Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080523c.jpg" align="left" border="0" height="265" width="353">
The chart is pretty clear. The table is pretty clear. The Euro
Area is pretty certainly on a still-declining path - and that path is
not showing any slowing. Growth is not contracting yet. But with the
two main sector PMIs teetering on the brink of a neutral &#8216;50&#8217; reading
&#8216;contraction&#8217; isn&#8217;t just a word with an apostrophe. It&#8217;s a real threat.

The tabular data remind us that over this horizon both indexes
are on their respective low readings for the period. A longer period of
calculation for the MFG PMI shows it standing in the 43rd percentile of
its range since mid-1997. The reading in May 2008 is at 96.1% of its
average for the longer period. Put another way however, if we rank the
various MFG readings we find that the current reading ranks 95th out of
132 observations back to mid 1997. That means in terms of ranking it is
in the BOTTOM 28th percentile of all MFG readings of that time &#8211; a very
weak result.

The history of the MFG survey is longer that for services. And
while 28% isn&#8217;t as weak as 0%, it is a more powerful number since it is
for a longer period of time when real weakness has visited the Euro
Area. Lying firmly in the bottom third of its range, the MFG reading is
not emitting signals that are very reassuring. The MFG PMI has been
below 50 only 30 times. The last time was in June 2005 (a streak of
three consecutive sub 50 readings). This month&#8217;s reading is the weakest
since August of 2005, just after that streak. It&#8217;s a disturbing report
for the Euro Area and possibly a warning about the future.


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col">FLASH
Readings </th>
</tr>
<tr>
<th colspan="3" scope="col">NTC PMIs
for the E-Zone-13</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr class="grey1">
<td class="firstcol">May-08</td>
<td>50.52</td>
<td>50.59</td>
</tr>
<tr>
<td class="firstcol">Apr-08</td>
<td>50.85</td>
<td>51.78</td>
</tr>
<tr class="grey1">
<td class="firstcol">Mar-08</td>
<td>52.01</td>
<td>51.69</td>
</tr>
<tr>
<td class="firstcol">Feb-08</td>
<td>52.25</td>
<td>52.25</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol">Averages</td>
</tr>
<tr class="grey1">
<td class="firstcol">3-Mo</td>
<td>51.13</td>
<td>51.35</td>
</tr>
<tr>
<td class="firstcol">6-Mo</td>
<td>51.78</td>
<td>51.93</td>
</tr>
<tr class="grey1">
<td class="firstcol">12-Mo</td>
<td>52.70</td>
<td>54.10</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol">24-Mo
Range</td>
</tr>
<tr class="grey1">
<td class="firstcol">High</td>
<td>57.61</td>
<td>61.21</td>
</tr>
<tr>
<td class="firstcol">Low</td>
<td>50.52</td>
<td>50.59</td>
</tr>
<tr class="grey1">
<td class="firstcol">% Range</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
</tbody>
</table>
</body></html>

The chart is pretty clear. The table is pretty clear. The Euro Area is pretty certainly on a still-declining path - and that path is not showing any slowing. Growth is not contracting yet. But with the two main sector PMIs teetering [...]

Here’s a Real FLASH: The Euro Area is Weak and Weakening

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080523a.jpg" width="353">
The National Association of Realtors reported that April sales of existing homes fell 1.0% m/m to 4.89M. The decline was to the lowest level in the nine year history of the series and it was about as expected. Total sales include sales of condos and co-ops.
The past weakness in home sales may, however, have eased. The level of April sales was equal to this past January&#39;s. That unchanged level contrasts with a -40.4% three-month rate of growth this past October.
Sales of existing single family homes fell a lesser 0.5% last month and the y/y decline of 16.1% also is somewhat less than the decline in overall sales. Like the overall series, sales were about level with this past Winter and the near-zero rate of decline contrasts with a roughly -40% growth rate this past Winter. Regardless, the series for single family homes (which has a longer history than the total) indicated that sales were at the lowest level since early 1998.
Median home prices rose 1.1% last month after a 2.3% March rise. Here again, recent downward momentum may have changed with the three-month average home price up at a 5.3% rate versus a 33% rate of decline last October. Indeed, prices may have firmed with sales but prices typically firm with the passage of Winter. And the recent 5.3% growth rate is well below that of past years.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080523b.jpg" width="353">
By region, home sales in the West provided all of the lift to the April total with a 6.4% gain and the three month change in sales improved to 33.7% (AR). Elsewhere sales were less robust. In the South April sales were unchanged and three month growth was still negative at -6.0%. In the Midwest April sales fell 6.0% and the three month growth rate remained at -31.7%. In the Northeast April sales fell 4.4% but three month growth showed more firmness at 39.9%.
Any improvement in sales last month failed to lower the number of unsold homes on the market which rose 10.5% (7.9% y/y). Again, seasonal patterns may have influenced that figure as the y/y change in inventories was just 7.9% and that compared to gains of 20% to 40% during the last two years. At the current sales rate the inventory still amounts to 11.2% months supply which is a record series high. For single family homes there was a 10.7 months supply at the current sales rate.
 Measuring Core Inflation: Notes from a 2007 Dallas Fed Conference can be found <a href="http://dallasfed.org/research/staff/2008/staff0802.pdf"> here</a>.
Measurement of Unemployment from the Federal Reserve Bank of Boston is available <a href="http://www.bos.frb.org/economic/ppb/2006/ppb062.pdf"> 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">Existing Single Family Home Sales (Thous)</th>
<th scope="col">April</th>
<th scope="col">y/y %</th>
<th scope="col">March</th>
<th scope="col">April &#39;07</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">Total</td>
<td>4,890</td>
<td>-17.5</td>
<td>4,940</td>
<td>5,930</td>
<td>5,672</td>
<td>6,508</td>
<td>7,076</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>870</td>
<td>-14.7</td>
<td>910</td>
<td>1,020</td>
<td>1,008</td>
<td>1,090</td>
<td>1,168</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,100</td>
<td>-19.7</td>
<td>1,170</td>
<td>1,370</td>
<td>1,331</td>
<td>1,491</td>
<td>1,589</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>1,920</td>
<td>-18.6</td>
<td>1,920</td>
<td>2,360</td>
<td>2,240</td>
<td>2,576</td>
<td>2,704</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,000</td>
<td>-15.3</td>
<td>940</td>
<td>1,180</td>
<td>1,093</td>
<td>1,353</td>
<td>1,617</td>
</tr>
<tr class="odd">
<td class="firstcol">Single-Family</td>
<td>4,340</td>
<td>-16.1</td>
<td>4,360</td>
<td>5,170</td>
<td>4,958</td>
<td>5,703</td>
<td>6,181</td>
</tr>
<tr>
<td class="firstcol">Median Price, Total, $</td>
<td>202,300</td>
<td>-8.0</td>
<td>200,100</td>
<td>219,900</td>
<td>216,617</td>
<td>222,000</td>
<td>218,217</td>
</tr>
</tbody>
</table>
</body>
</html>

