Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040614b.jpg" width="353">
Retail sales jumped 1.2% last month following the little revised 0.6% decline in April. Consensus expectations had been for a 1.1% rise.
Motor vehicle dealers&#39; sales surged 5.9% as unit sales of light vehicles rose 8.7% to 17.84M.
Sales at gasoline service stations jumped 4.0% (22.5% y/y). Average gasoline prices rose 10.3% m/m in May to $1.98/gal.
Excluding motor vehicles &amp; parts dealers, the 0.7% m/m gain in retail sales about equaled Consensus expectations. Less gasoline, however, nonauto sales rose just 0.3% (8.6% y/y) following a 0.1% dip in April.
The slowdown in sales was dominated by lower sales at food services &amp; drinking places (-0.3%) and a 1.4% decline in building materials. Sales at general merchandise stores recovered 1.3% (+8.4% y/y) versus a 0.7% April decline. Clothing and accessory store sales rose 0.9% (+6.7% y/y) following a 2.3% April slump.Sales of furniture/home furnishings &amp; electronics/appliances dipped 0.3% (+8.1% y/y) after a 0.7% April rise.

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<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM"> Retail Sales &amp; Food Services</a></td>
<td>1.2%</td>
<td>-0.6%</td>
<td>8.9%</td>
<td>5.4%</td>
<td>2.5%</td>
<td>3.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>0.7%</td>
<td>-0.1%</td>
<td>9.8%</td>
<td>5.2%</td>
<td>3.2%</td>
<td>3.1%</td>
</tr>
</tbody>
</table>
U.S. Trade Deficit Deeper Still 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 14, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040614a.jpg" width="353">
The U.S. foreign trade deficit deepened to another record in April of $48.33B versus the revised deficit of $46.57B a month earlier. Consensus expectations had been for a deficit of $45.0B.
Total imports rose a modest 0.2% in April following the downwardly revised 3.1% jump in March. The moderation was due to a m/m decline in the quantity of oil imports. The value of petroleum products imports fell 10.2% (+18.0% y/y).
Imports of non-petroleum goods rose 1.7% (14.6% y/y), the third strong monthly gain. Imports of capital goods rose 1.9% (14.0% y/y) following a 3.6% March increase. A 1.6% (15.1% y/y) rise in imports of non-auto consumer goods followed the 8.1% March jump.
Exports fell 1.5% following two months of strong gain and reflected dips across the board.
By country, the US trade deficit with China deepened sharply m/m to $12.0B ($124.1B in 2003). Exports fell 19.4% m/m (+28.1% y/y). The US trade deficit with Japan eased to $6.4B ($66.0B in 2003) and the deficit with the European Union eased to $9.2B ($93.1B in 2003).
&quot;Globalization: Threat or Opportunity for the U.S. Economy&quot; from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2004/el2004-12.html"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EE/@EE03/@EE03.HTM"> Foreign Trade</a></th>
<th scope="col">April</th>
<th scope="col">Mar</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Trade Deficit</td>
<td>$48.3B</td>
<td>$46.6B</td>
<td>$42.5B(4/03)</td>
<td>$496.5B</td>
<td>$421.7B</td>
<td>$362.7B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports - Goods &amp; Services</td>
<td>-1.5%</td>
<td>3.1%</td>
<td>15.5%</td>
<td>4.6%</td>
<td>-3.1%</td>
<td>-6.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports - Goods &amp; Services</td>
<td>0.2%</td>
<td>3.1%</td>
<td>14.9%</td>
<td>8.5%</td>
<td>2.1%</td>
<td>-5.5%</td>
</tr>
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Retail sales jumped 1.2% last month following the little revised 0.6% decline in April. Consensus expectations had been for a 1.1% rise. Motor vehicle dealers' sales surged 5.9% as unit sales of light vehicles rose 8.7% to 17.84M. [...]

