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/071003h.jpg" width="353">
Retail sales in Australia extended their recent surge through a third month in August as they recovered from a dip in April-May. They were up 0.7% in August alone and 3.2% over the last three months, the strongest 3-month gain since late in 2003. At least one forecast survey looked for only half as much increase in August.
In a number of other countries, we have noted recently that consumer spending has been lagging. Germany is a prime example, with a 1.4% drop in August, and the entire Euro-Area saw a minuscule 0.7% rise in August. This does not seem to be the case in Australia. The country&#39;s economy is benefiting from the commodity boom and also is experiencing a growing surplus in its balance of trade in services. Further, it seems not to have been hit with a downturn in the housing market. Lending for home purchase looks fairly steady and significantly, prices of established homes are rising, especially in Melbourne, Brisbane and Adelaide. So the environment for consumer spending is favorable.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071003i.jpg" width="353">
The upturn in reported retail sales in the last few months has occurred in several categories. All the reported categories were stronger in the June-August period than in the prior three months. But the biggest turns were in clothing, from a decline of 1.7% in February-May to a gain of 6.3% in the later span. The &quot;other&quot; retailing sector similarly went from a decrease of 0.6% to a gain of 4.7%. Household goods were basically flat from February through May, but then grew 3.1% from May through August.
So the retail sector in Australia is firm with a diversity of gains. One wire service said today (Wednesday in New York) that this would add to evidence that the Reserve Bank would want to raise rates soon. The mere expression of such sentiments at this time also sets the Australia economy and its policymakers apart from those in other parts of the world.
All of these data are included in Haver&#39;s ANZ database with some summary items in G10. Note that retail sales data in Australia do not include motor vehicles or motor fuel.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Australia: Retail Sales, SA</th>
<th scope="col">Aug 2007*</th>
<th scope="col">July 2007*</th>
<th scope="col">Aug/- May</th>
<th scope="col">May/- Feb</th>
<th scope="col" colspan="3">Monthly Averages</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol" colspan="5">&nbsp;</td>
<td>2006</td>
<td>2005</td>
<td>2004</td>
</tr>
<tr>
<td class="firstcol">Total, Mil.A$</td>
<td>19684</td>
<td>19542</td>
<td>--</td>
<td>--</td>
<td>18161</td>
<td>17144</td>
<td>16680</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Yr/Yr % Chg</td>
<td>8.3</td>
<td>7.2</td>
<td>--</td>
<td>--</td>
<td>5.9</td>
<td>2.8</td>
<td>7.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Mo/Mo % Chg</td>
<td>0.7</td>
<td>0.8</td>
<td>3.2</td>
<td>0.7</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Food</td>
<td>1.0</td>
<td>0.7</td>
<td>3.1</td>
<td>1.5</td>
<td>6.8</td>
<td>3.6</td>
<td>7.2</td>
</tr>
<tr>
<td class="firstcol">Clothing/Soft Goods</td>
<td>-0.1</td>
<td>1.0</td>
<td>6.3</td>
<td>-1.7</td>
<td>4.4</td>
<td>5.2</td>
<td>7.2</td>
</tr>
<tr>
<td class="firstcol">Household Goods</td>
<td>2.4</td>
<td>-0.6</td>
<td>3.1</td>
<td>0.2</td>
<td>5.7</td>
<td>5.5</td>
<td>8.9</td>
</tr>
<tr>
<td class="firstcol">&quot;Other&quot; Retailing</td>
<td>1.5</td>
<td>1.5</td>
<td>4.7</td>
<td>-0.6</td>
<td>5.9</td>
<td>-4.1</td>
<td>5.9</td>
</tr>
<tr>
<td class="firstcol">Hospitality</td>
<td>1.2</td>
<td>-0.6</td>
<td>2.1</td>
<td>0.8</td>
<td>8.3</td>
<td>2.6</td>
<td>7.7</td>
</tr>
</tbody>
</table>
</body>
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Retail sales in Australia extended their recent surge through a third month in August as they recovered from a dip in April-May. They were up 0.7% in August alone and 3.2% over the last three months, the strongest 3-month gain since [...]

