>-1.8</td>
<td>254.2</td>
<td>233.8</td>
<td>225.7</td>
</tr>
<tr>
<td class="firstcol">Exports to US</td>
<td>n.a.</td>
<td>6.1</td>
<td>6.3*</td>
<td>n.a..</td>
<td>-4.0*</td>
<td>78.0</td>
<td>68.8</td>
<td>94.1</td>
</tr>

<tr>
<td class="firstcol">EXCHANGE RATE&nbsp; US$/Euro</td>
<td>1.3626</td>
<td>1.3726</td>
<td>1.2810</td>
<td>-0.7</td>
<td>6.4</td>
<td>1.2560</td>
<td>1.2447</td>
<td>1.2439</td>
</tr>
<tr class="grey1">
<td class="firstcol" colspan=9>*July 2006&nbsp;&nbsp; n.a. not available</td>

</tr>
</tbody>
</table>


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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071008c.jpg" width="353">
Inflation is picking up in many emerging markets. Among the highest rates of inflation being recorded are those in Eastern Europe. Latvia, for example, announced today that inflation reached 11% in September and in Ukraine, it was over 14%. Although inflation rates in other Eastern Europe countries are lower most have been rising throughout the year, as can be seen in the first chart, which shows inflation rates for the Czech Republic, Lithuania, Latvia and the Ukraine.
Inflation has generally been kept in check in the Far East. One important exception is India where inflation has been running between 6 and 8% for the last year or so. More recently, inflation in China has accelerated. From a rate of 2.2% in January of this year, inflation in China has risen to 6.7% in September. The second chart shows inflation in four of the Far East countries--China, India, South Korea and Thailand.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071008b.jpg" width="353">
In Latin America where many countries experienced hyper inflation in the past, Brazil and Chile have succeeded in keeping inflation subdued. Currently, their inflation rates, though rising this year, are still below 6%. Argentina has had less success in getting its rate of inflation below that of Brazil and Chile, but its rate of inflation has continued to decline this year from 9.7% in January to 8.6% in September. The high rate of Inflation in Venezuela due, in part to the populist policies of its government, declined in September to 15.2%, from the peak of 20.4% reached in February. The third chart shows inflation in four Latin American countries--Argentina, Brazil, Chile and Venezuela. 
Among the emerging markets of the Middle East and Africa, Turkey, Egypt and Jordan have seen declines in their inflation rates during this year in contrast to the increases in other emerging markets. In South Africa, inflation has kept fairly steady between 6 and 7%. Inflation rates in these countries are shown in the fourth chart. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071008d.jpg" width="353"><img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071008e.jpg" width="353">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">INFLATION RATES (%)&nbsp;</th>
<th scope="col">SEP</th>
<th scope="col">AUG&nbsp;&nbsp;</th>
<th scope="col">JUL&nbsp; &nbsp;</th>
<th scope="col">JUN&nbsp;</th>
<th scope="col">MAY&nbsp;</th>
<th scope="col">APR</th>
<th scope="col">MAR</th>
<th scope="col">FEB</th>
<th scope="col">JAN</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Czech Republic</td>
<td>2.8</td>
<td>2.4</td>
<td>2.3</td>
<td>2.5</td>
<td>2.4</td>
<td>2.5</td>
<td>1.9</td>
<td>1.5</td>
<td>1.3</td>
</tr>
<tr>
<td class="firstcol">Lithuania</td>
<td>7.1</td>
<td>5.5</td>
<td>4.1</td>
<td>4.9</td>
<td>4.9</td>
<td>4.8</td>
<td>4.6</td>
<td>4.3</td>
<td>4.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Latvia</td>
<td>11.4</td>
<td>10.1</td>
<td>9.5</td>
<td>8.8</td>
<td>8.2</td>
<td>8.9</td>
<td>8.5</td>
<td>7.3</td>
<td>7.1</td>
</tr>
<tr>
<td class="firstcol"> Ukraine </td>
<td>14.4</td>
<td>14.3</td>
<td>13.5</td>
<td>12.9</td>
<td>10.7</td>
<td>10.5</td>
<td>10.1</td>
<td>9.5</td>
<td>10.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Thailand</td>
<td>2.1</td>
<td>1.1</td>
<td>1.2</td>
<td>1.9</td>
<td>1.9</td>
<td>1.8</td>
<td>2.0</td>
<td>2.3</td>
<td>3.1</td>
</tr>
<tr>
<td class="firstcol">South Korea</td>
<td>2.3</td>
<td>2.0</td>
<td>2.5</td>
<td>2.6</td>
<td>2.4</td>
<td>2.4</td>
<td>2.2</td>
<td>2.2</td>
<td>1.7</td>
</tr>
<tr class="odd">
<td class="firstcol">India</td>
<td>n.a.</td>
<td>7.3</td>
<td>6.4</td>
<td>5.7</td>
<td>6.6</td>
<td>6.8</td>
<td>6.7</td>
<td>7.6</td>
<td>6.7</td>
</tr>
<tr>
<td class="firstcol">China</td>
<td>n.a</td>
<td>6.7</td>
<td>4.7</td>
<td>4.5</td>
<td>3.4</td>
<td>3.0</td>
<td>3.3</td>
<td>2.8</td>
<td>2.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Argentina</td>
<td>8.6</td>
<td>8.7</td>
<td>8.6</td>
<td>8.8</td>
<td>8.8</td>
<td>8.9</td>
<td>9.1</td>
<td>9.6</td>
<td>9.7</td>
</tr>
<tr>
<td class="firstcol">Brazil</td>
<td>n.a</td>
<td>4.8</td>
<td>4.2</td>
<td>4.0</td>
<td>3.6</td>
<td>3.4</td>
<td>3.3</td>
<td>3.1</td>
<td>2.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Chile</td>
<td>5.9</td>
<td>4.7</td>
<td>3.8</td>
<td>3.2</td>
<td>2.9</td>
<td>2.5</td>
<td>2.6</td>
<td>2.7</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">Venezuela</td>
<td>15.3</td>
<td>15.9</td>
<td>17.2</td>
<td>19.4</td>
<td>19.5</td>
<td>19.4</td>
<td>18.5</td>
<td>20.4</td>
<td>18.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Turkey</td>
<td>7.1</td>
<td>7.4</td>
<td>6.9</td>
<td>8.6</td>
<td>9.2</td>
<td>10.7</td>
<td>10.9</td>
<td>10.2</td>
<td>9.9</td>
</tr>
<tr>
<td class="firstcol">South Africa</td>
<td>n.a</td>
<td>6.7</td>
<td>7.0</td>
<td>7.0</td>
<td>6.9</td>
<td>7.0</td>
<td>6.1</td>
<td>5.8</td>
<td>6.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Egypt</td>
<td>n.a</td>
<td>8.5</td>
<td>8.0</td>
<td>8.5</td>
<td>10.0</td>
<td>11.7</td>
<td>12.8</td>
<td>12.6</td>
<td>12.4</td>
</tr>
<tr>
<td class="firstcol">Jordan</td>
<td>n.a</td>
<td>3.9</td>
<td>3.7</td>
<td>3.9</td>
<td>3.6</td>
<td>5.6</td>
<td>6.7</td>
<td>8.4</td>
<td>7.6</td>
</tr>
</tbody>
</table>
</body>
</html>

Inflation is picking up in many emerging markets. Among the highest rates of inflation being recorded are those in Eastern Europe. Latvia, for example, announced today that inflation reached 11% in September and in Ukraine, it was [...]