The National Association of Realtors reported that April sales of existing homes fell 1.0% m/m to 4.89M. The decline was to the lowest level in the nine year history of the series and it was about as expected. Total sales include [...]

U.S. Existing Home Sales % Decline Eased

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080523a.jpg" align="left" border="0" height="265" width="353">
The National Association of Realtors reported that April sales
of existing homes fell 1.0% m/m to 4.89M. The decline was to
the lowest level in the nine year history of the series and it was
about as expected. Total sales include sales of condos and co-ops.
The past weakness in home sales may, however, have eased. The
level of April sales was equal to this past January's. That unchanged
level contrasts with a -40.4% three-month rate of growth this past
October.
Sales of existing single family homes fell a lesser 0.5% last
month and the y/y decline of 16.1% also is somewhat less than the
decline in overall sales. Like the overall series, sales were about
level with this past Winter and the near-zero rate of decline contrasts
with a roughly -40% growth rate this past Winter. Regardless, the
series for single family homes (which has a longer history than the
total) indicated that sales were at the lowest level since early 1998.
Median home prices rose 1.1% last month
after a 2.3% March rise. Here again, recent downward momentum may have
changed with the three-month average home price up at a 5.3% rate
versus a 33% rate of decline last October. Indeed, prices may have
firmed with sales but prices typically firm with the passage of Winter.
And the recent 5.3% growth rate is well below that of past years.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080523b.jpg" align="right" border="0" height="265" width="353">
By region, home sales in the West provided all of the lift to
the April total with a 6.4% gain and the three month change in sales
improved to 33.7% (AR). Elsewhere sales were less robust. In the South
April sales were unchanged and three month growth was still negative at
-6.0%. In the Midwest April sales fell 6.0% and the three month growth
rate remained at -31.7%. In the Northeast April sales fell 4.4% but
three month growth showed more firmness at 39.9%.
Any improvement in sales last month failed to lower the number
of unsold homes on the market which rose 10.5% (7.9% y/y). Again,
seasonal patterns may have influenced that figure as the y/y change in
inventories was just 7.9% and that compared to gains of 20% to 40%
during the last two years. At the current sales rate the inventory
still amounts to 11.2% months supply which is a record series high. For
single family homes there was a 10.7 months supply at the current sales
rate.
 Measuring Core Inflation: Notes
from a 2007 Dallas Fed Conference can be found <a href="http://dallasfed.org/research/staff/2008/staff0802.pdf">
here</a>.
Measurement of Unemployment from the
Federal Reserve Bank of Boston is available <a href="http://www.bos.frb.org/economic/ppb/2006/ppb062.pdf">
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">Existing
Single Family 
Home Sales (Thous)</th>
<th scope="col">April</th>
<th scope="col">y/y %</th>
<th scope="col">March</th>
<th scope="col">April '07</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">Total</td>
<td>4,890</td>
<td>-17.5</td>
<td>4,940</td>
<td>5,930</td>
<td>5,672</td>
<td>6,508</td>
<td>7,076</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>870</td>
<td>-14.7</td>
<td>910</td>
<td>1,020</td>
<td>1,008</td>
<td>1,090</td>
<td>1,168</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,100</td>
<td>-19.7</td>
<td>1,170</td>
<td>1,370</td>
<td>1,331</td>
<td>1,491</td>
<td>1,589</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>1,920</td>
<td>-18.6</td>
<td>1,920</td>
<td>2,360</td>
<td>2,240</td>
<td>2,576</td>
<td>2,704</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,000</td>
<td>-15.3</td>
<td>940</td>
<td>1,180</td>
<td>1,093</td>
<td>1,353</td>
<td>1,617</td>
</tr>
<tr class="odd">
<td class="firstcol">Single-Family</td>
<td>4,340</td>
<td>-16.1</td>
<td>4,360</td>
<td>5,170</td>
<td>4,958</td>
<td>5,703</td>
<td>6,181</td>
</tr>
<tr>
<td class="firstcol">Median Price, Total, $</td>
<td>202,300</td>
<td>-8.0</td>
<td>200,100</td>
<td>219,900</td>
<td>216,617</td>
<td>222,000</td>
<td>218,217</td>
</tr>
</tbody>
</table>
Here&#8217;s a Real FLASH: The Euro
Areais Weak and Weakening 
by <a href="/comment/Brusca.html">Robert
Brusca</a> May 23, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080523c.jpg" align="left" border="0" height="265" width="353">
The chart is pretty clear. The table is pretty clear. The Euro
Area is pretty certainly on a still-declining path - and that path is
not showing any slowing. Growth is not contracting yet. But with the
two main sector PMIs teetering on the brink of a neutral &#8216;50&#8217; reading
&#8216;contraction&#8217; isn&#8217;t just a word with an apostrophe. It&#8217;s a real threat.

