Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090825a.jpg" align="left" border="0" height="265" width="353">
Asian economies appear to be emerging from recession. Thailand
is the latest Far Eastern country to report growth in its second
quarter GDP.The second quarter was 2.32% above the first quarter.
Contrary to the experience of other Asian economies, the source of
growth in Thailand has not been exports, but the business sector.Gross
fixed capital formation increased 5% after declining almost 13% in the
first quarter and the rate of inventory liquidation declined sharply
from a liquidation of 75,380 million baht in the first quarter to one
of 4,394 million baht in the second quarter. Private consumption barely
increased while government consumption was up by 1.6%. Exports actually
declined by over 3% in the second quarter while imports increased by
almost 9%. Perhaps part of the increase in exports was due to the
increase in fixed capital formation that often entails some foreign
know how.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090825b.jpg" align="right" border="0" height="265" width="353">
Earlier, Singapore, South Korea, Indonesia and Greater
China--China, Hong Kong and Taiwan--all reported growth in the second
quarter. (China does not report quarter to quarter growth rates, but
the increase in the second quarter year over year growth implies an
increase in the first quarter.) The two charts show the growth that has
taken place in these countries in the second quarter.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Q/Q
Percent Changes ex where noted</th>
<th scope="col">Q2 09</th>
<th scope="col">Q1 09</th>
<th scope="col">Q4&nbsp; 08</th>
<th scope="col">Q3 08&nbsp;</th>
<th scope="col">Q2 08</th>
<th scope="col">Q1 08&nbsp;</th>
<th scope="col">GDP,Mil US$ 2008 </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">China (Y/Y Percent Change)</td>
<td>7.9</td>
<td>6.1</td>
<td>6.8</td>
<td>9.0</td>
<td>10.1</td>
<td>10.6</td>
<td>4,415,884</td>
</tr>
<tr>
<td class="firstcol">Hong Kong</td>
<td>3.82</td>
<td>-4.44</td>
<td>-2.50</td>
<td>-1.71</td>
<td>-0.74</td>
<td>1.21</td>
<td>215</td>
</tr>
<tr class="odd">
<td class="firstcol">Taiwan</td>
<td>4.51</td>
<td>-2.46</td>
<td>-6.14</td>
<td>-2.79</td>
<td>0.13</td>
<td>0.33</td>
<td>392</td>
</tr>
<tr>
<td class="firstcol">Singapore</td>
<td>4.82</td>
<td>-3.21</td>
<td>4.38</td>
<td>-0.52</td>
<td>-198</td>
<td>2.92</td>
<td>182</td>
</tr>
<tr class="odd">
<td class="firstcol">South Korea</td>
<td>2.33</td>
<td>0.12</td>
<td>-5.07</td>
<td>-0.52</td>
<td>-1.98</td>
<td>2.92</td>
<td>947</td>
</tr>
<tr>
<td class="firstcol">Indonesia</td>
<td>1.37</td>
<td>0.88</td>
<td>0.20</td>
<td>1.49</td>
<td>1.82</td>
<td>1.65</td>
<td>510</td>
</tr>
<tr class="odd">
<td class="firstcol">Thailand</td>
<td>2.32</td>
<td>-1.85</td>
<td>-5.89</td>
<td>0.55</td>
<td>0.07</td>
<td>1.15</td>
<td>273</td>
</tr>
</tbody>
</table>
</body></html>

Asian economies appear to be emerging from recession. Thailand is the latest Far Eastern country to report growth in its second quarter GDP.The second quarter was 2.32% above the first quarter. Contrary to the experience of other [...]