U.S. Retail Sales Lifted By Autos & Gasoline

Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040611b.jpg" width="353">
New data from the BLS show that roughly 10% of companies&#39; extended mass layoffs during the first quarter of 2004 were associated with the movement of work. Of 1,204 so-called layoff &quot;events&quot;, 119 were connected to relocations and one-third of those involved overseas sites. These actions caused a total 239,361 workers to lose their jobs for more than 30 days (the BLS threshold for an &quot;extended&quot; layoff), including 16,021 in the relocation situations. Of these, 4,633 jobs represented the reassignment of the work outside the United States.
These new data on relocation-related layoffs are presently being added to Haver&#39;s USECON and REGIONAL databases. Data for total layoffs by Census region are available now in the REGIONAL database. Watch for detailed breakdowns by industry and &quot;reason&quot; at the national level early next week in USECON. Mass layoffs are defined to include the separations of at least 50 people. The layoff event numbers are taken from unemployment insurance records. They are, then, NOT a sample survey, but an actual count. BLS analysts contact every company that implements a layoff event to ask about the total number of people separated and the reasons for the separation; the BLS reported that 7.2% of the firms refused to answer its questions, and others may have given incomplete responses. There is thus nonsampling error in the data, but no loss of quality due to sampling issues.
The data show that in the first quarter of 2004, 65% of the separations due to the movement of work occurred in the manufacturing industries. This is disproportionate compared with the mere 24% of all mass layoffs that came in manufacturing. In the information industry, only 1,449 workers lost jobs due to movement of the work. This constitutes about 9% of all layoffs associated with relocation and about 18.5% of all layoffs in the information industry. 
Motivations for layoffs related to the shift of work to new sites included financial difficulty, 15%, and internal reorganizations, 55%. Total layoffs during the first quarter were, by contrast, heavily concentrated in seasonal work and the completion of outstanding projects, absorbing 21% and 24%, respectively of the total. Financial difficulty and bankruptcy generated only 10% of total layoffs and reorganizations, 11%. 
These new data on layoffs associated with the movement of work are likely to be quite interesting. For instance, the numbers in the information industry seem low, compared with widely publicized shifts of customer support operations to other countries. It is thus important that the total figures represent hard information from administrative records, and not opinion surveys or anecdotes. 

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol">Q1 2004, Number</th>
<th scope="col">Layoff Events</th>
Workers Separated from Their Jobs
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td colspan="2">Selected Industries</td>
<td colspan="2">Selected Reasons</td>
</tr>
<tr>
<td class="firstcol">Manufacturing</td>
<td>Information</td>
<td>Financial Difficulty</td>
<td>Internal Reorganization</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Private Nonfarm</td>
<td>1,204</td>
<td>239,361</td>
<td>57,616</td>
<td>7,837</td>
<td>15,755</td>
<td>26,982</td>
</tr>
<tr>
<td class="firstcol">Associated with Movement of Work</td>
<td>113</td>
<td>16,021</td>
<td>10,438</td>
<td>1,449</td>
<td>2,394</td>
<td>8,736</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Overseas</td>
<td>34</td>
<td>4,633</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Domestic</td>
<td>79</td>
<td>9,985</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
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New data from the BLS show that roughly 10% of companies' extended mass layoffs during the first quarter of 2004 were associated with the movement of work. Of 1,204 so-called layoff "events", 119 were connected to relocations and one- [...]

Layoffs Associated with "Movement of Work": New BLS Series

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040611a.jpg" width="353">
Home prices as tallied by the Office of Federal Housing Enterprise Oversight (OFHEO) rose a moderate 1.0% in 1Q 2004, the weakest quarterly increase since 2Q &#39;98.
The OFHEO house price index is a geometric weighted average based on more than 26.5 million repeat transactions over 29 years and 12,000 transactions annually.
View the latest OFHEO release <a href="http://www.ofheo.gov/media/pdf/1q04hpi.pdf">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E911/@E91101/@E91101.HTM"> OFHEO</a></th>
<th scope="col">1Q04</th>
<th scope="col">4Q03</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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</thead>
<tbody>
<tr>
<td class="firstcol">House Price Index</td>
<td>1.0%</td>
<td>3.7%</td>
<td>7.7%</td>
<td>7.0%</td>
<td>7.1%</td>
<td>8.0%</td>
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Home prices as tallied by the Office of Federal Housing Enterprise Oversight (OFHEO) rose a moderate 1.0% in 1Q 2004, the weakest quarterly increase since 2Q '98. The OFHEO house price index is a geometric weighted average based on [...]

