Carol Stone, CBE

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080820c.jpg" align="left" border="0" height="265" width="353">
Mortgage applications fell 1.5% in the week ended August 15,
following a like decline the week before, together basically erasing a
2.8% increase in the August 1 week. This "Market Composite Index" stood
at 419.3 in the latest week, where the number of applications on March
16, 1990 is set equal to 100; this is down 34.6% from a year ago.
Applications for loans to purchase houses edged down 0.4% in the week
and are off 8.4% from July's weekly average and 28.9% from the year
earlier; those to refinance old loans decreased 3.7% to 1034.5, down
22.2% from July and 42.7% below a year ago.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080820a.jpg" align="right" border="0" height="265" width="353">
These data from the Mortgage Bankers Association are included
in Haver's SURVEYW database. Other analytical
information in this application survey tells that refinancing presently
constitutes only 34.8% of the number of applications and 32.4% of their
dollar value.
The mortgage interest rate situation is also notable. With the
turmoil among Fannie Mae, Freddie Mac and originating lenders and
rising delinquencies by borrowers, credit spreads remain wide
throughout financial markets, keeping interest rates elevated on all
but short-term, highly liquid debt. The most dramatic illustration in
these MBA data comes from the 1-year ARM rate versus the 1-year
Treasury. The ARM rate itself was 7.07% last week, higher than the
fixed rate on 30-year mortgages, 6.47%. The spread on the ARM over the
1-year constant maturity Treasury was 4.89%; the spread of the 30-year
mortgage over the 10-year Treasury was 2.56%. For the vast majority of
the history of these MBA mortgage rate series (since 1990), the spread
was larger for the longer-term rates, as one might intuit. But since
last August, this relationship, along with many other risk measures,
has been turned on its head, and sharply so. There is today far more
perceived risk in short-term mortgage instruments than long-term.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080820b.jpg" align="left" border="0" height="265" width="353"> 


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA
Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">08/15/08</th>
<th scope="col">08/08/08</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 Market Index</td>
<td>419.3</td>
<td>425.9</td>
<td>-34.6%</td>
<td>652.6</td>
<td>584.2</td>
<td>708.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>314.0</td>
<td>315.2</td>
<td>-28.9%</td>
<td>424.9</td>
<td>406.9</td>
<td>470.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,034.5</td>
<td>1,074.6</td>
<td>-42.7%</td>
<td>1,997.9</td>
<td>1,634.0</td>
<td>2,092.3</td>
</tr>
</tbody>
</table>
Reduced Oil Demand Is Pushing Down
on Prices 
by <a href="/comment/Stone.html">Carol
Stone</a> August 20, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080820f.jpg" align="left" border="0" height="265" width="353">
The recent price declines in oil and other energy products
have been noticeable (see graph) and welcome, giving evident support to
the stock market and consumer sentiment. In the U.S., the moving force
in petroleum prices has been demand, highlighted in the table below.
The Energy Department's "Weekly Petroleum Status Report", released
around mid-day every Wednesday, began to draw attention with weaker
usage figures in early- to mid-July, a period when gasoline consumption
normally increases. The lower numbers for "product supplied" were
mirrored in higher levels of gasoline and crude oil inventories, again,
not a normal development for the height of the summer-vacation driving
season.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080820g.jpg" align="right" border="0" height="265" width="353">
A summary of these demand and inventory developments can be
seen in the second graph here, the "Days of Supply" data, an
"inventory/sales" ratio for this industry. Inventories averaged over
the last four weeks are divided by "product supplied" for gasoline or
by crude oil input to refineries. The numbers out today for the period
ended August 15 show gasoline inventories at 20.8 days of gasoline
demand. This is down from 21.5 days last week, but still above 20.4
days a year ago. Crude oil supply stands at 20.5 days, up from 19.7
days last week. This supply figure is below the year-ago at 21.2, but
compares favorably to 19.1 days at the beginning of July, about when
demand weakness began to predominate.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080820h.jpg" align="left" border="0" height="265" width="353">
Lower demand, especially for gasoline, can come from more
efficient vehicles, more of which are appearing on the roadways. But
the most fundamental cause of less gasoline consumption is less
driving. Miles driven began to sink below year-earlier levels late in
2007 and have had a negative comparison in nine of the last 10 months;
the third graph here shows a 58% correlation between the year-to-year
changes in vehicle miles of travel and gasoline product supplied since
2003. Other periods of such driving behavior occurred in 1973 and 1979,
also times of energy crisis and surging prices. They were short-lived,
however, and driving picked right up again when price and supply
constraints eased. We have the impression that consumers realize more
of the connection between their driving and the price of gasoline, so
it will be interesting to see if they keep to their new behavior over a
sustained period.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">U.S.
Oil Demand (000 b/d)</th>
<th scope="col">08/15/08</th>
<th scope="col">08/08/08</th>
<th scope="col">July 2008</th>
<th scope="col">June 2008</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 Product Supplied</td>
<td>20,106</td>
<td>20,372</td>
<td>20,156</td>
<td>20,342</td>
<td>20,901</td>
<td>20,829</td>
<td>20,702</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Yr/yr % Chg</td>
<td>-5.6</td>
<td>-3.6</td>
<td>-3.2</td>
<td>-2.1</td>
<td>0.5</td>
<td>0.6</td>
<td>1.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Finished Gasoline</td>
<td>9,423</td>
<td>9,446</td>
<td>9,375</td>
<td>9,338</td>
<td>9,356</td>
<td>9,284</td>
<td>9,153</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Yr/yr % Chg</td>
<td>-3.5</td>
<td>-1.3</td>
<td>-4.0</td>
<td>-2.4</td>
<td>0.8</td>
<td>1.4</td>
<td>0.9</td>
</tr>
</tbody>
</table>
French Orders Show Some Life
ButStill Negative
Trend
 
