Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080822a.jpg" align="left" border="0" height="265" width="353">
Euro orders fell again in June by less month-to-month than in
May but drove the Yr/Yr drop to -7.4%. That is much deeper than the
-1.8% Y/Y drop recorded in May. Domestic orders in the zone are down
Yr/Yr but are still struggling to show growth over 3 months and 6
months. But foreign orders are weak and weakening. Foreign orders are
down at a very sharp 20.2% annual rate over the most recent three
months compared to falling by 12.1% Yr/Yr.
By comparison sales are still growing in the zone and are
growing for consumer goods Capital goods and intermediate goods on most
horizons. Still sales growth
shows signs of slowing. With the declines in orders we expect to see
clearer weakness in sales in coming months.
The county level adapt are peculiar. Germany shows a clear
trend of progressive deterioration in orders. For France orders growth
is becoming less weak over the shorter horizons, indicating
improvement. That trend is not credible given the weak French
industrial data we have seen. In
the UK orders have surged strongly in the past three months even as UK
GDP has gone flat. The overall EMU data tell a much clearer story of
trends. The country level data appear to be unstable and the country
level contrary data are not particularly compelling. Europe is
weakening. The country level should fall into line on this theme in the
coming months.


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="10" scope="col"> Euro Area and UK Industrial Orders &amp; Sales Trends</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Saar except m/m</td>
<td style="font-weight: bold;" colspan="3">% m/m</td>
<td>Jun 08</td>
<td>Jun 08</td>
<td>Jun 08</td>
<td>Jun 07</td>
<td>Jun 06</td>
<td>Qtr-2 -Date</td>
</tr>
<tr class="even">
<td class="firstcol">Euro Area Detail</td>
<td>Jun 08</td>
<td>May 08</td>
<td>Apr 08</td>
<td>3Mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG Sales</td>
<td>0.4%</td>
<td>0.3%</td>
<td>0.3%</td>
<td>4.2%</td>
<td>7.1%</td>
<td>4.4%</td>
<td>6.9%</td>
<td>7.7%</td>
<td>4.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer</td>
<td>0.1%</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.9%</td>
<td>0.8%</td>
<td>1.7%</td>
<td>6.9%</td>
<td>7.7%</td>
<td>0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital</td>
<td>0.3%</td>
<td>0.2%</td>
<td>0.2%</td>
<td>3.0%</td>
<td>4.8%</td>
<td>4.7%</td>
<td>4.5%</td>
<td>4.0%</td>
<td>3.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate</td>
<td>0.7%</td>
<td>-5.2%</td>
<td>4.7%</td>
<td>0.2%</td>
<td>1.9%</td>
<td>-1.8%</td>
<td>8.5%</td>
<td>6.9%</td>
<td>1.0%</td>
</tr>
<tr class="even">
<td class="firstcol" colspan="10">MFG Orders</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>-0.3%</td>
<td>-5.3%</td>
<td>3.6%</td>
<td>-8.6%</td>
<td>-2.3%</td>
<td>-7.4%</td>
<td>17.3%</td>
<td>6.4%</td>
<td>-6.0%</td>
</tr>
<tr>
<td class="firstcol">EA 15 Domestic MFG orders</td>
<td>0.7%</td>
<td>-5.2%</td>
<td>4.7%</td>
<td>0.2%</td>
<td>1.9%</td>
<td>-1.8%</td>
<td>12.2%</td>
<td>4.5%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">EA 15 Foreign MFG orders</td>
<td>-0.7%</td>
<td>-4.8%</td>
<td>0.0%</td>
<td>-20.2%</td>
<td>-7.4%</td>
<td>-12.1%</td>
<td>23.2%</td>
<td>8.5%</td>
<td>-15.7%</td>
</tr>
<tr class="even">
<td class="firstcol">Countries:</td>
<td>Jun 08</td>
<td>May 08</td>
<td>Apr 08</td>
<td>3Mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Qtr-2 -Date</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>-3.1%</td>
<td>-1.4%</td>
<td>-1.0%</td>
<td>-19.9%</td>
<td>-12.1%</td>
<td>-7.6%</td>
<td>18.5%</td>
<td>9.6%</td>
<td>-13.4%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>0.1%</td>
<td>-6.3%</td>
<td>5.9%</td>
<td>-2.5%</td>
<td>-4.0%</td>
<td>-13.7%</td>
<td>19.3%</td>
<td>3.4%</td>
<td>-11.3%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>#N/A</td>
<td>-3.1%</td>
<td>0.5%</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>10.7%</td>
<td>10.1%</td>
<td>#N/A</td>
</tr>
<tr>
<td class="firstcol">UK (EU)</td>
<td>-2.4%</td>
<td>-8.1%</td>
<td>20.6%</td>
<td>37.0%</td>
<td>2.5%</td>
<td>2.8%</td>
<td>1.4%</td>
<td>8.1%</td>
<td>-5.5%</td>
</tr>
</tbody>
</table>
</body></html>