More Good News From Asia: Thailand's Q2 GDP Increases 2.32%

Tom Moeller

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090821a.jpg">
The National Association of Realtors reported that sales of existing homes during July jumped for the fourth consecutive month. The 7.2% m/m rise to 5,240 (SAAR) was to the highest level since August of 2007. The increase in July sales beat Consensus expectations for sales of 5.00M homes. Total sales include sales of condos and co-ops.
Sales of existing single-family homes alone increased 5.5% last month and were up 13.8% from the January low. (These data have a longer history than the total sales series).
Recent sales have been helped by a tax credit for first-time home buyers. The credit of up to $8,000 extends though the end of this year. The full details of the home-buyer tax credit can be found <a href="http://www.federalhousingtaxcredit.com/2009/faq.php">here</a>.
The improvement in home sales looks to have inspired potential sellers to put more homes on the market. The number of unsold homes (condos &amp; single-family) for sale rose 7.3% during July to the highest level since November. Nevertheless, year-to-year inventories were down 10.6%. At the current sales rate there was a 9.4 months&#39; supply on the market. The figure was stable with June and was near the lowest since June 2007. For single-family homes the inventory rose 3.1% m/m (-13.2% y/y). At the current sales rate there was an 8.6 month&#39;s supply of homes on the market, the lowest since 2007.<img align="right" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090821b.jpg">
The median price of an existing home dipped m/m to $178,400. Though prices were still lower than the year ago level, they have risen by 8.3% from the January low.
The data on existing home sales, prices and affordability can be found in Haver&#39;s USECON database. The regional price, affordability and inventory data is available in the REALTOR database.
Reflections on a Year of Crisis is the title of this morning&#39;s speech by Fed Chairman Ben S. Bernanke in Jackson Hole, Wyoming and it is available <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20090821a.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Existing Home Sales (Thous, SAAR)</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>5,240</td>
<td>4,890</td>
<td>5.0%</td>
<td>4,893</td>
<td>5,674</td>
<td>6,516</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>930</td>
<td>820</td>
<td>3.3</td>
<td>845</td>
<td>1,010</td>
<td>1,093</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,220</td>
<td>1,100</td>
<td>8.0</td>
<td>1,130</td>
<td>1,331</td>
<td>1,494</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>1,950</td>
<td>1,820</td>
<td>5.4</td>
<td>1,860</td>
<td>2,243</td>
<td>2,577</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,130</td>
<td>1,150</td>
<td>1.8</td>
<td>1,064</td>
<td>1,095</td>
<td>1,357</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>4,610</td>
<td>4,330</td>
<td>5.0</td>
<td>4,341</td>
<td>4,960</td>
<td>5,712</td>
</tr>
<tr>
<td class="firstcol">Median Price, Total, $</td>
<td>178,400</td>
<td>182,000</td>
<td>-15.1</td>
<td>197,250</td>
<td>216,633</td>
<td>222,042</td>
</tr>
</tbody>
</table>
</body>
</html>

The National Association of Realtors reported that sales of existing homes during July jumped for the fourth consecutive month. The 7.2% m/m rise to 5,240 (SAAR) was to the highest level since August of 2007. The increase in July [...]

U.S. Existing Home Sales Rise With Distress Sales & Tax Credit

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090821c.jpg" align="left" border="0">
PMI Signals Are Lagging - PMI&#8217;s have lagged
the pickup but they are near to neutral and the Markit overview index
has reached the neutral mark of 50 in August. Markit&#8217;s overall PMI
reading for the Euro Area rose to this neutral level of 50 in August
lagging behind the GDP signals that in Q2 already turned up for two key
E-Zone countries (Germany and France) and with the Zone&#8217;s own GDP
barely falling. Purchaser indices that usually are more sensitive than
other macro-data have not been leading in Europe and that is a point to
ponder. 
 

Large jumps in August play catch-up --
The jumps in the respective MFG and Services indices were large. For
Services it is the largest jump in its history that extends back to
mid-1998. For the MFG index it is the eighth strongest jump in a
history that goes back to mid-1997. 
 

Still, the fact that the big signal from the PMIs is lagging
is a curiosity. 
 

Thinking more about PMIs -- PMI indices are
diffusion indices and formally they are indices of the breadth of
change in a certain direction (up or down, greater or less) rather than
of strength. The overall index is a weighted average of components that
look at specific aspects of an industry getting diffusion responses on
each. However, these indices are used as a proxy for strength since the
correlation with &#8216;strength&#8217; is high for &#8216;breadth&#8217;. Still we should bear
in mind always that &#8216;strength&#8217; is not in fact &#8216;breadth&#8217;, they are
different things and sometimes the difference matters, even if most of
the time it does not. 
 

Viva la difference?? If you have never
thought of the PMIs this way before, note that this concept has been
long in play in analyzing trends in the stock market. The stock market
index is a weighted average of stocks, an index that goes up and down,
but technicians also look at indicators of &#8216;breadth&#8217;. And when they do,
they DO NOT call them &#8216;strength&#8217; but when breadth and strength go
together a rally&#8217;s strength is said to be more powerful. Sometimes the
market goes &#8216;up&#8217; but decliners &#8216;outpace&#8217; advancers. This is exactly the
same thing as looking at output Vs its diffusion. Output and diffusion
do not always go in the same direction. Manufacturing output is like
the stock index and the MFG PMI is its breath measure. Services output
is compared to the breadth of the services PMI. But in the case of our
economic statistics we get the breadth reports much more quickly than
we get the output reports and so the diffusion indices take on a life
of their own and become proxies for &#8216;output.&#8217; 