Australia Retail Sales Show Some Vigor Through August

Robert Brusca

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071003g.jpg" width="353">
Retail volumes grew by just 0.1% in the Euro area 13 in August. This follows an upwardly-revised +0.4% in July. That is not an auspicious start to the quarter. However since Q2 ended on such a strong note, again of 0.6% that has sent Q3 off on a relatively firm note so that the gains so far in the quarter have been helped by that momentum. As a result, quarter-to-date growth in EMU is strong. Sales volumes overall are expanding at a 3% pace with food expenditures up at a pace of 0.6%; nonfood spending is expanding at a pace of 4% all annualized at the two-month market in the new quarter.
Still the individual country results are disparate. For Germany, sales are up at just a 2.1% pace in the quarter; for the UK the pace is a very hefty 8.1%. French figures are not yet available but France has been tracking on the high side. Still for EMU as a whole the pace of retail sales seems to be slowing. What the EMU post for the quarter will still depend importantly on what consumers do in September.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
<th colspan="7" scope="col">Euro Area 13 Retail Sales Volume</th>
</tr>
</thead>
<tbody>
<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>
</tr>
<tr>
<td class="firstcol">Euro Area 13 Total</td>
<td>0.1%</td>
<td>0.4%</td>
<td>0.6%</td>
<td>4.5%</td>
<td>1.9%</td>
<td>0.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food</td>
<td>0.2%</td>
<td>0.3%</td>
<td>-0.1%</td>
<td>2.0%</td>
<td>0.6%</td>
<td>0.3%</td>
</tr>
<tr>
<td class="firstcol">Nonfood</td>
<td>-0.1%</td>
<td>0.4%</td>
<td>1.1%</td>
<td>5.6%</td>
<td>2.2%</td>
<td>0.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Textiles</td>
<td>#N/A</td>
<td>0.8%</td>
<td>2.9%</td>
<td>0.6%</td>
<td>5.6%</td>
<td>4.9%</td>
</tr>
<tr>
<td class="firstcol">HH Goods</td>
<td>#N/A</td>
<td>0.2%</td>
<td>1.4%</td>
<td>4.9%</td>
<td>3.3%</td>
<td>3.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Books news, etc</td>
<td>#N/A</td>
<td>0.2%</td>
<td>1.6%</td>
<td>3.9%</td>
<td>3.4%</td>
<td>3.3%</td>
</tr>
<tr>
<td class="firstcol">Pharmaceutical</td>
<td>#N/A</td>
<td>0.3%</td>
<td>0.2%</td>
<td>3.8%</td>
<td>3.7%</td>
<td>3.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Other Nonspecified</td>
<td>#N/A</td>
<td>-0.1%</td>
<td>1.3%</td>
<td>2.2%</td>
<td>3.4%</td>
<td>1.1%</td>
</tr>
<tr>
<td class="firstcol">Mail order</td>
<td>#N/A</td>
<td>0.9%</td>
<td>-0.1%</td>
<td>9.3%</td>
<td>9.5%</td>
<td>1.6%</td>
</tr>
<tr class="grey3">
<td colspan="7" class="firstcol">Nonfood Country Detail Volume</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>0.9%</td>
<td>-0.5%</td>
<td>3.0%</td>
<td>14.5%</td>
<td>2.1%</td>
<td>-2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>#N/A</td>
<td>0.4%</td>
<td>1.3%</td>
<td>7.9%</td>
<td>6.5%</td>
<td>5.8%</td>
</tr>
<tr>
<td class="firstcol">Italy (Total; Value)</td>
<td>#N/A</td>
<td>-0.1%</td>
<td>0.0%</td>
<td>-1.1%</td>
<td>-1.6%</td>
<td>-1.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">UK (EU)</td>
<td>0.7%</td>
<td>0.7%</td>
<td>1.0%</td>
<td>10.2%</td>
<td>7.5%</td>
<td>7.0%</td>
</tr>
<tr class="grey2">
<td colspan="7" class="firstcol">Shaded areas calculated on a one-month lag due to lagging data</td>
</tr>
<tr class="odd">
<td colspan="7" class="firstcol">The EA 13 countries are Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Slovenia and Spain.</td>
</tr>
</tbody>
</table>
</body>
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Retail volumes grew by just 0.1% in the Euro area 13 in August. This follows an upwardly-revised +0.4% in July. That is not an auspicious start to the quarter. However since Q2 ended on such a strong note, again of 0.6% that has sent [...]