Inflation Trends in Emerging Markets

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<img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071008c.jpg"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071008b.jpg">
Inflation is picking up in many emerging markets. Among the highest rates of inflation being recorded are those in Eastern Europe. Latvia, for example, announced today that inflation reached 11% in September and in Ukraine, it was over 14%. Although inflation rates in other Eastern Europe countries are lower most have been rising throughout the year, as can be seen in the first chart, which shows inflation rates for the Czech Republic, Lithuania, Latvia and the Ukraine.
Inflation has generally been kept in check in the Far East. One important exception is India where inflation has been running between 6 and 8% for the last year or so. More recently, inflation in China has accelerated. From a rate of 2.2% in January of this year, inflation in China has risen to 6.7% in September. The second chart shows inflation in four of the Far East countries--China, India, South Korea and Thailand.
In Latin America where many countries experienced hyper inflation in the past, Brazil and Chile have succeeded in keeping inflation subdued. Currently, their inflation rates, though rising this year, are still below 6%. Argentina has had less success in getting its rate of inflation below that of Brazil and Chile, but its rate of inflation has continued to decline this year from 9.7% in January to 8.6% in September. The high rate of Inflation in Venezuela due, in part to the populist policies of its government, declined in September to 15.2%, from the peak of 20.4% reached in February. The third chart shows inflation in four Latin American countries--Argentina, Brazil, Chile and Venezuela. 
Among the emerging markets of the Middle East and Africa, Turkey, Egypt and Jordan have seen declines in their inflation rates during this year in contrast to the increases in other emerging markets. In South Africa, inflation has kept fairly steady between 6 and 7%. Inflation rates in these countries are shown in the fourth chart.
<img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071008d.jpg"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071008e.jpg">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">INFLATION RATES (%)&nbsp;</th>
<th scope="col">SEP</th>
<th scope="col">AUG</th>
<th scope="col">JUL</th>
<th scope="col">JUN</th>
<th scope="col">MAY</th>
<th scope="col">APR</th>
<th scope="col">MAR</th>
<th scope="col">FEB</th>
<th scope="col">JAN</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Czech Republic</td>
<td>2.8</td>
<td>2.4</td>
<td>2.3</td>
<td>2.5</td>
<td>2.4</td>
<td>2.5</td>
<td>1.9</td>
<td>1.5</td>
<td>1.3</td>
</tr>
<tr>
<td class="firstcol">Lithuania</td>
<td>7.1</td>
<td>5.5</td>
<td>4.1</td>
<td>4.9</td>
<td>4.9</td>
<td>4.8</td>
<td>4.6</td>
<td>4.3</td>
<td>4.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Latvia</td>
<td>11.4</td>
<td>10.1</td>
<td>9.5</td>
<td>8.8</td>
<td>8.2</td>
<td>8.9</td>
<td>8.5</td>
<td>7.3</td>
<td>7.1</td>
</tr>
<tr>
<td class="firstcol"> Ukraine </td>
<td>14.4</td>
<td>14.3</td>
<td>13.5</td>
<td>12.9</td>
<td>10.7</td>
<td>10.5</td>
<td>10.1</td>
<td>9.5</td>
<td>10.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Thailand</td>
<td>2.1</td>
<td>1.1</td>
<td>1.2</td>
<td>1.9</td>
<td>1.9</td>
<td>1.8</td>
<td>2.0</td>
<td>2.3</td>
<td>3.1</td>
</tr>
<tr>
<td class="firstcol">South Korea</td>
<td>2.3</td>
<td>2.0</td>
<td>2.5</td>
<td>2.6</td>
<td>2.4</td>
<td>2.4</td>
<td>2.2</td>
<td>2.2</td>
<td>1.7</td>
</tr>
<tr class="odd">
<td class="firstcol">India</td>
<td>n.a.</td>
<td>7.3</td>
<td>6.4</td>
<td>5.7</td>
<td>6.6</td>
<td>6.8</td>
<td>6.7</td>
<td>7.6</td>
<td>6.7</td>
</tr>
<tr>
<td class="firstcol">China</td>
<td>n.a</td>
<td>6.7</td>
<td>4.7</td>
<td>4.5</td>
<td>3.4</td>
<td>3.0</td>
<td>3.3</td>
<td>2.8</td>
<td>2.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Argentina</td>
<td>8.6</td>
<td>8.7</td>
<td>8.6</td>
<td>8.8</td>
<td>8.8</td>
<td>8.9</td>
<td>9.1</td>
<td>9.6</td>
<td>9.7</td>
</tr>
<tr>
<td class="firstcol">Brazil</td>
<td>n.a</td>
<td>4.8</td>
<td>4.2</td>
<td>4.0</td>
<td>3.6</td>
<td>3.4</td>
<td>3.3</td>
<td>3.1</td>
<td>2.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Chile</td>
<td>5.9</td>
<td>4.7</td>
<td>3.8</td>
<td>3.2</td>
<td>2.9</td>
<td>2.5</td>
<td>2.6</td>
<td>2.7</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">Venezuela</td>
<td>15.3</td>
<td>15.9</td>
<td>17.2</td>
<td>19.4</td>
<td>19.5</td>
<td>19.4</td>
<td>18.5</td>
<td>20.4</td>
<td>18.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Turkey</td>
<td>7.1</td>
<td>7.4</td>
<td>6.9</td>
<td>8.6</td>
<td>9.2</td>
<td>10.7</td>
<td>10.9</td>
<td>10.2</td>
<td>9.9</td>
</tr>
<tr>
<td class="firstcol">South Africa</td>
<td>n.a</td>
<td>6.7</td>
<td>7.0</td>
<td>7.0</td>
<td>6.9</td>
<td>7.0</td>
<td>6.1</td>
<td>5.8</td>
<td>6.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Egypt</td>
<td>n.a</td>
<td>8.5</td>
<td>8.0</td>
<td>8.5</td>
<td>10.0</td>
<td>11.7</td>
<td>12.8</td>
<td>12.6</td>
<td>12.4</td>
</tr>
<tr>
<td class="firstcol">Jordan</td>
<td>n.a</td>
<td>3.9</td>
<td>3.7</td>
<td>3.9</td>
<td>3.6</td>
<td>5.6</td>
<td>6.7</td>
<td>8.4</td>
<td>7.6</td>
</tr>
</tbody>
</table>
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Robert Brusca

