Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080908a.jpg" align="left" border="0">
After a scintillating run of price increases, the UK&#8217;s PPI has
finally fallen in August and the all-important core rate has dropped
and decelerated. The accompanying chart shows the sharp break-off in
the rate of PPI core inflation to just under 2.8% over three months
even as its year/year rate lingers at 6.3%. Headline inflation is still
at an astonishing 9.7% year/year but the three-month pace has fallen to
3.3%. The Bank of England puts a 2% ceiling on headline consumer price
inflation and has no corresponding number for the PPI or for any core
measure. But with oil having dominated inflation trends, the core has
to be an important signal these days. The PPI tends to be more volatile
than the CPI so we cannot make any firm statements about the CPI since
it will include imported goods and services prices. But the trend shift
in inflation&#8217;s pace is severe. The forces bringing the PPI down should
translate to the CPI. The move lower has been long awaited since spot
oil prices had broken from their peaks some time ago. This sort of
dramatic decline could pave the way for rate cuts even with an
excessive CPI pace since the drop is indicative of an ongoing process
and a deflation that is sudden and severe. It unties the hands of
policymakers to some extent but contains no assurances of imminent rate
cuts.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">UK PPI
</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">%m/m</td>
<td colspan="4">%-SAAR</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>Jun-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-moY-Ago</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>-0.4%</td>
<td>0.3%</td>
<td>0.9%</td>
<td>3.3%</td>
<td>10.3%</td>
<td>9.7%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">Core</td>
<td>-0.1%</td>
<td>0.3%</td>
<td>0.4%</td>
<td>2.8%</td>
<td>7.2%</td>
<td>6.3%</td>
<td>2.2%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">Core: ex
food beverages, tobacco
&amp; Petroleum</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body></html>

After a scintillating run of price increases, the UK’s PPI has finally fallen in August and the all-important core rate has dropped and decelerated. The accompanying chart shows the sharp break-off in the rate of PPI core inflation to [...]

A Sigh of Relief on Threadneedle Street

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080908b.jpg" align="left" border="0">
In its Economy Watchers Survey
the Cabinet Office in Japan surveys some 2050 individuals whose
business activity is sensitive to developments that affect households,
corporations and employment. Among the economy watchers are managers
and clerks at super markets, restaurant employees, taxi drivers, beauty
parlor operators and barbers, managers and employees in manufacturing
and service industries, staffs of employment agencies and temporary
manpower companies.

The economy watchers reported a further deterioration in
August in their already depressed appraisal of current conditions for
the total economy. The diffusion index was 28.3 compared with 29.3 in
July and the fifth consecutive decline since March. There was, however,
a slight improvement in their pessimistic expectations for the future
as that diffusion index rose to 32.0 from 30.8 in July. Both indexes
are well below levels reached a year ago. The current condition index
is down 44.1% and the future condition index, 46.5%. Recent levels of
both indexes have not been seen since the recession of the early
nineties as shown in the first chart.

Until recently, the current and future conditions indexes for
employment tended to be higher than those for households and
corporations. Currently, however, the employment indexes have been
deteriorating faster than those for households and corporations and are
now below them as shown in the second and third charts.

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080908c.jpg" border="0" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080908d.jpg" border="0" width="312">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">JAPAN:
ECONOMY WATCHERS SURVEY&nbsp;&nbsp; (Diffusion Indexes)</th>
<th scope="col">Aug 08</th>
<th scope="col">Jul 08&nbsp;</th>
<th scope="col">Jun 08&nbsp;</th>
<th scope="col">Aug 07&nbsp;</th>
<th scope="col">Y/Y % chg&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Current Conditions</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total</td>
<td>28.3</td>
<td>29.3</td>
<td>29.5</td>
<td>44.1</td>
<td>-35.8</td>
<td>44.9</td>
<td>51.4</td>
<td>50.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Households</td>
<td>28.3</td>
<td>30.6</td>
<td>29.3</td>
<td>43.7</td>
<td>-34.1</td>
<td>44.0</td>
<td>48.8</td>
<td>49.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Corporations</td>
<td>28.1</td>
<td>27.7</td>
<td>31.4</td>
<td>43.1</td>
<td>-34.8</td>
<td>45.1</td>
<td>51.8</td>
<td>50.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Employment</td>
<td>26.0</td>
<td>24.1</td>
<td>26.4</td>
<td>48.3</td>
<td>46.2</td>
<td>49.9</td>
<td>60.2</td>
<td>57.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Future Conditions</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total</td>
<td>32.0</td>
<td>30.8</td>
<td>32.1</td>
<td>46.5</td>
<td>-31.2</td>
<td>46.9</td>
<td>51.4</td>
<td>50.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Households</td>
<td>32.5</td>
<td>30.7</td>
<td>318</td>
<td>46.1</td>
<td>-29.5</td>
<td>46.6</td>
<td>52.5</td>
<td>50.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Corporations</td>
<td>31.8</td>
<td>32.1</td>
<td>32.8</td>
<td>46.3</td>
<td>-31.3</td>
<td>45.8</td>
<td>51.7</td>
<td>50.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Employment</td>
<td>29.3</td>
<td>28.0</td>
<td>31.8</td>
<td>49.7</td>
<td>-41.0</td>
<td>51.0</td>
<td>58.4</td>
<td>56.9</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>
</body></html>

In its Economy Watchers Survey the Cabinet Office in Japan surveys some 2050 individuals whose business activity is sensitive to developments that affect households, corporations and employment. Among the economy watchers are managers [...]

Japanese Economy Watchers Still in the Doldrums

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080908b.jpg" align="left" border="0">
In its Economy Watchers Survey
the Cabinet Office in Japan surveys some 2050 individuals whose
business activity is sensitive to developments that affect households,
corporations and employment. Among the economy watchers are managers
and clerks at super markets, restaurant employees, taxi drivers, beauty
parlor operators and barbers, managers and employees in manufacturing
and service industries, staffs of employment agencies and temporary
manpower companies.

The economy watchers reported a further deterioration in
August in their already depressed appraisal of current conditions for
the total economy. The diffusion index was 28.3 compared with 29.3 in
July and the fifth consecutive decline since March. There was, however,
a slight improvement in their pessimistic expectations for the future
as that diffusion index rose to 32.0 from 30.8 in July. Both indexes
are well below levels reached a year ago. The current condition index
is down 44.1% and the future condition index, 46.5%. Recent levels of
both indexes have not been seen since the recession of the early
nineties as shown in the first chart.

Until recently, the current and future conditions indexes for
employment tended to be higher than those for households and
corporations. Currently, however, the employment indexes have been
deteriorating faster than those for households and corporations and are
now below them as shown in the second and third charts.