European Retail Sales Remained Mixed, Weak in August but Solid in Q3

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071003f.jpg" width="353">
Service sector slows across EMU -- The Reuters/NTC EU indexes on the services sector show widespread weakness in September. For the Euro area 13, the index has dropped a sharp 3-plus points in September and the reading now resides only just above the midpoint of its range since May of 2000. In Germany, the reading holds in the 55th percentile of its range. For the other featured EMU countries the reading has dropped below the range midpoint. All readings remain above 50 and thus show continuing expansion in the sector. The UK index is relatively strong by comparison.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
<th colspan=7 scope="col">NTC Services Indexes</th>
</tr>
</thead>
<tbody>
<tr class="grey2">
<td class="firstcol">&nbsp;</td>
<td>Sep-07</td>
<td>Aug-07</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>Percentile</td>
</tr>
<tr>
<td class="firstcol">Euro area 13</td>
<td>54.22</td>
<td>58.04</td>
<td>56.87</td>
<td>57.20</td>
<td>57.26</td>
<td>54.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>53.09</td>
<td>59.76</td>
<td>57.11</td>
<td>57.58</td>
<td>57.25</td>
<td>55.4%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>56.79</td>
<td>58.40</td>
<td>58.04</td>
<td>58.28</td>
<td>58.67</td>
<td>48.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>53.86</td>
<td>56.18</td>
<td>56.17</td>
<td>56.15</td>
<td>55.66</td>
<td>45.3%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>52.37</td>
<td>53.51</td>
<td>54.07</td>
<td>54.65</td>
<td>56.38</td>
<td>42.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Ireland</td>
<td>54.76</td>
<td>56.98</td>
<td>55.98</td>
<td>56.31</td>
<td>58.46</td>
<td>41.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan=7>EU only</td>

</tr>
<tr>
<td class="firstcol">UK</td>
<td>56.69</td>
<td>57.55</td>
<td>57.09</td>
<td>57.24</td>
<td>58.10</td>
<td>72.9%</td>
</tr>
<tr class="grey1">
<td colspan="7" class="firstcol">Percentile is over range since May 2000</td>

</tr>
</tbody>
</table>
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Service sector slows across EMU -- The Reuters/NTC EU indexes on the services sector show widespread weakness in September. For the Euro area 13, the index has dropped a sharp 3-plus points in September and the reading now resides [...]

Service Sector Weakens in Europe

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071003c.jpg" width="353">
The ADP National Employment Report, reported by the payroll processor, found that private nonfarm payrolls rose a somewhat improved 58,000 during September versus just a 27,000 rise during August.
The U.S. Bureau of Labor Statistics employment figure for September will be published this Friday.
Last month, ADP&#39;s measure of private nonfarm payrolls for August indicated a revised 27,000 increase in jobs that was followed by a small 24,000 increase in private nonfarm payrolls.
The sub-index for large payrolls improved to a lesser rate of decline. Nevertheless, the index fell to its lowest level on record. 
The sub-index for small payrolls, conversely, rose an improved 53,000. 
According to ADP and Macro Advisers, the correlation between the monthly percentage change in the ADP estimate and that in the BLS data is 0.90.
ADP compiled the estimate from its database of individual companies&#39; payroll information. Macroeconomic Advisers, LLC, the St. Louis economic consulting firm, developed the methodology for transforming the raw data into an economic indicator.
The ADP National Employment Report data is maintained in Haver&#39;s USECON database; historical data go back to December 2000. The figures in this report cover only private sector jobs and exclude employment in the public sector, which rose an average 11,083 during the last twelve months. 
The full ADP National Employment Report can be found <a href="http://www.adpemploymentreport.com/PDF/FINAL_NER_August2007_Report.pdf">here</a>, and the ADP methodology is explained <a href="http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB25/@EB25.HTM">LAXEPA@USECON</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Nonfarm Private Payroll Employment (m/m Chg.)</td>
<td>58,000</td>
<td>27,000</td>
<td>1.1%</td>
<td>1.7%</td>
<td>1.8%</td>
<td>1.3%</td>
</tr>
</tbody>
</table>


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The ADP National Employment Report, reported by the payroll processor, found that private nonfarm payrolls rose a somewhat improved 58,000 during September versus just a 27,000 rise during August.

ADP Report: Private Payroll Growth Smallest Since 2003

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071003d.jpg" width="353">
According to the Institute for Supply Management, the nonmanufacturing sector Business Activity Index for September dipped to 54.8 versus August which was unchanged from July. The dip was in line with Consensus expectations for a decline to 55.0.
Since the series&#39; inception in 1997 there has been a 44% correlation between the level of the Business Activity Index and the Q/Q change in real GDP for services plus construction.
The new orders sub index provided much of the downward drift to the Business Activity Index and fell to 53.4 from 57.0 in August. The latest reading is near the lowest level since 2003.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071003e.jpg" width="353">
The employment sub index, however, recovered most of the declines during the prior two months with a rise to 52.7, back signaling positive jobs growth. Since the series&#39; inception in 1997 there has been a 56% correlation between the level of the ISM nonmanufacturing employment index and the m/m change in payroll employment in the service producing plus the construction industries.
Pricing power improved and recovered most of the declines during the prior three months. Since inception ten years ago, there has been a 60% correlation between the price index and the q/q change in the GDP services chain price index.
ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The non-manufacturing survey dates back to July 1997.
The Business Activity Index for the nonmanufacturing sector reflects a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index is a weighted average of five components. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">September &#39;06</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Business Activity Index</td>
<td>54.8</td>
<td>55.8</td>
<td>54.6</td>
<td>58.0</td>
<td>60.2</td>
<td>62.5</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>66.1</td>
<td>58.6</td>
<td>58.2</td>
<td>65.2</td>
<td>68.0</td>
<td>68.8</td>
</tr>
</tbody>
</table>


