Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080725d.jpg" align="left" border="0" height="265" width="353">
The German CPI ex-energy inflation rate is still very
well-behaved with inflation on that score below 2% over 12-months and
nearer to 1% over three- and six-months. For the PPI ex energy trends
are worsening, however. Export and import prices excluding the effects
of energy &#8211; just reported - are both up by over 2% over twelve months.
On shorter horizons where they are accelerating sharply, those trends
may be real but since the data are not seasonally adjusted those
calculations are not so reliable. 
 

Still, what is disturbing about those trends is the clear
acceleration in the ex-petrol inflation rates over those less reliable
but shorter horizons. 
 

On balance German inflation does not seem imperiled. But the
ECB caps overall EMU inflation, not German inflation and as one of the
more price-stable countries in the Zone Germany still posts a headline
CPI that is up by 3.3% and an ex-energy result that is up by 1.9%. The
ex-energy number falls below the ECB CPI cap rate, but the ECB does not
have any ceiling except for the full CPI number. Perhaps behind the
closed doors of the meeting room the ECB Council takes some solace in
ex-energy inflation being better behaved, but not in public. 
 

More ominously, the export and import prices for Germany &#8211;
despite ongoing euro strength- suggest that more inflation pressures
may be leaking in apart from energy. All in all this is not a great
result for the month, although the report has its spots for those who
may wish to mount an argument of optimism. I suspect the ECB and the
usual band of inflation adverse German observers will see little good
in this report. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">German
International and Domestic Inflation Trends </th>
</tr>
</thead>
<tbody>
<tr class="grey5">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% m/m</td>
<td colspan="4">% Saar</td>
</tr>
<tr class="grey4">
<td class="firstcol">SA:</td>
<td>Jun-08</td>
<td>May-08</td>
<td>Apr-08</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr-Ago</td>
</tr>
<tr class="grey1">
<td class="firstcol">Export Prices</td>
<td>0.7%</td>
<td>0.4%</td>
<td>0.1%</td>
<td>4.9%</td>
<td>4.7%</td>
<td>2.7%</td>
<td>2.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Import Prices</td>
<td>2.1%</td>
<td>2.3%</td>
<td>0.4%</td>
<td>20.6%</td>
<td>13.6%</td>
<td>8.8%</td>
<td>1.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">NSA</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="grey1">
<td class="firstcol">Exports excl-Petroleum</td>
<td>0.5%</td>
<td>0.3%</td>
<td>0.1%</td>
<td>3.4%</td>
<td>4.6%</td>
<td>2.3%</td>
<td>2.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Imports excl-Petroleum</td>
<td>0.5%</td>
<td>0.6%</td>
<td>0.3%</td>
<td>5.5%</td>
<td>6.3%</td>
<td>2.5%</td>
<td>1.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Memo: SA</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey1">
<td class="firstcol">CPI</td>
<td>0.4%</td>
<td>0.5%</td>
<td>0.0%</td>
<td>3.4%</td>
<td>3.1%</td>
<td>3.3%</td>
<td>2.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">CPI excl Energy</td>
<td>0.2%</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.8%</td>
<td>1.2%</td>
<td>1.9%</td>
<td>2.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">PPI</td>
<td>1.0%</td>
<td>1.1%</td>
<td>0.9%</td>
<td>12.6%</td>
<td>9.4%</td>
<td>6.6%</td>
<td>1.8%</td>
</tr>
<tr class="grey1">
<td class="firstcol">PPI excl Energy</td>
<td>0.4%</td>
<td>0.4%</td>
<td>0.2%</td>
<td>3.6%</td>
<td>4.2%</td>
<td>2.9%</td>
<td>2.8%</td>
</tr>
</tbody>
</table>
</body></html>

The German CPI ex-energy inflation rate is still very well-behaved with inflation on that score below 2% over 12-months and nearer to 1% over three- and six-months. For the PPI ex energy trends are worsening, however. Export and [...]

Excluding Energy German Export and Import Prices Break Through 2% Mark

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080725c.jpg" align="left" border="0" height="265" width="353">
France&#8217;s formerly stable service sector is weakening: The
Insee indicator that was above its mean level just three short months
ago is now falling sharply. The service sector barometer is now in the
37th percentile of its range with the outlook in the 35th percentile of
its range at a reading of -11 compared with an average of -2. 
 

Observed sales are in the 62nd percentile of that series&#8217;
historic range while expected sales are ominously in the 40th
percentile of their range. The future is expected to be worse. Sales
prices are in the high seventies to 8oth percentiles. While employment
observed over the past three-months was in the 80th percentile of this
historic range for the next three-months the reading for expected
employment conditions is in the bottom 20th percentile. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="11" scope="col">France INSEE Services Survey Jan 2000-date </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jul 08</td>
<td>Jun 08</td>
<td>May 08</td>
<td>Apr 08</td>
<td>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
</tr>
<tr>
<td class="firstcol">Climate Indicator</td>
<td>94</td>
<td>101</td>
<td>102</td>
<td>103</td>
<td>36.7</td>
<td>68</td>
<td>113</td>
<td>83</td>
<td>30</td>
<td>102</td>
</tr>
<tr>
<td class="firstcol">Climate: 3-Mo MAV</td>
<td>99</td>
<td>102</td>
<td>103</td>
<td>104</td>
<td>50.6</td>
<td>55</td>
<td>113</td>
<td>85</td>
<td>28</td>
<td>102</td>
</tr>
<tr>
<td class="firstcol">Climate: 12-Mo MAV</td>
<td>106</td>
<td>108</td>
<td>109</td>
<td>109</td>
<td>79.7</td>
<td>24</td>
<td>110</td>
<td>91</td>
<td>20</td>
<td>102</td>
</tr>
<tr>
<td class="firstcol">Outlook</td>
<td>-11</td>
<td>-6</td>
<td>-4</td>
<td>-3</td>
<td>35.5</td>
<td>75</td>
<td>9</td>
<td>-22</td>
<td>31</td>
<td>-2</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="11">Sales</td>
</tr>
<tr>
<td class="firstcol">Observed 3-Mos</td>
<td>7</td>
<td>11</td>
<td>11</td>
<td>11</td>
<td>62.1</td>
<td>41</td>
<td>18</td>
<td>-11</td>
<td>29</td>
<td>6</td>
</tr>
<tr>
<td class="firstcol">Expected 3-Mos</td>
<td>1</td>
<td>8</td>
<td>10</td>
<td>11</td>
<td>40.7</td>
<td>70</td>
<td>17</td>
<td>-10</td>
<td>27</td>
<td>7</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="11">Sales Price</td>
</tr>
<tr>
<td class="firstcol">Observed over 3-Mos</td>
<td>3</td>
<td>5</td>
<td>5</td>
<td>4</td>
<td>77.8</td>
<td>7</td>
<td>5</td>
<td>-4</td>
<td>9</td>
<td>0</td>
</tr>
<tr>
<td class="firstcol">Expected over 3-Mos</td>
<td>3</td>
<td>3</td>
<td>3</td>
<td>3</td>
<td>80.0</td>
<td>4</td>
<td>5</td>
<td>-5</td>
<td>10</td>
<td>0</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="11">Employment</td>
</tr>
<tr>
<td class="firstcol">Observed over 3-Mos</td>
<td>12</td>
<td>11</td>
<td>17</td>
<td>14</td>
<td>82.1</td>
<td>9</td>
<td>17</td>
<td>-11</td>
<td>28</td>
<td>5</td>
</tr>
<tr>
<td class="firstcol">Expected over 3-Mos</td>
<td>0</td>
<td>5</td>
<td>12</td>
<td>10</td>
<td>20.8</td>
<td>68</td>
<td>19</td>
<td>-5</td>
<td>24</td>
<td>5</td>
</tr>
</tbody>
</table>
</body></html>

France’s formerly stable service sector is weakening: The Insee indicator that was above its mean level just three short months ago is now falling sharply. The service sector barometer is now in the 37th percentile of its range with [...]