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071008a.jpg" width="353">
Both the chart and the table tell the story of waning German order strength. We have followed Euro-orders series closely as the euro has gained strength. What we see is that there is a clear loss in momentum. That loss is more severe if we compartmentalize German orders into a quarterly habitat. Viewed that way orders for Q3 are coming up quite weak. TWO full months into the new quarter overall German orders are falling at a 6.9% annualized rate. Foreign orders are off at a 13% annual rate. Domestic orders scratch out a feeble 0.1% gain in Q3. These are weak results. The blow is only somewhat softened by the strength that the components showed in 2007Q2 when orders rose at an annualized pace of 18.0% led by 29.3% for foreign orders and 7.3% for domestic orders.
The real question is which of the trends lies ahead? On that ground the slower one seems to have become dominant&#133; These results fall back into perspective on the Yr/Yr calculation where total order volumes are up by 4.2% on 5.1% for foreign orders and 3.2% for domestic orders. The Y/Y figures are solid, but they show that much of the earlier momentum has been lost.
Other German indicators have showed this from the IFO report to the ZEW survey to the EU indexes. Europe once rocked and now it is being rocked as financial ministers try to decide what to do.
Let&#146;s understand this as a logical outcropping of the desire to make the euro a main reserve unit. The more it comes into demand the stronger that euro will be and that more that will disrupt the export sector in EMU countries. Europe is much more export dependent than the US. So this is a problem for the euro area. While there is great prestige and some gain to being the reserve currency (segniorage: The difference between the value of money and the cost to produce it), there is also cost. Europe is too export dependent and not flexible enough for the euro to be a main reserve unit. Being a reserve currency is an honor and a challenge: you can&#146;t have one without the other.
In a two reserve currency system, when the dollar is weak, of course, past dollar hoarders want to switch into a stronger reserve unit. But unless Europe can absorb such flows it isn&#146;t going to work. To put it another way, the euro and its financial sector may be prepared to be a reserve unit but the euro area economy is not. Just look at the complications to US policy to see what Europe must be able to sustain to truly compete with the dollar. After all it is fair to argue that if certain disequilibrium conditions have been thrust onto the dollar some of those will now come to rest on the euro as it takes up more of the burden of being the reserve unit.
The US current account deficit is at about 5 &frac12;% of GDP. Blame the US if you will, but how can you ignore the consequences of its having been the reserve unit? Look at the massive reserve accumulations in Japan and in China (Hong Kong and Taiwan) and Korea. What of their obvious impacts on FX values? How can you ignore the fact that China wants to maintain a peg at an undervalued level? How can you argue that Japan has not been doing the same? The center country in reserve system is the one that is the numeraire and loses its policy independence. Every other currency pegs to it or floats against it. If some countries choose a balance of payments &#145;result&#146; (such as running persistent surpluses) the reserve country is stuck with the flip-side of those actions. I just don&#146;t see how Europe can do it. Germany and EMU already are stressed and previous little reserve shifting has occurred. What we are seeing in Europe is what happens when you are unprepared to experience your dream. The good news: the Euro is strong and has become a more important reserve unit internationally. The bad news? It&#146;s the same.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th colspan="8" scope="col">German Orders and Sales By Sector and Origin</th>
</tr>
</thead>
<tbody>
<tr class="grey3">
<td class="firstcol">Real and SA</td>
<td colspan="3">% M/M</td>
<td colspan="4">% Saar</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Aug-07</td>
<td>Jul-07</td>
<td>Jun-07</td>
<td>3-MO</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>YrAgo</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>1.2%</td>
<td>-6.1%</td>
<td>5.4%</td>
<td>0.6%</td>
<td style="color:red;">0.3%</td>
<td style="color:red;">4.2%</td>
<td>15.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign</td>
<td>2.4%</td>
<td>-10.8%</td>
<td>10.0%</td>
<td>2.1%</td>
<td style="color:red;">1.1%</td>
<td style="color:red;">5.1%</td>
<td>19.7%</td>
</tr>
<tr>
<td class="firstcol">Domestic</td>
<td>0.1%</td>
<td>-0.8%</td>
<td>0.4%</td>
<td style="color:red;">-1.1%</td>
<td style="color:red;">-0.5%</td>
<td style="color:red;">3.2%</td>
<td>10.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan="8">Sector Sales</td>

</tr>
<tr>
<td class="firstcol">Mfg/Mining</td>
<td>0.7%</td>
<td>0.2%</td>
<td>-0.2%</td>
<td>3.0%</td>
<td style="color:red;">1.5%</td>
<td style="color:red;">5.3%</td>
<td>8.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer</td>
<td>1.5%</td>
<td style="color:red;">-1.6%</td>
<td>-0.9%</td>
<td style="color:red;">-4.5%</td>
<td style="color:red;">-2.3%</td>
<td style="color:red;">1.6%</td>
<td>3.9%</td>
</tr>
<tr>
<td class="firstcol">Consumer Durables</td>
<td>4.1%</td>
<td style="color:red;">-1.5%</td>
<td>1.4%</td>
<td>16.9%</td>
<td>8.1%</td>
<td style="color:red;">2.3%</td>
<td>12.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Nondurables</td>
<td>1.0%</td>
<td style="color:red;">-1.6%</td>
<td>-1.5%</td>
<td style="color:red;">-8.3%</td>
<td style="color:red;">-4.2%</td>
<td style="color:red;">1.5%</td>
<td>2.2%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td style="color:red;">0.2%</td>
<td>1.6%</td>
<td>-0.9%</td>
<td>3.7%</td>
<td style="color:red;">1.9%</td>
<td style="color:red;">7.1%</td>
<td>8.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>1.1%</td>
<td style="color:red;">-0.6%</td>
<td>1.1%</td>
<td>6.7%</td>
<td style="color:red;">3.3%</td>
<td style="color:red;">5.5%</td>
<td>11.8%</td>
</tr>
<tr>
<td class="firstcol">All Mfg Sales</td>
<td>0.8%</td>
<td style="color:red;">-0.2%</td>
<td>0.0%</td>
<td>2.4%</td>
<td style="color:red;">1.2%</td>
<td style="color:red;">5.0%</td>
<td>7.9%</td>
</tr>
</tbody>
</table>
</body>
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Both the chart and the table tell the story of waning German order strength. We have followed Euro-orders series closely as the euro has gained strength. What we see is that there is a clear loss in momentum. That loss is more severe [...]