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According to the Institute for Supply Management, the nonmanufacturing sector Business Activity Index for September dipped to 54.8 versus August which was unchanged from July. The dip was in line with Consensus expectations for a [...]

U.S. ISM Nonmanufacturing Index Dipped

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071003a.jpg" width="353">
U.S. sales of light vehicles during September were roughly flat with August at a 16.23M unit annual selling rate. The September performance followed a 6.5% m/m rebound during August, according to the Autodata Corporation. Sales were better than expectations for a 5.9M selling rate.
Though gasoline prices have fallen somewhat since the May peak of $3.22 per gallon, the 21% gain last month versus September of 2006 appeared to impact those buyers searching for fuel efficiency.
Domestically made vehicle sales fell 1.5% m/m to 12.38M (-2.8% y/y). Sales of domestic light trucks fell 3.5% m/m to a 7.28M selling rate. In addition, for this year, sales of domestically assembled light trucks are down 3.1% versus the average of 2006 and sales last year fell 8.7% versus 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071003b.jpg" width="353">
Conversely, sales of U.S. made cars rose 1.4% m/m to 5.10M units last month (-1.9% y/y) after a firm 6.2% August rise. The domestic auto business continued to be under pressure, however, as the selling rate so far this year is down 5.4% from 2006 and sales last year fell 1.7% y/y.
Sales of the relatively fuel efficient imported light vehicles posted a 4.1% m/m rise to 3.85M units (-0.3% y/y). Notable, however, was that gain was due to a 7.9% m/m gain in light truck sales which this year are up 7.5% from 2006, a year when sales of imported light trucks rose 14.2% from 2005.
Sales of imported cars rose 1.8% last month to 2.35M (-4.0% y/y) though the y/y decline is versus a very strong 2006 when sales rose 9.1% from 2005. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED09/@ED0901/@ED0901.HTM">Light Vehicle Sales (SAAR, Mil. Units)</a></th>
<th scope="col">&nbsp;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 class="odd">
<td class="firstcol">Total</td>
<td>16.23</td>
<td>16.27</td>
<td>-2.2%</td>
<td>16.55</td>
<td>16.96</td>
<td>16.87</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>7.45</td>
<td>7.34</td>
<td>-2.6%</td>
<td>7.77</td>
<td>7.65</td>
<td>7.49</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Domestic</td>
<td>5.10</td>
<td>5.03</td>
<td>-1.9%</td>
<td>5.31</td>
<td>5.40</td>
<td>5.36</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imported</td>
<td>2.35</td>
<td>2.31</td>
<td>-4.0%</td>
<td>2.45</td>
<td>2.25</td>
<td>2.14</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Trucks</td>
<td>8.77</td>
<td>8.93</td>
<td>-2.0%</td>
<td>8.78</td>
<td>9.32</td>
<td>9.37</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Domestic</td>
<td>7.28</td>
<td>7.54</td>
<td>-3.5%</td>
<td>7.42</td>
<td>8.12</td>
<td>8.15</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imported</td>
<td>1.50</td>
<td>1.39</td>
<td>6.3%</td>
<td>1.37</td>
<td>1.20</td>
<td>1.23</td>
</tr>
</tbody>
</table>
</body>
</html>

U.S. sales of light vehicles during September were roughly flat with August at a 16.23M unit annual selling rate. The September performance followed a 6.5% m/m rebound during August, according to the Autodata Corporation. Sales were [...]