The diffusion difference - What the
diffusion indices usually do, is to pick up small improvements that
might be scattered around the economy and lost. Diffusion indices
create a signal that would otherwise get lost in the aggregation of
data with weighting always going to the largest of reporters. So this
time around it seems that the opposite is happening. A few larger
reporting firms are doing better and driving the macro -data higher
while the smaller firms are not yet on board for the ride. This is not
surprising with all the government intervention (&#8230;in Europe, the UK and
the US, in fact) since government tends to work &#8216;best&#8217; with big
business. If the assistance works properly (or at all) stimulating
output at the larger firms (like auto makers) should create some
knock-on effects that will draw other firms into the upswing. And the
PMI reports may be signaling that, in August, this is finally
happening. But this process is a bit like trying to start a fire with
wet wood on windy day. Just because you have gotten a spark does not
means you will be able to nurse a bone-warming bonfire out of it.
Still, with a spark, you have a chance. And there is some tentative
evidence that growth is spreading- at last. Getting the diffusion
indices on board is crucial &#8211; they remain important barometers of the
success in spreading growth. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col">FLASH
Readings </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="3">Markit PMIs for the E-Zone</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr>
<td class="firstcol">Aug-09</td>
<td>47.87</td>
<td>49.53</td>
</tr>
<tr>
<td class="firstcol">Jul-09</td>
<td>46.25</td>
<td>45.69</td>
</tr>
<tr>
<td class="firstcol">Jun-09</td>
<td>42.62</td>
<td>44.65</td>
</tr>
<tr>
<td class="firstcol">May-09</td>
<td>40.68</td>
<td>44.82</td>
</tr>
<tr class="even">
<td colspan="3" class="firstcol">Averages</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>43.18</td>
<td>46.53</td>
</tr>
<tr>
<td class="firstcol">6-Mo</td>
<td>38.98</td>
<td>44.58</td>
</tr>
<tr>
<td class="firstcol">12-Mo</td>
<td>39.28</td>
<td>44.11</td>
</tr>
<tr class="even">
<td colspan="3" class="firstcol">127-Mo
Range</td>
</tr>
<tr>
<td class="firstcol">High</td>
<td>60.47</td>
<td>62.36</td>
</tr>
<tr>
<td class="firstcol">Low</td>
<td>33.55</td>
<td>39.24</td>
</tr>
<tr>
<td class="firstcol">% Range</td>
<td>53.2%</td>
<td>44.5%</td>
</tr>
</tbody>
</table>
</body></html>

PMI Signals Are Lagging - PMI’s have lagged the pickup but they are near to neutral and the Markit overview index has reached the neutral mark of 50 in August. Markit’s overall PMI reading for the Euro Area rose to this neutral level [...]

Flash PMI’s Turn in EMU

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090821a.jpg" align="left" border="0">
The National Association of Realtors reported that sales of
existing homes during July jumped for the fourth consecutive
month. The 7.2% m/m rise to 5,240 (SAAR) was to the highest level since
August of 2007. The increase in July sales beat Consensus expectations
for sales of 5.00M homes. Total sales include sales of condos and
co-ops.
Sales of existing single-family homes alone increased 5.5%
last month and were up 13.8% from the January low. (These data have a
longer history than the total sales series).
Recent sales have been helped by a tax credit for first-time
home buyers. The credit of up to $8,000 extends though the end of this
year. The full details of the home-buyer tax credit can be found <a href="http://www.federalhousingtaxcredit.com/2009/faq.php">here</a>.
The improvement in home sales looks to have inspired potential
sellers to put more homes on the market. The number of unsold homes
(condos &amp; single-family) for sale rose 7.3% during July to the
highest level since November. Nevertheless, year-to-year inventories
were down 10.6%. At the current sales rate there was a 9.4 months'
supply on the market. The figure was stable with June and was near the
lowest since June 2007. For single-family homes the inventory rose 3.1%
m/m (-13.2% y/y). At the current sales rate there was an 8.6 month's
supply of homes on the market, the lowest since 2007.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090821b.jpg" align="right" border="0">
The median price of an existing home dipped m/m to $178,400.
Though prices were still lower than the year ago level, they have risen
by 8.3% from the January low.
The data on existing home sales, prices and affordability can
be found in Haver's USECON database. The regional
price, affordability and inventory data is available in the REALTOR
database.
Reflections on a Year of Crisis is the
title of this morning's speech by Fed Chairman Ben S. Bernanke in
Jackson Hole, Wyoming and it is available <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20090821a.htm">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Existing
Home Sales (Thous, SAAR)</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>5,240</td>
<td>4,890</td>
<td>5.0%</td>
<td>4,893</td>
<td>5,674</td>
<td>6,516</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>930</td>
<td>820</td>
<td>3.3</td>
<td>845</td>
<td>1,010</td>
<td>1,093</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,220</td>
<td>1,100</td>
<td>8.0</td>
<td>1,130</td>
<td>1,331</td>
<td>1,494</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>1,950</td>
<td>1,820</td>
<td>5.4</td>
<td>1,860</td>
<td>2,243</td>
<td>2,577</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,130</td>
<td>1,150</td>
<td>1.8</td>
<td>1,064</td>
<td>1,095</td>
<td>1,357</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>4,610</td>
<td>4,330</td>
<td>5.0</td>
<td>4,341</td>
<td>4,960</td>
<td>5,712</td>
</tr>
<tr>
<td class="firstcol">Median Price, Total, $</td>
<td>178,400</td>
<td>182,000</td>
<td>-15.1</td>
<td>197,250</td>
<td>216,633</td>
<td>222,042</td>
</tr>
</tbody>
</table>
Flash PMI&#8217;s Turn in EMU 
by <a href="/comment/Brusca.html">Robert
Brusca</a> August 21, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090821c.jpg" align="left" border="0">
PMI Signals Are Lagging - PMI&#8217;s have lagged
the pickup but they are near to neutral and the Markit overview index
has reached the neutral mark of 50 in August. Markit&#8217;s overall PMI
reading for the Euro Area rose to this neutral level of 50 in August
lagging behind the GDP signals that in Q2 already turned up for two key
E-Zone countries (Germany and France) and with the Zone&#8217;s own GDP
barely falling. Purchaser indices that usually are more sensitive than
other macro-data have not been leading in Europe and that is a point to
ponder. 
 