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080908c.jpg" border="0" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080908d.jpg" border="0" width="312">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">JAPAN:
ECONOMY WATCHERS SURVEY&nbsp;&nbsp; (Diffusion Indexes)</th>
<th scope="col">Aug 08</th>
<th scope="col">Jul 08&nbsp;</th>
<th scope="col">Jun 08&nbsp;</th>
<th scope="col">Aug 07&nbsp;</th>
<th scope="col">Y/Y % chg&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Current Conditions</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total</td>
<td>28.3</td>
<td>29.3</td>
<td>29.5</td>
<td>44.1</td>
<td>-35.8</td>
<td>44.9</td>
<td>51.4</td>
<td>50.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Households</td>
<td>28.3</td>
<td>30.6</td>
<td>29.3</td>
<td>43.7</td>
<td>-34.1</td>
<td>44.0</td>
<td>48.8</td>
<td>49.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Corporations</td>
<td>28.1</td>
<td>27.7</td>
<td>31.4</td>
<td>43.1</td>
<td>-34.8</td>
<td>45.1</td>
<td>51.8</td>
<td>50.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Employment</td>
<td>26.0</td>
<td>24.1</td>
<td>26.4</td>
<td>48.3</td>
<td>46.2</td>
<td>49.9</td>
<td>60.2</td>
<td>57.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Future Conditions</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total</td>
<td>32.0</td>
<td>30.8</td>
<td>32.1</td>
<td>46.5</td>
<td>-31.2</td>
<td>46.9</td>
<td>51.4</td>
<td>50.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Households</td>
<td>32.5</td>
<td>30.7</td>
<td>318</td>
<td>46.1</td>
<td>-29.5</td>
<td>46.6</td>
<td>52.5</td>
<td>50.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Corporations</td>
<td>31.8</td>
<td>32.1</td>
<td>32.8</td>
<td>46.3</td>
<td>-31.3</td>
<td>45.8</td>
<td>51.7</td>
<td>50.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Employment</td>
<td>29.3</td>
<td>28.0</td>
<td>31.8</td>
<td>49.7</td>
<td>-41.0</td>
<td>51.0</td>
<td>58.4</td>
<td>56.9</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>
A Sigh of Relief on Threadneedle
Street 
by <a href="/comment/Brusca.html">Robert
Brusca</a> September 8, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080908a.jpg" align="left" border="0">
After a scintillating run of price increases, the UK&#8217;s PPI has
finally fallen in August and the all-important core rate has dropped
and decelerated. The accompanying chart shows the sharp break-off in
the rate of PPI core inflation to just under 2.8% over three months
even as its year/year rate lingers at 6.3%. Headline inflation is still
at an astonishing 9.7% year/year but the three-month pace has fallen to
3.3%. The Bank of England puts a 2% ceiling on headline consumer price
inflation and has no corresponding number for the PPI or for any core
measure. But with oil having dominated inflation trends, the core has
to be an important signal these days. The PPI tends to be more volatile
than the CPI so we cannot make any firm statements about the CPI since
it will include imported goods and services prices. But the trend shift
in inflation&#8217;s pace is severe. The forces bringing the PPI down should
translate to the CPI. The move lower has been long awaited since spot
oil prices had broken from their peaks some time ago. This sort of
dramatic decline could pave the way for rate cuts even with an
excessive CPI pace since the drop is indicative of an ongoing process
and a deflation that is sudden and severe. It unties the hands of
policymakers to some extent but contains no assurances of imminent rate
cuts.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">UK PPI
</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">%m/m</td>
<td colspan="4">%-SAAR</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>Jun-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-moY-Ago</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>-0.4%</td>
<td>0.3%</td>
<td>0.9%</td>
<td>3.3%</td>
<td>10.3%</td>
<td>9.7%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">Core</td>
<td>-0.1%</td>
<td>0.3%</td>
<td>0.4%</td>
<td>2.8%</td>
<td>7.2%</td>
<td>6.3%</td>
<td>2.2%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">Core: ex
food beverages, tobacco
&amp; Petroleum</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body></html>

Japanese EconomyWatchers Still in the Doldrums

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080905f.jpg" align="left" border="0" height="265" width="353">
OECD Trends. The OECD
trend-adjusted LEIs show clear ongoing declines. The OECD declines are
getting progressively weaker for the entire area as well as for the
OECD seven and for the OECD four. In the US, however, the OECD LEI is
still declining but is dropping at a decelerating pace. The US LEI grew
at the strongest pace one year ago and now its Yr/Yr pace is only in
line with other OECD measures while its 3-month and 6-month pace is
stronger than the other comparable OECD measures.
The OECD says. The OECD
characterizes the G7 reading as consistent with a still-weakening
climate. The OECD reports that the growth cycle outlook is for a
slowdown in the OECD area, G7 area and Japan, while for the Euro area a
strong slowdown is anticipated. "OECD composite leading indicators for
July 2008 indicate a continued weakening outlook for all the major
seven economies," the OECD said in its monthly release. "The latest
data for major non-OECD member economies tentatively point to expansion
in China, Brazil and Russia and a downturn in India," it said.
Selected Countries. Italy's
composite indicator fell the sharpest of all the G7 countries, off 1.9
points on the month. The German and Canadian indicators dropped 1.5
points. Japan's indicator fell 0.5 point and the United States saw a
0.2 point fall.
Comparison with past US turning
point. The US indicator is weak but did not get as weak as
it did in or before the last economic downturn. It is now rising from
its current cycle low. In Japan the index reach a spike low as weak as
it was in the last recession but it did not stay impacted for as long
as it did last time. The Japanese index is now rising.
The index for the Euro-Zone economies is much weaker than
it was at the time of the last US recession and it is still dropping at
an increasing speed.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="5" scope="col"> OECD Trend-Restored Leading Indicators</th>
 </tr>
<tr>
<th colspan="5" scope="col">Growth progression-SAAR</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>3Mos</td>
<td>6Mos</td>
<td>12mos</td>
<td>Yr-Ago</td>
</tr>
<tr>
<td class="firstcol">OECD</td>
<td>-4.6%</td>
<td>-3.6%</td>
<td>-3.3%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">OECD 7</td>
<td>-3.8%</td>
<td>-3.4%</td>
<td>-3.9%</td>
<td>1.3%</td>
</tr>
<tr>
<td class="firstcol">OECD Europe</td>
<td>-9.0%</td>
<td>-6.8%</td>
<td>-4.5%</td>
<td>1.1%</td>
</tr>
<tr>
<td class="firstcol">OECD Japan</td>
<td>0.9%</td>
<td>-0.4%</td>
<td>-0.9%</td>
<td>-1.2%</td>
</tr>
<tr>
<td class="firstcol">OECD US</td>
<td>-0.5%</td>
<td>-1.8%</td>
<td>-3.8%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td colspan="5" class="firstcol">Six month readings at
6-month intervals:</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Recent six</td>
<td>6Mo Ago</td>
<td>12Mo Ago</td>
<td>18MO Ago</td>
</tr>
<tr>
<td class="firstcol">OECD</td>
<td>-3.6%</td>
<td>-2.9%</td>
<td>1.7%</td>
<td>2.2%</td>
</tr>
<tr>
<td class="firstcol">OECD 7</td>
<td>-3.4%</td>
<td>-4.3%</td>
<td>1.4%</td>
<td>1.2%</td>
</tr>
<tr>
<td class="firstcol">OECD Europe</td>
<td>-6.8%</td>
<td>-2.2%</td>
<td>0.6%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">OECD Japan</td>
<td>-0.4%</td>
<td>-1.5%</td>
<td>-3.7%</td>
<td>1.4%</td>
</tr>
<tr>
<td class="firstcol">OECD US</td>
<td>-1.8%</td>
<td>-5.7%</td>
<td>3.5%</td>
<td>1.5%</td>
</tr>
<tr>
<td colspan="5" class="firstcol">Slowdowns indicated by BOLD RED.</td>
</tr>
</tbody>
</table>
</body></html>

OECD Trends. The OECD trend-adjusted LEIs show clear ongoing declines. The OECD declines are getting progressively weaker for the entire area as well as for the OECD seven and for the OECD four. In the US, however, the OECD LEI is [...]