Euro orders fell again in June by less month-to-month than in May but drove the Yr/Yr drop to -7.4%. That is much deeper than the -1.8% Y/Y drop recorded in May. Domestic orders in the zone are down Yr/Yr but are still struggling to [...]

Euro Orders Continue to Plunge

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080822a.jpg" align="left" border="0" height="265" width="353">
Euro orders fell again in June by less month-to-month than in
May but drove the Yr/Yr drop to -7.4%. That is much deeper than the
-1.8% Y/Y drop recorded in May. Domestic orders in the zone are down
Yr/Yr but are still struggling to show growth over 3 months and 6
months. But foreign orders are weak and weakening. Foreign orders are
down at a very sharp 20.2% annual rate over the most recent three
months compared to falling by 12.1% Yr/Yr.
By comparison sales are still growing in the zone and are
growing for consumer goods Capital goods and intermediate goods on most
horizons. Still sales growth
shows signs of slowing. With the declines in orders we expect to see
clearer weakness in sales in coming months.
The county level adapt are peculiar. Germany shows a clear
trend of progressive deterioration in orders. For France orders growth
is becoming less weak over the shorter horizons, indicating
improvement. That trend is not credible given the weak French
industrial data we have seen. In
the UK orders have surged strongly in the past three months even as UK
GDP has gone flat. The overall EMU data tell a much clearer story of
trends. The country level data appear to be unstable and the country
level contrary data are not particularly compelling. Europe is
weakening. The country level should fall into line on this theme in the
coming months.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup><thead><tr>
<th colspan="10" scope="col"> Euro
Area and UK Industrial Orders &amp; Sales Trends</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Saar except m/m</td>
<td style="font-weight: bold;" colspan="3">%
m/m</td>
<td>Jun 
08</td>
<td>Jun 
08</td>
<td>Jun 
08</td>
<td>Jun 
07</td>
<td>Jun 
06</td>
<td>Qtr-2 
-Date</td>
</tr>
<tr class="even">
<td class="firstcol">Euro Area Detail</td>
<td>Jun 
08</td>
<td>May 
08</td>
<td>Apr 
08</td>
<td>3Mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG Sales</td>
<td>0.4%</td>
<td>0.3%</td>
<td>0.3%</td>
<td>4.2%</td>
<td>7.1%</td>
<td>4.4%</td>
<td>6.9%</td>
<td>7.7%</td>
<td>4.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer</td>
<td>0.1%</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.9%</td>
<td>0.8%</td>
<td>1.7%</td>
<td>6.9%</td>
<td>7.7%</td>
<td>0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital</td>
<td>0.3%</td>
<td>0.2%</td>
<td>0.2%</td>
<td>3.0%</td>
<td>4.8%</td>
<td>4.7%</td>
<td>4.5%</td>
<td>4.0%</td>
<td>3.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate</td>
<td>0.7%</td>
<td>-5.2%</td>
<td>4.7%</td>
<td>0.2%</td>
<td>1.9%</td>
<td>-1.8%</td>
<td>8.5%</td>
<td>6.9%</td>
<td>1.0%</td>
</tr>
<tr class="even">
<td class="firstcol" colspan="10">MFG
Orders</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>-0.3%</td>
<td>-5.3%</td>
<td>3.6%</td>
<td>-8.6%</td>
<td>-2.3%</td>
<td>-7.4%</td>
<td>17.3%</td>
<td>6.4%</td>
<td>-6.0%</td>
</tr>
<tr>
<td class="firstcol">EA 15 Domestic MFG orders</td>
<td>0.7%</td>
<td>-5.2%</td>
<td>4.7%</td>
<td>0.2%</td>
<td>1.9%</td>
<td>-1.8%</td>
<td>12.2%</td>
<td>4.5%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">EA 15 Foreign MFG orders</td>
<td>-0.7%</td>
<td>-4.8%</td>
<td>0.0%</td>
<td>-20.2%</td>
<td>-7.4%</td>
<td>-12.1%</td>
<td>23.2%</td>
<td>8.5%</td>
<td>-15.7%</td>
</tr>
<tr class="even">
<td class="firstcol">Countries:</td>
<td>Jun 
08</td>
<td>May 
08</td>
<td>Apr 
08</td>
<td>3Mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Qtr-2 
-Date</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>-3.1%</td>
<td>-1.4%</td>
<td>-1.0%</td>
<td>-19.9%</td>
<td>-12.1%</td>
<td>-7.6%</td>
<td>18.5%</td>
<td>9.6%</td>
<td>-13.4%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>0.1%</td>
<td>-6.3%</td>
<td>5.9%</td>
<td>-2.5%</td>
<td>-4.0%</td>
<td>-13.7%</td>
<td>19.3%</td>
<td>3.4%</td>
<td>-11.3%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>#N/A</td>
<td>-3.1%</td>
<td>0.5%</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>10.7%</td>
<td>10.1%</td>
<td>#N/A</td>
</tr>
<tr>
<td class="firstcol">UK (EU)</td>
<td>-2.4%</td>
<td>-8.1%</td>
<td>20.6%</td>
<td>37.0%</td>
<td>2.5%</td>
<td>2.8%</td>
<td>1.4%</td>
<td>8.1%</td>
<td>-5.5%</td>
</tr>
</tbody>
</table>
Euro Area Export Trends are Lagging 
by <a href="/comment/Brusca.html">Robert
Brusca</a> August 22, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080822b.jpg" align="left" border="0" height="265" width="353">
Import growth in the Euro Area is still firm while export
growth is fading. Import growth is of course is supported by strength
in oil imports, much of that on the price side. For manufactured goods
both exports and imports are weak over 12 months with imports falling
by 1.8% and exports up by a scant 0.8%.
The accompanying chart tells the story of the trends with
trade deficits posted in five of the past seven months. Europe is
slowing down. Europe&#8217;s exports are slowing down. It&#8217;s a strong euro,
weak domestic growth and a weakening global economy at work that is
producing these results.