German Orders Still Strong but Definitely Fading…

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071008a.jpg" width="353">
Both the chart and the table tell the story of waning German order strength. We have followed Euro-orders series closely as the euro has gained strength. What we see is that there is a clear loss in momentum. That loss is more severe if we compartmentalize German orders into a quarterly habitat. Viewed that way orders for Q3 are coming up quite weak. TWO full months into the new quarter overall German orders are falling at a 6.9% annualized rate. Foreign orders are off at a 13% annual rate. Domestic orders scratch out a feeble 0.1% gain in Q3. These are weak results. The blow is only somewhat softened by the strength that the components showed in 2007Q2 when orders rose at an annualized pace of 18.0% led by 29.3% for foreign orders and 7.3% for domestic orders.
The real question is which of the trends lies ahead? On that ground the slower one seems to have become dominant&#133; These results fall back into perspective on the Yr/Yr calculation where total order volumes are up by 4.2% on 5.1% for foreign orders and 3.2% for domestic orders. The Y/Y figures are solid, but they show that much of the earlier momentum has been lost.
Other German indicators have showed this from the IFO report to the ZEW survey to the EU indexes. Europe once rocked and now it is being rocked as financial ministers try to decide what to do.
Let&#146;s understand this as a logical outcropping of the desire to make the euro a main reserve unit. The more it comes into demand the stronger that euro will be and that more that will disrupt the export sector in EMU countries. Europe is much more export dependent than the US. So this is a problem for the euro area. While there is great prestige and some gain to being the reserve currency (segniorage: The difference between the value of money and the cost to produce it), there is also cost. Europe is too export dependent and not flexible enough for the euro to be a main reserve unit. Being a reserve currency is an honor and a challenge: you can&#146;t have one without the other.
In a two reserve currency system, when the dollar is weak, of course, past dollar hoarders want to switch into a stronger reserve unit. But unless Europe can absorb such flows it isn&#146;t going to work. To put it another way, the euro and its financial sector may be prepared to be a reserve unit but the euro area economy is not. Just look at the complications to US policy to see what Europe must be able to sustain to truly compete with the dollar. After all it is fair to argue that if certain disequilibrium conditions have been thrust onto the dollar some of those will now come to rest on the euro as it takes up more of the burden of being the reserve unit.
The US current account deficit is at about 5 &frac12;% of GDP. Blame the US if you will, but how can you ignore the consequences of its having been the reserve unit? Look at the massive reserve accumulations in Japan and in China (Hong Kong and Taiwan) and Korea. What of their obvious impacts on FX values? How can you ignore the fact that China wants to maintain a peg at an undervalued level? How can you argue that Japan has not been doing the same? The center country in reserve system is the one that is the numeraire and loses its policy independence. Every other currency pegs to it or floats against it. If some countries choose a balance of payments &#145;result&#146; (such as running persistent surpluses) the reserve country is stuck with the flip-side of those actions. I just don&#146;t see how Europe can do it. Germany and EMU already are stressed and previous little reserve shifting has occurred. What we are seeing in Europe is what happens when you are unprepared to experience your dream. The good news: the Euro is strong and has become a more important reserve unit internationally. The bad news? It&#146;s the same.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th colspan="8" scope="col">German Orders and Sales By Sector and Origin</th>
</tr>
</thead>
<tbody>
<tr class="grey3">
<td class="firstcol">Real and SA</td>
<td colspan="3">% M/M</td>
<td colspan="4">% Saar</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Aug-07</td>
<td>Jul-07</td>
<td>Jun-07</td>
<td>3-MO</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>YrAgo</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>1.2%</td>
<td>-6.1%</td>
<td>5.4%</td>
<td>0.6%</td>
<td style="color:red;">0.3%</td>
<td style="color:red;">4.2%</td>
<td>15.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign</td>
<td>2.4%</td>
<td>-10.8%</td>
<td>10.0%</td>
<td>2.1%</td>
<td style="color:red;">1.1%</td>
<td style="color:red;">5.1%</td>
<td>19.7%</td>
</tr>
<tr>
<td class="firstcol">Domestic</td>
<td>0.1%</td>
<td>-0.8%</td>
<td>0.4%</td>
<td style="color:red;">-1.1%</td>
<td style="color:red;">-0.5%</td>
<td style="color:red;">3.2%</td>
<td>10.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan="8">Sector Sales</td>