The tabular data remind us that over this horizon both indexes
are on their respective low readings for the period. A longer period of
calculation for the MFG PMI shows it standing in the 43rd percentile of
its range since mid-1997. The reading in May 2008 is at 96.1% of its
average for the longer period. Put another way however, if we rank the
various MFG readings we find that the current reading ranks 95th out of
132 observations back to mid 1997. That means in terms of ranking it is
in the BOTTOM 28th percentile of all MFG readings of that time &#8211; a very
weak result.

The history of the MFG survey is longer that for services. And
while 28% isn&#8217;t as weak as 0%, it is a more powerful number since it is
for a longer period of time when real weakness has visited the Euro
Area. Lying firmly in the bottom third of its range, the MFG reading is
not emitting signals that are very reassuring. The MFG PMI has been
below 50 only 30 times. The last time was in June 2005 (a streak of
three consecutive sub 50 readings). This month&#8217;s reading is the weakest
since August of 2005, just after that streak. It&#8217;s a disturbing report
for the Euro Area and possibly a warning about the future.


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col">FLASH
Readings </th>
</tr>
<tr>
<th colspan="3" scope="col">NTC PMIs
for the E-Zone-13</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr class="grey1">
<td class="firstcol">May-08</td>
<td>50.52</td>
<td>50.59</td>
</tr>
<tr>
<td class="firstcol">Apr-08</td>
<td>50.85</td>
<td>51.78</td>
</tr>
<tr class="grey1">
<td class="firstcol">Mar-08</td>
<td>52.01</td>
<td>51.69</td>
</tr>
<tr>
<td class="firstcol">Feb-08</td>
<td>52.25</td>
<td>52.25</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol">Averages</td>
</tr>
<tr class="grey1">
<td class="firstcol">3-Mo</td>
<td>51.13</td>
<td>51.35</td>
</tr>
<tr>
<td class="firstcol">6-Mo</td>
<td>51.78</td>
<td>51.93</td>
</tr>
<tr class="grey1">
<td class="firstcol">12-Mo</td>
<td>52.70</td>
<td>54.10</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol">24-Mo
Range</td>
</tr>
<tr class="grey1">
<td class="firstcol">High</td>
<td>57.61</td>
<td>61.21</td>
</tr>
<tr>
<td class="firstcol">Low</td>
<td>50.52</td>
<td>50.59</td>
</tr>
<tr class="grey1">
<td class="firstcol">% Range</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
</tbody>
</table>
Belgian Bank Index Drops With Some
Mixed Sectors 
by <a href="/comment/Brusca.html">Robert
Brusca</a> May 23, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080523d.jpg" align="left" border="0" height="265" width="353">
BNB index is a harbinger for the Euro Area.
The BNB index plunged sharply in April and is moderately lower again in
May. This month the NTC diffusion indexes for the Euro Area came out
slightly ahead of the Belgian index and they already tell a stogy of a
weakening EMU. The Belgian index adds wood to that fire. This early
read on EMU health in April has been a GOOD SOLID barometer of what the
larger and geographically linked key EMU economies will report for the
month. The accompanying chart shows the tracking of the Belgian
industrial index &#8211; usually the one of the first reads on the Euro Area
and EU in any given month - with the EU&#8217;s industrial index and with the
EU Commission index for Germany. The Belgian index has often moved
ahead of the EU and German indexes. In this episode, the Belgian index
had started to strengthen ahead of any such signs for Germany and EU
before posting this recent drop. So the plunge in Belgium in April
overstated the extent of the drop we saw in Germany and in EU but the
BNB MFG index&#8217;s flat reading at this low level in May reinforces this
negative trend. In any event, the smaller Belgian economy often sees
its BNB index move more sharply than the indexes for Germany and the EU
but it is generally a good &#8216;hint&#8217; for them and is not to be ignored.
The weak NTC indexes this month underscore that message.

MFG sector is weak. The BNB index shows us
widespread weakness in Belgium. The MFG index (an up minus down net
reading, like all the other components) is at zero after a -7.4, in May
which was the weakest since it was at -10.5 in August of 2005. The
current (just released) NTC MFG weakness in May is also the weakest
reading it has posted since August of 2005 &#8211; Belgium told us that last
month. The domestic production reading in Belgium rebounded to +7 from
+2 in April. The domestic and foreign orders indexes both a positive
(+6 and +8 respectively) after having plunged to register deep negative
readings in April (-22 and -14 respectively). Foreign orders were last
weaker that April in May of 2005 and domestic orders were last weaker
in June of 2003. The mid 2005 period is one that seems to bear up in
comparison with the NTC weakness. The order rebound this month looks
stronger than it is since it is a minor bounce from a deep hole last
month. Belgian prices continue to register mounting pressures.