<table border="0" cellspacing="0" width="100%"> <colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col">Euro Area
15-Trade Trends for Goods </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="2">m/m%</td>
<td colspan="4">% Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jun-08</td>
<td>May-08</td>
<td>3M</td>
<td>6M</td>
<td>12M</td>
<td>12M Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">Balance*</td>
<td>&#8364;&#8364; (2,954)</td>
<td>&#8364;&#8364; (1,035)</td>
<td>&#8364;&#8364; (861)</td>
<td>&#8364;&#8364; (440)</td>
<td>&#8364;&#8364; 1,543</td>
<td>&#8364;&#8364; (1,610)</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="7">Exports</td>
</tr>
<tr>
<td class="firstcol">All exports</td>
<td>1.4%</td>
<td>-4.7%</td>
<td>8.5%</td>
<td>11.3%</td>
<td>4.2%</td>
<td>10.1%</td>
</tr>
<tr>
<td class="firstcol">Food and drinks</td>
<td>-0.4%</td>
<td>-0.7%</td>
<td>8.5%</td>
<td>13.5%</td>
<td>9.5%</td>
<td>11.4%</td>
</tr>
<tr>
<td class="firstcol">Raw materials</td>
<td>2.4%</td>
<td>-1.1%</td>
<td>23.4%</td>
<td>31.3%</td>
<td>10.4%</td>
<td>11.1%</td>
</tr>
<tr>
<td class="firstcol">Other</td>
<td>1.5%</td>
<td>-5.1%</td>
<td>8.2%</td>
<td>10.7%</td>
<td>3.7%</td>
<td>9.9%</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>1.1%</td>
<td>-3.8%</td>
<td>6.9%</td>
<td>11.2%</td>
<td>0.8%</td>
<td>13.3%</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="7">Imports</td>
</tr>
<tr>
<td class="firstcol">All imports</td>
<td>2.9%</td>
<td>-3.0%</td>
<td>14.8%</td>
<td>14.1%</td>
<td>10.6%</td>
<td>3.8%</td>
</tr>
<tr>
<td class="firstcol">Food and drinks</td>
<td>0.6%</td>
<td>0.2%</td>
<td>7.9%</td>
<td>-2.1%</td>
<td>8.3%</td>
<td>7.4%</td>
</tr>
<tr>
<td class="firstcol">Raw materials</td>
<td>-1.1%</td>
<td>1.2%</td>
<td>1.2%</td>
<td>6.7%</td>
<td>2.3%</td>
<td>15.5%</td>
</tr>
<tr>
<td class="firstcol">Other</td>
<td>3.2%</td>
<td>-3.3%</td>
<td>16.0%</td>
<td>15.6%</td>
<td>11.2%</td>
<td>3.0%</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>0.3%</td>
<td>-1.3%</td>
<td>-0.3%</td>
<td>3.8%</td>
<td>-1.7%</td>
<td>9.9%</td>
</tr>
<tr class="grey2">
<td colspan="5" class="firstcol">*Millions of
Euros; mo or period
average</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body></html>