</tr>
<tr>
<td class="firstcol">Mfg/Mining</td>
<td>0.7%</td>
<td>0.2%</td>
<td>-0.2%</td>
<td>3.0%</td>
<td style="color:red;">1.5%</td>
<td style="color:red;">5.3%</td>
<td>8.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer</td>
<td>1.5%</td>
<td style="color:red;">-1.6%</td>
<td>-0.9%</td>
<td style="color:red;">-4.5%</td>
<td style="color:red;">-2.3%</td>
<td style="color:red;">1.6%</td>
<td>3.9%</td>
</tr>
<tr>
<td class="firstcol">Consumer Durables</td>
<td>4.1%</td>
<td style="color:red;">-1.5%</td>
<td>1.4%</td>
<td>16.9%</td>
<td>8.1%</td>
<td style="color:red;">2.3%</td>
<td>12.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Nondurables</td>
<td>1.0%</td>
<td style="color:red;">-1.6%</td>
<td>-1.5%</td>
<td style="color:red;">-8.3%</td>
<td style="color:red;">-4.2%</td>
<td style="color:red;">1.5%</td>
<td>2.2%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td style="color:red;">0.2%</td>
<td>1.6%</td>
<td>-0.9%</td>
<td>3.7%</td>
<td style="color:red;">1.9%</td>
<td style="color:red;">7.1%</td>
<td>8.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>1.1%</td>
<td style="color:red;">-0.6%</td>
<td>1.1%</td>
<td>6.7%</td>
<td style="color:red;">3.3%</td>
<td style="color:red;">5.5%</td>
<td>11.8%</td>
</tr>
<tr>
<td class="firstcol">All Mfg Sales</td>
<td>0.8%</td>
<td style="color:red;">-0.2%</td>
<td>0.0%</td>
<td>2.4%</td>
<td style="color:red;">1.2%</td>
<td style="color:red;">5.0%</td>
<td>7.9%</td>
</tr>
</tbody>
</table>
<img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071008c.jpg"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071008b.jpg">
Inflation is picking up in many emerging markets. Among the highest rates of inflation being recorded are those in Eastern Europe. Latvia, for example, announced today that inflation reached 11% in September and in Ukraine, it was over 14%. Although inflation rates in other Eastern Europe countries are lower most have been rising throughout the year, as can be seen in the first chart, which shows inflation rates for the Czech Republic, Lithuania, Latvia and the Ukraine.
Inflation has generally been kept in check in the Far East. One important exception is India where inflation has been running between 6 and 8% for the last year or so. More recently, inflation in China has accelerated. From a rate of 2.2% in January of this year, inflation in China has risen to 6.7% in September. The second chart shows inflation in four of the Far East countries--China, India, South Korea and Thailand.
In Latin America where many countries experienced hyper inflation in the past, Brazil and Chile have succeeded in keeping inflation subdued. Currently, their inflation rates, though rising this year, are still below 6%. Argentina has had less success in getting its rate of inflation below that of Brazil and Chile, but its rate of inflation has continued to decline this year from 9.7% in January to 8.6% in September. The high rate of Inflation in Venezuela due, in part to the populist policies of its government, declined in September to 15.2%, from the peak of 20.4% reached in February. The third chart shows inflation in four Latin American countries--Argentina, Brazil, Chile and Venezuela. 
Among the emerging markets of the Middle East and Africa, Turkey, Egypt and Jordan have seen declines in their inflation rates during this year in contrast to the increases in other emerging markets. In South Africa, inflation has kept fairly steady between 6 and 7%. Inflation rates in these countries are shown in the fourth chart.
<img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071008d.jpg"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071008e.jpg">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">INFLATION RATES (%)&nbsp;</th>
<th scope="col">SEP</th>
<th scope="col">AUG</th>
<th scope="col">JUL</th>
<th scope="col">JUN</th>
<th scope="col">MAY</th>
<th scope="col">APR</th>
<th scope="col">MAR</th>
<th scope="col">FEB</th>
<th scope="col">JAN</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Czech Republic</td>
<td>2.8</td>
<td>2.4</td>
<td>2.3</td>
<td>2.5</td>
<td>2.4</td>
<td>2.5</td>
<td>1.9</td>
<td>1.5</td>
<td>1.3</td>
</tr>
<tr>
<td class="firstcol">Lithuania</td>
<td>7.1</td>
<td>5.5</td>
<td>4.1</td>
<td>4.9</td>
<td>4.9</td>
<td>4.8</td>
<td>4.6</td>
<td>4.3</td>
<td>4.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Latvia</td>
<td>11.4</td>
<td>10.1</td>
<td>9.5</td>
<td>8.8</td>
<td>8.2</td>
<td>8.9</td>
<td>8.5</td>
<td>7.3</td>
<td>7.1</td>
</tr>
<tr>
<td class="firstcol"> Ukraine </td>
<td>14.4</td>
<td>14.3</td>
<td>13.5</td>
<td>12.9</td>
<td>10.7</td>
<td>10.5</td>
<td>10.1</td>
<td>9.5</td>
<td>10.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Thailand</td>
<td>2.1</td>
<td>1.1</td>
<td>1.2</td>
<td>1.9</td>
<td>1.9</td>
<td>1.8</td>
<td>2.0</td>
<td>2.3</td>
<td>3.1</td>
</tr>
<tr>
<td class="firstcol">South Korea</td>
<td>2.3</td>
<td>2.0</td>
<td>2.5</td>
<td>2.6</td>
<td>2.4</td>
<td>2.4</td>
<td>2.2</td>
<td>2.2</td>
<td>1.7</td>
</tr>
<tr class="odd">
<td class="firstcol">India</td>
<td>n.a.</td>
<td>7.3</td>
<td>6.4</td>
<td>5.7</td>
<td>6.6</td>
<td>6.8</td>
<td>6.7</td>
<td>7.6</td>
<td>6.7</td>
</tr>
<tr>
<td class="firstcol">China</td>
<td>n.a</td>
<td>6.7</td>
<td>4.7</td>
<td>4.5</td>
<td>3.4</td>
<td>3.0</td>
<td>3.3</td>
<td>2.8</td>
<td>2.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Argentina</td>
<td>8.6</td>
<td>8.7</td>
<td>8.6</td>
<td>8.8</td>
<td>8.8</td>
<td>8.9</td>
<td>9.1</td>
<td>9.6</td>
<td>9.7</td>
</tr>
<tr>
<td class="firstcol">Brazil</td>
<td>n.a</td>
<td>4.8</td>
<td>4.2</td>
<td>4.0</td>
<td>3.6</td>
<td>3.4</td>
<td>3.3</td>
<td>3.1</td>
<td>2.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Chile</td>
<td>5.9</td>
<td>4.7</td>
<td>3.8</td>
<td>3.2</td>
<td>2.9</td>
<td>2.5</td>
<td>2.6</td>
<td>2.7</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">Venezuela</td>
<td>15.3</td>
<td>15.9</td>
<td>17.2</td>
<td>19.4</td>
<td>19.5</td>
<td>19.4</td>
<td>18.5</td>
<td>20.4</td>
<td>18.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Turkey</td>
<td>7.1</td>
<td>7.4</td>
<td>6.9</td>
<td>8.6</td>
<td>9.2</td>
<td>10.7</td>
<td>10.9</td>
<td>10.2</td>
<td>9.9</td>
</tr>
<tr>
<td class="firstcol">South Africa</td>
<td>n.a</td>
<td>6.7</td>
<td>7.0</td>
<td>7.0</td>
<td>6.9</td>
<td>7.0</td>
<td>6.1</td>
<td>5.8</td>
<td>6.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Egypt</td>
<td>n.a</td>
<td>8.5</td>
<td>8.0</td>
<td>8.5</td>
<td>10.0</td>
<td>11.7</td>
<td>12.8</td>
<td>12.6</td>
<td>12.4</td>
</tr>
<tr>
<td class="firstcol">Jordan</td>
<td>n.a</td>
<td>3.9</td>
<td>3.7</td>
<td>3.9</td>
<td>3.6</td>
<td>5.6</td>
<td>6.7</td>
<td>8.4</td>
<td>7.6</td>
</tr>
</tbody>
</table>
</body>
</html>

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071005i.jpg" width="353">
Household confidence in France fails to climb to or above -10.
The chart on French consumer confidence shows that there is something around the level of -10 on the index that seems critical to the development of the direction on the index. In 1994-95 the index was about to move above +10 and eventually dipped to -30 before soaring above -10 to reach a peak of +10 in late 2000. From that peak confidence fell but once it broke below 10 in 2002 its fall accelerated. Now as confidence has tried to recover again it has once again failed to reach -10 or to climb above it. With that failure, confidence has fallen back sharply. Various line items on confidence are weak with the exception of plans to save with that indicator in the top 12 percent of its lifetime range.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" colspan=11>INSEE Household Monthly Survey</th>
</tr>
<tr>
<th scope="col">&nbsp;</th>
<th scope="col">&nbsp;</th>
<th scope="col">&nbsp;</th>
<th scope="col">&nbsp;</th>
<th scope="col">&nbsp;</th>
<th scope="col" colspan=2>Since Jan 1990</th>
<th scope="col" colspan=4>Since Jan 1990</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Sep 07</td>
<td>Aug 07</td>
<td>Jul 07</td>
<td>Jun 07</td>
<td>Percentile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
</tr>
<tr>
<td class="firstcol">Household Confidence</td>
<td>-21</td>
<td>-17</td>
<td>-15</td>
<td>-13</td>
<td>27.9</td>
<td>109</td>
<td>10</td>
<td>-33</td>
<td>43</td>
<td>-17</td>
</tr>
<tr class="even">
<td class="firstcol" colspan="11">Living Standards</td>

</tr>
<tr>
<td class="firstcol">past 12 Mos</td>
<td>-50</td>
<td>-47</td>
<td>-46</td>
<td>-45</td>
<td>19.0</td>
<td>139</td>
<td>18</td>
<td>-66</td>
<td>84</td>
<td>-37</td>
</tr>
<tr>
<td class="firstcol">Next 12-Mos</td>
<td>-26</td>
<td>-17</td>
<td>-11</td>
<td>-3</td>
<td>28.1</td>
<td>115</td>
<td>15</td>
<td>-42</td>
<td>57</td>
<td>-18</td>
</tr>
<tr>
<td class="firstcol">Unemployment: Next 12</td>
<td>13</td>
<td>0</td>
<td>-8</td>
<td>-8</td>
<td>45.5</td>
<td>152</td>
<td>73</td>
<td>-37</td>
<td>110</td>
<td>30</td>
</tr>
<tr class="even">
<td class="firstcol" colspan=11>Price Developments</td>