by <a href="/comment/Brusca.html">Robert
Brusca</a> August 20, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080820d.jpg" align="left" border="0" height="265" width="353">
French orders edged higher in June as weak domestic orders
were offset by strong foreign orders. Foreign orders were by a robust
2.6% m/m in June. Still for the full quarter orders are falling. Total
orders are off at an11.3% annual rate in Q2 and foreign orders are off
at an 18.6% annual rate.

The sequential growth rates for orders do not show a
cumulating deterioration. Sequential order weakness has dissipated over
the more recent periods &#8211; except for the Q/Q growth rate. Yr/Yr growth
is -12.1% compared to -2.5% over three months. The same sort of pattern
emerges for foreign orders. Despite the order rise in June trends still
look quite negative. The month&#8217;s rebound follows sharp declines in May.
French orders have been very choppy.


<table border="0" cellspacing="0" width="100%">
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> French
Orders</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">SAAR except m/m</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>Quarter-2-Date</td>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>0.1%</td>
<td>-6.3%</td>
<td>5.9%</td>
<td>-2.5%</td>
<td>-4.0%</td>
<td>-12.1%</td>
<td>-11.3%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>2.6%</td>
<td>-10.4%</td>
<td>6.6%</td>
<td>-7.9%</td>
<td>-10.3%</td>
<td>-11.4%</td>
<td>-18.6%</td>
</tr>
</tbody>
</table>
Japan Sector Indices are Weakening&#8230; by <a href="/comment/Brusca.html">Robert
Brusca</a> August 20, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080820e.jpg" align="left" border="0" height="265" width="353">
The all industries index dropped in June, its first drop in
four months. The index still stands in the 88th
percentile (top 12 percent) of its range. Construction fell again
dropping to the bottom of its range. The all important tertiary (or
services) index is in the 92nd percentile of its
range. It has fallen in four of the past seven months and in each of
the past two.
The construction index has been weak for some time. The
tertiary and overall indices are weakening for the second time since
early in 2008. The tertiary sector is where most of the jobs are.

<table border="0" cellspacing="0" width="100%">
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col"> Up-to-date
Japan Industry Surveys</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol"></td>
<td colspan="3">Recent Months</td>
<td colspan="3">Moving Averages</td>
<td colspan="3">Extremes; Range</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</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>Max</td>
<td>Min</td>
<td>%-Tile</td>
</tr>
<tr>
<td class="firstcol">All Industry</td>
<td>106.5</td>
<td>107.5</td>
<td>107.1</td>
<td>107.0</td>
<td>106.8</td>
<td>107.1</td>
<td>108.1</td>
<td>93.8</td>
<td>88.8%</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>69.9</td>
<td>70.5</td>
<td>71.8</td>
<td>70.7</td>
<td>71.3</td>
<td>72.5</td>
<td>122.9</td>
<td>69.9</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Tertiary</td>
<td>109.5</td>
<td>110.4</td>
<td>110.6</td>
<td>110.2</td>
<td>109.6</td>
<td>110.0</td>
<td>110.9</td>
<td>92.0</td>
<td>92.6%</td>
</tr>
<tr class="grey1">
<td colspan="10" class="firstcol">Ranges,
Max, Min since 1993</td>
</tr>
</tbody>
</table>
</body></html>

Mortgage applications fell 1.5% in the week ended August 15, following a like decline the week before, together basically erasing a 2.8% increase in the August 1 week. This "Market Composite Index" stood at 419.3 in the latest week, [...]