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/080822f.jpg" width="353">
The composite index of leading economic indicators, reported by the Conference Board fell 0.7% in July after being unchanged in June (revised from -0.1%). Forecasts had anticipated only a 0.2% decline.
Last month the drop in building permits, higher claims for unemployment insurance and lower stock prices made the largest negative contributions to the leaders&#39; decline. These were partially offset by a steepening of the yield curve (10-year Treasury yield vs. fed funds rate) and improvement in the University of Michigan index of consumer expectations.
The breadth of one-month increase amongst the leaders&#39; 10 components eroded slightly to 40% from 45% in June. Over a six-month period the breadth of gain amongst the leaders&#39; components fell back to 30% after rising to a revised 40% the month before.
The leading index is based on actual reports for eight economic data series. The Conference Board estimates two series, orders for consumer goods and orders for capital goods.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080822g.jpg" width="353">
The coincident indicators rose 0.1% after a marginal downward revision of June&#39;s index to unchanged from +0.1%. Three of its components were positive in July but over the last six months all of them have declined. The index is off 0.5% from its peak last October. As Tom Moeller pointed out here last month, this is far more modest than the declines generally associated with recessions, as illustrated in the second graph here. Over the last ten years there has been an 86% correlation between the y/y changes in the coincident indicators and real GDP.
The lagging index 0.4% in July; the previously reported 0.3% decrease in June was revised to unchanged. The ratio of coincident to lagging indicators (a measure of economic excess) edged down from 95.5 during April, May and June to 95.3 in July. This indicator, which tends to lead the leading indicator index, fell steeply across the second half of 2007 and has since stabilized. While this looks like a hint that the precursors to an economic pick-up are coming in view, a major caveat would be the significant revisions, even in direction, that characterize the lagging index. So making firm, but hasty conclusions can be problematic.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM">Business Cycle Indicators</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">April, 6 Month % (AR)</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>-0.7</td>
<td>0.0%</td>
<td>-0.1%</td>
<td>-1.8%</td>
<td>-0.4%</td>
<td>1.3%</td>
<td>2.7%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.1</td>
<td>0.0%</td>
<td>-0.1%</td>
<td>-0.7%</td>
<td>1.7%</td>
<td>2.4%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.4</td>
<td>0.0%</td>
<td>-0.2%</td>
<td>1.6%</td>
<td>2.9%</td>
<td>3.1%</td>
<td>3.1%</td>
</tr>
</tbody>
</table>


</html>

The composite index of leading economic indicators, reported by the Conference Board fell 0.7% in July after being unchanged in June (revised from -0.1%). Forecasts had anticipated only a 0.2% decline. Last month the drop in building [...]