</tr>
<tr>
<td class="firstcol">Past 12Mo</td>
<td>9</td>
<td>5</td>
<td>1</td>
<td>-8</td>
<td>75.9</td>
<td>27</td>
<td>30</td>
<td>-57</td>
<td>87</td>
<td>-20</td>
</tr>
<tr>
<td class="firstcol">Next 12-Mos</td>
<td>-15</td>
<td>-20</td>
<td>-26</td>
<td>-28</td>
<td>49.5</td>
<td>16</td>
<td>31</td>
<td>-60</td>
<td>91</td>
<td>-34</td>
</tr>
<tr class="even">
<td class="firstcol" colspan=11>Savings</td>

</tr>
<tr>
<td class="firstcol">Favorable to save</td>
<td>36</td>
<td>35</td>
<td>33</td>
<td>34</td>
<td>88.9</td>
<td>8</td>
<td>40</td>
<td>4</td>
<td>36</td>
<td>23</td>
</tr>
<tr>
<td class="firstcol">Ability to save Next 12</td>
<td>-6</td>
<td>-5</td>
<td>-4</td>
<td>-4</td>
<td>58.6</td>
<td>67</td>
<td>6</td>
<td>-23</td>
<td>29</td>
<td>-8</td>
</tr>
<tr class="even">
<td class="firstcol" colspan="11">Spending</td>

</tr>
<tr>
<td class="firstcol">Favorable for major purchase</td>
<td>-8</td>
<td>-6</td>
<td>-3</td>
<td>-7</td>
<td>58.6</td>
<td>51</td>
<td>16</td>
<td>-42</td>
<td>58</td>
<td>-12</td>
</tr>
<tr class="even">
<td class="firstcol" colspan=11>Financial Situation</td>

</tr>
<tr>
<td class="firstcol">Current</td>
<td>16</td>
<td>15</td>
<td>15</td>
<td>14</td>
<td>61.9</td>
<td>39</td>
<td>24</td>
<td>3</td>
<td>21</td>
<td>12</td>
</tr>
<tr>
<td class="firstcol">Past 12 MOs</td>
<td>-15</td>
<td>-14</td>
<td>-14</td>
<td>-11</td>
<td>54.5</td>
<td>68</td>
<td>-5</td>
<td>-27</td>
<td>22</td>
<td>-16</td>
</tr>
<tr>
<td class="firstcol">Next 12-Mos</td>
<td>-4</td>
<td>-3</td>
<td>-1</td>
<td>4</td>
<td>44.4</td>
<td>159</td>
<td>11</td>
<td>-16</td>
<td>27</td>
<td>0</td>
</tr>
<tr class="grey1">
<td colspan="11" class="firstcol">Number of observations in the period 208</td>
</tr>
</tbody>
</table>
</body>
</html>

Household confidence in France fails to climb to or above -10. The chart on French consumer confidence shows that there is something around the level of -10 on the index that seems critical to the development of the direction on the [...]

French Household Confidence Takes Sharp Reversal

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

Apart from the US, productivity is moribund

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Nonfarm payrolls increased 22,000 during August after rising 79,000 in July, revised from 73,000 and falling 13,000 during June, revised from a 14,000 increase. Expectations had been for an 83,000 rise in the Action Economics Forecast Survey. The three-month average change in payrolls of 29,300 compared to 28,300 in July, but stood far below its high of 231,700 in January.

Average hourly earnings rose an expected 0.3% in August after unrevised gains of 0.3% in July and 0.2% in June. Earnings growth of 3.7% y/y equals that in June which is the lowest since July 2024, but has been trending lower from its 5.9% high in March 2022.

The unemployment rate, measured in the household survey, edged up m/m to an expected 4.3% from 4.2% in July and 4.1% in June. It reached a low of 3.4% in April 2023. The unemployment rate, including employees working part-time for economic reasons plus all marginally-attached workers, rose to 8.1% last month from 7.9% In July. It was 6.6% in April 2023.

In the **establishment survey**, private-sector employment in August rose 38,000 after rising 77,000 in July.  Factory sector jobs declined 12,000, off for the fourth straight month. Durable goods employment fell 19,000 after rising 5,000, as motor vehicle & parts hiring declined 7,300 after a 2,000 July gain. Nondurables employment rose 7,000, reversing a 7,000 July decline. Construction sector employment weakened 7,000, down for the third straight month. The number of mining & logging industry jobs declined 6,000, also registering the fourth consecutive month of decline.

Private service-sector employment increased 63,000 during August after improving 85,000 in July. Increases varied greatly amongst service-sector categories. Private education & health sector employment rose 46,000 last month, following a 77,000 increase in July. The number of leisure & hospitality jobs rose 28,000 after a 6,000 gain. Trade, transportation & utilities employment gained 2,000, following a 5,000 increase, but financial activities employment weakened 3,000 after increasing 9,000 in July. The number of professional & business services jobs fell 17,000, down for the fourth straight month as temporary help employment declined 9,800, also off for the fourth month in a row. Information sector employment declined 5,000, after falling 7,000 in July and 3,000 in June. Transportation & warehousing hiring weakened 3,600 last month following a 6,300 drop.

Government sector payrolls declined 16,000 last month following a 2,000 rise. Federal government employment weakened 15,000 and has fallen for seven straight months. State government payrolls declined 13,000 after falling in each of the prior three months. To the upside, local government hiring rose 12,000 following a 17,000 July increase.

Private-sector average hourly earnings rose 0.3% (3.7% y/y) in August, the same as in July. Earnings in the goods-producing sector increased 0.4% (4.0% y/y) in August, double the July rise. In construction, earnings rose 0.6% (4.2% y/y) following a 0.3% rise, while factory sector earnings improved 0.3% (3.9% y/y) after a 0.2% gain. In the service sector, earnings rose 0.3% (3.6% y/y) in August, the same as in July. Professional & business services pay increased 0.4% (5.0% y/y) for the second consecutive month while leisure & hospitality earnings also increased 0.4% (3.7% y/y) after two straight months of 0.3% increase. Information earnings rose 0.2% (4.6% y/y) for the second straight month.

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The length of the average workweek was 34.2 hours in August for the third straight month. The workweek in the goods-producing sector eased to 39.8 hours from 39.9 hours in July. The construction sector average workweek held at 39.0 hours while the factory sector workweek eased to 40.0 hours from 40.2 hours. The average workweek in the private service sector held at 33.2 hours. Information sector hours edged up to 37.0 from 36.9. Financial activities hours held at 37.6. Private education & health services hours eased to 32.7 from 32.8 in July.