How weak are things?The current assessment
is still mildly negative at a -2 reading, the same as in April. It was
last weaker in January of 2008 at -5: so that&#8217;s no big deal - or is it?
Foreign orders at a -7 after a -8 last month are more seriously
weakened in the current assessment, suggesting that foreign-linked
weakness is a more immediate concern. Recall the weak NTC readings and
be aware that for Euro Area shipments outside each country that cross
national borders but that stay inside the currency zone called EMU
still count as exports in domestic statistics. We know that the EMU
region itself is weakening. This is the sort of thing we have been
waiting to see happen in the aftermath of the ongoing surge in the
euro. Even so we have seen sporadic signs of resiliency within this
weakening zone even amid other signs of weakness such as the odd spike
up in Italian consumer confidence in May as Biz confidence fades and
GDP registers borderline growth. For the record the NTC MFG index for
Germany weakened only slightly in May (to 53.5 from 53.6) and its
services index fell a bit more sharply (to 53.7 form 54.9)

Weakness across Belgium a geographically central-EU
state. Apart from industry the Belgian wholesale/retail index
fell sharply to -7.7 from -9.5 in April and +0.2 in March. It had
briefly resided at -8 in February of this year and then recovered - but
no more. It was last weaker in May of 2005 at -8.7. The construction
index is very weak as well, but it recovered to a -3.1 after posting a
-8.7 in April. It was last weaker in September of 2002. 
 

The business services index at 15.0 was the huge surprise of
the month. It jumped from a solid 6.3 in April when it was last weaker
in August of 2005. This spurt in services is out of the scenario as far
as the rest of the Belgian survey and the flash EMU services readings
are concerned. One reason may be that Belgium packages trade as a
separate sector from Business services instead of combing them under
&#8216;services&#8217;. Mix consumer and business services together and the result
is not so robust but is still a clear improvement in Belgium. The local
services sector tends to be more isolated from the surrounding service
sector reports than are MFG sector data.

Trying to position Belgian and EMU growth.Those
lows in 2005 mark the time when the Euro Area was beginning to recover
from its period of extended weakness. What we see is the new lows in
the various components of the April 2008 Belgian survey go back to OR
BEYOND that point, inviting comparisons with a time when things were
bad and terms like euro-sclerosis were in vogue. The May overall
Belgian reading shows some further slippage but is not as deeply weak
as the April report was.

As we said last month when this same survey was
issued: The &#8216;New Europe&#8217; where the words &#8216;robust&#8217; and
&#8216;solid&#8217; and &#8216;inflation-fighting&#8217; have been the key terminology may now
be past their vintage years. The euro consumer never did kick in as a
force to support growth. Investment-led growth can only take you so far
especially when the rest of the world is slowing and external demand
for investment goods begins to dry up&#8230;and your currency is setting
record highs while your central bank with inflation marginally over the
target starts threatening to HIKE RATES!

For a time Euro Area growth seemed to be able to outlast
weakness the way that Dorian Grey was able to outlast aging and death.
But in the end these sorts of tricks are confounded by the forces of
fundamentalism. Europe is beginning to show more widespread signs of
weakness. Financial turmoil has hurt it and slowed it. The Bank of
France this past month said that nonfinancial firms and consumers were
not shut off from credit, still credit use slowed. Weakness in the US
is doing its part too, to slow European growth. But now, surging oil
prices may be the coup de grace. They have led to picketing and ports
in France are disrupted by fishermen seeking more aid with fuel costs.
Other groups are screaming for relief in Europe &#8211; some want excise tax
relief. Energy prices, in the land where gasoline is already the
equivalent of $9/gallon, are high. Economic disruption is afoot. On top
of all the other pressures and given that oil prices affect the whole
world this way (since most oil producing countries save and invent
their enriched oil revenues) there is plenty of room for growth
pessimists to come out of the wood work. With these higher oil prices
&#8216;Growth Optimism&#8217; is another endangered cottage industry. And the
adverse impact is not even in the data yet.


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col">Belgium
National Bank Indexes </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>May-08</td>
<td>Apr-08</td>
<td>Mar-08</td>
<td>3-Mo Change</td>
<td>6-Mo Change</td>
<td>12-Mo Change</td>
</tr>
<tr>
<td class="firstcol">Total Industry</td>
<td>-1.6</td>
<td>-7.9</td>
<td>1.2</td>
<td>-1.8</td>
<td>-3.0</td>
<td>-5.5</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>0.0</td>
<td>-7.4</td>
<td>1.1</td>
<td>-0.5</td>
<td>0.5</td>
<td>-3.9</td>
</tr>
<tr>
<td class="firstcol">Production</td>
<td>7.0</td>
<td>2.0</td>
<td>6.0</td>
<td>4.0</td>
<td>6.0</td>
<td>2.0</td>
</tr>
<tr>
<td class="firstcol">Domestic Orders</td>
<td>6.0</td>
<td>-22.0</td>
<td>1.0</td>
<td>6.0</td>
<td>0.0</td>
<td>2.0</td>
</tr>
<tr>
<td class="firstcol">Foreign Orders</td>
<td>8.0</td>
<td>-14.0</td>
<td>1.0</td>
<td>2.0</td>
<td>6.0</td>
<td>5.0</td>
</tr>
<tr>
<td class="firstcol">Prices</td>
<td>5.0</td>
<td>8.0</td>
<td>7.0</td>
<td>-10.0</td>
<td>3.0</td>
<td>-2.0</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="7">Current
assessment</td>
</tr>
<tr>
<td class="firstcol">Tot Orders</td>
<td>-2.0</td>
<td>-2.0</td>
<td>-1.0</td>
<td>-5.0</td>
<td>2.0</td>
<td>-6.0</td>
</tr>
<tr>
<td class="firstcol">Foreign Orders</td>
<td>-7.0</td>
<td>-8.0</td>
<td>4.0</td>
<td>-7.0</td>
<td>-2.0</td>
<td>-8.0</td>
</tr>
<tr>
<td class="firstcol">Inventories</td>
<td>1.0</td>
<td>5.0</td>
<td>3.0</td>
<td>-3.0</td>
<td>-4.0</td>
<td>2.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>0.0</td>
<td>0.0</td>
<td>0.0</td>
</tr>
<tr>
<td class="firstcol">Wholesale &amp; Retail</td>
<td>-7.7</td>
<td>-9.5</td>
<td>0.2</td>
<td>0.3</td>
<td>-15.9</td>
<td>-15.0</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>-3.1</td>
<td>-8.7</td>
<td>2.9</td>
<td>-10.1</td>
<td>-6.8</td>
<td>-3.4</td>
</tr>
<tr>
<td class="firstcol">Business Services</td>
<td>15.0</td>
<td>6.3</td>
<td>6.4</td>
<td>7.5</td>
<td>2.2</td>
<td>0.3</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="4">Comparisons:</td>
<td colspan="3">Changes lag one month</td>
</tr>
<tr>
<td class="firstcol">EU Index: Industry</td>
<td>#N/A</td>
<td>-2.0</td>
<td>0.0</td>
<td>-3.0</td>
<td>-4.0</td>
<td>-9.0</td>
</tr>
<tr>
<td class="firstcol">Germany Index: Industry</td>
<td>#N/A</td>
<td>1.0</td>
<td>2.0</td>
<td>0.0</td>
<td>-3.0</td>
<td>-8.0</td>
</tr>
<tr>
<td class="firstcol" colspan="4">Compare: BNB
Index</td>
<td>-7.1</td>
<td>-6.0</td>
<td>-11.7</td>
</tr>
</tbody>
</table>
</body></html>