U.S. Leading Indicators Dragged Down by Building Permits, Jobless Claims

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080822c.jpg" width="353">
The Philadelphia Federal Reserve Bank reported that its Index of General Business conditions in the manufacturing sector &quot;recovered&quot; somewhat in August to -12.7 from -16.3 in July. This was a bit more improvement than forecast by market economists, who looked for -14.
The Philadelphia Fed constructs a diffusion index for total business activity and each of nine sub- indexes. The business conditions index reflects a separate survey question, though, not some weighted combination of the sub-indexes.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080822d.jpg" width="353">
Market participants often monitor the Philadelphia Fed&#39;s General Activity Index as a hint about how the ISM survey will turn out for the same month. Indeed, there is an 80% correlation between the two indexes over the last 10 years and 74% over the life of the Philadelphia survey, since 1968. This relationship did break down in January (see graph), but the subsequent monthly trends have been similar. More broadly, during the last ten years the Philadelphia Index has held a 61% correlation with the three-month growth in industrial production for manufacturing. And there has been a 43% correlation with q/q growth in real GDP; however, until about 2000, that 10-year correlation was also around 60%. In all, this survey serves as a useful indicator of real activity, with the advantage of early timing in compilation and publication each month.
The new orders sub-index, at -11.9, maintained its general June level for a third month. This resulted from nearly equal increases in the number of companies reporting increases and decreases in new orders in August. The shipments index was noticeably less negative for this month, at -3.3 from -8.0 in July; the better showing came from less weakness, not more strength, as the number of companies with lower shipments fell 6 points and the number with higher shipments also fell, by 1.7 points. Unfilled orders had a -8.7 balance, compared with -18.3 in July, the net of an increase of 6.8 points in the share of companies with larger backlogs and a decrease of 2.9 points in those with smaller ones. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080822e.jpg" width="353">
The prices paid index came down markedly to 57.5 from July&#39;s 75.6; the number of companies paying higher prices fell by 11.1 points, the largest monthly decrease in three years. The proportion of companies paying lower prices for materials rose from 0.9% to 7.9%; while this is a low absolute figure, it is higher than the 7.0% 20-year average for the proportion of firms enjoying price declines. During the last ten years there has been a 67% correlation between the prices paid index and the three-month growth in the intermediate goods PPI. There has been an 82% correlation with the change in core intermediate goods prices.
The separate index of business conditions expected in six months recovered to 27.6 after July&#39;s decline to 18.0. Here again, however, it was less a case of outright gain and more that fewer companies reported declines.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Philadelphia Fed (%)</th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">August &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>-12.7</td>
<td>-16.3</td>
<td>-17.1</td>
<td>5.7</td>
<td>5.1</td>
<td>8.1</td>
<td>11.5</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>57.5</td>
<td>75.6</td>
<td>&nbsp;69.3</td>
<td>&nbsp;16.0</td>
<td>26.4</td>
<td>36.6</td>
<td>40.1</td>
</tr>
</tbody>
</table>
</body>
</html>

The Philadelphia Federal Reserve Bank reported that its Index of General Business conditions in the manufacturing sector "recovered" somewhat in August to -12.7 from -16.3 in July. This was a bit more improvement than forecast by [...]

Philadelphia Fed Index: Less Weakness

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080821c.jpg" align="left" border="0" height="265" width="353">
Initial claims for unemployment insurance fell last week to
432,000 from 445,000 during the prior week. Consensus expectations had
envisioned a slightly smaller decrease. Claims for both last week and
the week before were revised downward marginally. The four-week moving
average increased to 444,750 (39.3% y/y).
Continuing claims for unemployment insurance edged down 17,000
during the latest week, after increasing 77,000 the week before, which
also reflects a slight downward revision. The total number of
recipients was 3,362,000; this represented 2.5% of covered employment.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080821d.jpg" align="right" border="0" height="265" width="353">
This report included data for a second week of the recently
enacted "Emergency Unemployment Compensation" program, a federally
funded effort targeting people who have exhausted all other
unemployment insurance programs. There were 1,284,252 recipients in the
week ended August 2, following 713,968 the prior week. Thus, while the
regular state programs showed some reductions among newer
beneficiaries, this supplemental program has obviously found a
reservoir of necessitous individuals who have been unemployed for quite
some time. This is about the same magnitude so far as the number of
beneficiaries of a similar temporary program initiated in 2002.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment
Insurance (000s)</a>&nbsp;</th>
<th scope="col">08/16/08</th>
<th scope="col">08/09/08</th>
<th scope="col">08/02/08</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;432</td>
<td>&nbsp;445</td>
<td>457</td>
<td>32.5%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,362</td>
<td>3,379</td>
<td>30.9%</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
</body></html>