OECD LEIs Continue to Sag as Japan Bucks Trend

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080905e.jpg" align="left" border="0" height="265" width="353">
German statistics have been weakening and the weakness in
orders reported yesterday was a shock to some. Today the process of
being shocked continues with stark and unexpected weakness in German
industrial output. Output is off for the second time in two months and
by a severe 1.8% m/m. Yr/Yr the drop is -0.6%. MFG IP is off by 2% in
the month. Sequential growth rates generally show that the weakness is
still cumulating (construction and consumer spending are exceptions of
sorts). In the new quarter to date (Q3) output is falling at a 13.3%
annual rate, led by weakness in capital goods. While the drop in
consumer goods output is the most severe on a Yr/Yr basis, the
deceleration is the greatest for capital goods where output seems to
stay so high for so long. This it turns out was mirage like Wiley
Coyote standing on thin air waving to the Road Runner before gravity
took hold. German capital goods output too seemed to defy the gravity
and domestic weakness and the overly strong euro. But now that
resilience is a thing of the past.
German authorities have tried to argue that the weakness is
partly due to the start of the school year. But they hasten to add the
trends are going to be lower. There should be fewer denials of
encroaching weakness in Germany since the bottom fell out of orders and
IP and that has happened just over the past two days.
Things change. And they did not elect either Obama or McCain.
Still the ECB has decided to tighten up its collateral
acceptance parameters, and that action will impair liquidity in the
Zone and at a time when economic weakness seems to be taking greater
hold. In the US two speeches, one by Reserve Bank president Yellen, the
other by Reserve Bank president Fisher, talked in less than glowing
terms about the US economy. Fisher worries more about inflation
prospects while Yellen reports that the next move by the Fed is more
likely to be up than down but she reiterated Fed fallibility. Central
bankers clearly are not plugged into the news that reveals accelerating
weakness. Even the Bush Administration today took the opportunity to
say that a new stimulus program was not needed.
While the economic data are worsening central banks seem to be
taking the opportunity to let weaker growth drag inflation lower,
rather than to move to offset the weakness. This is done by ignoring
the weakening (Trichet), denying it (Germany, at least so far) or by
making inflation the greater threat (Richard Fisher, and others).

<table border="0" cellspacing="0" width="100%">
<colgroup><col></colgroup>
<thead><tr><th colspan="8" scope="col"> Total German IP</th>

</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar exept m/m</td>
<td>Jul-08</td>
<td>Jun-08</td>
<td>May-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Quarter-to-Date</td>
</tr>
<tr>
<td class="firstcol">IP total</td>
<td>-1.8%</td>
<td>0.1%</td>
<td>-1.8%</td>
<td>-13.3%</td>
<td>-8.0%</td>
<td>-0.6%</td>
<td>-13.3%</td>
</tr>
<tr>
<td class="firstcol">Consumer</td>
<td>-1.7%</td>
<td>0.4%</td>
<td>-0.3%</td>
<td>-6.2%</td>
<td>-8.6%</td>
<td>-2.1%</td>
<td>-8.8%</td>
</tr>
<tr>
<td class="firstcol">Capital</td>
<td>-3.7%</td>
<td>1.7%</td>
<td>-3.7%</td>
<td>-21.0%</td>
<td>-11.7%</td>
<td>-0.1%</td>
<td>-21.2%</td>
</tr>
<tr>
<td class="firstcol">Intermediate</td>
<td>-0.6%</td>
<td>-0.5%</td>
<td>-1.0%</td>
<td>-8.2%</td>
<td>-3.4%</td>
<td>0.4%</td>
<td>-7.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Memo</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>-2.0%</td>
<td>-2.4%</td>
<td>2.4%</td>
<td>-8.2%</td>
<td>-23.1%</td>
<td>-2.8%</td>
<td>-15.8%</td>
</tr>
<tr>
<td class="firstcol">MFG IP</td>
<td>-2.0%</td>
<td>0.5%</td>
<td>-1.9%</td>
<td>-13.1%</td>
<td>-7.8%</td>
<td>-0.2%</td>
<td>-13.3%</td>
</tr>
<tr>
<td class="firstcol">MFG Orders</td>
<td>-1.7%</td>
<td>-2.6%</td>
<td>-1.3%</td>
<td>-20.0%</td>
<td>-15.2%</td>
<td>-4.1%</td>
<td>-20.7%</td>
</tr>
</tbody>
</table>
</body></html>

German statistics have been weakening and the weakness in orders reported yesterday was a shock to some. Today the process of being shocked continues with stark and unexpected weakness in German industrial output. Output is off for [...]

German Sector Trends are Clear and Weak

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080905a.jpg" width="353">
Last month, nonfarm payrolls fell 84,000, according to the Bureau of Labor Statistics. The latest decline was slightly greater than expectations for a 75,000 drop but it was accompanied by downward revisions to prior months&#39; data. Payrolls have declined in each month of this year and it amounts to 605,000 jobs lost.
During the last three months payrolls fell at a 0.7% annual rate. That compared to a rate of decline in excess of 2.0% by the end of the last recession.
The unemployment rate jumped to 6.1% last month versus expectations for just a slight increase to 5.7%. That was the highest level since September of 2003.
Household sector employment fell 342,000 (-0.2% y/y) after a 72,000 worker decline during July. It was the sixth monthly decline this year. The level of the unemployed rose 592,000 (31.4% y/y) after a 285,000 increase in July.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080905c.jpg" width="353">
The labor force rose another 250,000 (1.3% y/y) last month and the labor force participation rate held at 66.1% for the third straight month. It was 66.0% during all of last year and 66.2% in 2006. The participation rate amongst adult men was 75.8%, about the same as averaged last year, and amongst adult women it was 61.1% versus 60.6% averaged during 2007.
The average duration of unemployment increased to 17.4 weeks and that was still up from 16.9 weeks averaged during the last two years. The number of those unemployed for more than 27 weeks rose by nearly one half versus one year ago.
From the establishment survey, hiring in the private service sector industries was notably weak. Jobs fell 44,000 but the 18,000 July decline was less than the 76,000 decline reported initially. Prior months&#39; job losses also were revised shallower. Nevertheless, August was the seventh decline in the last eight months and the three-month rate of decline during that period was 0.3%.
A decline of 53,000 (-0.7% y/y) jobs was reported for the professional &amp; business service industries. That was led by a 61,600 (-3.6% y/y) drop in hiring in the management &amp; technical support services area. Temporary help services job also were quite weak as they fell 36,900 (-9.1% y/y). Retail sector jobs fell 19,900 and they&#39;re down at a 1.2% rate during the last three months. That rate of decline, however, remained less than the 3.0% rate of this past April. Motor vehicle &amp; parts dealers employment led that drop with a 14,100 August decline and they&#39;re down at a 7.3% rate over the last three months. Jobs in the information sector fell 3,000 last month and at a 2.2% rate during the last three. Financial sector jobs fell 3,000 and at a 0.9% rate over the last three months.
These declines have been offset by 11.3% three-month growth in the number of jobs in education and by 2.7% growth health care jobs. The number of finance sector jobs fell 3,000 last month and they&#39;re down at a 0.9% rate during the last three. Real estate sector jobs slipped 1,400 and they have been falling at a moderate 0.6% annual rate during the last three months which is an improvement from the 3% to 4% rates of job loss late last year and early this year.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080905b.jpg" width="353">
Factory sector jobs fell 61,000 which was the largest monthly decline since mid-2003. Payrolls were down at a 4.1% rate over the last three months though that was slower than the 10% rate of decline by the end of the 2001 recession. The motor vehicle &amp; parts sector shed 39,000 (-12.9% y/y) jobs while jobs in the furniture industry fell 6,800 (-8.4% y/y).
Construction sector employment slipped just 8,000 last month after a little-revised 20,000 drop during July. They fell at a 4.2% annual rate during the last three months versus a 7.8% rate of decline as of June.
Government sector jobs continued to rise and they posted a 17,000 August increase. They&#39;ve increased at a 0.6% rate during the last three months. Federal government hiring rose at a 1.0% rate during the last three months while state as well as local government hiring rose at a 1.3% and a 0.2% rate, respectively. These rates of growth are down from their recent peaks.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080905d.jpg" width="353">
The one month diffusion index, which measures the breadth of job gain or loss (50 is the break-even level), improved to a near-break even 48.9%. The three-month index improved just slightly to 40.1% from the cycle low of 38.3% reached last month. The three-month figure for the factory sector was even weaker at 25.6%. That&#39;s up slightly from July but near the lowest since 2003.
Average hourly earnings increased 0.4%, the same as during as during an upwardly revised July. The three-month growth rate rose to 4.3%, its highest since early last year. Factory sector earnings fell 0.2% during August and rose at a 2.3% rate during the last three months, which was near the weakest since late last year. Private service sector earnings rose 0.4% and at an elevated 4.1% rate during the last three months.
China and India: Two Paths to Economic Power from the Federal Reserve Bank of Dallas can be found <a href="http://dallasfed.org/research/eclett/2008/el0808.html">here</a>.