Large jumps in August play catch-up --
The jumps in the respective MFG and Services indices were large. For
Services it is the largest jump in its history that extends back to
mid-1998. For the MFG index it is the eighth strongest jump in a
history that goes back to mid-1997. 
 

Still, the fact that the big signal from the PMIs is lagging
is a curiosity. 
 

Thinking more about PMIs -- PMI indices are
diffusion indices and formally they are indices of the breadth of
change in a certain direction (up or down, greater or less) rather than
of strength. The overall index is a weighted average of components that
look at specific aspects of an industry getting diffusion responses on
each. However, these indices are used as a proxy for strength since the
correlation with &#8216;strength&#8217; is high for &#8216;breadth&#8217;. Still we should bear
in mind always that &#8216;strength&#8217; is not in fact &#8216;breadth&#8217;, they are
different things and sometimes the difference matters, even if most of
the time it does not. 
 

Viva la difference?? If you have never
thought of the PMIs this way before, note that this concept has been
long in play in analyzing trends in the stock market. The stock market
index is a weighted average of stocks, an index that goes up and down,
but technicians also look at indicators of &#8216;breadth&#8217;. And when they do,
they DO NOT call them &#8216;strength&#8217; but when breadth and strength go
together a rally&#8217;s strength is said to be more powerful. Sometimes the
market goes &#8216;up&#8217; but decliners &#8216;outpace&#8217; advancers. This is exactly the
same thing as looking at output Vs its diffusion. Output and diffusion
do not always go in the same direction. Manufacturing output is like
the stock index and the MFG PMI is its breath measure. Services output
is compared to the breadth of the services PMI. But in the case of our
economic statistics we get the breadth reports much more quickly than
we get the output reports and so the diffusion indices take on a life
of their own and become proxies for &#8216;output.&#8217; 

The diffusion difference - What the
diffusion indices usually do, is to pick up small improvements that
might be scattered around the economy and lost. Diffusion indices
create a signal that would otherwise get lost in the aggregation of
data with weighting always going to the largest of reporters. So this
time around it seems that the opposite is happening. A few larger
reporting firms are doing better and driving the macro -data higher
while the smaller firms are not yet on board for the ride. This is not
surprising with all the government intervention (&#8230;in Europe, the UK and
the US, in fact) since government tends to work &#8216;best&#8217; with big
business. If the assistance works properly (or at all) stimulating
output at the larger firms (like auto makers) should create some
knock-on effects that will draw other firms into the upswing. And the
PMI reports may be signaling that, in August, this is finally
happening. But this process is a bit like trying to start a fire with
wet wood on windy day. Just because you have gotten a spark does not
means you will be able to nurse a bone-warming bonfire out of it.
Still, with a spark, you have a chance. And there is some tentative
evidence that growth is spreading- at last. Getting the diffusion
indices on board is crucial &#8211; they remain important barometers of the
success in spreading growth. 
 