In the **household survey**, the unemployment rate increased to 4.3% in August after rising to 4.2% in July from 4.1% in June as employment rose 288,000 after falling 260,000 in July and the size of the labor force increased 436,000 after three straight months of decline. The labor force participation rate rose to 62.3% last month from 62.2%, remaining well below the high of 63.3% early in 2020. The rate for teenagers eased to 34.8%, a five-year low. For workers aged 20-24, the rate plunged to 70.2%, a four year-low. For workers aged 25-54, the participation rate increased to 83.7%, an eleven-month high. For individuals 55 and over, the rate held steady at 38.1% but remained near a 20-year low of 38.0% in June.

The employment/population ratio for all workers steadied at 59.6% last month. It remained below the peak reading of 61.1% in February, 2020 just prior to the pandemic. For men, the rate rose to 65.0% from 64.7% in July and for women, the rate eased to 54.5 % on the heels of a slip to 54.7% in July.

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's **USECON** database. Detailed figures are in the **EMPL** and **LABOR** databases. The expectations figures are in the **AS1REPNA** database.

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- Hiring weakens broadly; factory, construction & government jobs decline.
- Earnings gain slows y/y.
- Unemployment rate increases as job growth lags rise in labor force.

U.S. Payroll Employment Report Reveals Unexpected Weakness in August; Earnings Rise Steadily, but Jobless Rate Increases

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Germany's factory orders declined for the third straight month in July. Real new orders fell 2.9% month-on-month in July, against expectations for a small increase. The drop was sharper than a 0.2% decrease in June; foreign orders declined 3.1% in July, as orders from the euro area contracted 3.8%, and orders from outside the euro area fell by 2.8%. These metrics suggest that demand both inside and outside the euro area remains weak. Domestic orders dropped 2.5% in July, an exact offset to their gain in June. When ranked on growth rates over the last 30 years, all three sector growth rates are below their medians (below a ranking of 50%). However, when ranked on the real index number level, total orders rank at their 55.6 percentile, foreign orders rank at their 79.5 percentile and domestic orders rank at their 15.2 percentile. All-in-all it’s an unimpressive report.

**Orders sequentially and QTD:** Sequential trends are ambivalent but still clearly weak. Sequential growth rates do not show a clear acceleration/deceleration pattern. But for total, foreign and domestic real orders, both 3-month and 12-month growth rates are negative (one exception: foreign orders over 12 months). Domestic orders show negative growth over 6 months as well. Quarter-to-date growth rates are negative for all sectors.

**Sales trends:** Real sales are mixed in July, rising 0.9% overall on declines in two sectors: consumer durables and intermediate goods. Sector sales mostly maintain growth as manufacturing sales are positive based on growth rates over 12 months, 6 months, and 3 months. Consumer goods and intermediate goods sales show deceleration and ongoing contraction. Consumer durable goods and intermediate goods show QTD declines. On the manufacturing & mining to total, manufacturing and capital goods show index standings above their respective 50% on 30 years of data. That also shows above-median growth rates on annual data along with consumer goods and consumer nondurable goods.

**Industrial confidence:** Industrial confidence measures for Germany, France, Italy, and Spain, the four largest EMU members, show improved (but still net negative readings) in July compared to June. Over three months and six months, Germany and Italy show some improvement; France still shows steady deterioration. Spain shows improvement over 3 months and it is only slight improvement. The queue standings for the industrial reading over 30 years of data show Spain with an above-median reading in July. Germany and France are exceptionally weak and Italy has been weaker only 26% of the time based on the queue standing measure. Not only are German orders and demand weak and faltering but the broad EU Commission measures of industrial confidence show broadly weak readings for the largest economies in the EMU.

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Germany

German Factory Orders Plunge on Domestic Weakness

Andrew Cates

**Gold prices and trade policy uncertainty**
This week’s record-breaking surge in gold prices has coincided with renewed volatility in trade policy uncertainty, reflecting the market’s heightened sensitivity to political and legal developments in Washington. A series of legislative challenges to the administration’s latest tariff measures has raised the prospect that parts of the policy framework could be overturned or significantly diluted. That possibility has injected another layer of uncertainty into an already fragile trade environment, amplifying demand for gold as a hedge. Investors appear to be weighing not only the inflationary risks of tariffs that remain in place but also the destabilizing effects of unpredictable policy reversals, leaving gold prices at historic highs and the trade policy uncertainty index elevated.

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**US Tariffs**
Although the data in this chart extend only through June 2025, they clearly illustrate which trading partners would gain the most if US tariff policies were to be reversed. China stands out as the most heavily penalised, with effective tariff rates rising by more than 25 percentage points in just six months. Japan and South Korea have also faced significant tariff hikes, suggesting that their exporters would benefit substantially from any policy rollback. Taiwan, India, and the EU also feature prominently, though at more moderate levels. By contrast, ASEAN economies, Australia, and the UK have seen relatively smaller increases, leaving them less exposed. In aggregate, a broad reversal of tariffs would most immediately alleviate the pressure on East Asian exporters—particularly China—while also reducing costs for US importers and consumers who have been disproportionately affected by higher prices on goods from the region.

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**The Indian economy and US trade policy** 
India faces a particularly sharp squeeze from the latest wave of US tariff hikes, given that the US now absorbs nearly one-fifth of its exports. The imposition of higher barriers has dealt a direct blow to key sectors, such as textiles and jewellery, while also undermining investor confidence. That pressure is clearly visible in the sharp depreciation of India’s trade-weighted currency, which has accelerated in 2025. Rather than offering a competitiveness boost, the weaker rupee has compounded difficulties by lifting import costs and stoking inflation at home. The result is that tariffs have both curtailed India’s export earnings and strained its domestic economy, leaving policymakers with limited options beyond seeking trade diversification and targeted support measures.

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**Global monetary policy** 
The latest Blue Chip Financial Forecasts survey helps explain why equity markets have remained upbeat despite escalating geopolitical and trade tensions. The survey points to an expected sizeable policy easing over the coming year, particularly in the US and UK where forecasters anticipate close to a full percentage point of rate cuts. Australia and Canada are also projected to deliver meaningful reductions, while the euro area is expected to ease more modestly. Japan stands out as the exception, with expectations tilted toward further tightening. For equities, these projections of broad-based rate cuts provide a crucial cushion—supporting valuations, lowering discount rates, and reinforcing the sense that policymakers are prepared to offset the drag from tariffs and slowing global growth.

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**Euro area inflation** 
By contrast with the US and UK, where forecasters in the latest Blue Chip Financial Forecasts survey anticipate close to a full percentage point of rate cuts, expectations for the ECB are more restrained. This reflects the fact that the ECB has already delivered a relatively large degree of policy easing, while headline inflation has now fallen back to levels close to its target. Even so, further rate reductions remain likely if underlying price pressures continue to moderate. As the chart shows, services inflation has begun to move lower in line with a clear decline in wage growth, suggesting that disinflationary momentum is building. Should this trend persist, the ECB will have scope to add to its easing cycle, though at a slower and more cautious pace than peers such as the Fed or the Bank of England.