<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/USECON/@EB/@EB01/@EB01.HTM">Employment: 000s</a></th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>-84</td>
<td>-60</td>
<td>-100</td>
<td>-0.2%</td>
<td>1.1%</td>
<td>1.8%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Previous</td>
<td>--</td>
<td>-51</td>
<td>-51</td>
<td>--</td>
<td>1.3%</td>
<td>1.9%</td>
<td>1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-61</td>
<td>-38</td>
<td>-44</td>
<td>-3.0%</td>
<td>-1.9%</td>
<td>-0.5%</td>
<td>-0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>-8</td>
<td>-20</td>
<td>-50</td>
<td>-5.7%</td>
<td>-1.0%</td>
<td>4.9%</td>
<td>5.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.7</td>
<td>33.7</td>
<td>33.7</td>
<td>33.8 (August &#39;07)</td>
<td>33.8</td>
<td>33.9</td>
<td>33.8</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.4%</td>
<td>0.4%</td>
<td>0.3%</td>
<td>3.6%</td>
<td>4.0%</td>
<td>3.9%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>6.1%</td>
<td>5.7%</td>
<td>5.5%</td>
<td>4.7% (August &#39;07)</td>
<td>4.6%</td>
<td>4.6%</td>
<td>5.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

Last month, nonfarm payrolls fell 84,000, according to the Bureau of Labor Statistics. The latest decline was slightly greater than expectations for a 75,000 drop but it was accompanied by downward revisions to prior months' data. [...]

U.S. Payrolls Down Again, Jobless Rate Up Further

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080905a.jpg" align="left" border="0" height="265" width="353">
Last month, nonfarm payrolls fell 84,000,
according to the Bureau of Labor Statistics. The latest decline was
slightly greater than expectations for a 75,000 drop but it was
accompanied by downward revisions to prior months' data. Payrolls have
declined in each month of this year and it amounts to 605,000 jobs lost.
During the last three months payrolls fell at a 0.7% annual
rate. That compared to a rate of decline in excess of 2.0% by the end
of the last recession.
The unemployment rate jumped to 6.1% last
month versus expectations for just a slight increase to 5.7%. That was
the highest level since September of 2003.
Household sector employment fell 342,000 (-0.2% y/y) after a
72,000 worker decline during July. It was the sixth monthly decline
this year. The level of the unemployed rose 592,000 (31.4% y/y) after a
285,000 increase in July.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080905c.jpg" align="right" border="0" height="265" width="353">
The labor force rose another 250,000 (1.3% y/y) last month and
the labor force participation rate held at 66.1% for the third straight
month. It was 66.0% during all of last year and 66.2% in 2006. The
participation rate amongst adult men was 75.8%, about the same as
averaged last year, and amongst adult women it was 61.1% versus 60.6%
averaged during 2007.
The average duration of unemployment increased to 17.4 weeks
and that was still up from 16.9 weeks averaged during the last two
years. The number of those unemployed for more than 27 weeks rose by
nearly one half versus one year ago.
From the establishment survey, hiring in the private service
sector industries was notably weak. Jobs fell 44,000 but the 18,000
July decline was less than the 76,000 decline reported initially. Prior
months' job losses also were revised shallower. Nevertheless, August
was the seventh decline in the last eight months and the three-month
rate of decline during that period was 0.3%.
A decline of 53,000 (-0.7% y/y) jobs was reported for the
professional &amp; business service industries. That was led by a
61,600 (-3.6% y/y) drop in hiring in the management &amp; technical
support services area. Temporary help services job also were quite weak
as they fell 36,900 (-9.1% y/y). Retail sector jobs fell 19,900 and
they're down at a 1.2% rate during the last three months. That rate of
decline, however, remained less than the 3.0% rate of this past April.
Motor vehicle &amp; parts dealers employment led that drop with a
14,100 August decline and they're down at a 7.3% rate over the last
three months. Jobs in the information sector fell 3,000 last month and
at a 2.2% rate during the last three. Financial sector jobs fell 3,000
and at a 0.9% rate over the last three months.
These declines have been offset by 11.3% three-month growth in
the number of jobs in education and by 2.7% growth health care jobs.
The number of finance sector jobs fell 3,000 last month and they're
down at a 0.9% rate during the last three. Real estate sector jobs
slipped 1,400 and they have been falling at a moderate 0.6% annual rate
during the last three months which is an improvement from the 3% to 4%
rates of job loss late last year and early this year.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080905b.jpg" align="left" border="0" height="265" width="353">
Factory sector jobs fell 61,000 which was the largest monthly
decline since mid-2003. Payrolls were down at a 4.1% rate over the last
three months though that was slower than the 10% rate of decline by the
end of the 2001 recession. The motor vehicle &amp; parts sector
shed 39,000 (-12.9% y/y) jobs while jobs in the furniture industry fell
6,800 (-8.4% y/y).
Construction sector employment slipped just 8,000 last month
after a little-revised 20,000 drop during July. They fell at a 4.2%
annual rate during the last three months versus a 7.8% rate of decline
as of June.
Government sector jobs continued to rise and they posted a
17,000 August increase. They've increased at a 0.6% rate during the
last three months. Federal government hiring rose at a 1.0% rate during
the last three months while state as well as local government hiring
rose at a 1.3% and a 0.2% rate, respectively. These rates of growth are
down from their recent peaks.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080905d.jpg" align="right" border="0" height="265" width="353">
The one month diffusion index, which
measures the breadth of job gain or loss (50 is the break-even level),
improved to a near-break even 48.9%. The three-month index improved
just slightly to 40.1% from the cycle low of 38.3% reached last month.
The three-month figure for the factory sector was even weaker at 25.6%.
That's up slightly from July but near the lowest since 2003.
Average hourly earnings increased 0.4%, the
same as during as during an upwardly revised July. The three-month
growth rate rose to 4.3%, its highest since early last year. Factory
sector earnings fell 0.2% during August and rose at a 2.3% rate during
the last three months, which was near the weakest since late last year.
Private service sector earnings rose 0.4% and at an elevated 4.1% rate
during the last three months.
China and India:
Two Paths to Economic Power from the Federal Reserve Bank of
Dallas can be found <a href="http://dallasfed.org/research/eclett/2008/el0808.html">here</a>.