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080522e.jpg" align="left" border="0" height="265" width="353">
Italy&#8217;s economy continues to be under pressure. Confindustria,
the employers association, is looking for GDP to drop in Q2. Prime
Minter Berlusconi has offered selected tax cuts to try and stimulate
the moribund economy. Retail sales fell sharply in March. Yet, in May
consumer confidence rose to highest reading of the year &#8211; it was a huge
surprise. The assessment of the overall situation in the next 12 months
improved very sharply to -9 from -28. The overall situation for the
last 12-months improved to -81 from -84 and is still weaker than its
-78 reading in January. The prospect of unemployment lessened in May.
The environment for savings both current and future assessments
improved sharply. The environment for major purchases in the future
improved marginally.

The improvement in sentiment is surprising even after looking
at the survey. While PM Berlusconi has announced policy moves geared to
help spur output, this came after the survey. Italy&#8217;s economy is
continuing to fade, from the production to the consumption side. . The
improvement in consumer sentiment is still a bit of a mystery and it is
doubtful that it will be able to extend itself, but that is matter for
next month.



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="11" scope="col">Italy ISAE Consumer Confidence </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td colspan="6">Since January 1999</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Mar 08</td>
<td>Feb 08</td>
<td>Jan 08</td>
<td>Dec 07</td>
<td>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
</tr>
<tr>
<td class="firstcol">Consumer Confidence</td>
<td>99</td>
<td>102.8</td>
<td>102.2</td>
<td>106.7</td>
<td>6.1</td>
<td>108</td>
<td>127</td>
<td>97</td>
<td>30</td>
<td>111</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="11">Last 12 months</td>
</tr>
<tr>
<td class="firstcol">OVERALL SITUATION</td>
<td>-84</td>
<td>-76</td>
<td>-79</td>
<td>-69</td>
<td>0.0</td>
<td>111</td>
<td>-22</td>
<td>-84</td>
<td>62</td>
<td>-55</td>
</tr>
<tr>
<td class="firstcol">PRICE TRENDS</td>
<td>-17.5</td>
<td>-18</td>
<td>-23</td>
<td>-21.5</td>
<td>40.8</td>
<td>61</td>
<td>4</td>
<td>-32</td>
<td>36</td>
<td>-15</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="11">Next 12months</td>
</tr>
<tr>
<td class="firstcol">OVERALL SITUATION</td>
<td>-35</td>
<td>-31</td>
<td>-39</td>
<td>-35</td>
<td>6.3</td>
<td>108</td>
<td>24</td>
<td>-39</td>
<td>63</td>
<td>-13</td>
</tr>
<tr>
<td class="firstcol">PRICE TRENDS</td>
<td>23</td>
<td>22</td>
<td>24.5</td>
<td>28</td>
<td>38.1</td>
<td>55</td>
<td>49</td>
<td>7</td>
<td>42</td>
<td>24</td>
</tr>
<tr>
<td class="firstcol">UNEMPLOYMENT</td>
<td>6</td>
<td>5</td>
<td>-2</td>
<td>4</td>
<td>92.3</td>
<td>6</td>
<td>9</td>
<td>-30</td>
<td>39</td>
<td>-5</td>
</tr>
<tr>
<td class="firstcol">HOUSEHOLD BUDGET</td>
<td>-2</td>
<td>-3</td>
<td>1</td>
<td>9</td>
<td>2.8</td>
<td>110</td>
<td>33</td>
<td>-3</td>
<td>36</td>
<td>14</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="11">HOUSEHOLD FIN SITUATION</td>
</tr>
<tr>
<td class="firstcol">Last 12 months</td>
<td>-55</td>
<td>-53</td>
<td>-46</td>
<td>-44</td>
<td>0.0</td>
<td>111</td>
<td>-7</td>
<td>-55</td>
<td>48</td>
<td>-29</td>
</tr>
<tr>
<td class="firstcol">Next12 months</td>
<td>-16</td>
<td>-12</td>
<td>-14</td>
<td>-14</td>
<td>0.0</td>
<td>111</td>
<td>14</td>
<td>-16</td>
<td>30</td>
<td>-1</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="11">HOUSEHOLD SAVINGS</td>
</tr>
<tr>
<td class="firstcol">Current</td>
<td>54</td>
<td>61</td>
<td>53</td>
<td>60</td>
<td>79.1</td>
<td>11</td>
<td>63</td>
<td>20</td>
<td>43</td>
<td>39</td>
</tr>
<tr>
<td class="firstcol">Future</td>
<td>-45</td>
<td>-42</td>
<td>-35</td>
<td>-37</td>
<td>0.0</td>
<td>111</td>
<td>-9</td>
<td>-45</td>
<td>36</td>
<td>-23</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="11">MAJOR Purchases</td>
</tr>
<tr>
<td class="firstcol">Current</td>
<td>-50</td>
<td>-44</td>
<td>-42</td>
<td>-47</td>
<td>16.7</td>
<td>89</td>
<td>-15</td>
<td>-57</td>
<td>42</td>
<td>-40</td>
</tr>
<tr>
<td class="firstcol">Future</td>
<td>-65</td>
<td>-61</td>
<td>-53</td>
<td>-61</td>
<td>25.8</td>
<td>65</td>
<td>-42</td>
<td>-73</td>
<td>31</td>
<td>-62</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td colspan="3">Total number of months:</td>
<td>111</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body></html>