Home Price Inflation Cooled

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040610d.jpg" width="353">
Labor markets in Australia look prosperous. While this labor force survey shows that the number of people employed fell 41,000 in May, that decline followed sizable rises the two months before. Year-on-year, employment was up 2.0% in May, similar to recent increases and a pick-up from the performance through 2003. Just as notably, the unemployment rate has continued to decline, reaching 5.5% in May, the second lowest in the 26-year history of the survey. The lowest reading was 5.4% in June 1981.
In May, the decline in unemployment in the face of falling employment indicates that overall labor force participation was down, and indeed, the participation rate dipped from 63.9% to 63.5% in the month. This could raise skepticism about the ability of the Australian economy to keep its workforce at work. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040610c.jpg" width="353"> It appears, though, that this is more probably a temporary blip in the data.
One way to assess this is to examine the extent of the population actually employed. Haver&#39;s DLXVG3 software allows us to calculate such an &quot;employment rate&quot;. Using the two variables, employment (as the primary or &quot;red&quot; series) and population (as the secondary or &quot;blue&quot; series), we can use the Data Transformation capability (Ctrl-T or directly on the command toolbar) to form this rate, as shown in the adjoining graphs. In the second graph, we see that this rate too fell in May, but April&#39;s value, 60.4%, was the highest ever, and even the May reduction leaves intact a pronounced uptrend. Australian labor markets are in fact providing job opportunities for record numbers of their population.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
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<tr>
<th scope="col" class="firstcol">Australia Labor Force Survey</th>
<th scope="col">May 2004</th>
<th scope="col">Apr 2004</th>
<th scope="col">Mar 2004</th>
<th scope="col">Year Ago</th>
December/December
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr>
<td class="firstcol">Employment: Change, Thous</td>
<td>-41</td>
<td>+62</td>
<td>+60</td>
<td>+188</td>
<td>+153</td>
<td>+282</td>
<td>+81</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Yr/Yr % Change</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>2.0</td>
<td>1.6</td>
<td>3.0</td>
<td>0.9</td>
</tr>
<tr>
<td class="firstcol">&quot;Employment Rate&quot;*, %</td>
<td>60.0</td>
<td>60.4</td>
<td>60.1</td>
<td>59.8</td>
<td>59.8**</td>
<td>59.4**</td>
<td>59.1**</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate, %</td>
<td>5.5</td>
<td>5.6</td>
<td>5.6</td>
<td>6.2</td>
<td>6.0**</td>
<td>6.4**</td>
<td>6.8**</td>
</tr>
<tr>
<td class="firstcol">Labor Force: Change, Thous</td>
<td>-55</td>
<td>+65</td>
<td>+37</td>
<td>-1</td>
<td>+194</td>
<td>+216</td>
<td>+151</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Yr/Yr % Change</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>1.2</td>
<td>1.1</td>
<td>2.5</td>
<td>1.4</td>
</tr>
</tbody>
</table>
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Labor markets in Australia look prosperous. While this labor force survey shows that the number of people employed fell 41,000 in May, that decline followed sizable rises the two months before. Year-on-year, employment was up 2.0% in [...]