<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/USECON/@EB/@EB01/@EB01.HTM">Employment:
000s</a></th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>-84</td>
<td>-60</td>
<td>-100</td>
<td>-0.2%</td>
<td>1.1%</td>
<td>1.8%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Previous</td>
<td>--</td>
<td>-51</td>
<td>-51</td>
<td>--</td>
<td>1.3%</td>
<td>1.9%</td>
<td>1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-61</td>
<td>-38</td>
<td>-44</td>
<td>-3.0%</td>
<td>-1.9%</td>
<td>-0.5%</td>
<td>-0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>-8</td>
<td>-20</td>
<td>-50</td>
<td>-5.7%</td>
<td>-1.0%</td>
<td>4.9%</td>
<td>5.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.7</td>
<td>33.7</td>
<td>33.7</td>
<td>33.8 (August '07)</td>
<td>33.8</td>
<td>33.9</td>
<td>33.8</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.4%</td>
<td>0.4%</td>
<td>0.3%</td>
<td>3.6%</td>
<td>4.0%</td>
<td>3.9%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>6.1%</td>
<td>5.7%</td>
<td>5.5%</td>
<td>4.7% (August '07)</td>
<td>4.6%</td>
<td>4.6%</td>
<td>5.1%</td>
</tr>
</tbody>
</table>
German Sector Trends are Clear and
Weak 
by <a href="/comment/Brusca.html">Robert
Brusca</a> September 5, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080905e.jpg" align="left" border="0" height="265" width="353">
German statistics have been weakening and the weakness in
orders reported yesterday was a shock to some. Today the process of
being shocked continues with stark and unexpected weakness in German
industrial output. Output is off for the second time in two months and
by a severe 1.8% m/m. Yr/Yr the drop is -0.6%. MFG IP is off by 2% in
the month. Sequential growth rates generally show that the weakness is
still cumulating (construction and consumer spending are exceptions of
sorts). In the new quarter to date (Q3) output is falling at a 13.3%
annual rate, led by weakness in capital goods. While the drop in
consumer goods output is the most severe on a Yr/Yr basis, the
deceleration is the greatest for capital goods where output seems to
stay so high for so long. This it turns out was mirage like Wiley
Coyote standing on thin air waving to the Road Runner before gravity
took hold. German capital goods output too seemed to defy the gravity
and domestic weakness and the overly strong euro. But now that
resilience is a thing of the past.
German authorities have tried to argue that the weakness is
partly due to the start of the school year. But they hasten to add the
trends are going to be lower. There should be fewer denials of
encroaching weakness in Germany since the bottom fell out of orders and
IP and that has happened just over the past two days.
Things change. And they did not elect either Obama or McCain.
Still the ECB has decided to tighten up its collateral
acceptance parameters, and that action will impair liquidity in the
Zone and at a time when economic weakness seems to be taking greater
hold. In the US two speeches, one by Reserve Bank president Yellen, the
other by Reserve Bank president Fisher, talked in less than glowing
terms about the US economy. Fisher worries more about inflation
prospects while Yellen reports that the next move by the Fed is more
likely to be up than down but she reiterated Fed fallibility. Central
bankers clearly are not plugged into the news that reveals accelerating
weakness. Even the Bush Administration today took the opportunity to
say that a new stimulus program was not needed.
While the economic data are worsening central banks seem to be
taking the opportunity to let weaker growth drag inflation lower,
rather than to move to offset the weakness. This is done by ignoring
the weakening (Trichet), denying it (Germany, at least so far) or by
making inflation the greater threat (Richard Fisher, and others).

<table border="0" cellspacing="0" width="100%">
<colgroup><col></colgroup>
<thead><tr>
</tr>
</thead><thead><tr>
<th colspan="8" scope="col"> Total
German IP</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar exept m/m</td>
<td>Jul-08</td>
<td>Jun-08</td>
<td>May-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Quarter-to -Date</td>
</tr>
<tr>
<td class="firstcol">IP total</td>
<td>-1.8%</td>
<td>0.1%</td>
<td>-1.8%</td>
<td>-13.3%</td>
<td>-8.0%</td>
<td>-0.6%</td>
<td>-13.3%</td>
</tr>
<tr>
<td class="firstcol">Consumer</td>
<td>-1.7%</td>
<td>0.4%</td>
<td>-0.3%</td>
<td>-6.2%</td>
<td>-8.6%</td>
<td>-2.1%</td>
<td>-8.8%</td>
</tr>
<tr>
<td class="firstcol">Capital</td>
<td>-3.7%</td>
<td>1.7%</td>
<td>-3.7%</td>
<td>-21.0%</td>
<td>-11.7%</td>
<td>-0.1%</td>
<td>-21.2%</td>
</tr>
<tr>
<td class="firstcol">Intermediate</td>
<td>-0.6%</td>
<td>-0.5%</td>
<td>-1.0%</td>
<td>-8.2%</td>
<td>-3.4%</td>
<td>0.4%</td>
<td>-7.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Memo</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>-2.0%</td>
<td>-2.4%</td>
<td>2.4%</td>
<td>-8.2%</td>
<td>-23.1%</td>
<td>-2.8%</td>
<td>-15.8%</td>
</tr>
<tr>
<td class="firstcol">MFG IP</td>
<td>-2.0%</td>
<td>0.5%</td>
<td>-1.9%</td>
<td>-13.1%</td>
<td>-7.8%</td>
<td>-0.2%</td>
<td>-13.3%</td>
</tr>
<tr>
<td class="firstcol">MFG Orders</td>
<td>-1.7%</td>
<td>-2.6%</td>
<td>-1.3%</td>
<td>-20.0%</td>
<td>-15.2%</td>
<td>-4.1%</td>
<td>-20.7%</td>
</tr>
</tbody>
</table> 
OECD LEIs Continue to Sag as Japan
Bucks Trend 
by <a href="/comment/Brusca.html">Robert
Brusca</a> September 5, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080905f.jpg" align="left" border="0" height="265" width="353">
OECD Trends. The OECD
trend-adjusted LEIs show clear ongoing declines. The OECD declines are
getting progressively weaker for the entire area as well as for the
OECD seven and for the OECD four. In the US, however, the OECD LEI is
still declining but is dropping at a decelerating pace. The US LEI grew
at the strongest pace one year ago and now its Yr/Yr pace is only in
line with other OECD measures while its 3-month and 6-month pace is
stronger than the other comparable OECD measures.
The OECD says. The OECD
characterizes the G7 reading as consistent with a still-weakening
climate. The OECD reports that the growth cycle outlook is for a
slowdown in the OECD area, G7 area and Japan, while for the Euro area a
strong slowdown is anticipated. "OECD composite leading indicators for
July 2008 indicate a continued weakening outlook for all the major
seven economies," the OECD said in its monthly release. "The latest
data for major non-OECD member economies tentatively point to expansion
in China, Brazil and Russia and a downturn in India," it said.
Selected Countries. Italy's
composite indicator fell the sharpest of all the G7 countries, off 1.9
points on the month. The German and Canadian indicators dropped 1.5
points. Japan's indicator fell 0.5 point and the United States saw a
0.2 point fall.
Comparison with past US turning
point. The US indicator is weak but did not get as weak as
it did in or before the last economic downturn. It is now rising from
its current cycle low. In Japan the index reach a spike low as weak as
it was in the last recession but it did not stay impacted for as long
as it did last time. The Japanese index is now rising.
The index for the Euro-Zone economies is much weaker than
it was at the time of the last US recession and it is still dropping at
an increasing speed.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup><thead><tr>
<th colspan="5" scope="col"> OECD
Trend-Restored Leading Indicators</th>
</tr>
<tr>
<th colspan="5" scope="col">Growth
progression-SAAR</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>3Mos</td>
<td>6Mos</td>
<td>12mos</td>
<td>Yr-Ago</td>
</tr>
<tr>
<td class="firstcol">OECD</td>
<td>-4.6%</td>
<td>-3.6%</td>
<td>-3.3%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">OECD 7</td>
<td>-3.8%</td>
<td>-3.4%</td>
<td>-3.9%</td>
<td>1.3%</td>
</tr>
<tr>
<td class="firstcol">OECD Europe</td>
<td>-9.0%</td>
<td>-6.8%</td>
<td>-4.5%</td>
<td>1.1%</td>
</tr>
<tr>
<td class="firstcol">OECD Japan</td>
<td>0.9%</td>
<td>-0.4%</td>
<td>-0.9%</td>
<td>-1.2%</td>
</tr>
<tr>
<td class="firstcol">OECD US</td>
<td>-0.5%</td>
<td>-1.8%</td>
<td>-3.8%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td colspan="5" class="firstcol">Six
month readings at
6-month intervals:</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Recent six</td>
<td>6Mo Ago</td>
<td>12Mo Ago</td>
<td>18MO Ago</td>
</tr>
<tr>
<td class="firstcol">OECD</td>
<td>-3.6%</td>
<td>-2.9%</td>
<td>1.7%</td>
<td>2.2%</td>
</tr>
<tr>
<td class="firstcol">OECD 7</td>
<td>-3.4%</td>
<td>-4.3%</td>
<td>1.4%</td>
<td>1.2%</td>
</tr>
<tr>
<td class="firstcol">OECD Europe</td>
<td>-6.8%</td>
<td>-2.2%</td>
<td>0.6%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">OECD Japan</td>
<td>-0.4%</td>
<td>-1.5%</td>
<td>-3.7%</td>
<td>1.4%</td>
</tr>
<tr>
<td class="firstcol">OECD US</td>
<td>-1.8%</td>
<td>-5.7%</td>
<td>3.5%</td>
<td>1.5%</td>
</tr>
<tr>
<td colspan="5" class="firstcol">Slowdowns
indicated by BOLD RED.</td>
</tr>
</tbody>
</table>
</body></html>