<table border="0" cellspacing="0" width="100%"> <colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col">FLASH
Readings </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="3">Markit PMIs for the E-Zone</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr>
<td class="firstcol">Aug-09</td>
<td>47.87</td>
<td>49.53</td>
</tr>
<tr>
<td class="firstcol">Jul-09</td>
<td>46.25</td>
<td>45.69</td>
</tr>
<tr>
<td class="firstcol">Jun-09</td>
<td>42.62</td>
<td>44.65</td>
</tr>
<tr>
<td class="firstcol">May-09</td>
<td>40.68</td>
<td>44.82</td>
</tr>
<tr class="even">
<td colspan="3" class="firstcol">Averages</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>43.18</td>
<td>46.53</td>
</tr>
<tr>
<td class="firstcol">6-Mo</td>
<td>38.98</td>
<td>44.58</td>
</tr>
<tr>
<td class="firstcol">12-Mo</td>
<td>39.28</td>
<td>44.11</td>
</tr>
<tr class="even">
<td colspan="3" class="firstcol">127-Mo
Range</td>
</tr>
<tr>
<td class="firstcol">High</td>
<td>60.47</td>
<td>62.36</td>
</tr>
<tr>
<td class="firstcol">Low</td>
<td>33.55</td>
<td>39.24</td>
</tr>
<tr>
<td class="firstcol">% Range</td>
<td>53.2%</td>
<td>44.5%</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/090820g.jpg" width="353">
The Philadelphia Federal Reserve Bank indicated that its August index of factory sector activity in the region rose to its highest since November of 2007. The level of 4.2 compared to figures near -40.0 this past fall and winter. Consensus expectations had been for a slightly negative reading of -1.5 for this month.
During the last ten years there has been a 77% correlation between the level of the Philadelphia Fed Business Conditions Index and the three-month growth in factory sector industrial production. There has been a 70% correlation with q/q growth in real GDP. The latest survey from the Philadelphia Federal Reserve Bank can be found <a href="http://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2009/bos0809.pdf">here.</a><img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090820h.jpg" width="353">
Amongst the components, new orders improved to 4.2 from -2.2 and the latest figure was the highest since 2007. A sharp rise in the inventory component to its highest since 2007 may indicate that the period of strong inventory decumulation reached its end. The latest figure of 0.3 compares to a low of -55.6 reached this past March. Also showing improvement was the employment index. It rose to a still negative -12.9 but that compared with a low of -52.0 during March. During the last ten years there has been a 79% correlation between the index level and the m/m change in manufacturing sector payrolls.
Improved pricing power accompanied the gains in real activity. The prices paid index jumped to its first positive reading since last October. During the last ten years there has been a 74% correlation between the prices paid index and the three-month growth in the intermediate goods PPI. There has been an 83% correlation with the change in core intermediate goods prices.
Expected business conditions in six months also have improved. The August index ticked up to 56.8 and recovered most of its July decline. The latest figure was still near its highest level since 2003. Most of the index components moved sideways at improved levels but the inventories series jumped sharply to new cycle high.
The figures from the Philadelphia Federal Reserve can be found in Haver&#39;s SURVEYS database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Philadelphia Fed (%)</th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">August &#39;08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">General Activity Index</td>
<td>4.2</td>
<td>-7.5</td>
<td>-20.1</td>
<td>-21.3</td>
<td>5.0</td>
<td>8.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders</td>
<td>4.2</td>
<td>-2.2</td>
<td>-15.2</td>
<td>-14.7</td>
<td>6.9</td>
<td>9.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Number of Employees</td>
<td>-12.9</td>
<td>-25.3</td>
<td>-4.6</td>
<td>-8.7</td>
<td>6.8</td>
<td>9.0</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>10.0</td>
<td>&nbsp;-3.5</td>
<td>&nbsp;53.0</td>
<td>36.4</td>
<td>26.3</td>
<td>36.7</td>
</tr>
</tbody>
</table>
</body>
</html>

The Philadelphia Federal Reserve Bank indicated that its August index of factory sector activity in the region rose to its highest since November of 2007. The level of 4.2 compared to figures near -40.0 this past fall and winter. [...]

Philadelphia Fed Index Remains Positive At Its Highest Level Since 2007

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090820e.jpg" width="353">
The Conference Board&#39;s Index of Leading Economic Indicators continued to suggest a pending economic recovery. The July composite index of leaders rose another 0.6% after gains of 0.8%, 1.2% and 1.1% during the prior three months. The combined 3.8% rise during those four months was the strongest since early-2002 while the index itself was at the highest level since last June. The leading index is based on actual reports for eight economic data series. The Conference Board initially estimates two series, orders for consumer goods and orders for capital goods.
For the fourth straight month, nearly three-quarters of the ten components of the leading index increased.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090820f.jpg" width="353">
Again suggesting that the rate of decline in the economy is slowing were the coincident indicators which were unchanged m/m. This compares with monthly declines of 0.6%-to-1.1% dating back to September.
In a sign that excesses in the U.S. economy are diminishing, the lagging index fell for the seventh month in the last eight. The ratio of coincident-to-lagging indicators (a measure of economic excess) rose again m/m to the highest level since December.
The Conference Board figures are available in Haver&#39;s BCI database. Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM">Business Cycle Indicators</a> (%)</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">April 6-Month % (AR)</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>0.6</td>
<td>0.8</td>
<td>1.2</td>
<td>6.2</td>
<td>-2.8</td>
<td>-0.3</td>
<td>1.5</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.0</td>
<td>-0.4</td>
<td>-0.4</td>
<td>-5.4</td>
<td>-0.9</td>
<td>1.6</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-1.0</td>
<td>-0.7</td>
<td>-0.3</td>
<td>-8.6</td>
<td>2.9</td>
<td>2.8</td>
<td>3.3</td>
</tr>
</tbody>
</table>


</html>

The Conference Board's Index of Leading Economic Indicators continued to suggest a pending economic recovery. The July composite index of leaders rose another 0.6% after gains of 0.8%, 1.2% and 1.1% during the prior three months. The [...]

U.S. Leading Indicators Signal Economic Recovery With Fourth Straight Monthly Increase

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090820d.jpg" align="left" border="0" height="265" width="353">
The 0.4% rise in real UK retail sales is the largest increase
in fourteen months. Retail sales ex autos also rose by 0.4% and put in
its second month-in-row increase. 
 

The momentum in real retail sales is positive, having
recovered from some very deep lows reached just after mid-year in 2008.
In contrast this global business cycle hit the US consumer most
strongly at the end of 2008 and in early 2009. 
 

UK food and beverage purchases have been a mainstay of growth
over the past year. But spending in this category fell in July.
Clothing and foot wear expenditures have run hot and cold and these
took a small decline in July as well. The strength in retail sales came
from other sectors in July. 
 

