Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040804c.jpg" width="353">
Unit sales of light vehicles bounded back last month. The 12.0% m/m gain to a 17.30M selling rate did not, however, fully recoup the 13.4% decline in June. Consensus expectations had been for sales of 16.7M.
The three month moving average of light vehicle sales improved to 16.86M, up 5.4% versus a low early last year. Pricing has firmed somewhat with that improvement. The CPI for new vehicles has risen at a 0.9% rate during the last three months versus a 4.5% rate of decline in early 2003.
Improved sales of light trucks led last month&#39;s rebound with a 17.3% m/m rise which recovered about all of the prior month&#39;s steep decline. Auto sales also rose but by a lesser 5.7% m/m which gained back about half of the June skid.
The strength in truck sales raised sales of domestic light vehicles by 15.6% to 14.02M (+2.5% y/y). Imported vehicle sales fell 1.0% m/m, the third decline in the last four months. (US sales of light trucks totaled 7.84M last year while imported truck sales totaled 1.20M.)
Imports&#39; share of the US market for new vehicles in July dropped to 19.0% versus 19.7% last year.

<table border="0" cellspacing="0" width="100%">
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<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED09/@ED0901/@ED0901.HTM"> Light Vehicle Sales (SAAR, Mil.Units)</a></th>
<th scope="col"> July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>17.30</td>
<td>15.44</td>
<td>2.0%</td>
<td>16.69</td>
<td>16.81</td>
<td>17.26</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>7.48</td>
<td>7.08</td>
<td>-1.9%</td>
<td>7.63</td>
<td>8.07</td>
<td>8.48</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Trucks</td>
<td>9.81</td>
<td>8.37</td>
<td>5.3%</td>
<td>9.06</td>
<td>8.74</td>
<td>8.78</td>
</tr>
</tbody>
</table>
</body>
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Unit sales of light vehicles bounded back last month. The 12.0% m/m gain to a 17.30M selling rate did not, however, fully recoup the 13.4% decline in June. Consensus expectations had been for sales of 16.7M. The three month moving [...]

July U.S. Light Vehicle Sales Rebounded

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040804c.jpg" width="353">
Unit sales of light vehicles bounded back last month. The 12.0% m/m gain to a 17.30M selling rate did not, however, fully recoup the 13.4% decline in June. Consensus expectations had been for sales of 16.7M.
The three month moving average of light vehicle sales improved to 16.86M, up 5.4% versus a low early last year. Pricing has firmed somewhat with that improvement. The CPI for new vehicles has risen at a 0.9% rate during the last three months versus a 4.5% rate of decline in early 2003.
Improved sales of light trucks led last month&#39;s rebound with a 17.3% m/m rise which recovered about all of the prior month&#39;s steep decline. Auto sales also rose but by a lesser 5.7% m/m which gained back about half of the June skid.
The strength in truck sales raised sales of domestic light vehicles by 15.6% to 14.02M (+2.5% y/y). Imported vehicle sales fell 1.0% m/m, the third decline in the last four months. (US sales of light trucks totaled 7.84M last year while imported truck sales totaled 1.20M.)
Imports&#39; share of the US market for new vehicles in July dropped to 19.0% versus 19.7% last year.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED09/@ED0901/@ED0901.HTM"> Light Vehicle Sales (SAAR, Mil.Units)</a></th>
<th scope="col"> July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>17.30</td>
<td>15.44</td>
<td>2.0%</td>
<td>16.69</td>
<td>16.81</td>
<td>17.26</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>7.48</td>
<td>7.08</td>
<td>-1.9%</td>
<td>7.63</td>
<td>8.07</td>
<td>8.48</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Trucks</td>
<td>9.81</td>
<td>8.37</td>
<td>5.3%</td>
<td>9.06</td>
<td>8.74</td>
<td>8.78</td>
</tr>
</tbody>
</table>
ISM Non-Manufacturing Index Recovered, Employment Index Down Sharply 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 4, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040804f.jpg" width="353">
The Institute for Supply Management reported that its Business Activity Index for the non-manufacturing sector rose last month to 64.8 versus 59.9 in June. Consensus expectations had been for a lesser rise to 62.0.
Since the series&#39; inception in 1997 there has been a 60% correlation between the Business Activity Index and the q/q change in GDP services plus construction.
The new orders index jumped to a record high of 66.4, up 4.0 points from June and up 8.3 points from the 2003 average.
The employment index fell a sharp 7.4 points from the June record to the lowest level since last September. Nevertheless, higher employment was reported by 18% of firms, down from 27% in June but up versus 17% last year.
Since the series&#39; inception in 1997 there has been a 60% correlation between the level of the ISM non-manufacturing employment index and the m/m change in payroll employment in the service producing and construction industries.
Business activity for the non-manufacturing sector is a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index is a weighted average five components.
The seasonally adjusted prices index slipped to 73.1 from the record high in June.
ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The non-manufacturing survey dates only to July 1997, therefore its seasonal adjustment should be viewed tentatively. 