Australia Employment Maintains Uptrend, Despite Decrease in May

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040610e.jpg" width="353">
The U.S. Government Budget deficit shrunk to $62.5B in May versus a deficit of $88.9B in May &#39;03. The improvement was slightly greater than expected by the Consensus. For the first eight months of FY04 the deficit of $344.3 was 18.4% larger than last year.
Growth in net receipts for the first eight months of FY04 improved to 2.3% versus the first eight months of FY03. The rise from 1.3% growth last month reflected strong individual tax receipts, up 27.5% versus last May. That pulled fiscal YTD growth in individual tax receipts to -3.1% versus last year and compared to a 7.5% decline n FY03.
Corporate tax receipts continued to surge and for the fiscal year-to-date were up 46.6% ($96.0B) versus last fiscal YTD. Growth in contributions for social insurance contributions (FICA) improved to 2.5% with the rise in employment.
Growth in Federal net expenditures eased to 5.5% versus the first eight months of last fiscal year. Defense expenditures growth slowed to 12.5% from 16.7% in April. Growth in Medicare outlays slumped to 3.9% from 8.9% but interest expense fell only 0.7% versus a 3.8% y/y decline in April.
&quot;Deficit-Financed Tax Cuts and Interest Rates&quot; from the Federal Reserve Bank of Philadelphia is available <a href="http://www.phil.frb.org/files/br/br204sl.pdf"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E106/@E10602/@E10602.HTM"> US Government Finance</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">May &#39;03</th>
<th scope="col">FY2003</th>
<th scope="col">FY2002</th>
<th scope="col">FY2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>$-62.5B</td>
<td>$17.6B</td>
<td>$-88.9B</td>
<td>$-374.2B</td>
<td>$-157.8B</td>
<td>$127.3B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revenues</td>
<td>$115.5B</td>
<td>$220.1B</td>
<td>11.6%</td>
<td>-3.8%</td>
<td>-6.9%</td>
<td>-1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Outlays</td>
<td>$177.9B</td>
<td>$202.5B</td>
<td>-7.5%</td>
<td>7.2%</td>
<td>7.9%</td>
<td>4.2%</td>
</tr>
</tbody>
</table>
Initial Claims for Jobless Insurance Rose 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 10, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040610a.jpg" width="353">
Initial claims for jobless insurance rose 12,000 last week to 352,000 following two weeks of decline. Consensus expectations had been for 335,000 claims.
The 4-week moving average of initial claims rose to 346,000 (-18.7% y/y), the highest level since late April.
Continuing claims for unemployment insurance fell 106,000 to the lowest level since May 2001.
The insured rate of unemployment fell back to 2.3%.
&quot;A Jobless Recovery With More People Working?&quot; from the Federal Reserve Bank of St. Louis can be found <a href="http://stlouisfed.org/publications/re/2004/b/pages/jobless_recovery.html"> here</a>.

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<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM"> Unemployment Insurance (000s)</a></th>
<th scope="col">6/05/04</th>
<th scope="col">5/29/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;&nbsp; 352</td>
<td>340</td>
<td>-17.0%</td>
<td>403</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>&nbsp;&nbsp; --</td>
<td>2,881</td>
<td>-22.3%</td>
<td>3,533</td>
<td>3,573</td>
<td>3,023</td>
</tr>
</tbody>
</table>
Import Price Jump Led By Oil & Commodities 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 10, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040610b.jpg" width="353">
Import prices jumped 1.6% last month led by a 5.6% surge in industrial materials prices. The rise pulled the y/y gain in import prices to 7.0%, the fastest rate of increase since early last year.
The recent rise in import prices has been accompanied by a 20% decline in the trade weighted value of the dollar against major currencies since early 2002. During the last fifteen years there has been a (negative) 60% correlation between this value of the dollar and the y/y change in nonoil import prices.
Higher oil prices accounted for much of the gain in overall import prices. The 10.3% May increase in petroleum prices has been followed this month by a decline in the price of Brent crude to $34.74 yesterday from an average $37.50 last month.
Nonpetroleum import prices also rose a strong 0.4% (3.0% y/y) in May but the rise largely reflected a 2.1% (14.7% y/y) gain in nonoil industrial supplies such as iron &amp; steel, lumber and natural gas.
Capital goods prices ticked up 0.1% (-1.0% y/y) following a 0.5% April decline. Computer &amp; peripheral prices rose 0.1% (-5.0% y/y). Capital goods prices excluding computers also rose 0.1% (+1.2% y/y). Non-auto consumer goods prices fell 0.1% (0.6% y/y) for the second month. Motor vehicle &amp; parts prices were unchanged (+1.3% y/y). Prices for imported foods, feeds &amp; beverages fell 0.3% (+5.5% y/y), the first monthly decline since last August.
Export prices gained 0.3% led by a 0.5% rise in agricultural export prices (20.9% y/y). Nonagricultural export prices rose 0.2% (2.8% y/y).