Italy’s economy continues to be under pressure. Confindustria, the employers association, is looking for GDP to drop in Q2. Prime Minter Berlusconi has offered selected tax cuts to try and stimulate the moribund economy. Retail sales [...]

Confidence, Still Weak, Makes Sharp Jump

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080522c.jpg" width="353">
According to the Office of Federal Housing Enterprise Oversight (OFHEO), home prices in the U.S. declined by 1.7% last quarter. The seasonally adjusted drop was about as expected but it was the third consecutive quarterly decline.That drop was for mortgages for purchase only and excludes those for refinancings.
Price declines in the not seasonally adjusted figure, which includes refinancings, fell a lesser 0.2% (q/q) but the y/y indication of little change in prices represented widespread differences across the country.
Prices in California dropped 4.4% and that marked the sixth consecutive down quarter, a period during which prices fell 11.5%. Prices in Florida fell a sharp 3.3% and it was the fifth consecutive quarterly decline. Over that period prices dropped 8.2%. Home prices fell less far in New Jersey but they were still down 1.2% from the peak one year ago and in New York prices were unchanged last quarter as they have been for roughly a year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080522d.jpg" width="353">
Appreciation in home prices still occurred over the last year in many areas. Prices in Texas haven&#39;t yet posted a q/q decline and the yearly gain of 4.7% is exceeded by several states, including Wyoming where prices are up 6.3% y/y. Prices also have been relatively firm in Indiana and in Arkansas, where prices rose 2.1% y/y. Wisconsin, New Jersey and Mississippi (+3.1% y/y) also showed gains in home prices during the last year.
The House Price Indices in this report are weighted indexes based on repeat sales or refinancings using data provided by Fannie Mae or Freddie Mac. The overall figures are available in Haver&#39;s USECON data base and the state figures are in the REGIONAL database.
The latest report from the Office of Federal Housing Enterprise Oversight (OFHEO) can be found <a href="http://www.ofheo.gov/media/pdf/1q08hpi.pdf">here</a>.
Falling House Prices and Rising Time on the Market from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2008/el2008-11.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/REGIONAL/@R11/@R1101/@R1101.HTM">House Price Index (OFHEO, %)</a></th>
<th scope="col">1Q &#39;08</th>
<th scope="col">4Q &#39;07</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">United States (Purchase Only, SA)</td>
<td>-1.7</td>
<td>-1.4</td>
<td>-3.1</td>
<td>1.8</td>
<td>6.4</td>
<td>9.6</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">United States (Total, NSA)</td>
<td>-0.2</td>
<td>0.3</td>
<td>-0.0</td>
<td>2.7</td>
<td>8.0</td>
<td>11.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Texas</td>
<td>0.7</td>
<td>1.1</td>
<td>4.7</td>
<td>6.4</td>
<td>6.2</td>
<td>4.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Indiana</td>
<td>1.3</td>
<td>0.4</td>
<td>2.2</td>
<td>2.5</td>
<td>2.2</td>
<td>4.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Wisconsin</td>
<td>0.4</td>
<td>0.9</td>
<td>1.8</td>
<td>2.8</td>
<td>4.6</td>
<td>8.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; New York</td>
<td>0.0</td>
<td>0.9</td>
<td>0.2</td>
<td>2.2</td>
<td>8.0</td>
<td>13.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; New Jersey</td>
<td>-0.5</td>
<td>0.2</td>
<td>-1.2</td>
<td>1.5</td>
<td>9.7</td>
<td>15.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Michigan</td>
<td>0.6</td>
<td>0.1</td>
<td>-3.1</td>
<td>-2.7</td>
<td>-0.4</td>
<td>3.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Florida</td>
<td>-3.3</td>
<td>-1.8</td>
<td>-8.1</td>
<td>-0.6</td>
<td>17.1</td>
<td>25.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; California</td>
<td>-4.4</td>
<td>-2.8</td>
<td>-10.6</td>
<td>-3.3</td>
<td>11.3</td>
<td>23.2</td>
</tr>
</tbody>
</table>
</body>
</html>

According to the Office of Federal Housing Enterprise Oversight (OFHEO), home prices in the U.S. declined by 1.7% last quarter. The seasonally adjusted drop was about as expected but it was the third consecutive quarterly decline.That [...]