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<html><head>
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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080904h.jpg" align="left" border="0" height="265" width="353">
German orders are clearly falling. Orders are dropping from
domestic sources as well as from foreign sources. The degree of decline
is accelerating both domestically and from overseas; the degree of the
drop is substantial.
The new quarter is quite new, but one month into it, the
degree of decline is severe for orders and sales.
Orders are weak enough and have been weak enough for long
enough that real sales are starting to show adverse trends. Over three
months all major sales categories are showing significant volume
declines.
In comment today Nout Wellink of the Dutch central bank warned
that the credit crisis would linger for several years.
European Economic and Monetary Affairs Commissioner
Joaquin Almunia said that, "We're experiencing a serious economic
downturn&#8230;&#8217; he attributes the slip to several causes but adds that fears
of recession are exaggerated. Still, the notion of recession is
haunting Europe as it has haunted the US. Former BOE governor Eddie
George said, "My impression is that most forecasters now expect little
growth if any at all across the industrial world as a whole over the
next year or so ahead, and certainly technical recession cannot be
ruled out."
In Germany there seem to be a difference of opinion on the
subject. Up until now most pronouncements have been upbeat
hold-the-line sort of things. But yesterday, Deputy Economy Minister
Walther Otremba said in an interview that, "Economic
indicators and surveys are clearly pointing down and we must expect a
slump." He added, "The crisis won't be over quickly; whether or not
things will pick up next year is doubtful." Still,
yesterday German Finance Minister Peer Steinbrueck also said, "It is completely irresponsible for
some pessimists to proclaim, on the basis of just one single quarter of
slightly negative growth, that the specter of recession is looming,"
Europe&#8217;s data are weak enough to talk of slumps and
recessions; the talk is not all on the back of one quarter of declining
GDP. Europe&#8217;s policymakers
(at least the ones in office) do not want to entertain that notion,
however. That reluctance
suggests either that they are unrealistic or plan to do nothing to
avert the growing weakness.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col"> German
Orders and Sales By Sector and Origin</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Real and SA</td>
<td colspan="3">% M/M</td>
<td colspan="5">% Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jul-08</td>
<td>Jun-08</td>
<td>May-08</td>
<td>3-MO</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>YrAgo</td>
<td>QTR-2-Date</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>-1.7%</td>
<td>-2.6%</td>
<td>-1.3%</td>
<td>-20.0%</td>
<td>-10.6%</td>
<td>-4.1%</td>
<td>7.2%</td>
<td>-20.7%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>0.3%</td>
<td>-4.5%</td>
<td>0.1%</td>
<td>-15.3%</td>
<td>-8.0%</td>
<td>-3.4%</td>
<td>7.0%</td>
<td>-15.2%</td>
</tr>
<tr>
<td class="firstcol">Domestic</td>
<td>-3.6%</td>
<td>-0.5%</td>
<td>-2.9%</td>
<td>-24.7%</td>
<td>-13.2%</td>
<td>-4.8%</td>
<td>7.5%</td>
<td>-25.8%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Real Sector Sales</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">MFG/Mining</td>
<td>-2.3%</td>
<td>-0.2%</td>
<td>-0.7%</td>
<td>-12.2%</td>
<td>-6.3%</td>
<td>-0.7%</td>
<td>5.8%</td>
<td>-15.0%</td>
</tr>
<tr>
<td class="firstcol">Consumer</td>
<td>-0.4%</td>
<td>-1.4%</td>
<td>-0.1%</td>
<td>-7.2%</td>
<td>-3.7%</td>
<td>-2.5%</td>
<td>1.6%</td>
<td>-7.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer Durables</td>
<td>-3.4%</td>
<td>1.7%</td>
<td>-3.2%</td>
<td>-18.1%</td>
<td>-9.5%</td>
<td>-4.7%</td>
<td>2.9%</td>
<td>-18.6%&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer Nondurables</td>
<td>0.2%</td>
<td>-1.9%</td>
<td>0.6%</td>
<td>-4.6%</td>
<td>-2.3%</td>
<td>-2.1%</td>
<td>1.4%</td>
<td>-5.3%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>-4.4%</td>
<td>0.9%</td>
<td>-2.5%</td>
<td>-21.9%</td>
<td>-11.6%</td>
<td>-1.0%</td>
<td>7.8%</td>
<td>-24.9%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Gds</td>
<td>-1.0%</td>
<td>-1.0%</td>
<td>1.5%</td>
<td>-2.3%</td>
<td>-1.1%</td>
<td>0.4%</td>
<td>6.4%</td>
<td>-6.9%</td>
</tr>
<tr>
<td class="firstcol">All MFG-Sales</td>
<td>-2.1%</td>
<td>-0.3%</td>
<td>-0.7%</td>
<td>-12.1%</td>
<td>-6.3%</td>
<td>-0.8%</td>
<td>5.5%</td>
<td>-14.6%</td>
</tr>
</tbody>
</table>
</body></html>

German orders are clearly falling. Orders are dropping from domestic sources as well as from foreign sources. The degree of decline is accelerating both domestically and from overseas; the degree of the drop is substantial. The new [...]