Mortgage Applications Edge Lower; Credit Spreads Evince High Risk

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080819h.jpg" align="left" border="0" height="265" width="353">
Although German officials are trying to calm the public about
growth prospects the inflation numbers that being churned out are far
from reassuring in inflation-wary Germany. Core PPI inflation is on a
tear up to a 6.1% pace over three-months and 3.6% Yr/Yr. In Q3-to-date
inflation for the Core PPI is running at a 7.1% pace with headline PPI
inflation at a 19.4% pace. And Germany is one of those EMU places that
tends to keep inflation more under control. 
 

Growth has been sputtering. Accelerating inflation will simply
tie the hands of the ECB for a longer period of time. Everyone believes
that falling oil prices make headline inflation less of a threat. But
the rising core remains an issue that all central banks will be wary
of. Prospects for unwinding elevated core inflation under lower energy
prices are good, too. But any core unwind will take time. 
 
 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="9" scope="col">Germany PPI </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">%m/m</td>
<td colspan="4">%-SAAR</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jul-08</td>
<td>Jun-08</td>
<td>May-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-moY-Ago</td>
<td>IN Q3</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>2.0%</td>
<td>1.0%</td>
<td>1.1%</td>
<td>17.4%</td>
<td>12.7%</td>
<td>8.9%</td>
<td>1.1%</td>
<td>19.4%</td>
</tr>
<tr>
<td class="firstcol">Ex Energy</td>
<td>0.8%</td>
<td>0.4%</td>
<td>0.4%</td>
<td>6.1%</td>
<td>5.1%</td>
<td>3.6%</td>
<td>2.5%</td>
<td>7.1%</td>
</tr>
</tbody>
</table>
</body></html>

Although German officials are trying to calm the public about growth prospects the inflation numbers that being churned out are far from reassuring in inflation-wary Germany. Core PPI inflation is on a tear up to a 6.1% pace over [...]

German PPI is Still Soaring: 27 Year High Pace

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080819e.jpg" align="left" border="0" height="265" width="353">
Producer prices continued strongly higher in July, with the
total index up 1.2% after June&#8217;s outsized 1.8%, and the core up a
substantial 0.7%, considerably more than June&#8217;s 0.2%. Forecasts for the
total index centered around 0.6% and for the core, 0.2%. Intermediate
goods rose 2.7%, with their core up 2.0% and crude goods were up 4.2%,
with the core up 3.4%. All of these are monthly changes; year-on-year,
finished goods prices are up 9.8% and crude goods a whopping 51.3%. 
 

What we know, though, before we panic over these inflationary
figures, is that the PPI data are collected near mid-month,
specifically the Tuesday of the week containing the 13th of the month.
For July, that day would be Tuesday, July 15, now five weeks ago. That
period was near the peak in commodity prices; by yesterday, futures
prices, measured by the Reuters/Jeffries CRB Futures Index had fallen
14.6% since that date, and the CRB Spot Index was down 5.5%. So while
the previous gains in commodity prices continue through the production
and distribution system, we do know that some relief might already be
in process. 
 

Meantime, the bigger-than-expected gain in the July finished
goods index did hit a wide variety of items. Food was a notable
exception, inching up only 0.3% from June. But energy rose 3.1%,
concentrated in residential gas (8.8%) and heating oil (3.7%); before
seasonal adjustment, gasoline was up 2.8%, but that was all seasonal
(believe it or not!), so that with adjustment, it was actually down
0.2% (sure.) Among consumer goods with better-than-1% monthly increases
are soaps &amp; detergents, tires &amp; tubes, newspapers,
floor coverings, sporting goods and fine jewelry. Capital equipment
overall saw an 0.8% rise, seasonally adjusted. Among the larger
advances there are machine tools, materials handling equipment, pumps,
transformers, heavy trucks and ships. Passenger car wholesale prices
rose 0.5% in July and light trucks 0.8%, both seasonally adjusted.
Several of these show the effects of earlier increases in lumber,
petroleum and metals and we can hope that renewed declines in those raw
materials can help alleviate further price pain.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080819g.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080819f.jpg" border="0" height="265" width="312"> 