Home Prices Fell Further

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080522a.jpg" width="353">
Initial claims for unemployment insurance fell a more-than-expected 9,000 last week to 365,000, reversing the prior week&#39;s little revised 6,000 rise.
The latest figure is for the week when the Bureau of Labor Statistics surveyed May nonfarm payroll employment. Claims rose 20,000 (5.8%) from the April survey period.
The four week moving average of initial claims rose week-to-week to 372,250 (22.1% y/y). Claims averaged 364,000 during April.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080522b.jpg" width="353">
A claims level below 400,000 typically has been associated with growth in nonfarm payrolls. During the last ten years there has been a (negative) 76% correlation between the level of initial claims and the m/m change in nonfarm payroll employment.
Continuing claims for unemployment insurance were unchanged after an upwardly revised increase of 41,000 during the prior week and that increase was revised up. The latest level was the highest since March 2004. It provides some indication of workers&#39; ability to find employment.
The figures for continuing claims lag the initial claims figures by one week.
The insured rate of unemployment held steady at 2.3% for the fourth consecutive week. That was the highest since 2004.
When Motivation Means Opportunity: Training for Real Jobs from the Federal Reserve Bank of Boston can be found <a href="http://www.bos.frb.org/commdev/c&amp;b/2008/winter/Ghazi_Vermont_HITEC_Inc.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">05/17/08</th>
<th scope="col">05/10/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;365</td>
<td>374</td>
<td>17.4%</td>
<td>321</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,073</td>
<td>22.3%</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>


</html>

Initial claims for unemployment insurance fell a more-than-expected 9,000 last week to 365,000, reversing the prior week's little revised 6,000 rise. The latest figure is for the week when the Bureau of Labor Statistics surveyed May [...]

U.S. Initial Unemployment Insurance Claims Fell

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080522c.jpg" width="353">
According to the Office of Federal Housing Enterprise Oversight (OFHEO), home prices in the U.S. declined by 1.7% last quarter. The seasonally adjusted drop was about as expected but it was the third consecutive quarterly decline.That drop was for mortgages for purchase only and excludes those for refinancings.
Price declines in the not seasonally adjusted figure, which includes refinancings, fell a lesser 0.2% (q/q) but the y/y indication of little change in prices represented widespread differences across the country.
Prices in California dropped 4.4% and that marked the sixth consecutive down quarter, a period during which prices fell 11.5%. Prices in Florida fell a sharp 3.3% and it was the fifth consecutive quarterly decline. Over that period prices dropped 8.2%. Home prices fell less far in New Jersey but they were still down 1.2% from the peak one year ago and in New York prices were unchanged last quarter as they have been for roughly a year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080522d.jpg" width="353">
Appreciation in home prices still occurred over the last year in many areas. Prices in Texas haven&#39;t yet posted a q/q decline and the yearly gain of 4.7% is exceeded by several states, including Wyoming where prices are up 6.3% y/y. Prices also have been relatively firm in Indiana and in Arkansas, where prices rose 2.1% y/y. Wisconsin, New Jersey and Mississippi (+3.1% y/y) also showed gains in home prices during the last year.
The House Price Indices in this report are weighted indexes based on repeat sales or refinancings using data provided by Fannie Mae or Freddie Mac. The overall figures are available in Haver&#39;s USECON data base and the state figures are in the REGIONAL database.
The latest report from the Office of Federal Housing Enterprise Oversight (OFHEO) can be found <a href="http://www.ofheo.gov/media/pdf/1q08hpi.pdf">here</a>.
Falling House Prices and Rising Time on the Market from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2008/el2008-11.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/REGIONAL/@R11/@R1101/@R1101.HTM">House Price Index (OFHEO, %)</a></th>
<th scope="col">1Q &#39;08</th>
<th scope="col">4Q &#39;07</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">United States (Purchase Only, SA)</td>
<td>-1.7</td>
<td>-1.4</td>
<td>-3.1</td>
<td>1.8</td>
<td>6.4</td>
<td>9.6</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">United States (Total, NSA)</td>
<td>-0.2</td>
<td>0.3</td>
<td>-0.0</td>
<td>2.7</td>
<td>8.0</td>
<td>11.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Texas</td>
<td>0.7</td>
<td>1.1</td>
<td>4.7</td>
<td>6.4</td>
<td>6.2</td>
<td>4.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Indiana</td>
<td>1.3</td>
<td>0.4</td>
<td>2.2</td>
<td>2.5</td>
<td>2.2</td>
<td>4.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Wisconsin</td>
<td>0.4</td>
<td>0.9</td>
<td>1.8</td>
<td>2.8</td>
<td>4.6</td>
<td>8.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; New York</td>
<td>0.0</td>
<td>0.9</td>
<td>0.2</td>
<td>2.2</td>
<td>8.0</td>
<td>13.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; New Jersey</td>
<td>-0.5</td>
<td>0.2</td>
<td>-1.2</td>
<td>1.5</td>
<td>9.7</td>
<td>15.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Michigan</td>
<td>0.6</td>
<td>0.1</td>
<td>-3.1</td>
<td>-2.7</td>
<td>-0.4</td>
<td>3.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Florida</td>
<td>-3.3</td>
<td>-1.8</td>
<td>-8.1</td>
<td>-0.6</td>
<td>17.1</td>
<td>25.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; California</td>
<td>-4.4</td>
<td>-2.8</td>
<td>-10.6</td>
<td>-3.3</td>
<td>11.3</td>
<td>23.2</td>
</tr>
</tbody>
</table>
U.S. Initial Unemployment Insurance Claims Fell 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 22, 2008