France’s Insee Services Indicator Plunges as Weakness Spreads

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080725a.jpg" width="353">
Orders for durable goods rose 0.8% last month and the increase followed a 0.1% uptick during May. Consensus expectations had been for a 0.4% decline during June. The figures of late, however, have been very much influenced by weakness in the transportation sector. Less transportation orders popped 2.0% during June and they have risen 6.2% during the past twelve months.
Lower orders for aircraft &amp; parts dragged the June orders total down with a 20.3% decline (-30.4% y/y). That drop reflected an 8.6% shortfall (+53.6 y/y) in defense orders as well as a 25.1% drop (-45.2% y/y) in nondefense orders.
Orders for nondefense capital goods fell 3.2% last month but this decline also reflected weakness in aircraft orders. Less aircraft, nondefense capital goods orders rose 1.4% during June and these orders have risen 1.6% since yearend. The y/y gain of 5.5% compares to a 2.7% decline during all of last year. During the last ten years there has been an 80% correlation between the y/y gain in nondefense capital goods orders and the rise in equipment &amp; software spending in the GDP accounts. The correlation with capital goods shipments is, as one would expect, a larger 92%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080725b.jpg" width="353">
To the upside during June were primary metal orders. They surged 5.1% and are up 10.7% this year, 22.7% y/y. Orders for machinery recovered most of the prior month&#39;s decline with a 2.3% (11.8% y/y) rise during June. Year-to-date machinery orders are, however, only near last year&#39;s rate of gain with a 1.6% rise after last year&#39;s 0.6% uptick.Orders for computers &amp; related products slipped 0.5% but they are up 1.1% so far this year. New orders for communications equipment reversed all of the prior month&#39;s rise with a 4.4% decline and they are down 4.7% so far this year.
Overall shipments of durable goods rose 0.5% and made up about half of the May decline. Less transportation shipments recovered all of the May decline with a 0.2% (2.6% y/y) uptick.
Inventories of durable goods rose 0.5% during June, about as they did during the prior two months. Year-to-date inventories increased 3.6%, about the same as they did last year. Less transportation inventories are up 2.5%, about as they were last year.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED0101.HTM">NAICS Classification</a></th>
<th scope="col">June</th>
<th scope="col">May</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">Durable Goods Orders</td>
<td>0.8%</td>
<td>0.1%</td>
<td>-1.1%</td>
<td>1.4%</td>
<td>6.2%</td>
<td>10.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Excluding Transportation</td>
<td>2.0%</td>
<td>-0.5%</td>
<td>6.2%</td>
<td>-0.3%</td>
<td>9.1%</td>
<td>9.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>-3.2%</td>
<td>0.2%</td>
<td>-5.7%</td>
<td>3.5%</td>
<td>9.4%</td>
<td>17.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>1.4%</td>
<td>-0.1%</td>
<td>5.5%</td>
<td>-2.7%</td>
<td>10.7%</td>
<td>11.6%</td>
</tr>
</tbody>
</table>
</body>
</html>

Orders for durable goods rose 0.8% last month and the increase followed a 0.1% uptick during May. Consensus expectations had been for a 0.4% decline during June. The figures of late, however, have been very much influenced by weakness [...]

U.S. Durable Goods Orders Rose. Less Transportation Orders Jumped

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080725a.jpg" align="left" border="0" height="265" width="353">
Orders for durable goods rose 0.8% last month and the increase
followed a 0.1% uptick during May. Consensus expectations had been for
a 0.4% decline during June. The figures of late, however, have been
very much influenced by weakness in the transportation sector. Less
transportation orders popped 2.0% during June and they have risen 6.2%
during the past twelve months.
Lower orders for aircraft &amp; parts dragged the June
orders total down with a 20.3% decline (-30.4% y/y). That drop
reflected an 8.6% shortfall (+53.6 y/y) in defense orders as well as a
25.1% drop (-45.2% y/y) in nondefense orders.
Orders for nondefense capital goods fell 3.2% last month but
this decline also reflected weakness in aircraft orders. Less aircraft,
nondefense capital goods orders rose 1.4% during June and these orders
have risen 1.6% since yearend. The y/y gain of 5.5% compares to a 2.7%
decline during all of last year. During the last ten years there has
been an 80% correlation between the y/y gain in nondefense capital
goods orders and the rise in equipment &amp; software spending in
the GDP accounts. The correlation with capital goods shipments is, as
one would expect, a larger 92%.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080725b.jpg" align="right" border="0" height="265" width="353">
To the upside during June were primary metal orders. They
surged 5.1% and are up 10.7% this year, 22.7% y/y. Orders for machinery
recovered most of the prior month's decline with a 2.3% (11.8% y/y)
rise during June. Year-to-date machinery orders are, however, only near
last year's rate of gain with a 1.6% rise after last year's 0.6%
uptick.Orders for computers &amp; related products slipped 0.5% but
they are up 1.1% so far this year. New orders for communications
equipment reversed all of the prior month's rise with a 4.4% decline
and they are down 4.7% so far this year.
Overall shipments of durable goods rose 0.5% and made up about
half of the May decline. Less transportation shipments recovered all of
the May decline with a 0.2% (2.6% y/y) uptick.
Inventories of durable goods rose 0.5% during June, about as
they did during the prior two months. Year-to-date inventories
increased 3.6%, about the same as they did last year. Less
transportation inventories are up 2.5%, about as they were last year.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED0101.HTM">NAICS
Classification</a></th>
<th scope="col">June</th>
<th scope="col">May</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">Durable Goods Orders</td>
<td>0.8%</td>
<td>0.1%</td>
<td>-1.1%</td>
<td>1.4%</td>
<td>6.2%</td>
<td>10.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Excluding Transportation</td>
<td>2.0%</td>
<td>-0.5%</td>
<td>6.2%</td>
<td>-0.3%</td>
<td>9.1%</td>
<td>9.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>-3.2%</td>
<td>0.2%</td>
<td>-5.7%</td>
<td>3.5%</td>
<td>9.4%</td>
<td>17.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>1.4%</td>
<td>-0.1%</td>
<td>5.5%</td>
<td>-2.7%</td>
<td>10.7%</td>
<td>11.6%</td>
</tr>
</tbody>
</table>
Michigan Consumer Sentiment Better
Than Expected in July 
by <a href="/comment/Moeller.html">Tom
Moeller</a> July 25, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080725g.jpg" align="left" border="0" height="265" width="353">
The University of Michigan's July reading of consumer
sentiment rose 8.5% from June, an improvement from the read for early
July which showed a 0.4% uptick versus the June average. The rise beat
Consensus expectations for a reading of 56.3 which would have been
unchanged from June. The latest level of sentiment was its highest
since April.
During the last ten years there has been a 47% correlation
between the level of sentiment and the three month change in real
consumer spending.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080725h.jpg" align="right" border="0" height="265" width="353">
The expectations component of overall sentiment was much
firmer than reported at mid-month. The full-month index rose 8.7% to
its highest level since March led by a 9.4% rise (-16.0% y/y) in
expectations for personal finances. Expectations for business
conditions during the next year also were firm and expectations for
conditions during the next five years made up about all of a sharp July
decline.
The current conditions index rose 8.1% and recovered all of a
decline during June. The rise was due to a sharp increase in the index
of whether now is a good time to buy large household goods, to the
highest level since March (-26.3% y/y). The view of current personal
finances also rose and made about half of the June decline (-36.5% y/y).
The opinion of government policy, which apparently influences
economic expectations, gave back about half of its June improvement.
The mean expected rate of inflation during the next twelve
months slipped m/m to 6.3% versus an initial expectation for 6.9%.
During the next five years the expected inflation rate fell further to
3.5%, the lowest level since April.
The University of Michigan survey is not seasonally
adjusted.The reading is based on telephone interviews with about 500
households at month-end; the mid-month results are based on about 300
interviews. The summary indexes are in Haver's USECON database,
with details in the proprietary UMSCA database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University
of Michigan</a></th>
<th scope="col">July</th>
<th scope="col">(Prelim.)</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">July 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">Consumer Sentiment</td>
<td>61.2</td>
<td>56.6</td>
<td>56.4</td>
<td>59.8</td>
<td>-32.3% </td>
<td>85.6</td>
<td>87.3</td>
<td>88.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>73.1</td>
<td>69.5</td>
<td>67.6</td>
<td>73.3</td>
<td>-30.0%</td>
<td>101.2</td>
<td>105.1</td>
<td>105.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>53.5</td>
<td>48.3</td>
<td>49.2</td>
<td>51.1</td>
<td>-34.4%</td>
<td>75.6</td>
<td>75.9</td>
<td>77.4</td>
</tr>
</tbody>
</table>
U.S. New-Home Sales Dipped in
June, Decline Stabilizing? 
by <a href="/comment/Moeller.html">Tom
Moeller</a> July 25, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080725e.jpg" align="left" border="0" height="265" width="353">
Sales new single-family homes in June dipped 0.6% to 530,000.
The fall added to a 1.7% drop during May that was a much shallower
decline than initially reported. The level of sales in June was down
61.8% from the July 2005 peak. Nevertheless, the latest level of sales
beat expectations for 503,000.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080725f.jpg" align="right" border="0" height="265" width="353">
By region sales in the South fell 2.0% and they are down 12.5%
since December. In the West sales dipped 0.9% and that resulted in a
15.6% drop so far this year. Though sales in the Northeast recovered
the May decline with a 5.3% gain, they remained down 28.6% since
December. In the Midwest June sales rose 2.5%. So far this year this
has been the star performing region as sales posted a 12.2% increase.
The median price for a new single-family home increased 1.4%
to $230,900 after a 6.5% decline during May which was a deeper drop
than reported initially. 
 