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Producer
Price Index (%)</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Yr/Yr</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">Finished&nbsp; Goods</td>
<td>1.2</td>
<td>1.8</td>
<td>9.8</td>
<td>3.9</td>
<td>3.0</td>
<td>4.9</td>
</tr>
<tr>
<td class="firstcol">Core</td>
<td>0.7</td>
<td>0.2</td>
<td>3.6</td>
<td>1.9</td>
<td>1.5</td>
<td>2.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>2.7</td>
<td>2.1</td>
<td>16.8</td>
<td>4.1</td>
<td>6.4</td>
<td>8.0</td>
</tr>
<tr>
<td class="firstcol">Core</td>
<td>2.0</td>
<td>1.3</td>
<td>10.2</td>
<td>2.8</td>
<td>6.0</td>
<td>5.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>4.2</td>
<td>3.7</td>
<td>51.3</td>
<td>12.1</td>
<td>1.4</td>
<td>14.6</td>
</tr>
<tr>
<td class="firstcol">Core</td>
<td>3.4</td>
<td>-0.2</td>
<td>36.9</td>
<td>15.6</td>
<td>20.8</td>
<td>4.9</td>
</tr>
</tbody>
</table>
</body></html>

Producer prices continued strongly higher in July, with the total index up 1.2% after June’s outsized 1.8%, and the core up a substantial 0.7%, considerably more than June’s 0.2%. Forecasts for the total index centered around 0.6% and [...]

U.S. PPI Up 1.2%; Big Increases Widespread

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080819c.jpg" width="353">
The ZEW indicator of German economic sentiment among institutional investors and analysts improved in August. It remained, however at historically low levels. The percent balance between the pessimists and the optimists rose from -63.9% in July to -55.5% in August. At the same time, the appraisal of current conditions by the financial community worsened and showed an excess of pessimists of 9.2%, the first negative since March 2006. The first chart shows the percent balances for expectations and current conditions.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080819d.jpg" width="353">
The recent declines in the euro and the price of oil may well have accounted for the improvement in sentiment concerning the outlook for the next six months. Lower oil prices should improve the profit outlook for business and the lower Euro should benefit exports. The second chart shows the daily price of oil and the value of Euro in dollar terms in the current year. The price of oil is down 23% from its high on July 11, and the Euro is down 8% since its high on July 15.
After Eurostat reported that Germany&#39;s second quarter GDP declined by 0.5%, it is not surprising that the pessimists have begun to exceed the optimists in their appraisal of current conditions.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">GERMANY&nbsp;&nbsp;</th>
<th scope="col">Aug 08</th>
<th scope="col">Jul&nbsp; 08&nbsp;</th>
<th scope="col">Jun 08&nbsp;</th>
<th scope="col">May 08&nbsp;</th>
<th scope="col">Apr 08&nbsp;</th>
<th scope="col">Mar 08</th>
<th scope="col">Feb 08</th>
<th scope="col">Jan 08</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">ZEW Indicator of Expectations (% bal)</td>
<td>-55.5</td>
<td>-63.9</td>
<td>-52.4</td>
<td>-41.4</td>
<td>-40.7</td>
<td>-32.0</td>
<td>-39.5</td>
<td>-41.6</td>
</tr>
<tr class="odd">
<td class="firstcol">ZEW Indicator of Current Situation (% bal)</td>
<td>-9.2</td>
<td>17.0</td>
<td>37.6</td>
<td>38.6</td>
<td>33.2</td>
<td>32.1</td>
<td>33.7</td>
<td>56.6</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol"></td>
<td>High&nbsp;</td>
<td>Date&nbsp;&nbsp;</td>
<td>Recent&nbsp;</td>
<td>Date</td>
<td>% chg&nbsp;</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Oil Price (bbl)</td>
<td>143.25</td>
<td>7/11</td>
<td>110.08</td>
<td>8/15</td>
<td>-23.16</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">US/Euro</td>
<td>1.599</td>
<td>7/15</td>
<td>1.470</td>
<td>8/18</td>
<td>-8.04</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
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</body>
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The ZEW indicator of German economic sentiment among institutional investors and analysts improved in August. It remained, however at historically low levels. The percent balance between the pessimists and the optimists rose from [...]