In the quarter to date real ex-auto retail sales are growing
at a robust 6.4% annual rate. The new quarter is only one month old but
it is off to a very good start for UK retailers.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="9" scope="col"> UK Real and Nominal Retail Sales
</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Nominal</td>
<td>Jul-09</td>
<td>Jun-09</td>
<td>May-09</td>
<td>3-MO</td>
<td>6-MO</td>
<td>12-MO</td>
<td>Yr AGo</td>
<td>Quarter-2-date</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Retail Total</td>
<td>0.5%</td>
<td>0.7%</td>
<td>-0.5%</td>
<td>2.9%</td>
<td>2.9%</td>
<td>2.6%</td>
<td>3.1%</td>
<td>5.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Food Bev &amp;
Tobacco</td>
<td>-0.4%</td>
<td>0.7%</td>
<td>0.5%</td>
<td>3.0%</td>
<td>7.1%</td>
<td>5.2%</td>
<td>7.1%</td>
<td>1.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Clothing footwear</td>
<td>-0.1%</td>
<td>3.2%</td>
<td>-2.2%</td>
<td>3.3%</td>
<td>-1.4%</td>
<td>2.7%</td>
<td>1.0%</td>
<td>7.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="even">
<td class="firstcol">Real</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Retail Ex auto</td>
<td>0.4%</td>
<td>1.4%</td>
<td>-0.9%</td>
<td>3.6%</td>
<td>1.8%</td>
<td>3.3%</td>
<td>1.1%</td>
<td>6.4%</td>
</tr>
</tbody>
</table>
</body></html>

The 0.4% rise in real UK retail sales is the largest increase in fourteen months. Retail sales ex autos also rose by 0.4% and put in its second month-in-row increase. The momentum in real retail sales is positive, having recovered [...]

UK Retail Sales Stir

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

Only modest evidence of AI-related surge in US productivity growth

Previous Trump tariffs fading. A boost from new tariffs ahead?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

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Real GDP eased 0.3% SAAR (+2.1% y/y) during the first quarter of 2025 after increasing 2.4% in Q4’24 and 3.1% in Q3’24. A 0.4% increase had been expected in the Action Economics Forecast Survey. It was the first decline since Q1 2022.

Foreign trade subtracted 4.83 percentage points from growth last quarter as imports surged 41.3% (13.4% y/y) ahead of tariffs, which began to come into effect in the first quarter. The rise followed a 1.9% decline in Q4’24. Exports rose 1.8% (3.0% y/y) after easing 0.2% in Q4. Inventories added 2.25 percentage points to growth after subtracting 0.84 percentage point from Q4 growth.

Real final sales to domestic purchasers grew 2.3% (2.9% y/y) in Q1 after rising 3.0% in Q4. Personal consumption expenditures rose 1.8% (3.1% y/y) following a 4.0% gain. Durable goods spending fell 3.4% (+5.3% y/y) after surging 12.4% in Q4. Motor vehicle purchases declined 11.1% (+5.5% y/y) after strengthening 19.7% in Q4. Spending on home furnishings & appliances gained 1.5% (6.1% y/y) following a 5.4% rise. Recreational goods & vehicle outlays rose 2.5% (7.0% y/y) last quarter after a 13.9% Q4 increase.

Nondurable goods outlays rose 2.7% (3.0% y/y) following 3.1% growth in Q4. Apparel spending increased 6.7% (2.5% y/y) following a 5.0% rise. Food & beverage buying gained 2.5% (2.3% y/y) after a 1.8% increase. Gasoline & fuel oil purchases increased 4.6% (3.4% y/y) after falling 2.0% in Q4.

Spending on services increased 2.4% last quarter (2.7% y/y) after a 3.0% gain. Outlays on housing & utilities increased 3.4% (1.8% y/y) after rising 1.1% in Q4. Health care expenditures rose 4.0% (4.8% y/y) following a 4.7% strengthening. Transportation outlays increased 5.3% (4.6% y/y) after a 3.7% rise while recreation spending rose 4.7% (2.8% y/y) following a 4.5% rise. Restaurant & hotel expenditures declined 2.1% (+0.5% y/y) following a 2.8% rise. Financial services expenditures rose 1.9% (2.0% y/y) after a 3.1% Q4 increase.

Business fixed investment increased 9.8% (3.6% y/y) following a 3.0% decline in Q4. Expenditures on structures rose 0.4% (-0.4% y/y) after a 2.9% increase. Expenditures on producers’ durable equipment jumped 22.5% (8.0% y/y) after falling 8.7%.  Outlays on information processing equipment soared 69.3% (18.9% y/y) following a 7.3% decline. Industrial equipment investment fell 1.4% (-0.3% y/y) after easing 0.9%. Intellectual property product spending rose 4.1% (1.8% y/y) following a 0.5% decline. 

Residential structures investment increased 1.3% (-0.1% y/y) in Q1 after a 5.5% Q4 rise.

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Government spending fell 1.5% (+2.4% y/y) after a 3.1% Q4 rise. Federal government expenditures declined 5.1% (+2.9% y/y) after rising 4.0% in Q4. National defense expenditures declined 8.0% (+4.0% y/y) after increasing 4.8% in Q4. State & local government spending rose 0.8% (2.1% y/y) following a 2.5% rise.