The number of new homes for sale fell 5.3%
(-21.5% y/y) and reduced the inventory of unsold homes to the lowest
level since December of 2004. The decline in the number of unsold homes
has been greatest in the West (-23.9% y/y) but declines of similar
magnitude have been logged elsewhere in the country.
The month's supply of new homes for sale again ticked lower
m/m to 10.0 but that remained near the cycle's high. 


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">US
New Homes</th>
<th scope="col">June</th>
<th scope="col">May</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">Total Sales
(SAAR, 000s)</td>
<td>530</td>
<td>533</td>
<td>-33.2%</td>
<td>768</td>
<td>1,049</td>
<td>1,279</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>40</td>
<td>38</td>
<td>&nbsp;-37.5</td>
<td>64</td>
<td>64</td>
<td>81</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>83</td>
<td>81</td>
<td>-27.2</td>
<td>118</td>
<td>161</td>
<td>203</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>293</td>
<td>299</td>
<td>-33.4</td>
<td>408</td>
<td>559</td>
<td>638</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>114</td>
<td>115</td>
<td>-34.9</td>
<td>178</td>
<td>266</td>
<td>356</td>
</tr>
<tr>
<td class="firstcol">Median Price
(NSA, $)</td>
<td>230,900</td>
<td>227,700</td>
<td>-2.0</td>
<td>243,742</td>
<td>243,067</td>
<td>234,208</td>
</tr>
</tbody>
</table>
France&#8217;s Insee Services
IndicatorPlunges as Weakness Spreads 
by <a href="/comment/Brusca.html">Robert
Brusca</a> July 25, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080725c.jpg" align="left" border="0" height="265" width="353">
France&#8217;s formerly stable service sector is weakening: The
Insee indicator that was above its mean level just three short months
ago is now falling sharply. The service sector barometer is now in the
37th percentile of its range with the outlook in the 35th percentile of
its range at a reading of -11 compared with an average of -2. 
 

Observed sales are in the 62nd percentile of that series&#8217;
historic range while expected sales are ominously in the 40th
percentile of their range. The future is expected to be worse. Sales
prices are in the high seventies to 8oth percentiles. While employment
observed over the past three-months was in the 80th percentile of this
historic range for the next three-months the reading for expected
employment conditions is in the bottom 20th percentile. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="11" scope="col">France
INSEE Services Survey Jan 2000-date </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jul 
08</td>
<td>Jun 
08</td>
<td>May 
08</td>
<td>Apr 
08</td>
<td>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
</tr>
<tr>
<td class="firstcol">Climate Indicator</td>
<td>94</td>
<td>101</td>
<td>102</td>
<td>103</td>
<td>36.7</td>
<td>68</td>
<td>113</td>
<td>83</td>
<td>30</td>
<td>102</td>
</tr>
<tr>
<td class="firstcol">Climate: 3-Mo MAV</td>
<td>99</td>
<td>102</td>
<td>103</td>
<td>104</td>
<td>50.6</td>
<td>55</td>
<td>113</td>
<td>85</td>
<td>28</td>
<td>102</td>
</tr>
<tr>
<td class="firstcol">Climate: 12-Mo MAV</td>
<td>106</td>
<td>108</td>
<td>109</td>
<td>109</td>
<td>79.7</td>
<td>24</td>
<td>110</td>
<td>91</td>
<td>20</td>
<td>102</td>
</tr>
<tr>
<td class="firstcol">Outlook</td>
<td>-11</td>
<td>-6</td>
<td>-4</td>
<td>-3</td>
<td>35.5</td>
<td>75</td>
<td>9</td>
<td>-22</td>
<td>31</td>
<td>-2</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="11">Sales</td>
</tr>
<tr>
<td class="firstcol">Observed 3-Mos</td>
<td>7</td>
<td>11</td>
<td>11</td>
<td>11</td>
<td>62.1</td>
<td>41</td>
<td>18</td>
<td>-11</td>
<td>29</td>
<td>6</td>
</tr>
<tr>
<td class="firstcol">Expected 3-Mos</td>
<td>1</td>
<td>8</td>
<td>10</td>
<td>11</td>
<td>40.7</td>
<td>70</td>
<td>17</td>
<td>-10</td>
<td>27</td>
<td>7</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="11">Sales
Price</td>
</tr>
<tr>
<td class="firstcol">Observed over 3-Mos</td>
<td>3</td>
<td>5</td>
<td>5</td>
<td>4</td>
<td>77.8</td>
<td>7</td>
<td>5</td>
<td>-4</td>
<td>9</td>
<td>0</td>
</tr>
<tr>
<td class="firstcol">Expected over 3-Mos</td>
<td>3</td>
<td>3</td>
<td>3</td>
<td>3</td>
<td>80.0</td>
<td>4</td>
<td>5</td>
<td>-5</td>
<td>10</td>
<td>0</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="11">Employment</td>
</tr>
<tr>
<td class="firstcol">Observed over 3-Mos</td>
<td>12</td>
<td>11</td>
<td>17</td>
<td>14</td>
<td>82.1</td>
<td>9</td>
<td>17</td>
<td>-11</td>
<td>28</td>
<td>5</td>
</tr>
<tr>
<td class="firstcol">Expected over 3-Mos</td>
<td>0</td>
<td>5</td>
<td>12</td>
<td>10</td>
<td>20.8</td>
<td>68</td>
<td>19</td>
<td>-5</td>
<td>24</td>
<td>5</td>
</tr>
</tbody>
</table>
Excluding Energy German Export and
Import Prices Break Through 2% Mark 
by <a href="/comment/Brusca.html">Robert
Brusca</a> July 25, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080725d.jpg" align="left" border="0" height="265" width="353">
The German CPI ex-energy inflation rate is still very
well-behaved with inflation on that score below 2% over 12-months and
nearer to 1% over three- and six-months. For the PPI ex energy trends
are worsening, however. Export and import prices excluding the effects
of energy &#8211; just reported - are both up by over 2% over twelve months.
On shorter horizons where they are accelerating sharply, those trends
may be real but since the data are not seasonally adjusted those
calculations are not so reliable. 
 