Initial claims for unemployment insurance fell last week to 432,000 from 445,000 during the prior week. Consensus expectations had envisioned a slightly smaller decrease. Claims for both last week and the week before were revised [...]

U.S. Initial Jobless Claims Ease for a Second Week; Supplemental Program Reaches 1.3 Million

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080821b.jpg" align="left" border="0" height="265" width="353">
UK retail sales showed a sharp bump up in May of this year.
Since that time it has been all downhill for the three major trends in
retail sales: 3-mo, 6-mo and Yr/yr. The trends generally display a
progressive deterioration in the pace of sales. 
 

Over three-months there is a slight uptick in these
deteriorating trends and one that spreads across the main growths we
display in the table. Even real retail sales ex- autos show some lift.
But retail sales are volatile and vagaries of weather and calendar can
imbue a month with unexpected results. If we take the growth in July
annualized over the level of sales Q2 we find that quarter-to-date
sales are not just losing momentum but declining. The bump up in July
was not enough to offset the sharp weakness experienced in June. That
suggests that the June/July period taken together is a better barometer
of sales trends. 
 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="9" scope="col"> UK Real and Nominal Retail Sales </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"> Nominal</td>
<td> Jul-08</td>
<td> Jun-08</td>
<td> May-08</td>
<td> 3-Mo</td>
<td> 6-Mo</td>
<td> 12-Mo</td>
<td> Yr Ago</td>
<td> Quarter-2-date</td>
</tr>
<tr>
<td class="firstcol">Retail Total</td>
<td>1.0%</td>
<td>-3.9%</td>
<td>4.2%</td>
<td>4.6%</td>
<td>3.2%</td>
<td>3.6%</td>
<td>3.2%</td>
<td>-1.8%</td>
</tr>
<tr>
<td class="firstcol">Food Beverages &amp; Tobacco</td>
<td>1.2%</td>
<td>-3.2%</td>
<td>4.3%</td>
<td>9.0%</td>
<td>5.3%</td>
<td>6.8%</td>
<td>0.6%</td>
<td>2.6%</td>
</tr>
<tr>
<td class="firstcol">Clothing Footwear</td>
<td>2.2%</td>
<td>-7.7%</td>
<td>9.5%</td>
<td>14.2%</td>
<td>1.9%</td>
<td>1.7%</td>
<td>1.5%</td>
<td>-1.0%</td>
</tr>
<tr class="odd">
<td class="firstcol"> Real</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Retail Ex Auto</td>
<td>0.8%</td>
<td>-4.3%</td>
<td>4.0%</td>
<td>1.2%</td>
<td>0.4%</td>
<td>2.0%</td>
<td>4.4%</td>
<td>-5.0%</td>
</tr>
</tbody>
</table>
</body></html>

UK retail sales showed a sharp bump up in May of this year. Since that time it has been all downhill for the three major trends in retail sales: 3-mo, 6-mo and Yr/yr. The trends generally display a progressive deterioration in the [...]

Despite a Bump Up in July UK Retail Sales Trends Remain Poor

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080821a.jpg" align="left" border="0" height="265" width="353">
But has Europe already been flattened? 
 

The services and MFG PMIs (form NTC/Markit) for EMU flattened
out this month falling month-to-month but barely falling. As a result
the services and MFG PMIs are at the bottom of their recent ranges
dating back to January 2006. For MFG indices stretch back to 1998 and
in that broader range their current reading resides in the 26th
percentile, nearly the bottom quartile. But by count MFG PMIs have been
weaker than this value only 6% of the time. So while the weakest
reading is a lot lower MFG PMIs are rarely lower than they are now. 
 