U.S. Vehicle Sales Flat; Truck Sales Down, Cars Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071002e.jpg" width="353">
The Euro Area&#39;s year-over-year PPI excluding construction continues to head lower, while the six-month measure has seen some steady pressure and recent quasi-plateauing. But the three-month PPI is heading strongly lower. On balance, the Euro area PPI seems to be well-behaved.
The trends are well-behaved across components as well. Only consumer goods prices at the producer level are showing any acceleration in the recent three-months among major categories. Capital good prices are decelerating as are intermediate and energy goods. Manufacturing as a whole shows prices decelerating and the PPI ex-energy is also decelerating. The EMU PPI is well contained.
At the country level, Germany and Italy show the same sort of compliant patterns in their respective PPIs. The EU&#146;s UK demonstrates some flare up in the overall PPI but still shows a PPI ex energy with decelerating trends. These are encouraging trends but this is not the ECB&#146;s prime inflation measure. That one, the HICP, has been showing some pressure lately. But the lack of pressure at the PPI level is still good news &#150; at least through August.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
<th colspan=7 scope="col">Euro Area and UK PPI Trends</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="2">M/M</td>
<td colspan="4">SAAR</td>
</tr>
<tr class="grey3">
<td class="firstcol">Euro Area 13</td>
<td>Aug-07</td>
<td>Jul-07</td>
<td>3-Mo</td>
<td>6-MO</td>
<td>Yr/Yr</td>
<td>Y/Y Yr Ago</td>
</tr>
<tr>
<td class="firstcol">Total ex Construction</td>
<td>0.1%</td>
<td>0.3%</td>
<td>1.7%</td>
<td style="color:red">3.2%</td>
<td>1.7%</td>
<td>5.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Excl Energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.5%</td>
<td style="color:red">3.2%</td>
<td>2.9%</td>
<td>3.6%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>0.0%</td>
<td>0.1%</td>
<td>0.6%</td>
<td>0.9%</td>
<td style="color:red">1.6%</td>
<td>1.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Goods</td>
<td>0.5%</td>
<td>0.4%</td>
<td style="color:red">4.4%</td>
<td style="color:red">3.3%</td>
<td style="color:red">2.3%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">Intermediate &amp; Capital Goods</td>
<td>0.1%</td>
<td>0.1%</td>
<td>1.3%</td>
<td>3.0%</td>
<td>3.3%</td>
<td>4.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Energy</td>
<td>-0.7%</td>
<td>0.4%</td>
<td>-1.2%</td>
<td style="color:red">3.3%</td>
<td>-2.2%</td>
<td>12.6%</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>0.1%</td>
<td>0.3%</td>
<td>2.4%</td>
<td style="color:red">4.8%</td>
<td>2.2%</td>
<td>4.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>0.1%</td>
<td>-0.1%</td>
<td>0.7%</td>
<td style="color:red">1.7%</td>
<td>1.0%</td>
<td>5.9%</td>
</tr>
<tr>
<td class="firstcol">PPI ex Energy</td>
<td>0.3%</td>
<td>0.1%</td>
<td>2.2%</td>
<td style="color:red">2.8%</td>
<td>2.6%</td>
<td>3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>0.1%</td>
<td>0.3%</td>
<td>2.0%</td>
<td style="color:red">3.7%</td>
<td>1.9%</td>
<td>6.6%</td>
</tr>
<tr>
<td class="firstcol">PPI ex Energy</td>
<td>0.3%</td>
<td>0.2%</td>
<td>2.1%</td>
<td style="color:red">3.2%</td>
<td>3.1%</td>
<td>4.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">UK</td>
<td>-0.6%</td>
<td>0.7%</td>
<td style="color:red">2.6%</td>
<td>-2.3%</td>
<td>-0.1%</td>
<td>8.4%</td>
</tr>
<tr>
<td class="firstcol">PPI ex Energy</td>
<td>0.2%</td>
<td>0.4%</td>
<td>2.5%</td>
<td>2.7%</td>
<td style="color:red">3.0%</td>
<td>3.0%</td>
</tr>
<tr class="grey1">
<td colspan="7" class="firstcol">Euro area 13 Harmonized PPI excluding Construction</td>

</tr>
<tr class="grey1">
<td colspan="7" class="firstcol">The EA 13 countries are Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Slovenia and Spain.</td>

</tr>

</tbody>
</table>
</body>
</html>

The Euro Area's year-over-year PPI excluding construction continues to head lower, while the six-month measure has seen some steady pressure and recent quasi-plateauing. But the three-month PPI is heading strongly lower. On balance, [...]

Euro Area PPI Behaves in August

Job openings less than the number unemployed in July for first time since 2021

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

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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.

250905C2.jpg

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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

250905E.jpg

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.

250905.jpg

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.

250904Z1.jpg

**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.

250904Z2.jpg

**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.

250904Z3.jpg

**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.

250904Z4.jpg

**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.

250904Z5.jpg

**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.

250904Z6.jpg

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).

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/0sd6yLt6aGEGOdVpZ2VZbW?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

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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