Still, what is disturbing about those trends is the clear
acceleration in the ex-petrol inflation rates over those less reliable
but shorter horizons. 
 

On balance German inflation does not seem imperiled. But the
ECB caps overall EMU inflation, not German inflation and as one of the
more price-stable countries in the Zone Germany still posts a headline
CPI that is up by 3.3% and an ex-energy result that is up by 1.9%. The
ex-energy number falls below the ECB CPI cap rate, but the ECB does not
have any ceiling except for the full CPI number. Perhaps behind the
closed doors of the meeting room the ECB Council takes some solace in
ex-energy inflation being better behaved, but not in public. 
 

More ominously, the export and import prices for Germany &#8211;
despite ongoing euro strength- suggest that more inflation pressures
may be leaking in apart from energy. All in all this is not a great
result for the month, although the report has its spots for those who
may wish to mount an argument of optimism. I suspect the ECB and the
usual band of inflation adverse German observers will see little good
in this report. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">German
International and Domestic Inflation Trends </th>
</tr>
</thead>
<tbody>
<tr class="grey5">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% m/m</td>
<td colspan="4">% Saar</td>
</tr>
<tr class="grey4">
<td class="firstcol">SA:</td>
<td>Jun-08</td>
<td>May-08</td>
<td>Apr-08</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr-Ago</td>
</tr>
<tr class="grey1">
<td class="firstcol">Export Prices</td>
<td>0.7%</td>
<td>0.4%</td>
<td>0.1%</td>
<td>4.9%</td>
<td>4.7%</td>
<td>2.7%</td>
<td>2.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Import Prices</td>
<td>2.1%</td>
<td>2.3%</td>
<td>0.4%</td>
<td>20.6%</td>
<td>13.6%</td>
<td>8.8%</td>
<td>1.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">NSA</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="grey1">
<td class="firstcol">Exports excl-Petroleum</td>
<td>0.5%</td>
<td>0.3%</td>
<td>0.1%</td>
<td>3.4%</td>
<td>4.6%</td>
<td>2.3%</td>
<td>2.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Imports excl-Petroleum</td>
<td>0.5%</td>
<td>0.6%</td>
<td>0.3%</td>
<td>5.5%</td>
<td>6.3%</td>
<td>2.5%</td>
<td>1.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Memo: SA</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey1">
<td class="firstcol">CPI</td>
<td>0.4%</td>
<td>0.5%</td>
<td>0.0%</td>
<td>3.4%</td>
<td>3.1%</td>
<td>3.3%</td>
<td>2.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">CPI excl Energy</td>
<td>0.2%</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.8%</td>
<td>1.2%</td>
<td>1.9%</td>
<td>2.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">PPI</td>
<td>1.0%</td>
<td>1.1%</td>
<td>0.9%</td>
<td>12.6%</td>
<td>9.4%</td>
<td>6.6%</td>
<td>1.8%</td>
</tr>
<tr class="grey1">
<td class="firstcol">PPI excl Energy</td>
<td>0.4%</td>
<td>0.4%</td>
<td>0.2%</td>
<td>3.6%</td>
<td>4.2%</td>
<td>2.9%</td>
<td>2.8%</td>
</tr>
</tbody>
</table>
</body></html>

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080724d.jpg" align="left" border="0" height="265" width="353">
There is little let up in the pace of the drop in the Euro
Area MFG and services PMIs. Indeed their rate of decline has picked up
pace. The services PMI has been in existence for 31 months and it is at
its lowest level since its inception. The MFG is at its lowest level
for that period as well. 
 

The MFG index has been in existence much longer. And for that
longer period back to 1996 it stands in the 26th percentile of its
range - a low reading. 
 

Except for January of this year when the services index fell
very sharply, the past two months represent the fastest six month rate
of decline for the services index. For MFG the July decline is the
fastest six month decline in this cycle. This suggests that the
downward pressure on the Euro Area economies is becoming more intense. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col"> FLASH
Readings</th>
</tr>
<tr class="even">
<th colspan="3" scope="col">Markit
PMIs for the
Euro-Area-13</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr>
<td class="firstcol">Jul-08</td>
<td>47.54</td>
<td>48.26</td>
</tr>
<tr class="grey1">
<td class="firstcol">Jun-08</td>
<td>49.07</td>
<td>49.46</td>
</tr>
<tr>
<td class="firstcol">May-08</td>
<td>50.52</td>
<td>50.59</td>
</tr>
<tr class="grey1">
<td class="firstcol">Apr-08</td>
<td>50.85</td>
<td>51.78</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol">Averages</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>49.04</td>
<td>49.44</td>
</tr>
<tr class="grey1">
<td class="firstcol">6-Mo</td>
<td>50.37</td>
<td>50.67</td>
</tr>
<tr>
<td class="firstcol">12-Mo</td>
<td>51.56</td>
<td>52.54</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol">31-Mo
Range</td>
</tr>
<tr>
<td class="firstcol">High</td>
<td>57.61</td>
<td>61.21</td>
</tr>
<tr class="grey1">
<td class="firstcol">Low</td>
<td>47.54</td>
<td>48.26</td>
</tr>
<tr>
<td class="firstcol">% Range</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
</tbody>
</table>
</body></html>

There is little let up in the pace of the drop in the Euro Area MFG and services PMIs. Indeed their rate of decline has picked up pace. The services PMI has been in existence for 31 months and it is at its lowest level since its [...]