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<thead>
<tr>
<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/USECON/@E8/@E807/@E807.HTM"> Import/Export Prices (NSA)</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>1.6%</td>
<td>0.2%</td>
<td>7.0%</td>
<td>2.9%</td>
<td>-2.5%</td>
<td>-3.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>10.3%</td>
<td>-0.4%</td>
<td>43.9%</td>
<td>21.0%</td>
<td>3.0%</td>
<td>-17.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>0.4%</td>
<td>0.3%</td>
<td>3.0%</td>
<td>1.1%</td>
<td>-2.4%</td>
<td>-1.5%</td>
</tr>
<tr>
<td class="firstcol">Export - All Commodities</td>
<td>0.3%</td>
<td>0.7%</td>
<td>4.3%</td>
<td>1.6%</td>
<td>-1.0%</td>
<td>-0.8%</td>
</tr>
</tbody>
</table>
</body>
</html>

The U.S. Government Budget deficit shrunk to $62.5B in May versus a deficit of $88.9B in May '03. The improvement was slightly greater than expected by the Consensus. For the first eight months of FY04 the deficit of $344.3 was 18.4% [...]

U.S. Budget Deficit Shrunk

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040609c.jpg" width="353">
Germany&#39;s CPI picked up in May, driving mainly by higher energy prices, particularly gasoline. The year-on-year rate was 2.0%, up from 1.6% in April and the strongest advance since March 2002. The impact of energy is seen in the Bundesbank&#39;s seasonally adjusted series that excludes energy, which did not accelerate in May and, in fact, was virtually flat on a month-to-month basis.
Another influential aspect of Germany&#39;s consumer pricing structure is government- regulated prices, and these too have boosted the CPI this year. These prices as a group were hiked 3.2% in January, the largest boost since 1993. Health care costs were apparently the prime mover, along with elementary education expenses. Tobacco prices were raised in March.
Otherwise, private market prices remain soft. Household furnishings, apparel and transportation costs (excluding fuel) have all remained steady or even weak.
This mixed pattern suggests that true inflationary pressure has not yet developed in Germany. Factors largely external to domestic market forces are pushing up some prices, but those that are flexible seem to be staying down, offsetting at least some of the impact of the managed price hikes.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">% Changes</th>
<th scope="col">May 2004</th>
<th scope="col">Apr 2004</th>
<th scope="col">Mar 2004</th>
December/December
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr>
<td class="firstcol">Total (SA)</td>
<td>0.2</td>
<td>0.3</td>
<td>0.4</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Yr/Yr (NSA)</td>
<td>2.0</td>
<td>1.6</td>
<td>1.1</td>
<td>1.1</td>
<td>1.2</td>
<td>1.6</td>
</tr>
<tr>
<td class="firstcol">Total Ex Energy (SA)</td>
<td>0.0</td>
<td>0.2</td>
<td>0.4</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Yr/Yr (SA)</td>
<td>1.6</td>
<td>1.6</td>
<td>1.3</td>
<td>1.2</td>
<td>0.7</td>
<td>2.0</td>
</tr>
<tr>
<td class="firstcol">Total Ex Energy &amp; Gov&#39;t Regulated Prices, Yr/Yr (NSA)</td>
<td>0.8</td>
<td>0.8</td>
<td>0.8</td>
<td>0.8</td>
<td>0.8</td>
<td>1.7</td>
</tr>
</tbody>
</table>
</body>
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Germany's CPI picked up in May, driving mainly by higher energy prices, particularly gasoline. The year-on-year rate was 2.0%, up from 1.6% in April and the strongest advance since March 2002. The impact of energy is seen in the [...]

German CPI has largest 12-Month rise in 2 years, due to energy, government-regulated sectors

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040609a.jpg" width="353">
&quot;Economic developments going forward will determine the level and term structure of interest rates. Federal funds futures prices already reflect expectations of a substantial firming of policy by the Federal Open Market Committee (FOMC). Unlike 1994, there has been an appreciable increase of market rates in anticipation of policy tightening, though history cautions that investors&#39; anticipations of the cumulative magnitude of policy actions and their timing under such circumstances are far from perfect.&quot; - Alan Greenspan
The complete text of Chairman Greenspan&#39;s June 8th comments on economic developments can be found <a href="http://www.federalreserve.gov/BoardDocs/Speeches/2004/20040608/default.htm"> here</a>.
&quot;Great Expectations: The Role of Beliefs in Economics and Monetary Policy&quot; from Federal Reserve Bank of Philadelphia President Santomero are available <a href="http://www.phil.frb.org/files/br/br204as.pdf"> here</a>.