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080522a.jpg" width="353">
Initial claims for unemployment insurance fell a more-than-expected 9,000 last week to 365,000, reversing the prior week&#39;s little revised 6,000 rise.
The latest figure is for the week when the Bureau of Labor Statistics surveyed May nonfarm payroll employment. Claims rose 20,000 (5.8%) from the April survey period.
The four week moving average of initial claims rose week-to-week to 372,250 (22.1% y/y). Claims averaged 364,000 during April.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080522b.jpg" width="353">
A claims level below 400,000 typically has been associated with growth in nonfarm payrolls. During the last ten years there has been a (negative) 76% correlation between the level of initial claims and the m/m change in nonfarm payroll employment.
Continuing claims for unemployment insurance were unchanged after an upwardly revised increase of 41,000 during the prior week and that increase was revised up. The latest level was the highest since March 2004. It provides some indication of workers&#39; ability to find employment.
The figures for continuing claims lag the initial claims figures by one week.
The insured rate of unemployment held steady at 2.3% for the fourth consecutive week. That was the highest since 2004.
When Motivation Means Opportunity: Training for Real Jobs from the Federal Reserve Bank of Boston can be found <a href="http://www.bos.frb.org/commdev/c&amp;b/2008/winter/Ghazi_Vermont_HITEC_Inc.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">05/17/08</th>
<th scope="col">05/10/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;365</td>
<td>374</td>
<td>17.4%</td>
<td>321</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,073</td>
<td>22.3%</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>


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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080521f.jpg" align="left" border="0" height="265" width="353">
Germany continues to show resilience even in the face of weak
reports it has issued. Here is a reversal that fits in with the strong
2008-Q1 GDP that Germany reported. Not surprisingly this report also
boosted the euro. Oddly with this rebound in hand the stronger GDP
behind us the IFO&#8217;s Gernot Nerb declares autumn as the proper time for
the ECB to cut rates. With Germany showing such &#8216;strength&#8217; and with
inflation pressures swirling and engulfing even core inflation measures
why should the ECB do any such thing, let alone ponder it?

IFO measures remain at firm level in their respective ranges
since 1991. The total index is in the 75th percentile of its range and
most readings are in the 70s in terms of percentile readings.
Wholesaling is a bit weaker and services sports a percentile reading
that is pushing the 80th percentile (79.4). All sector readings also
are well above their averages since 1991. The monthly rebound in May is
robust and spans alls sectors except construction.

So is Germany recovering now? Is it merely cutting the losses
from last month? Where does it stand?

Clearly the Nerb comments view this as a bit of a wry smile in
the land of bad jokes. The improvement is not expected to continue if
he is calling for an ECB rate cut buy August. But any continued
strength could be a greater conduit for inflation pressures in the
meantime. Those pressures clearly still are dogging the EMU economy.
Granted that Germany is the strongest economy of all of these, and
still it has the best inflation record. Those weaker economies in EMU
have been pushing higher inflation results for some time. On the whole
that growth/inflation mix remains a nettlesome problem for the ECB to
attack.

The rise in the euro to a new one-month high Vs the dollar is
telling. This report has shattered a paradigm that was in place. We
cannot be sure how much staying power this monthly rise really has. But
the Zew financial experts also saw it and flagged it correctly. Looking
back at history it is hard to see how Germany and the rest of EMU can
do well with such a strong euro value &#8211; looking at it in trade-weighted
and inflation-adjusted terms. Orders data have been withering too.
There are signs that weakness is still the operative trend.

The April diffusion reading from the IFO was the lowest since
January of 2006. Plus it represents a sharp 4.7 point drop from its
March value. The drop in March was the largest overall index drop since
Sept of 2001. Even with the rebound in May, weakness shows though. May
can be viewed as technical rebound and as still preserving the
down-trend that has been put in place for the IFO barometer. But for
the moment the outlook is confused enough to have boosted the euro FX
rate. That strength is not going to be able to last either. But a
stronger Germany makes the ECB more wary of rate-cutting and that, in
turn, gives the stronger euro some fundamental support, at least for a
while.


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="9" scope="col">Summary of IFO Sector Diffusion readings: CLIMATE </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">CLIMATE Sum</td>
<td>Current</td>
<td>Last Mo</td>
<td colspan="6">Since Jan 1991*</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>May-08</td>
<td>Apr-08</td>
<td>Average</td>
<td>Median</td>
<td>Max</td>
<td>Min</td>
<td>range</td>
<td>% range</td>
</tr>
<tr class="odd">
<td class="firstcol">All Sectors</td>
<td>6.2</td>
<td>4.0</td>
<td>-6.8</td>
<td>-10.0</td>
<td>16.7</td>
<td>-26.4</td>
<td>43.1</td>
<td>75.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Manufacturing</td>
<td>15.0</td>
<td>13.3</td>
<td>3.5</td>
<td>3.5</td>
<td>27.4</td>
<td>-22.7</td>
<td>50.1</td>
<td>75.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Construction</td>
<td>-20.3</td>
<td>-20.0</td>
<td>-33.4</td>
<td>-39.2</td>
<td>-8.0</td>
<td>-50.5</td>
<td>42.5</td>
<td>71.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Wholesale</td>
<td>4.0</td>
<td>1.6</td>
<td>-10.6</td>
<td>-15.7</td>
<td>23.4</td>
<td>-39.4</td>
<td>62.8</td>
<td>69.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail</td>
<td>-4.4</td>
<td>-10.9</td>
<td>-20.3</td>
<td>-19.6</td>
<td>1.3</td>
<td>-39.7</td>
<td>41.0</td>
<td>86.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>19.4</td>
<td>18.9</td>
<td>9.8</td>
<td>9.0</td>
<td>28.5</td>
<td>-15.7</td>
<td>44.2</td>
<td>79.4%</td>
</tr>
<tr>
<td colspan="9" class="firstcol">* May 2001 for Services</td>
</tr>
</tbody>
</table>
</body></html>

Germany continues to show resilience even in the face of weak reports it has issued. Here is a reversal that fits in with the strong 2008-Q1 GDP that Germany reported. Not surprisingly this report also boosted the euro. Oddly with [...]

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250801A4.jpg

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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: May 2008

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