The MFG and Services PMIs Simply are Dropping Rapidly

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080724e.jpg" width="353">
For June the level of existing homes fell 2.6% to 4.86 million, reported the National Association of Realtors. The decline reversed all of a 2.0% increase during May and it was to a new low for this cycle. The figure was weaker than the expected selling rate of 4.94M homes. Total sales include sales of condos and co-ops.
Sales of existing single-family homes fell a larger 3.2%. These sales (which have a longer history than the total) were at the lowest level since early-1998.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080724f.jpg" width="353">
By region, home sales in the West rose for the fourth straight month and they were up 17.0% from the October &#39;07 low. Elsewhere, sales in the Northeast reversed the increases of the prior four months. In the Midwest total sales fell to near the low for this cycle but sales of single-family homes were at the lowest level since 1997. Sales down South fell to the lowest level since 2000.
Median home prices repeated their May increase and rose 3.5%. Prices were up 10.0% from the February low after a 33% three-month rate of decline in October. However, prices typically firm in the Spring.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080724g.jpg" width="353">
The number of unsold homes (condos &amp; single-family) on the market was roughly unchanged m/m (+2.8% y/y). At the current sales rate the inventory rose slightly to an 11.1 months supply which is about the record high for this series. For single-family homes there also was an 11.0 months supply at the current sales rate which was the highest supply since 1985.
The Fed&#39;s latest Beige Book which covers regional economic conditions can be found <a href="http://www.federalreserve.gov/fomc/beigebook/2008/20080723/default.htm"> 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">June</th>
<th scope="col">y/y %</th>
<th scope="col">May</th>
<th scope="col">June &#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>4,860</td>
<td>-15.5</td>
<td>4,990</td>
<td>5,750</td>
<td>5,672</td>
<td>6,508</td>
<td>7,076</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>850</td>
<td>-15.8</td>
<td>910</td>
<td>1,010</td>
<td>1,008</td>
<td>1,090</td>
<td>1,168</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,120</td>
<td>-17.6</td>
<td>1,160</td>
<td>1,360</td>
<td>1,331</td>
<td>1,491</td>
<td>1,589</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>1,850</td>
<td>-18.1</td>
<td>1,910</td>
<td>2,260</td>
<td>2,240</td>
<td>2,576</td>
<td>2,704</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,030</td>
<td>-6.4</td>
<td>1,020</td>
<td>1,100</td>
<td>1,093</td>
<td>1,353</td>
<td>1,617</td>
</tr>
<tr class="odd">
<td class="firstcol">Single-Family</td>
<td>4,270</td>
<td>-14.8</td>
<td>4,410</td>
<td>5,010</td>
<td>4,958</td>
<td>5,703</td>
<td>6,181</td>
</tr>
<tr>
<td class="firstcol">Median Price, Total, $</td>
<td>215,100</td>
<td>-6.1</td>
<td>207,900</td>
<td>229,000</td>
<td>216,617</td>
<td>222,000</td>
<td>218,217</td>
</tr>
</tbody>
</table>
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For June the level of existing homes fell 2.6% to 4.86 million, reported the National Association of Realtors. The decline reversed all of a 2.0% increase during May and it was to a new low for this cycle. The figure was weaker than [...]

U.S. Existing Home Sales Drift Down

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080724a.jpg" width="353">
Initial claims for unemployment insurance shot higher last week to 406,000. The latest level compared to an upwardly revised 372,000 during the prior week. It reached a level not seen since this past March which was the highest point since mid-2005. The latest weekly surge surpassed Consensus expectations for a rise to 380,000 claims.
As a result of the latest weekly jump in initial claims the four-week moving average increased, but just modestly, to 382,500 (23.1% y/y). During June claims averaged 391,000.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080724b.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. Over the longer period of time, the level of claims for jobless insurance has not trended higher with the size of the labor force due to a higher proportion of self-employed workers who are not eligible for benefits.
Initial claims claims for jobless insurance in California are up 34.7% y/y. They also are up 46.0% in New York and by 55.1% in Ohio. In Massachusetts the gain in claims moderated to 10.7% and in Michigan the rise fell to 8.2% after the doubling this past May. In Pennsylvania claims fell 12.1% from last year. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080724c.jpg" width="353">
Continuing claims for unemployment insurance during the latest week fell by 9,000 following a little-revised 87,000 worker decline during the prior week. The four-week moving average of continuing claims slipped slightly but remained near the cycle high of 3,142,750. That was roughly a quarter higher than a year ago and the highest level since early 2004.
Continuing claims provide some indication of workers&#39; ability to find employment and they lag the initial claims figures by one week.
The insured rate of unemployment was unchanged at 2.3%.
The Congressional Budget Office&#39;s Cost Estimate of the Foreclosure Prevention Act of 2008 can be found <a href="http://www.cbo.gov/ftpdocs/95xx/doc9592/hr3221.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">07/19/08</th>
<th scope="col">07/12/08</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;406</td>
<td>372</td>
<td>31.8%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,107</td>
<td>22.2%</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial claims for unemployment insurance shot higher last week to 406,000. The latest level compared to an upwardly revised 372,000 during the prior week. It reached a level not seen since this past March which was the highest point [...]

U.S. Initial Unemployment Insurance Claims Shoot Back Up

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080724a.jpg" align="left" border="0" height="265" width="353">
Initial claims for unemployment insurance shot higher last
week to 406,000. The latest level compared to an upwardly revised
372,000 during the prior week. It reached a level not seen since this
past March which was the highest point since mid-2005. The latest
weekly surge surpassed Consensus expectations for a rise to 380,000
claims.
As a result of the latest weekly jump in initial claims the
four-week moving average increased, but just modestly, to 382,500
(23.1% y/y). During June claims averaged 391,000.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080724b.jpg" align="right" border="0" height="265" 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. Over the longer
period of time, the level of claims for jobless insurance has not
trended higher with the size of the labor force due to a higher
proportion of self-employed workers who are not eligible for benefits.
Initial claims claims for jobless insurance in California are
up 34.7% y/y. They also are up 46.0% in New York and by 55.1% in Ohio.
In Massachusetts the gain in claims moderated to 10.7% and in Michigan
the rise fell to 8.2% after the doubling this past May. In Pennsylvania
claims fell 12.1% from last year. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080724c.jpg" align="left" border="0" height="265" width="353">
Continuing claims for unemployment insurance during the latest
week fell by 9,000 following a little-revised 87,000 worker decline
during the prior week. The four-week moving average of continuing
claims slipped slightly but remained near the cycle high of 3,142,750.
That was roughly a quarter higher than a year ago and the highest level
since early 2004.
Continuing claims provide some indication of workers' ability
to find employment and they lag the initial claims figures by one week.
The insured rate of unemployment was unchanged at 2.3%.
The Congressional Budget Office's Cost Estimate of
the Foreclosure Prevention Act of 2008 can be found <a href="http://www.cbo.gov/ftpdocs/95xx/doc9592/hr3221.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">07/19/08</th>
<th scope="col">07/12/08</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;406</td>
<td>372</td>
<td>31.8%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,107</td>
<td>22.2%</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
U.S. Existing Home Sales Drift Down 
by <a href="/comment/Moeller.html">Tom
Moeller</a> July 24, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080724e.jpg" align="left" border="0" height="265" width="353">
For June the level of existing homes fell 2.6%
to 4.86 million, reported the National Association of Realtors. The
decline reversed all of a 2.0% increase during May and it was to a new
low for this cycle. The figure was weaker than the expected selling
rate of 4.94M homes. Total sales include sales of condos and co-ops.
Sales of existing single-family homes fell a larger 3.2%.
These sales (which have a longer history than the total) were at the
lowest level since early-1998.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080724f.jpg" align="right" border="0" height="265" width="353">
By region, home sales in the West rose for the fourth straight
month and they were up 17.0% from the October '07 low. Elsewhere, sales
in the Northeast reversed the increases of the prior four months. In
the Midwest total sales fell to near the low for this cycle but sales
of single-family homes were at the lowest level since 1997. Sales down
South fell to the lowest level since 2000.
Median home prices repeated their May
increase and rose 3.5%. Prices were up 10.0% from the February low
after a 33% three-month rate of decline in October. However, prices
typically firm in the Spring.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080724g.jpg" align="left" border="0" height="265" width="353">
The number of unsold homes (condos &amp; single-family) on
the market was roughly unchanged m/m (+2.8% y/y). At the current sales
rate the inventory rose slightly to an 11.1 months supply which is
about the record high for this series. For single-family homes there
also was an 11.0 months supply at the current sales rate which was the
highest supply since 1985.
The Fed's latest Beige Book which covers
regional economic conditions can be found <a href="http://www.federalreserve.gov/fomc/beigebook/2008/20080723/default.htm">
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">June</th>
<th scope="col">y/y %</th>
<th scope="col">May</th>
<th scope="col">June '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>4,860</td>
<td>-15.5</td>
<td>4,990</td>
<td>5,750</td>
<td>5,672</td>
<td>6,508</td>
<td>7,076</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>850</td>
<td>-15.8</td>
<td>910</td>
<td>1,010</td>
<td>1,008</td>
<td>1,090</td>
<td>1,168</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,120</td>
<td>-17.6</td>
<td>1,160</td>
<td>1,360</td>
<td>1,331</td>
<td>1,491</td>
<td>1,589</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>1,850</td>
<td>-18.1</td>
<td>1,910</td>
<td>2,260</td>
<td>2,240</td>
<td>2,576</td>
<td>2,704</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,030</td>
<td>-6.4</td>
<td>1,020</td>
<td>1,100</td>
<td>1,093</td>
<td>1,353</td>
<td>1,617</td>
</tr>
<tr class="odd">
<td class="firstcol">Single-Family</td>
<td>4,270</td>
<td>-14.8</td>
<td>4,410</td>
<td>5,010</td>
<td>4,958</td>
<td>5,703</td>
<td>6,181</td>
</tr>
<tr>
<td class="firstcol">Median Price, Total, $</td>
<td>215,100</td>
<td>-6.1</td>
<td>207,900</td>
<td>229,000</td>
<td>216,617</td>
<td>222,000</td>
<td>218,217</td>
</tr>
</tbody>
</table>
The MFG and Services PMIs Simply
are Dropping Rapidly 
by <a href="/comment/Brusca.html">Robert
Brusca</a> July 24, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080724d.jpg" align="left" border="0" height="265" width="353">
There is little let up in the pace of the drop in the Euro
Area MFG and services PMIs. Indeed their rate of decline has picked up
pace. The services PMI has been in existence for 31 months and it is at
its lowest level since its inception. The MFG is at its lowest level
for that period as well. 
 