Declines in Euro and Oil Price Improve ZEW Indicator of Expectations

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080819a.jpg" width="353">
After June&#146;s phantom jump in housing starts, which owed completely to a building code change in New York, they fell back in July by 11.0% to just 965,000 (S.A.A.R.). This was the lowest since 921,000 in March 1991. This month, both single-family and multi-family starts declined, by 2.9% and 23.6%, respectively. There were marginal upward revisions to June and May totals. As evident in the first graph, the total and the single-family amounts are not only the lowest since the last major housing contraction in 1991, but they are at levels that have only been since during periods of major housing distress.
At the same time, multi-family starts have been somewhat steadier. They retreated surely in July from their artificial surge in June, but their general pace has held up; in July, they numbered 324,000, just below their average over the last 10 years of 339,000. With the great weakness in single-family units, multi-family building now constitutes more than a third of new home construction.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080819b.jpg" width="353">
By region in July, the Northeast reversed its June increase, but it remains the steadiest part of the country on trend, and actually stands 13.0% above a year ago. The July loss was all in multi-family, while single-family units there were up smartly, by 11.3%. Total starts were also down in the South and the West, both, coincidentally, by 8.2%. Starts rose in the Midwest in July, by 10.0%.
Building permits followed the same pattern as starts nationally in July, falling 17.7% after a June increase of 16.4%. Single-family permits dropped 5.2% in the month to 584,000, the weakest since September 1982.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"> Housing Starts (000s, SAAR)</th>
<th scope="col"> July</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</td>
<td>965</td>
<td>1,084</td>
<td>982</td>
<td>-29.6%</td>
<td>1,341</td>
<td>1,812</td>
<td>2,073</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>641</td>
<td>660</td>
<td>682</td>
<td>-39.2%</td>
<td>1,034</td>
<td>1,474</td>
<td>1,719</td>
</tr>
<tr>
<td class="firstcol">Multi-Family</td>
<td>324</td>
<td>424</td>
<td>300</td>
<td>+2.5%</td>
<td>307</td>
<td>338</td>
<td>354</td>
</tr>
<tr class="odd">
<td class="firstcol">Building Permits</td>
<td>937</td>
<td>1,138</td>
<td>978</td>
<td>-32.4%</td>
<td>1,389</td>
<td>1,844</td>
<td>2,160</td>
</tr>
</tbody>
</table>
</body>
</html>

After Junes phantom jump in housing starts, which owed completely to a building code change in New York, they fell back in July by 11.0% to just 965,000 (S.A.A.R.). This was the lowest since 921,000 in March 1991. This month, both [...]

U.S. Housing Starts Sag Back to Low

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080819e.jpg" align="left" border="0" height="265" width="353">
Producer prices continued strongly higher in July, with the
total index up 1.2% after June&#8217;s outsized 1.8%, and the core up a
substantial 0.7%, considerably more than June&#8217;s 0.2%. Forecasts for the
total index centered around 0.6% and for the core, 0.2%. Intermediate
goods rose 2.7%, with their core up 2.0% and crude goods were up 4.2%,
with the core up 3.4%. All of these are monthly changes; year-on-year,
finished goods prices are up 9.8% and crude goods a whopping 51.3%. 
 

What we know, though, before we panic over these inflationary
figures, is that the PPI data are collected near mid-month,
specifically the Tuesday of the week containing the 13th of the month.
For July, that day would be Tuesday, July 15, now five weeks ago. That
period was near the peak in commodity prices; by yesterday, futures
prices, measured by the Reuters/Jeffries CRB Futures Index had fallen
14.6% since that date, and the CRB Spot Index was down 5.5%. So while
the previous gains in commodity prices continue through the production
and distribution system, we do know that some relief might already be
in process. 
 

Meantime, the bigger-than-expected gain in the July finished
goods index did hit a wide variety of items. Food was a notable
exception, inching up only 0.3% from June. But energy rose 3.1%,
concentrated in residential gas (8.8%) and heating oil (3.7%); before
seasonal adjustment, gasoline was up 2.8%, but that was all seasonal
(believe it or not!), so that with adjustment, it was actually down
0.2% (sure.) Among consumer goods with better-than-1% monthly increases
are soaps &amp; detergents, tires &amp; tubes, newspapers,
floor coverings, sporting goods and fine jewelry. Capital equipment
overall saw an 0.8% rise, seasonally adjusted. Among the larger
advances there are machine tools, materials handling equipment, pumps,
transformers, heavy trucks and ships. Passenger car wholesale prices
rose 0.5% in July and light trucks 0.8%, both seasonally adjusted.
Several of these show the effects of earlier increases in lumber,
petroleum and metals and we can hope that renewed declines in those raw
materials can help alleviate further price pain.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080819g.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080819f.jpg" border="0" height="265" width="312"> 