The GDP price index rose 3.7% (2.6% y/y) after increasing 2.3% in Q4. It was the largest increase since Q4’22. A 2.4% increase had been expected. The PCE chain price index increased 3.6% (2.5% y/y) following a 2.4% rise. The PCE price index excluding food and energy rose 3.5% (2.8% y/y) after increasing 2.6% in Q4. The business fixed investment price index rose 0.4% (1.8% y/y) after 1.5% rise. The residential price index strengthened 3.9% (3.2% y/y) after a 1.9% rise while the government price index increased 4.7% (2.8% y/y) following a 2.1% rise.

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

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- Decline in GDP is first in three years.
- Foreign trade subtracts substantially ahead of tariffs.
- Domestic final demand growth weakens.
- Price index strengthens with higher core PCE prices.

U.S. GDP Unexpectedly Declines in Q1’25; Prices Strengthen

Michael J. Moran

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High-side readings on the price indexes for personal consumption expenditures in January and February caused some concern about emerging price pressure, especially with some policies of the Trump administration possibly adding to the upward force. However, March brought notable relief, with the headline price index falling slightly (-0.04%). A marked decline in energy prices was helpful (-2.7%), but core prices also were subdued, increasing less than 0.1%.  Year-over-year changes were still above the Fed’s target of 2%, but only barely so for the headline measure (2.3%). The core index backed away from the reading of 3.0% in February, but the latest reading of 2.7% was in line with observations in the past year, and still uncomfortably above target.

Consumers roused from a winter slumber in March, with nominal outlays increasing 0.7%. With inflation restrained, real outlays also posted a gain of 0.7%. Spending on durable gods stood out, with real outlays advancing 3.2%. Real outlays for both nondurable goods and services rose 0.4%, a solid pace. Signs of life were certainly welcome after an average decline of 0.1% in January and February. The March rebound left growth of 1.8% (annual rate) in the first quarter.

The brisk increase in spending in March was supported by a solid gain in personal income (0.5% in both nominal and real terms). Growth in wage income was firm at 0.5%, while proprietors’ income was robust with a gain of 1.8% (not annualized!). The farm sector led the advance in proprietors’ income, but the nonfarm sector also was strong (0.6%).

The personal income and consumption figures are available in Haver’s **USECON** database with detail in the **USNA** database. The Action Economics forecasts are in **AS1REPNA**.

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- Price pressure eases.
- Spending rebounds after two soft months.

Personal Income, Consumption, and Prices in March

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The Pending Home Sales Index, a forward-looking home sales measure based on contract signings, from the National Association of Realtors rose 6.1% to 76.5 (-0.6% y/y) during March after rising a little-revised 2.1% in February. These changes followed a 4.6% January decline.

The rise in March sales occurred as the rate on a 30-year mortgage eased to an average 6.65% from 6.84% in February. This rate was well above a low of 2.68% averaged in December 2020.

Pending home sales were up in most regions of the country. Sales in the Midwest rose 4.9% (1.4% y/y) last month after rising 1.8% in February. Sales in the South increased 9.8% (-0.4% y/y) following a 5.8% February rise. Sales in the West improved 4.8% (-2.0% y/y) after falling 3.0% in February. Sales in the Northeast were off 0.5% (-3.0% y/y) in March after falling 0.9% in February.

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

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

- Sales rise to highest level in four months.
- Strength is evident throughout most of country.

U.S. Pending Home Sales Surge in March

Sandy Batten

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The employment cost index (ECI) for civilian workers, arguably the most accurate measure of labor compensation in the United States, rose 0.9% q/q (3.6% y/y) in Q1, the same quarterly increase as in last year’s Q4, according to the Bureau of Labor Statistics. The quarterly gains have fluctuated between 0.8% and 1.0% for the past six quarters. The Action Economics Forecast Survey had expected a 0.9% q/q increase and a 3.5% y/y gain.

Wages and salaries for civilian workers rose 0.8% q/q (3.5% y/y) in Q1, down from 1.0% q/q in Q4. This tied the Q3 2024 quarterly rise as the smallest increase since Q2 2021. It was also the smallest y/y increase since Q2 2021. Benefits increased by an outsized 1.2% q/q (3.9% y/y) in Q1 versus 0.8% q/q in Q4. This is the largest quarterly gain since Q2 2022. In general, employment cost gains remain above the pace observed prior to the pandemic but are slowing gradually.

Private industry workers’ compensation rose 0.8% q/q (3.4% y/y) in Q1, down from 0.9% q/q (3.6% y/y) in Q4. Wages and salaries for private industry workers increased 0.8% q/q (3.4% y/y) in Q1 versus 0.8% q/q (3.7% y/y) in Q4. The quarterly gain in Q1 tied that in Q3 2024 as the smallest increase since Q4 2020. Benefits for private industry workers jumped 1.2% q/q (3.6% y/y). the largest quarterly gain since Q2 2022. The acceleration in benefits in Q1 was primarily in service-producing industries.