The MFG index has been in existence much longer. And for that
longer period back to 1996 it stands in the 26th percentile of its
range - a low reading. 
 

Except for January of this year when the services index fell
very sharply, the past two months represent the fastest six month rate
of decline for the services index. For MFG the July decline is the
fastest six month decline in this cycle. This suggests that the
downward pressure on the Euro Area economies is becoming more intense. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col"> FLASH
Readings</th>
</tr>
<tr class="even">
<th colspan="3" scope="col">Markit
PMIs for the
Euro-Area-13</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr>
<td class="firstcol">Jul-08</td>
<td>47.54</td>
<td>48.26</td>
</tr>
<tr class="grey1">
<td class="firstcol">Jun-08</td>
<td>49.07</td>
<td>49.46</td>
</tr>
<tr>
<td class="firstcol">May-08</td>
<td>50.52</td>
<td>50.59</td>
</tr>
<tr class="grey1">
<td class="firstcol">Apr-08</td>
<td>50.85</td>
<td>51.78</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol">Averages</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>49.04</td>
<td>49.44</td>
</tr>
<tr class="grey1">
<td class="firstcol">6-Mo</td>
<td>50.37</td>
<td>50.67</td>
</tr>
<tr>
<td class="firstcol">12-Mo</td>
<td>51.56</td>
<td>52.54</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol">31-Mo
Range</td>
</tr>
<tr>
<td class="firstcol">High</td>
<td>57.61</td>
<td>61.21</td>
</tr>
<tr class="grey1">
<td class="firstcol">Low</td>
<td>47.54</td>
<td>48.26</td>
</tr>
<tr>
<td class="firstcol">% Range</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
</tbody>
</table>
</body></html>

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

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

Resilient US economy is pushing up longer-term inflation expectations and interest rates

Positive US economic data surprises leading to upward adjustment of interest rate expectations

Recent aggressive policy easing in China has given a massive boost to equity prices

FOMC expects much more easing now than in June

US is clear world leader in business capital spending on artificial intelligence

Blue Chip forecasters expect US to lead aggressive policy rate cuts over coming year—apart from Japan

Ratio of job openings to the number unemployed in the US now below pre-pandemic level

U.S. layoffs not showing as much cooling in labor markets as unemployment rate

While goods prices have moderated, service price inflation remains elevated and sticky

Since Jan 2023, BCEI US outlook has improved, worsened for Japan and the euro area

Persistent negative US economic surprises leading to big rate-cut expectations

Germany is Euro area weakling

Flash PMIs show good start to Q3 in US; loss of momentum in the euro area

Chinese economy on downtrend could threaten global economy

Working age population labor force participation near all-time high as retirements increase

Blue Chip forecasters look for widespread policy rate cuts just ahead

Flash June PMIs point to a widespread slowdown apart from the US

Announcement of snap French election is causing concern across Europe

The UK economy’s post-pandemic under-performance relative to its pre-pandemic trend

US Beveridge Curve back to near pre-pandemic levels

Negative economic surprises in the US but positive in Europe, especially the UK

Latest PMIs show US losing momentum while RoW is gaining momentum

Sticky services prices behind sticky overall PCE inflation

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Andrew Cates

**Markets and data**
As noted, a soft landing narrative has continued to shape sentiment in financial markets in recent weeks. Incoming global growth data, most notably from the US, have been stronger than expected. And inflation outcomes have additionally been weaker-than-expected. As chart 1 below suggests that combination – stronger growth and weaker inflation – has typically been greeted positively by equity investors.

1241031Z1.jpg

**US bond yields** 
That being said there has also been an active debate in markets about the potential consequences of a US election. US bond yields, for example, have been climbing possibly because of market fears about the burgeoning US federal government deficit and debt. Still, as chart 2 below suggests, the increase in yields has unfolded at the same time as the incoming US (and broader global growth) data have been outperforming expectations. Inasmuch as that trend additionally led to some re-pricing of Fed policy, economic fundamentals have arguably been the dominant driver of the US Treasury market, not fears about politics and deficits.

1241031Z2.jpg

**Global growth momentum**
Still, although incoming US data have been outperforming expectations in recent weeks, latest forward looking business surveys suggest that global growth is losing momentum. October’s flash PMIs, for example, revealed that business activity contracted for a second consecutive month in the euro area and Australia, and slipped into a phase of decline in Japan as well. The UK additionally saw growth weaken sharply. And although the US continued to reveal resilience, that was primarily because of ongoing growth in the service sector - the manufacturing sector, in contrast, has been contracting for four consecutive months (see chart 3).

1241031Z3.jpg

**UK fiscal policy** 
One reason why UK businesses may have elicited weaker confidence in recent weeks concerns fears about this week’s Budget. Some of the details, for example, had been widely telegraphed in the UK press. The specifics that were announced on October 30th included a large rise in public spending (amounting to over 2% of GDP per year), and with only half of that being recouped in higher taxes. About two-thirds of that higher tax burden, moreover, falls on the corporate sector. The UK’s fiscal watchdog – the Office for Budget Responsibility – expects overall public sector borrowing to rise from £121.9 billion (4.5 per cent of GDP) last year to £127.5 billion this year, before falling steadily back to £70.6 billion (2.1 per cent) by 2029-30. That’s about 0.9 per cent of GDP a year higher on average over the forecast horizon compared to their last projections in March (see chart 4).