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Producer
Price Index (%)</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Yr/Yr</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">Finished&nbsp; Goods</td>
<td>1.2</td>
<td>1.8</td>
<td>9.8</td>
<td>3.9</td>
<td>3.0</td>
<td>4.9</td>
</tr>
<tr>
<td class="firstcol">Core</td>
<td>0.7</td>
<td>0.2</td>
<td>3.6</td>
<td>1.9</td>
<td>1.5</td>
<td>2.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>2.7</td>
<td>2.1</td>
<td>16.8</td>
<td>4.1</td>
<td>6.4</td>
<td>8.0</td>
</tr>
<tr>
<td class="firstcol">Core</td>
<td>2.0</td>
<td>1.3</td>
<td>10.2</td>
<td>2.8</td>
<td>6.0</td>
<td>5.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>4.2</td>
<td>3.7</td>
<td>51.3</td>
<td>12.1</td>
<td>1.4</td>
<td>14.6</td>
</tr>
<tr>
<td class="firstcol">Core</td>
<td>3.4</td>
<td>-0.2</td>
<td>36.9</td>
<td>15.6</td>
<td>20.8</td>
<td>4.9</td>
</tr>
</tbody>
</table>
U.S. Housing Starts Sag Back to Low 
by <a href="/comment/Stone.html">Carol
Stone</a> August 19, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080819a.jpg" align="left" border="0" height="265" width="353">
After June&#8217;s phantom jump in housing starts, which owed
completely to a building code change in New York, they fell back in
July by 11.0% to just 965,000 (S.A.A.R.). This was the lowest since
921,000 in March 1991. This
month, both single-family and multi-family starts declined, by 2.9% and
23.6%, respectively. There
were marginal upward revisions to June and May totals.
As evident in the first graph, the total and the
single-family amounts are not only the lowest since the last major
housing contraction in 1991, but they are at levels that have only been
since during periods of major housing distress.
At the same time, multi-family starts have been somewhat
steadier. They retreated
surely in July from their artificial surge in June, but their general
pace has held up; in July, they numbered 324,000, just below their
average over the last 10 years of 339,000. With
the great weakness in single-family units, multi-family building now
constitutes more than a third of new home construction.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080819b.jpg" align="right" border="0" height="265" width="353">
By region in July, the Northeast reversed its June increase,
but it remains the steadiest part of the country on trend, and actually
stands 13.0% above a year ago. The
July loss was all in multi-family, while single-family units there were
up smartly, by 11.3%. Total starts were also down in the South and the
West, both, coincidentally, by 8.2%. Starts
rose in the Midwest in July, by 10.0%.
Building permits followed the same pattern as starts
nationally in July, falling 17.7% after a June increase of 16.4%.
Single-family permits dropped 5.2% in the month to 584,000, the weakest
since September 1982.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">
Housing Starts (000s, SAAR)</th>
<th scope="col"> July</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</td>
<td>965</td>
<td>1,084</td>
<td>982</td>
<td>-29.6%</td>
<td>1,341</td>
<td>1,812</td>
<td>2,073</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>641</td>
<td>660</td>
<td>682</td>
<td>-39.2%</td>
<td>1,034</td>
<td>1,474</td>
<td>1,719</td>
</tr>
<tr>
<td class="firstcol">Multi-Family</td>
<td>324</td>
<td>424</td>
<td>300</td>
<td>+2.5%</td>
<td>307</td>
<td>338</td>
<td>354</td>
</tr>
<tr class="odd">
<td class="firstcol">Building Permits</td>
<td>937</td>
<td>1,138</td>
<td>978</td>
<td>-32.4%</td>