German Orders so Long Resistant to Weakness Have Fully Succumbed

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Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

Even with expected tariff-induced increases in inflation, BCFF forecasters look for a more aggressive round of monetary easing

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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

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250801A4.jpg

250801D4.jpg

Nonfarm payrolls increased 73,000 during July after rising 14,000 in June, revised from 147,000, and 19,000 in May, revised from 144,000. Expectations had been for a 102,000 rise in the Action Economics Forecast Survey. The three-month average change in payrolls of 35,000 compared to 64,000 in June. The Bureau of Labor Statistics indicates that monthly revisions result from additional reports received from businesses and government agencies since the last published estimates.

Average hourly earnings rose an expected 0.3% during July after unrevised gains of 0.2% and 0.4% in June & May. Earnings growth of 3.9% y/y is little changed over twelve months, 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 4.2% from 4.1% and compared to 4.2% in the previous three months. 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 7.9% last month from 7.7% In June. It was 6.6% in April 2023.

In the **establishment survey**, private-sector employment in July rose 83,000, factory sector jobs declined 11,000, off for the third straight month. Construction sector employment increased 2,000, after rising 3,000 in June. The number of mining & logging industry jobs declined 4,000 after falling in both of the prior two months. 

Private service sector employment increased 96,000 July after improving 16,000 in June. Increases varied greatly amongst service sector categories. Private education & health sector employment rose 79,000 last month, following a 52,000 increase in June. The number of trade, transportation & utilities jobs gained 11,000, following a 22,000 decline and financial activities employment improved 15,000 after a 2,000 drop, while leisure & hospitality employment rose just 5,000 after a 4,000 gain. The number of professional & business services jobs fell 14,000, down for the third straight month.  Information sector employment fell 2,000, after holding steady in June.

Government sector payrolls declined 10,000 last month and revered June’s 11,000 rise. Federal government employment weakened 12,000 and has fallen for six straight months. Local government employment eased 3,000 after rising 10,000 in June while state government payrolls rose 5,000 after increasing 10,000.

Private-sector average hourly earnings rose 0.3% (3.9% y/y) in July. Earnings in the goods-producing sector edged up 0.1% (3.6% y/y). In construction, earnings rose 0.2% (3.7% y/y) following a 0.4% rise, but factory sector earnings eased 0.1% (+3.6% y/y). In the service sector, earnings rose 0.4% (4.0% y/y) in July after increasing 0.2% in June.

250801C4.jpg

The length of the average workweek rose to 34.3 hours in July from 34.2 hours in June. The workweek in the goods-producing sector lengthened to 39.9 hours from 39.7 hours. The construction sector average workweek rose to 39.1 hours from 38.9 while the factory sector workweek held steady at 40.1 hours. The average workweek in the private service sector edged up to 33.2 hours from 33.1 hours.

In the **household survey**, the unemployment rate increased to 4.2% in July after falling to 4.1% as employment fell 260,000 after rising 93,000 in June and the size of the labor force declined 38,000, off for the third straight month. The labor force participation rate eased to 62.2% last month from 62.3% and remained below the high of 63.3% early in 2020. The rate for teenagers declined to 35.0%, after plunging to 35.1%. For workers aged 20-24, the rate declined to 70.9%. For workers aged 25-54, the participation rate eased to 83.4%. For individuals 55 and over, the rate improved slightly to 38.1% but remained near a 20-year low of 38.0% in June.

The employment/population ratio for all workers slipped to 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 fell to 64.7% in July from 64.9% and for women, the rate eased to 54.7% from 54.8% in June.

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.

250801X4.jpg

250801F4.jpg

- Recent job growth reduced by fewer factory & government jobs.
- Earnings gain remains steady y/y.
- Jobless rate reverses June decline.

U.S. Employment Report Shows Weakness in July, While Revisions Reduce Earlier Gains; Jobless Rate Picks Up

250801F20.jpg

250801G20.jpg

U.S. light vehicle sales increased 7.6% (6.0% y/y) to 16.87 million units (SAAR) in July after falling 0.3% to 15.68 million units in June. The gain followed three straight months of decline. The improvement in July vehicle sales accompanied a 1.7% y/y rise in real disposable income through June, which compared to 2.1% growth last year.

Increases in sales were broad-based last month. Light truck sales rose 7.7% (10.0% y/y) in July to 14.02 million units, after easing 0.2% to 13.02 million in June and weakening 8.7% in May to 13.04 million. Purchases of domestically-made light trucks improved 7.1% (12.0% y/y) to 10.79 million units, after falling 1.0% in June to 10.07 million. Sales of imported light trucks rose 9.8% (3.8% y/y) to 3.24 million units, following a 3.9% rise in June.

Trucks’ record 83.1% share of the light vehicle market last month compared to 83.0% in June and 80.1% in July of last year. The share averaged 80.3% during all of 2024 versus 53.3% ten years earlier.

Auto sales rose 6.4% last month, down 9.8% y/y, to 2.84 million units (SAAR) following a 0.4% June decline. Purchases of domestically-produced cars rebounded 10.1% (-6.4% y/y) last month to 2.18 million units, after declining 2.5% in June. Sales of imported autos fell 2.9% (-20.5% y/y) to 0.66 million units, after a 4.6% June gain.

Imports' 23.1% share of the U.S. light vehicle market edged down from 23.2% in June. These compare to a May 2023 low of 22.9% and a high of 26.3% in November of 2023. Imports' share of the passenger car market fell to 23.2% last month and compared to 26.4% in July of last year. It reached a high of 38.7% in September 2021. Imports' share of the light truck market rose to 23.1% last month after rising to 22.7% in June.

U.S. vehicle sales figures can be found in Haver's **USECON** database. Additional detail by manufacturer is in the **INDUSTRY** database.

250801H20.jpg

250801I20.jpg

- Both light truck and auto sales recover.
- Domestic and imports each increase.
- Imports' market share steadies.

U.S. Light Vehicle Sales Rebound in July

Winnie Tapasanun

250801A.jpg

250801B.jpg

The ISM U.S. manufacturing PMI fell to 48.0 in July from 49.0 in June and 48.5 in May, according to the Institute for Supply Management. The July manufacturing PMI, below the 50 expansion-contraction dividing line, indicated that the U.S. manufacturing sector contracted for the fifth consecutive month and to the lowest level since October 2024. The July reading, while slightly higher than a low of 46.9 in October and 47.0 in July of last year, was below its recent high of 50.9 in January and a peak of 63.8 in March 2021. A reading of 49.5 for July had been expected in the Action Economics Forecast Survey.

The production index rose to 51.4 in July after rising to 50.3 in June, suggesting production expanded for the second successive month and to the highest level since January; it was up from its most recent low of 44.0 in April but slightly below a high of 53.7 in March 2024. Twenty percent (NSA) of respondents reported higher production in July while 19.2% reported lower.