1241031Z4.jpg

**Japan’s politics**
Staying with policy and politics, Japan’s ruling party, the Liberal Democratic Party (LDP), faced an electoral upset over the weekend, losing its majority in the lower house of Parliament. Even with the support of its coalition partner, Komeito, the LDP is now unable to form a majority. This has put Prime Minister Ishiba's position in jeopardy, as he may need to seek support from parties outside his usual allies to advance his policy agenda, should he continue in office. In response to the news, the yen weakened further, reflecting the market's concerns, while equities experienced a slight increase.

1241031Z5.jpg

**China and US politics**
Ahead of next week’s US Presidential Elections there remains much uncertainty about the outlook for China (and the broader Asian region). Many observers are keen to assess the potential extent and nature of future policy actions toward China by an incoming president. Key concerns include the possibility of ongoing US efforts to curb China’s advancements in critical technologies, such as artificial intelligence, and trade-related restrictions aimed at addressing overcapacity in electric vehicles (EVs) and other sectors. Notably, presidential candidate and former President Trump, has proposed significantly raising tariffs on goods imported from China if elected. However, regardless of who takes office, it is likely that China will continue to face frictions with the US, as the latter has maintained a hawkish stance toward China over the past decade, irrespective of the sitting president.

1241031Z6.jpg

Some unexpected resilience in the US economy and particularly in the labour market has continued to reinforce soft landing narratives over the past few days. At the broader global level, weaker-than-expected inflation data have also been reinforcing the view that most major central banks will continue to loosen monetary policy in the period ahead. In our charts this week we illustrate how this soft landing narrative continues to shape sentiment in financial markets (see charts 1 and 2). But we illustrate too, that notwithstanding US resilience, latest forward looking business surveys suggest that global growth is losing momentum. Domestic policy and politics, however, have also been important in recent days with the new UK labour government’s first budget dominating the headlines (chart 4). Some uncertainty has additionally crept into Japan’s political scene and generated some financial market consequences (chart 5). Finally, and looking ahead to next week, US politics has continued to dominate the global headlines and may well be a key driver of economic and financial market outcomes in the period immediately ahead (chart 6).

<iframe style="border-radius:12px" src="https://open.spotify.com/embed/episode/3LgxPbpC2008MeaTo1jjnm?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: Data, Policy and Politics

1241031A5.jpg

1241031B5.jpg

The PCE chain price index rose 0.2% in September following unrevised increases of 0.1% and 0.2% in August and July. The y/y rise continued its downward trend. The 2.1% annual rise compares to its 7.2% y/y peak in June 2022. The price index excluding food and energy, however, moved 0.3% higher last month after three straight months of 0.2% increase. The y/y rise was steady at 2.7% and remained half of its 5.6% peak in February and March of 2022. Durable goods prices rose 0.3% (-1.9% y/y), after declines in four of the prior five months. Motor vehicle & prices rose 0.3% (-2.4% y/y), after declining steadily since December. Recreational product prices eased 0.3% (-2.0% y/y) but home furnishings costs rose 0.5% (-2.7% y/y). Nondurable goods prices eased 0.4% (-0.8% y/y) in September, off for the fourth month in five, but clothing prices rose 0.7% (1.4% y/y) after a 0.5% gain. Services prices increased 0.3% (3.7% y/y) after rising 0.2%. Housing & utility prices rose 0.4% (4.9% y/y) after a 0.3% rise, and services prices excluding energy & healthcare increased 0.3% (3.9% y/y) in September for the fourth straight month. Healthcare prices rose 0.4% (3.0% y/y). Food & beverage prices rose 0.4% in September (1.2% y/y) while energy goods & services prices fell 2.0% (-8.1% y/y).

Personal consumption expenditures (PCE) increased 0.5% (5.3% y/y) in September, after a 0.3% rise during August. A 0.4% increase had been expected in the Action Economics Forecast Survey. When adjusted for price changes, PCE increased 0.4% last month (3.1% y/y) after increasing 0.2% during August.

Real spending on durable goods rose 0.4% (3.4% y/y) last month after a 0.2% August decline. Real spending on motor vehicles rose 1.4% (0.2% y/y), after a 2.3% decline. Real outlays on furnishings & durable household equipment declined 0.3% (+4.8% y/y) following a 0.1% uptick while real spending on recreational goods & vehicles rose 0.2% (5.3% y/y) last month, after a 1.3% August jump. Spending on other durable goods eased 0.3% (+5.3% y/y) after strengthening 1.3% in August.

Real spending on nondurable goods surged 0.8% (2.5% y/y) during September, after holding steady in August. Real clothing and footwear purchases edged 0.1% higher (1.5% y/y) last month following a 0.5% decline. Real food & beverage purchases rebounded 0.6% (1.8% y/y) after slipping 0.2%. Real outlays on gasoline & other energy products rose 0.3% (0.7% y/y) last month after declining 1.7% in August. Real spending on other nondurable goods improved 1.3% (4.0% y/y) after a rise of 0.8% in August.

Real spending on services edged up 0.2% (3.2% y/y) in September, following a 0.3% rise in August. Real spending on housing & utilities rose 0.2% (1.1% y/y), after ticking 0.1% higher, while real healthcare spending rose 0.2% (4.9% y/y) following a 0.1% August rise. Real spending on food services & accommodations strengthened 0.8% (1.7% y/y) after a 0.4% rise in August, while real spending on financial services & insurance gained 0.2% (2.8% y/y) last month, after rising 0.5%. Real spending on transportation services fell 0.7% (+4.6% y/y) in September after rising 1.0% in August. Recreation spending fell 0.4% (+2.7% y/y) after rising 0.6% while other services spending gained 0.1% (3.2% y/y) for the second straight month.

Personal income rose 0.3% (5.5% y/y) in September, after rising of 0.2% in August. A 0.4% gain was expected. Wages & salaries rose 0.5% (6.4% y/y) for the second straight month. Rental income rose 0.5% (5.8% y/y) in September, the same as in August. Proprietors’ income weakened 0.4% (+2.2% y/y) following a 0.1% August increase. Income from assets weakened 0.2% (+1.4% y/y), off for the third straight month, and current transfer receipts rose 0.4% (7.6% y/y) in September after rising 0.3% in August. Government social benefits increased 0.4% (7.5% y/y), after a 0.3% rise in August.

Disposable personal income increased 0.3% (5.3% y/y) in September following a 0.2% August increase. After adjusting for price changes, disposable income improved 0.1% (3.1% y/y) for the fourth straight month.

The personal saving rate dipped to 4.6% in September from 4.8% in August. The rate was down from a January high of 5.5%. Personal saving fell 4.7% (+10.3% y/y) in September after falling 1.7% in August.

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

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- Monthly gain in core prices is highest in six months.
- Improvement in real spending is concentrated in goods.
- Disposable income firms as wages maintain strength.

U.S. Core PCE Price Gain Picks Up, but Real Spending Posts Solid Increase in September

Sandy Batten

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The employment cost index (ECI) for civilian workers rose 0.8% q/q (3.9% y/y) in this year’s third quarter following a 0.9% quarterly gain in Q2, according to the Bureau of Labor Statistics. This is the smallest quarterly increase since Q2 2021 and the smallest annual increase since Q4 2021. The Action Economics Forecast Survey had expected a 0.9% q/q increase and a 4.1% y/y gain.