<td>1,389</td>
<td>1,844</td>
<td>2,160</td>
</tr>
</tbody>
</table>
Declines in Euro and Oil Price
Improve ZEW Indicator of Expectations 
by <a href="/comment/Curley.html">Louise
Curley</a> August 19, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080819c.jpg" align="left" border="0" height="265" width="353">
The ZEW indicator of German economic sentiment among
institutional investors and analysts improved in August. It remained,
however at historically low levels. The percent balance between the
pessimists and the optimists rose from -63.9% in July to -55.5% in
August. At the same time, the appraisal of current conditions by the
financial community worsened and showed an excess of pessimists of
9.2%, the first negative since March 2006. The first chart shows the
percent balances for expectations and current conditions.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080819d.jpg" align="right" border="0" height="265" width="353">
The recent declines in the euro and the price of oil may well
have accounted for the improvement in sentiment concerning the outlook
for the next six months. Lower oil prices should improve the profit
outlook for business and the lower Euro should benefit exports. The
second chart shows the daily price of oil and the value of Euro in
dollar terms in the current year. The price of oil is down 23% from its
high on July 11, and the Euro is down 8% since its high on July 15.
After Eurostat reported that Germany's second quarter GDP
declined by 0.5%, it is not surprising that the pessimists have begun
to exceed the optimists in their appraisal of current conditions.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">GERMANY&nbsp;&nbsp;</th>
<th scope="col">Aug 08</th>
<th scope="col">Jul&nbsp; 08&nbsp;</th>
<th scope="col">Jun 08&nbsp;</th>
<th scope="col">May 08&nbsp;</th>
<th scope="col">Apr 08&nbsp;</th>
<th scope="col">Mar 08</th>
<th scope="col">Feb 08</th>
<th scope="col">Jan 08</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">ZEW Indicator of
Expectations (% bal)</td>
<td>-55.5</td>
<td>-63.9</td>
<td>-52.4</td>
<td>-41.4</td>
<td>-40.7</td>
<td>-32.0</td>
<td>-39.5</td>
<td>-41.6</td>
</tr>
<tr class="odd">
<td class="firstcol">ZEW Indicator of
Current Situation (% bal)</td>
<td>-9.2</td>
<td>17.0</td>
<td>37.6</td>
<td>38.6</td>
<td>33.2</td>
<td>32.1</td>
<td>33.7</td>
<td>56.6</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol"></td>
<td>High&nbsp;</td>
<td>Date&nbsp;&nbsp;</td>
<td>Recent&nbsp;</td>
<td>Date</td>
<td>% chg&nbsp;</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Oil Price (bbl)</td>
<td>143.25</td>
<td>7/11</td>
<td>110.08</td>
<td>8/15</td>
<td>-23.16</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">US/Euro</td>
<td>1.599</td>
<td>7/15</td>
<td>1.470</td>
<td>8/18</td>
<td>-8.04</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
German PPI is Still Soaring:
27Year High Pace 
by <a href="/comment/Brusca.html">By&nbsp;Robert
Brusca</a> August 19, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080819h.jpg" align="left" border="0" height="265" width="353">
Although German officials are trying to calm the public about
growth prospects the inflation numbers that being churned out are far
from reassuring in inflation-wary Germany. Core PPI inflation is on a
tear up to a 6.1% pace over three-months and 3.6% Yr/Yr. In Q3-to-date
inflation for the Core PPI is running at a 7.1% pace with headline PPI
inflation at a 19.4% pace. And Germany is one of those EMU places that
tends to keep inflation more under control. 
 