The new orders index increased to 47.1 in July after falling to 46.4 in June, indicating new orders contracted for the sixth straight month but at a slightly less severe pace. The Index, while below its recent high of 55.1 in January, was up from a low of 42.7 in January 2023. Nearly nineteen percent (NSA) of respondents reported higher new orders in July while 25.9% reported declines. The inventories index, however, fell to 48.9 in July after rising to 49.2 in June, showing inventories contracted for the third consecutive month. The index was down from its recent high of 53.4 in March and a high of 56.5 in July 2022. Meanwhile, the supplier deliveries index fell to 49.3 in July from 54.2 in June, indicating faster delivery performance following seven straight months in slower territory. An 8.7% (NSA) of respondents reported slower delivery speeds in July while an increased 10.2% reported faster speeds.

On the labor front, the employment index fell to 43.4 in July after falling to 45.0 in June, indicating employment contracted for the sixth straight month and to the lowest level since June 2020. The index was down from its recent high of 50.3 in January and a high of 56.5 in March 2022. A 12.6% (NSA) of respondents reported higher employment in July while an increased 25.0% reported less hiring.

On the pricing front, the prices paid index declined to 64.8 (NSA) in July after rising to 69.7 in June, indicating raw materials prices rose for the 10th straight month but at the slowest rising rate since February. The July index remained well above a low of 39.4 in December 2022 but meaningfully below a high of 87.1 in March 2022 and a peak of 92.1 in June 2021. A decreased 35.4% (NSA) of respondents reported higher prices in July while 5.8% reported price declines.

In other ISM series not included in the composite index, the new export orders index slipped to 46.1 in July after increasing to 46.3 in June, indicating new export orders contracted for the fifth straight month. It was down from its recent high of 52.4 in January and a high of 57.1 in February 2022. The imports index edged up to 47.6 in July after rising to 47.4 in June, remaining at a contraction level for the fourth consecutive month; it was down from its recent high of 52.6 in February and a high of 55.4 in February 2022. The order backlog index increased to 46.8 (NSA) in July after declining to 44.3 in June, indicating falling backlog levels since October 2022. It was up from a low of 37.5 in May 2023 but down from a peak of 70.6 in May 2021.

The ISM figures are based on responses from over 400 purchasing and supply executives from 18 industries, which are weighted according to each industry’s contribution to GDP. These data are diffusion indexes where a reading above 50 indicates expansion; below 50 indicates contraction. The ISM Manufacturing PMI is a composite index based on the diffusion indexes of five of the indexes (seasonally adjusted) with equal weights: New Orders, Production, Employment, Supplier Deliveries, and Inventories. The figures from the Institute for Supply Management can be found in Haver’s **USECON** database; further detail is found in the **SURVEYS** database. The expectations number is available in Haver’s **AS1REPNA** database.

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- 48.0 in July vs. 49.0 in June; the fifth consecutive month of contraction.
- Production (51.4) expands to a six-month high.
- New orders (47.1) contract for the sixth successive month.
- Employment (43.4) contracts to the lowest level since June ’20.
- Prices Index (64.8) indicates prices rise for the 10th straight month; exports & imports contracting.

U.S. ISM Manufacturing PMI Contracts in July to a Nine-Month Low

Michael J. Moran

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Total construction activity fell 0.4 percent in June, continuing a soft trend that began in the middle of last year. After peaking in May 2024, total outlays have declined 3.6%. The retreat was modest at first, but the softness began to intensify last fall. Activity has now declined in nine of the past ten months, with the drop over this span totaling 3.1%. The private sector accounts for nearly all of the softness, with both residential and nonresidential contributing; public construction has continued to advance, although gains in recent months have been modest.

Private residential construction fell 0.7% in June, marking the 12th decline in the past 13 months and leaving activity 7.3% below the peak in May 2024. Hints of softness in private residential construction first appeared in mid-2023, when multi-family construction first stalled and then moved notably downward throughout 2024. Following the swoon in 2024, multi-family activity has stabilized in recent months.

However, single family building has taken the lead in pulling activity lower, declining for four consecutive months with pronounced retreats in the past three (average of -1.8%). Prospects for single-family construction do not seem bright, as the ups and downs in single-family housing starts have left little net growth in the past year; the past four months have been especially soft.

Improvements to existing structures contributed to weakness with sharp declines early in the year, but this area has posted small gains in the past three months. Home improvements (i.e. additions and renovations) should not be ignored in assessing residential construction, as they typically represent 35 to 40 percent of private activity.

Private nonresidential construction fell 0.3 percent in June, reinforcing the downward drift that has been in place since the start of 2024. This sector has posted 11 declines in the past 18 months. While activity grew in several months over this span, most of the increases were minuscule. The net effect of the ups and downs was a drop of 6.6% (annual rate of 4.4%). Total nonresidential activity has several components, and some have advanced in the past year or so, but none has posted an impressive performance. Two areas, lodging (hotel, motels, resorts) and commercial (retail and wholesale), have been notably soft.

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The public sector has started to sputter after two years of strong activity. Building was vigorous in 2023, growing 21.8% (December to December), and activity advanced an additional 2.4% in 2024. Growth so far this year has been modest on balance. Most months have registered gains, but they offset declines in the closing months of last year by only a small margin. Activity in June was 0.1% above the reading in October (the high point in 2024). Both state and Local governments and the federal sector have posted similar performances: robust in 2023, moderate in 2024, and hesitating this year.

The construction figures can be found in Haver's **USECON** database. The expectations figure is from the Action Economics Forecast Survey in **AS1REPNA**.

- Private building, both residential and nonresidential, drifting lower.
- Public construction hesitating after two strong years.

U.S. Construction: Sluggish in June

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Manufacturing PMIs in the S&P framework were mixed in July. However, the median reading edged slightly higher rising to 48.6 in July from 48.5 in June. But both of these are significantly weaker than the 49.1 reading in May. Manufacturing continues to post PMI readings that are below 50 indicating sector contraction on a fairly broad basis in July among the 17 reporting countries in the table plus the euro area. Only India and Vietnam reported PMI readings above 50 indicating sector expansion in July. In June, three of these jurisdictions showed readings above 50; in May, only three had readings above 50 as well. It remains a difficult time for manufacturing globally.

The readings for the manufacturing PMIs also show slippage in the medians from 12-months to six-months to three-months. The 12-month median is 49.2, the six-month median at 48.8, and the three-month median at 48.7. The bottom line is that most manufacturing sectors show contraction, and the contractions are generally getting slightly worse.

However, on an individual basis over three months about two-thirds of the reporters showed an improvement. Over six months just under 40% showed improvement and over a year about 44% of them showed improvement compared to the year before. Only the three-month versus six-month comparison shows a majority of reporters indicating better performance in July.

The ranked or queue standings metrics that place these individual readings for July in their queue of data over the last 4 ½ years, show standings above 50% which put the individual readings above their medians for this period. And only six of these eighteen reporting jurisdictions sported readings above 50%. Those were for the euro area, Germany, France, and India. India has a rating well above 50% at its 96th percentile; Malaysia has a reading above 50% and Vietnam has a reading well above 50% at its 74th percentile.

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The global economy has been put through the ringer with shocks from a war in Ukraine, stepped up military action in the Middle East, threats in the Straits of Hormuz, and an aggressive tariff policy from the United States, affecting global trade- a significant factor for manufacturing. These events have wrong-footed manufacturing globally. During this period, the inflation threat has dissipated; however, in most countries, inflation still slightly overshoots its target where central banks have such targets.

The U.S. has a particularly large number of policy changes afoot. Its manufacturing sector is still struggling. And recent employment data there indicate what appears to be a broader slowdown in the economy. Job growth in the U.S. has slowed and U.S. trends now show consumer spending slowing along with weaker and downwardly revised job growth. Put together, these are signals to watch closely.

Economy in Brief: 2008

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