Compensation in private goods-producing industries increased 1.0% q/q (3.2% y/y) in Q1, the largest quarterly gain in five quarters, versus a 0.7% q/q increase in Q4. Compensation in construction jumped 1.3% q/q, its largest quarterly increase since Q2 2022, up from a 0.6% q/q gain in Q4. Manufacturing compensation growth slowed to 0.7% q/q, its slowest quarterly advance since Q4 2020, from 0.8% q/q in Q4. Compensation in private service-producing industries increased 0.8% q/q (3.5% y/y), down slightly from a 0.9% q/q gain in Q4. Compensation in education and health services jumped 1.3% q/q, its largest quarterly gain since Q3 2023. In contrast, compensation in other services edged up 0.1% q/q in Q1, its smallest quarterly advance since before the pandemic.

The employment cost index measures the change in the cost of labor, free from the influence of employment shifts across occupations and industries. It is provided by the Bureau of Labor Statistics and is available in Haver’s **USECON** database. Consensus estimates from the Action Economics Forecast Survey are in Haver’s **AS1REPNA** database.

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- Compensation grew 0.9 q/q in Q1, the same pace as in Q4.
- Wage growth slowed to 0.8% q/q while benefits surged 1.2% q/q, their largest quarterly increase since Q2 2022.

Employment Cost Growth Steady in Q1 2025

Kathleen Stephansen, CBE

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The ADP National Employment Report indicated that nonfarm private sector payrolls rose 62,000 (1.4% y/y) during April after increasing 147,000 (1.4% y/y) during March, revised from 155,000. A 124,000 April rise in ADP employment had been expected in the Action Economics Forecast Survey.

Growth in median annual pay for "job stayers" eased to 4.5% y/y during April, from 4.6% y/y in March and from 4.7% y/y in the prior two months. Manufacturing sector pay grew 4.6% y/y during April, down from 4.8% y/y in March. Construction sector pay was unchanged at 4.7% y/y. Natural resource & mining sector pay grew 4.4% y/y. Financial sector pay rose 5.1% y/y, while education & health services pay rose 4.7% y/y. Leisure & hospitality pay also increased 4.7% y/y. Professional & business service sector pay increased 4.3% y/y as did trade, transportation & utilities pay. Information pay rose 4.1% y/y. Median annual pay for “job changers” rose 6.9% y/y after 6.7% y/y in March.

Small business hiring (less than 50 employees) rose 11,000 (0.6% y/y) after rising 18,000 (0.6% y/y) in March, revised down from 52,000. Employment at medium-sized firms (50-499,000 employees) rose 40,000 (1.1% y/y) after rising 43,000 (1.1% y/y). Large business hiring (500+ employees) rose 12,000 (3.4% y/y) in April, after rising 61,000 (3.6% y/y) in March, revised from 59,000.

Goods-producing employment rose 26,000 (1.3% y/y) in April, after rising 16,000 (1.3% y/y) during March, revised from 24,000. Manufacturing jobs rose 4,000 (-0.2% y/y) after rising 17,000 (-0.3% y/y) in March. The number of construction sector jobs rose 16,000 (3.4% y/y) in April, following a 2,000 (3.6% y/y) March increase, revised from 6,000. Natural resources & mining jobs rose 6,000 (2.8% y/y) in April after falling 3,000 (+1.9% y/y) in March.

The number of service-producing jobs rose 34,000 (1.4% y/y) during April, following a rise of 131,000 (1.4% y/y) in March. Professional & business services employment fell 2,000 (0.6% y/y) after rising 46,000 (0.7% y/y) in the prior month, revised from 57,000. Employment in the financial industry rose 20,000 (2.1% y/y) in April, after rising 38,000 (2.0% y/y) in March. Leisure and hospitality employment increased 27,000 (3.0% y/y), following a 23,000 (2.9% y/y) March increase, revised from 17,000. The number of education & health care jobs fell 23,000 (1.6% y/y) in April, following a 15,000 (1.8% y/y) rise in March, revised from 12,000. Information sector employment fell 8,000 (-0.1% y/y) after a rise of 3,000 (0.2% y/y) in March. The number of jobs in trade, transportation & utilities rose 21,000 (0.4% y/y) in April, after falling 4,000 (+0.4% y/y) in March, revised from a 6,000 fall. Employment in “other” services rose fell 1,000 (+3.2% y/y) following a 10,000 (3.4% y/y) rise in March, revised from 11,000.

By region, employment in the Northeast increased 10,000 (1.9% y/y) in April, following an increase of 95,000 (2.0% y/y) in March, revised from 89,000. Employment in the Midwest rose 42,000 (1.5% y/y) after a gain of 84,000 (1.4% y/y) in March, revised from 81,000. In the South, employment rose 3,000 (1.3% y/y) during April, after rising 10,000 (1.4% y/y) in March, revised from 27,000. In the West, employment rose 9,000 (0.6% y/y) after declining 43,000 (+0.6% y/y), revised from a 41,000 decline in March.

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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- Employment increase is modest in both services & factory sectors.
- Wage growth for “job stayers” moderates.
- Small and medium-sized business employment slows.

Economy in Brief: August 2009

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