Mortgage Applications At Two Year Low 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 9, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040609b.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association dropped 8.9% (-66.2% y/y) last week to the lowest level since June &#39;02. Applications began the month of June 14.2% below the May average which fell 18.9% from April.
Applications to refinance mortgages fell 13.9% last week and started June 25.1% below the May average. Purchase applications fell 6.0% (+3.2% y/y), down 7.0% from May.
During the last ten years there has been a 61% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
The effective interest rate on a conventional 30-Year mortgage was little changed at 6.53%, the average for May. The effective rate on a 15-year mortgage also was little changed at 5.97%, the May average.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM"> MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">06/04/04</th>
<th scope="col">05/28/04</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>568.8</td>
<td>624.6</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>432.2</td>
<td>459.8</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,363.2</td>
<td>1,583.6</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
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"Economic developments going forward will determine the level and term structure of interest rates. Federal funds futures prices already reflect expectations of a substantial firming of policy by the Federal Open Market Committee [...]

The Future Course of Interest Rates

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040608a.jpg" width="353">
The Small Business Optimism Index published by the National Federation of Independent Business (NFIB) slipped 0.9% last month following a 2.8% jump in April.
The decline reflected fewer firms expecting the economy to improve as well as a slight decline in the percent of firms planning to raise employment and capital expenditures.
Nevertheless, the percentage of firms raising average selling prices rose and the percent reporting higher earnings this quarter improved.
During the last ten years there has been a 50% correlation between the level of the NFIB index and the y/y change in real GDP.
About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S7/@S7.HTM">Nat&#39;l Federation of Independent Business</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Small Business Optimism Index (1986=100)</td>
<td>104.5</td>
<td>105.4</td>
<td>4.4%</td>
<td>101.3</td>
<td>101.2</td>
<td>98.4</td>
</tr>
</tbody>
</table>
Chain Store Sales Inched Higher 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 8, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040608b.jpg" width="353">
Chain store sales inched 0.2% higher last week following three successive down periods, according to the International Council of Shopping Centers (ICSC)-UBS.
Sales in early June started 0.7% below the May average.
During the last ten years there has been a 59% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">06/05/04</th>
<th scope="col">05/29/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>438.5</td>
<td>437.7</td>
<td>5.5%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
The Future Course of Interest Rates 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 9, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040608c.jpg" width="353">
&quot;Economic developments going forward will determine the level and term structure of interest rates. Federal funds futures prices already reflect expectations of a substantial firming of policy by the Federal Open Market Committee (FOMC). Unlike 1994, there has been an appreciable increase of market rates in anticipation of policy tightening, though history cautions that investors&#39; anticipations of the cumulative magnitude of policy actions and their timing under such circumstances are far from perfect.&quot; - Alan Greenspan
The complete text of Chairman Greenspan&#39;s June 8th comments on economic developments can be found <a href="http://www.federalreserve.gov/BoardDocs/Speeches/2004/20040608/default.htm">here</a>.
&quot;Great Expectations: The Role of Beliefs in Economics and Monetary Policy&quot; from Federal Reserve Bank of Philadelphia President Santomero is available <a href="http://www.phil.frb.org/files/br/br204as.pdf">here</a>.

</body>
</html>

The Small Business Optimism Index published by the National Federation of Independent Business (NFIB) slipped 0.9% last month following a 2.8% jump in April. The decline reflected fewer firms expecting the economy to improve as well [...]

Small Business Optimism Slipped

US production rebounded in Q2, but demand continued to slow

US leader, Germany trailer for real GDP growth over past 3 years

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

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

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

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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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

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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.

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- 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

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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

Robert Brusca

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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: June 2004

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