Growth has been sputtering. Accelerating inflation will simply
tie the hands of the ECB for a longer period of time. Everyone believes
that falling oil prices make headline inflation less of a threat. But
the rising core remains an issue that all central banks will be wary
of. Prospects for unwinding elevated core inflation under lower energy
prices are good, too. But any core unwind will take time. 
 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">Germany PPI
</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">%m/m</td>
<td colspan="4">%-SAAR</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jul-08</td>
<td>Jun-08</td>
<td>May-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-moY-Ago</td>
<td>IN Q3</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>2.0%</td>
<td>1.0%</td>
<td>1.1%</td>
<td>17.4%</td>
<td>12.7%</td>
<td>8.9%</td>
<td>1.1%</td>
<td>19.4%</td>
</tr>
<tr>
<td class="firstcol">Ex Energy</td>
<td>0.8%</td>
<td>0.4%</td>
<td>0.4%</td>
<td>6.1%</td>
<td>5.1%</td>
<td>3.6%</td>
<td>2.5%</td>
<td>7.1%</td>
</tr>
</tbody>
</table>
</body></html>

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080818b.jpg" align="left" border="0" height="265" width="353">
The National Association of Home Builders reported a stable
performance in its Housing Market Index (HMI) for August, albeit at the
index&#8217;s all-time low of 16, first seen in July. It stood at 22 this time last year and averaged 19 for the first six months of 2008. The
index is compiled from survey questions asking builders to rate market
conditions as &#8220;good&#8221;, &#8220;fair&#8221; or &#8220;poor&#8221; or &#8220;very high&#8221; to &#8220;very low&#8221;. Numerical equivalent results over 50 indicate a predominance of &#8220;good&#8221; readings.
Since 1990, the year-to-year change in this index has had a
correlation of 72% with the year-to-year percentage change in new
single-family home sales (see graph). One wonders, then, if the relative improvement in the HMI might be a precursor to an outright improvement in home sales. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080818c.jpg" align="right" border="0" height="265" width="353">
In this regard, the Home Builders Association press release highlights the gains in two of the HMI components. Present
sales conditions ticked up from 15 in July to 16 this month and
builders&#8217; expectations for six months out moved from 23 to 25. The most tangible measure, the &#8220;traffic of prospective buyers&#8221; held steady at its all-time low of 12. By region, two parts of the country showed increases, the Northeast and the Midwest. The South was steady and conditions in the West continued to erode. These readings ranged from 11 to 20.
The NAHB has compiled the Housing Market Index since 1985. The results, along with other housing and remodeling indexes from NAHB Economics, are included in Haver&#8217;s SURVEYS database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat'l Association of Home Builders</a></th>
<th scope="col">August</th>
<th scope="col">July &nbsp;</th>
<th scope="col">Aug '07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Housing Market Index</td>
<td>16</td>
<td>16</td>
<td>22</td>
<td>27</td>
<td>42</td>
<td>67</td>
</tr>
</tbody>
</table>
</body></html>

The National Association of Home Builders reported a stable performance in its Housing Market Index (HMI) for August, albeit at the index’s all-time low of 16, first seen in July. It stood at 22 this time last year and averaged 19 for [...]

Home Builders' Survey Shows Tentative Signs of Stabilization

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080818a.jpg" align="left" border="0" height="265" width="353">
The average asking price for a house coming onto the market in
the U.K. declined 4.8% in August from a year ago after a 2.0%
year-to-year decline in July. These were the first two declines in the
series which was first begun in 2002.
Rightmove's house price index differs from the usual indexes
of house prices that measure the price of an average house as in the
Nationwide Buildings Societies' survey or the average of house prices
as in the Halifax Bank of Scotland's survey. Rightmove compiles the
asking prices of properties coming to market through Rightmove
Company's 11.500 estate agency branches. The Rightmove index is based
on the price a seller initially asks for his property, not what he
eventually gets for it.
The year-to-year changes in the three indexes are shown in the
accompanying chart. The year-to-year declines in actual prices of
houses have occurred before, and have been deeper than, the
year-to-year changes in the Rightmove index. The recent year-to-year
declines in the Rightmove index suggest that the actual declines in
house prices have at last begun to affect sellers' appraisals of their
properties.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">UK
HOUSE PRICES INDEXES (NSA)&nbsp;</th>
<th scope="col">Aug 08</th>
<th scope="col">Jul&nbsp; 08&nbsp;</th>
<th scope="col">Aug&nbsp;&nbsp;
07&nbsp;</th>
<th scope="col">Y/Y % chg&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Rightmove (Jan
2002=100)</td>
<td>187.0</td>
<td>191.4</td>
<td>196.5</td>
<td>-4.83</td>
<td>191.2</td>
<td>172.0</td>
<td>159.4</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol"></td>
<td>Jul 08</td>
<td>Jun&nbsp; 08&nbsp;</td>
<td>Jul&nbsp; 07&nbsp;</td>
<td>Y/Y % chg&nbsp;</td>
<td>2007</td>
<td>2006</td>
<td>2005</td>
</tr>
<tr class="odd">
<td class="firstcol">Halifax Bank of
Scotland (1983=100)</td>
<td>577.5</td>
<td>588.3</td>
<td>649.2</td>
<td>-11.04</td>
<td>634.5</td>
<td>580.3</td>
<td>535.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Nationwide Building
Societies 
(Q1 1993=100)&nbsp;</td>
<td>337.8</td>
<td>343.9</td>
<td>367.6</td>
<td>-8.11</td>
<td>361.8</td>
<td>331.4</td>
<td>311.4</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>
</body></html>

The average asking price for a house coming onto the market in the U.K. declined 4.8% in August from a year ago after a 2.0% year-to-year decline in July. These were the first two declines in the series which was first begun in 2002. [...]

UK's "Rightmove" House Price Index in Second Year-to-Year Decline

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: 2008

Jump to:

Mortgage Applications Edge Lower; Credit Spreads Evince High Risk

German PPI is Still Soaring: 27 Year High Pace

U.S. PPI Up 1.2%; Big Increases Widespread

Declines in Euro and Oil Price Improve ZEW Indicator of Expectations

U.S. Housing Starts Sag Back to Low

U.S. PPI Up 1.2%; Big Increases Widespread

Home Builders' Survey Shows Tentative Signs of Stabilization

UK's "Rightmove" House Price Index in Second Year-to-Year Decline