The MFG reading is the more interesting of the two since it
spans a longer time horizon. The services index is still relatively new
and untested in a Biz cycle. Still the two indices together paint a
weakening picture of the Zone. One unanswered question is how much the
recent drop in oil prices will breathe new life into fading sectors. It
is still too soon to tell, although German financial experts who were
respondents to the Zew survey seem encouraged. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="3" scope="col">FLASH Readings </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="3" class="firstcol">Markit PMIs for the
E-Zone-13</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr class="odd">
<td class="firstcol">Aug-08</td>
<td>47.49</td>
<td>48.23</td>
</tr>
<tr>
<td class="firstcol">Jul-08</td>
<td>47.54</td>
<td>48.26</td>
</tr>
<tr>
<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="odd">
<td colspan="3" class="firstcol">Averages</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>48.03</td>
<td>48.65</td>
</tr>
<tr>
<td class="firstcol">6-Mo</td>
<td>49.58</td>
<td>50.00</td>
</tr>
<tr>
<td class="firstcol">12-Mo</td>
<td>51.01</td>
<td>51.74</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>
<td class="firstcol">Low</td>
<td>47.49</td>
<td>48.23</td>
</tr>
<tr>
<td class="firstcol">% Range</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
</tbody>
</table>
</body></html>

But has Europe already been flattened? The services and MFG PMIs (form NTC/Markit) for EMU flattened out this month falling month-to-month but barely falling. As a result the services and MFG PMIs are at the bottom of their recent [...]

Euro-PMIs Flatten Out

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080821c.jpg" align="left" border="0" height="265" width="353">
Initial claims for unemployment insurance fell last week to
432,000 from 445,000 during the prior week. Consensus expectations had
envisioned a slightly smaller decrease. Claims for both last week and
the week before were revised downward marginally. The four-week moving
average increased to 444,750 (39.3% y/y).
Continuing claims for unemployment insurance edged down 17,000
during the latest week, after increasing 77,000 the week before, which
also reflects a slight downward revision. The total number of
recipients was 3,362,000; this represented 2.5% of covered employment.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080821d.jpg" align="right" border="0" height="265" width="353">
This report included data for a second week of the recently
enacted "Emergency Unemployment Compensation" program, a federally
funded effort targeting people who have exhausted all other
unemployment insurance programs. There were 1,284,252 recipients in the
week ended August 2, following 713,968 the prior week. Thus, while the
regular state programs showed some reductions among newer
beneficiaries, this supplemental program has obviously found a
reservoir of necessitous individuals who have been unemployed for quite
some time. This is about the same magnitude so far as the number of
beneficiaries of a similar temporary program initiated in 2002.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment
Insurance (000s)</a>&nbsp;</th>
<th scope="col">08/16/08</th>
<th scope="col">08/09/08</th>
<th scope="col">08/02/08</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;432</td>
<td>&nbsp;445</td>
<td>457</td>
<td>32.5%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,362</td>
<td>3,379</td>
<td>30.9%</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
 Despite a Bump Up in July UK Retail Sales Trends
Remain Poor
 
by <a href="/comment/Brusca.html">Robert
Brusca</a>August 21, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080821b.jpg" align="left" border="0" height="265" width="353">
UK retail sales showed a sharp bump up in May of this year.
Since that time it has been all downhill for the three major trends in
retail sales: 3-mo, 6-mo and Yr/yr. The trends generally display a
progressive deterioration in the pace of sales. 
 