Wages and salaries for civilian workers also rose 0.8% q/q (3.9% y/y) in Q3 versus a 0.9% quarterly increase in Q2 and three consecutive 1.1% quarterly gains. This was the smallest quarterly gain and the smallest annual increase since Q2 2021. Benefits increased 0.8% q/q (3.7% y/y) in Q3 versus 1.0% q/q in Q2. In general, employment cost gains remain above the pace observed prior to the pandemic but are slowing meaningfully.

Private industry workers’ compensation rose 0.7% q/q (3.7% y/y) in Q3, down from 0.9% q/q (3.9% y/y) in Q2. Wages and salaries for private industry workers increased 0.8% q/q (3.8% y/y) in Q3, the same quarterly increase as in Q2. The quarterly gains in Q2 and Q3 were the smallest since Q4 2020. Benefits for private industry workers rose 0.7% q/q (3.3% y/y) in Q3 versus 0.8% q/q (3.4% y/y) in Q2.

By industrial sector, total compensation in goods-producing industries rose 0.9% q/q (3.5% y/y) in Q3 following an outsized slowdown to 0.5% q/q in Q2. Compensation in construction jumped up 1.1% q/q following a 0.3% q/q decline in Q2 while manufacturing compensation slowed to 0.8% q/q from 0.9% in Q2. In service-producing industries, total compensation increased 0.8% q/q (3.9% y/y) following a 1.0% quarterly gain in Q2. Compensation in private service-producing industries increased 0.7% q/q (3.6% y/y). Information compensation surged 1.4% q/q in Q3 following a rare 02% quarterly decline in Q2. Growth of education and health services compensation remained elevated, rising 1.2% q/q after a 1.0% q/q gain in Q2. Professional and business services compensation slowed to 0.2% q/q in Q3 from 0.8%, while the rise in leisure and hospitality compensation slowed to 0.6% q/q in Q3 after a 1.4% q/q jump in Q2.

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

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- The pace of growth in employment costs slowed to multiyear lows in Q3.
- While still elevated relative to pre-pandemic readings, the trend in employment costs is clearly down.

Rise of U.S. Employment Cost Index Slows Further in Q3

Carol Stone, CBE

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Initial claims for unemployment insurance were 216,000 seasonally adjusted in the week ended October 26, down from 228,000 in the October 19 week; that earlier number was revised slightly from 227,000 reported before. The 216,000 amount was lower than the Action Economics Forecast Survey expectation of 233,000. The four-week moving average of these initial claims was 236,500 in the week ended October 26, down from 238,750 the week before.

In the week ended October 19, the total number of unemployment insurance beneficiaries was 1.862 million, seasonally adjusted, down from 1.888 million the prior week. That earlier week was revised down from 1.897 million previously reported. The four-week moving average of these beneficiaries was 1.869 million in the October 19 week, up from 1.858 million the previous week.

The associated insured unemployment rate, that is, the number of beneficiaries as a percent of covered employment, was back to 1.2% and the prior week was revised down from 1.3% to 1.2%. So, this rate has returned to the 1.2% amount that has been in place since March 2013, and the hurricane effects of early October were not so widespread as to raise the overall rate.

Economic conditions vary widely across states and territories. In the week ended October 12, the highest unemployment rates were in New Jersey (2.15%), California (1.92%), Puerto Rico (1.84%), Washington (1.78%) and Nevada (1.58%). The lowest rates were in South Dakota (0.23%), North Dakota (0.35%), Virginia (0.41%), Nebraska, Florida and Alabama (each 0.43%) and Kentucky (0.44%). Rates in other notable states include New York (1.44%), Illinois (1.43%), Pennsylvania (1.34%) and Texas (1.02%). These state rates are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986. The expectations figure is from the Action Economics Forecast Survey in the **AS1REPNA** database.

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- Initial claims down 12,000 in latest week.
- Total unemployment insurance beneficiaries decrease 26,000 in October 19 week.
- Insured unemployment rate revised down, maintaining 1.2% amount even during hurricanes.

U.S.  Unemployment Insurance Claims Ease to 216,000 in October 26 Week

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Inflation in the European Monetary Union turned flat in September with the headline flat and the core flat month-to-month. Over 12 months, headline inflation is rising at a 1.7% annual rate, the same as over six months; over three months, that pace steps down to 1.6%. Headline inflation is across the board consistent with the European central bank’s target of inflation of around 2%. Core inflation is higher. Over 12 months, the core runs hot at a 2.8% pace, rising over six months at a stronger 3.2% annual rate and then dipping to a 2.3% annual rate over three months. The three-month pace is coming much closer to the ECB's target for inflation.

The four largest economies in the EMU also had inflation fall in September. In Germany, prices dropped by 0.2%, the same as in Spain. Headline prices fell 0.7% in France and just ticked lower by 0.1% in Italy. Price dropping across the board is a special sign; in this case, it signals dropping oil prices.

Sequential inflation rates for headline inflation in large economies also are looking good. Germany and Spain have the highest 12-month inflation rates at 1.7%. France is next at 1.4% and then Italy logs a 0.7% 12-month inflation rate. However, over six months, inflation picks up above target for Italy and Germany to 2.7%; it cruises at a 1.9% annual rate in France and at 1% annual rate in Spain. Over three months, prices are flat in Germany, rising at a 0.2% annual rate in France, rising at a 0.3% annual rate in Spain, and rising at a 2.3% annual rate in Italy. The results we see for headline inflation clearly echoed across the large economies of the European Monetary Union.

However, as having been the case for some time, the sticking point for inflation is the core. This is because Brent oil prices fell by 8.1% in September and fell by 7.6% in August after rising by 0.1% in July. In fact, Brent oil prices are falling to a 47.7% annual rate over three months, falling at a 29.3% annual rate over six months, and falling at a 24% annual rate over 12 months. This helps to explain why headline inflation is doing so well. Core inflation is showing more signs of being stuck at a too-high level.

Core (ex-energy) inflation in the case of Germany is at a 2.6% annual rate over 12 months. Spain’s core pace is at a 2.4% annual rate, Italy logs a 1.9% annual rate, and France checks in at a 1.5% annual rate. For France and Italy, core inflation over 12 months is very much in the fold of the target pace, while in the case of Spain and Germany, the departures aren't so great as they both hover around 2.5% at an annual rate. However over six months, German inflation is still up by 2.4%, the same as in Italy. Spain logs in at a 2.2% annual rate. France stays with the low 1.5% annual rate. Over three months, inflation runs at a 2.8% annual rate for ex-energy in Germany; it's at a 2.4% annual rate for the core in Spain and 2.1% for the core in Italy, compared to an even weaker 0.4% annual rate in France.

Even with core inflation getting stuck in the EMU economy overall at 2.8%, inflation is still not very far from the ECB's goal and is broadly behaving for the large economies. And if economic data are deemed weak enough, inflation doesn't seem to be that far from the ECB's target nor is it misbehaving enough to keep ECB rate cuts off the table.

Economy in Brief: July 2008

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Excluding Energy German Export and Import Prices Break Through 2% Mark

France’s Insee Services Indicator Plunges as Weakness Spreads

U.S. Durable Goods Orders Rose. Less Transportation Orders Jumped

U.S. Durable Goods Orders Rose. Less Transportation Orders Jumped

The MFG and Services PMIs Simply are Dropping Rapidly

U.S. Existing Home Sales Drift Down

U.S. Initial Unemployment Insurance Claims Shoot Back Up

U.S. Initial Unemployment Insurance Claims Shoot Back Up