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**Prices and cost pressures in the US corporate sector** 
Corporate profitability has long been one of the best leading signals for US equity cycles, and the measure here (Non-financial corporate profits per unit of output – i.e. profit margins) has slipped from its late-2023 peak and moved sideways for much of the past year. That’s not a collapse, but it does raise questions about how long equities can keep rising without stronger profit momentum. The recent Q2 uptick—a 1.8% annualised gain—came despite a hefty rise in non-labour costs, with margins protected by modest pricing power and a notable 2.2% drop in unit labour costs. Whether that labour relief reflects softer wage pressures or a structural productivity boost—potentially tied to AI—will be crucial in determining if profits can remain resilient, or if this plateau is the prelude to a downturn.

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Equity markets have lost a little ground in recent days and bond markets have been more jittery, as legal challenges to US tariff policies add to a tense backdrop of geopolitical meetings between China, Russia, and India. Gold’s surge to record highs arguably captures the search for safe havens amid this uncertainty (chart 1), while the possibility of tariff reversals keeps alive the prospect of relief for the most affected exporters, notably China, Japan, and South Korea (chart 2). India’s position looks more precarious, with its reliance on the US market colliding with a weakening trade-weighted currency as tariffs bite into growth and investor confidence (chart 3). Monetary policy expectations, however, continue to offer some support, with the latest Blue Chip Financial Forecasts survey pointing to sizeable easing in the US and UK (chart 4). The ECB is expected to tread more cautiously after earlier cuts and with headline inflation now near target. Still, if inflation continues to ease, further action remains possible (chart 5). In the US, corporate resilience is also helping offset some of the gloom: despite tariff-driven spikes in non-labour costs, falling unit labour costs—possibly aided by AI productivity gains—and firmer prices allowed profits per unit of output to rise in Q2 (chart 6).

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Charts of the Week: A Few Cuts More

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The U.S. ISM Services PMI increased to 52.0 in August after falling to 50.1 in July from 50.8 in June, according to the Institute for Supply Management. The index had been declining since it reached 53.5 in February. The index hit a recent high of 55.8 in October of last year and remains below the all-time high of 67.5 in November 2021. The Action Economics Forecast Survey expected a reading of 51.0 for August.

The ISM Composite Index combines the services index and the manufacturing index released on Tuesday. This index rose to 51.6 in August from 49.8 in July. This also was the highest level in six months.

Amongst the services component series, the business activity index rose to 55.0 last month after falling to 52.6 in July. Twenty-three percent (NSA) of respondents reported improved activity while 14.2% reported decline. The new orders index increased to 56.0 from 50.3 in July. Twenty-seven percent (NSA) of respondents reported improved orders while a lessened 16.2% reported decline. The employment series was little-changed in August at 46.5, after falling from 47.2 in June. A lessened 10.3% (NSA) of respondents reported increased employment while a lower 16.8% reported decline. Working lower, the supplier delivery series fell to 50.3 in August after rising to 51.0 in July. Four percent of respondents (NSA) reported faster delivery speeds while 4.5% reported slower speeds.

On the inflation front, the prices index eased to 69.2 after surging to 69.9 in July. A lessened 36.7% (NSA) of respondents reported higher prices while 2.6% reported lower prices. The index has increased from its December 2023 53.1.

Additionally, the new export orders index eased to 47.3 (NSA) in July following a decline to 47.9 in July. Twelve percent of survey respondents reported higher exports while 16.9% reported decline. The imports index surged to 54.6 last month after falling to 45.9 in July. A higher 18.9%% of respondents reported higher imports while a lessened 9.8% reported decline. The inventory change index rose to 53.2 from 51.8 and the order backlog index fell to 40.4 in August after rising to 44.3 in July. These series are not seasonally adjusted and not included in the ISM Services PMI total.

The ISM Services PMI is a composite index consisting of four equally weighted diffusion indexes: Business Activity, New Orders, Employment, and Supplier Deliveries. A reading above 50 indicates expansion in the services sector, while below 50 suggests contraction. Supplier Deliveries is the only ISM index that is inversed; a reading above 50 indicates slower deliveries.

The ISM figures are available in Haver's **USECON** database, with additional detail in the **SURVEYS** database. The expectations figure from Action Economics is in the **AS1REPNA** database.

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- Total index rebounds to six-month high.	
- Business activity and new orders improve.
- Prices index eases.

U.S. ISM Services PMI Increases in August

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The ADP National Employment Report indicated that nonfarm private sector payrolls rose 54,000 (1.1% y/y) during August after increasing 106,000 in July, revised from 104,000 and declining an unrevised 23,000 in June. The Action Economic Forecast Survey expected a 75,000 increase in August.

Small business hiring (less than 50 employees) increased 12,000 (0.4% y/y) in August after an 8,000 July rise, revised from 12,000. Employment at medium-sized firms (50-499 employees) rose 25,000 (1.1% y/y) in August after increasing 53,000 in July, revised from 46,000. Large business hiring (500+ employees) gained 18,000 (2.4% y/y) following a 47,000 July increase, revised from 46,000.

Goods-producing employment rose 13,000 (1.3% y/y) after increasing 32,000 in July. Construction jobs increased 16,000 (2.4% y/y) following a 13,000 gain in July. Manufacturing jobs declined 7,000 (+0.1% y/y), after two months of moderate increase. Natural resources and mining jobs increased 4,000 (4.1% y/y) in August after rising 11,000 in July.

Service-producing jobs increased 42,000 (1.0% y/y) after a 74,000 July gain. Changes amongst industry sectors were mixed. Leisure & hospitality employment rose 50,000 (3.5% y/y) after increasing 45,000 in July. Professional & business jobs improved 15,000 (0.5% y/y) following a 9,000 increase. Information sector employment rose 7,000 (1.1% y/y) after increasing 9,000.  Working lower, trade, transportation & utilities employment fell 17,000 (+0.3% y/y) after rising 20,000 in July. Education & health services posted a 12,000 decline (+0.2% y/y) after falling 40,000 in July. This was the sixth decline in seven months. Financial activities employment slid 2,000 (+1.9% y/y) after a 28,000 strengthening.

By region, in the Northeast the number of jobs rose 15,000 (1.2% y/y) in August following four consecutive monthly declines. Jobs rose 14,000 (1.3% y/y) in the Midwest after increasing 12,000 in July. In the West, jobs rose 8,000 (0.8% y/y) following a 67,000 increase, and in the South, employment rose 4,000 (0.8% y/y) following a 40,000 July strengthening.

Wage growth for job-stayers continued to moderate in August as year/year growth of median annual pay weakened to 4.4% from 4.5% in July, the slowest pace since June 2021. The slowdown in wage growth for job-stayers was widespread across major industries. Wage growth for job-changers was steady at 7.1% y/y, but down from a high of 16.1% in April 2022.

The ADP National Employment Report and Pay Insights data can be found in Haver's **USECON** database. Historical figures date back to January 2010 for private employment. Pay data date back to October 2020. The expectation figure is available in Haver's **AS1REPNA** database.

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- Private payroll job increase is half July’s gain.
- Goods-producing employment slows as factory hiring falls; service-sector jobs also moderate.
- Job-stayer wage growth eases.

Economy in Brief: 2007

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