Over three-months there is a slight uptick in these
deteriorating trends and one that spreads across the main growths we
display in the table. Even real retail sales ex- autos show some lift.
But retail sales are volatile and vagaries of weather and calendar can
imbue a month with unexpected results. If we take the growth in July
annualized over the level of sales Q2 we find that quarter-to-date
sales are not just losing momentum but declining. The bump up in July
was not enough to offset the sharp weakness experienced in June. That
suggests that the June/July period taken together is a better barometer
of sales trends. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="9" scope="col"> UK Real and Nominal Retail Sales</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"> Nominal</td>
<td> Jul-08</td>
<td> Jun-08</td>
<td> May-08</td>
<td> 3-MO</td>
<td> 6-MO</td>
<td> 12-MO</td>
<td> YrAGo</td>
<td> Quarter-2-date</td>
</tr>
<tr>
<td class="firstcol">Retail Total</td>
<td>1.0%</td>
<td>-3.9%</td>
<td>4.2%</td>
<td>4.6%</td>
<td>3.2%</td>
<td>3.6%</td>
<td>3.2%</td>
<td>-1.8%</td>
</tr>
<tr>
<td class="firstcol">Food Beverages &amp; Tobacco</td>
<td>1.2%</td>
<td>-3.2%</td>
<td>4.3%</td>
<td>9.0%</td>
<td>5.3%</td>
<td>6.8%</td>
<td>0.6%</td>
<td>2.6%</td>
</tr>
<tr>
<td class="firstcol">Clothing Footwear</td>
<td>2.2%</td>
<td>-7.7%</td>
<td>9.5%</td>
<td>14.2%</td>
<td>1.9%</td>
<td>1.7%</td>
<td>1.5%</td>
<td>-1.0%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="9"> Real</td>
</tr>
<tr>
<td class="firstcol">Retail Ex Auto</td>
<td>0.8%</td>
<td>-4.3%</td>
<td>4.0%</td>
<td>1.2%</td>
<td>0.4%</td>
<td>2.0%</td>
<td>4.4%</td>
<td>-5.0%</td>
</tr>
</tbody>
</table>
Euro-PMIs Flatten Out&nbsp; 
by <a href="/comment/Brusca.html">Robert
Brusca</a> August 21, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080821a.jpg" align="left" border="0" height="265" width="353">
But has Europe already been flattened? 
 

The services and MFG PMIs (form NTC/Markit) for EMU flattened
out this month falling month-to-month but barely falling. As a result
the services and MFG PMIs are at the bottom of their recent ranges
dating back to January 2006. For MFG indices stretch back to 1998 and
in that broader range their current reading resides in the 26th
percentile, nearly the bottom quartile. But by count MFG PMIs have been
weaker than this value only 6% of the time. So while the weakest
reading is a lot lower MFG PMIs are rarely lower than they are now. 
 

The MFG reading is the more interesting of the two since it
spans a longer time horizon. The services index is still relatively new
and untested in a Biz cycle. Still the two indices together paint a
weakening picture of the Zone. One unanswered question is how much the
recent drop in oil prices will breathe new life into fading sectors. It
is still too soon to tell, although German financial experts who were
respondents to the Zew survey seem encouraged. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="3" scope="col">FLASH Readings </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="3" class="firstcol">Markit PMIs for the
E-Zone-13</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr class="odd">
<td class="firstcol">Aug-08</td>
<td>47.49</td>
<td>48.23</td>
</tr>
<tr>
<td class="firstcol">Jul-08</td>
<td>47.54</td>
<td>48.26</td>
</tr>
<tr>
<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="odd">
<td colspan="3" class="firstcol">Averages</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>48.03</td>
<td>48.65</td>
</tr>
<tr>
<td class="firstcol">6-Mo</td>
<td>49.58</td>
<td>50.00</td>
</tr>
<tr>
<td class="firstcol">12-Mo</td>
<td>51.01</td>
<td>51.74</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>
<td class="firstcol">Low</td>
<td>47.49</td>
<td>48.23</td>
</tr>
<tr>
<td class="firstcol">% Range</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
</tbody>
</table>
</body></html>

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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Tom Moeller

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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.

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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.

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- 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

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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: August 2008

Jump to:

Euro Orders Continue to Plunge

Euro Orders Continue to Plunge

U.S. Leading Indicators Dragged Down by Building Permits, Jobless Claims

Philadelphia Fed Index: Less Weakness

U.S. Initial Jobless Claims Ease for a Second Week; Supplemental Program Reaches 1.3 Million

Despite a Bump Up in July UK Retail Sales Trends Remain Poor

Euro-PMIs Flatten Out

U.S. Initial Jobless Claims Ease for a Second Week; Supplemental Program Reaches 1.3 Million