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<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM Non-manufacturing Survey</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">July &#39;03</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Business Activity Index</td>
<td>64.8</td>
<td>59.9</td>
<td>64.1</td>
<td>58.1</td>
<td>55.1</td>
<td>48.9</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>73.1</td>
<td>74.6</td>
<td>52.6</td>
<td>56.7</td>
<td>53.9</td>
<td>51.5</td>
</tr>
</tbody>
</table>
Factory Inventories Up, Bottlenecks Are Few 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 4, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040804d.jpg" width="353">
Factory inventories jumped 0.7% in June following a like, upwardly revised gain in May. The gain was seventh successive month of accumulation.
Unfilled orders also rose, up a strong 0.6% and 8.2% y/y. The gain did not, however, represent much of a bottleneck problem. The ratio of unfilled orders to shipments rose versus the low of last March but remained well below the highs of 2001.
Factory orders rose 0.7% following an upwardly revised 0.4% May gain. Durable goods orders jumped 0.9% versus the advance report of a 0.7% rise.Non-durable goods orders (which equal shipments) rose 0.5% (12.7% y/y) after an upwardly revised 2.0% gain in May.
Factory shipments rose 0.7%. Excluding the transportation sector shipments rose 0.6% for the second consecutive month (12.7% y/y).

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM"> Factory Survey</a> (NAICS)</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>0.7%</td>
<td>0.7%</td>
<td>2.3%</td>
<td>-1.3%</td>
<td>-1.8%</td>
<td>-6.1%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>0.7%</td>
<td>0.4%</td>
<td>12.1%</td>
<td>3.7%</td>
<td>-1.9%</td>
<td>-6.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>0.7%</td>
<td>0.6%</td>
<td>11.7%</td>
<td>2.6%</td>
<td>-2.0%</td>
<td>-5.4%</td>
</tr>
<tr>
<td class="firstcol">Unfilled Orders</td>
<td>0.6%</td>
<td>0.6%</td>
<td>8.2%</td>
<td>4.2%</td>
<td>-6.1%</td>
<td>-5.9%</td>
</tr>
</tbody>
</table>
Mortgage Applications Slipped 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 4, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040804e.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association slipped 0.2% last week after rising 0.6% the prior week. Applications in July rose 8.8% versus June.
Purchase applications rose 1.6% following the 1.0% gain the prior week. The July average was 4.2% higher than June.
During the last ten years there has been a 63% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
Applications to refinance mortgages fell 2.9%, down for the fourth straight week. Refi&#39;s in July were 17.3% ahead of June.
The effective interest rate on a conventional 30-Year mortgage was about stable at 6.26% and 6.24% in July. The effective rate on a 15-year mortgage also was about stable at 5.71%.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org"> here</a>.

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<colgroup><col><col><col><col><col><col></colgroup>
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<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">07/30/04</th>
<th scope="col">07/23/04</th>
<th scope="col"> Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>620.4</td>
<td>621.9</td>
<td>-36.9%</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>452.0</td>
<td>444.8</td>
<td>-1.0%</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,600.3</td>
<td>1,648.8</td>
<td>-60.5%</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
</table>


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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040804d.jpg" width="353">
Factory inventories jumped 0.7% in June following a like, upwardly revised gain in May. The gain was seventh successive month of accumulation.
Unfilled orders also rose, up a strong 0.6% and 8.2% y/y. The gain did not, however, represent much of a bottleneck problem. The ratio of unfilled orders to shipments rose versus the low of last March but remained well below the highs of 2001.
Factory orders rose 0.7% following an upwardly revised 0.4% May gain. Durable goods orders jumped 0.9% versus the advance report of a 0.7% rise.Non-durable goods orders (which equal shipments) rose 0.5% (12.7% y/y) after an upwardly revised 2.0% gain in May.
Factory shipments rose 0.7%. Excluding the transportation sector shipments rose 0.6% for the second consecutive month (12.7% y/y).

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM"> Factory Survey</a> (NAICS)</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>0.7%</td>
<td>0.7%</td>
<td>2.3%</td>
<td>-1.3%</td>
<td>-1.8%</td>
<td>-6.1%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>0.7%</td>
<td>0.4%</td>
<td>12.1%</td>
<td>3.7%</td>
<td>-1.9%</td>
<td>-6.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>0.7%</td>
<td>0.6%</td>
<td>11.7%</td>
<td>2.6%</td>
<td>-2.0%</td>
<td>-5.4%</td>
</tr>
<tr>
<td class="firstcol">Unfilled Orders</td>
<td>0.6%</td>
<td>0.6%</td>
<td>8.2%</td>
<td>4.2%</td>
<td>-6.1%</td>
<td>-5.9%</td>
</tr>
</tbody>
</table>
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Factory inventories jumped 0.7% in June following a like, upwardly revised gain in May. The gain was seventh successive month of accumulation. Unfilled orders also rose, up a strong 0.6% and 8.2% y/y. The gain did not, however, [...]

Factory Inventories Up, Bottlenecks Are Few

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040803e.jpg" width="353">
The Survey of the Distributive Trades conducted by the Confederation of British Industries (CBI) showed that the balance of outlets reporting increases in sales over a year ago in the UK fell from 43 in June to 24 in July. The survey has tended to anticipate year-to-year changes in total retail sales as shown in the attached chart.
The National Statistical Office attributed the strong showing of retail sales in June to Euro 2004, the European soccer tournament that boosted sales of TVs and sportswear. With the ending of Euro 2004 and the impact of higher borrowing costs arising out of the increases in the Bank Rate since last November a moderation in consumer spending or even a decline would not be unusual. Moreover, by June, retail sales had experienced the longest period of expansion--thirteen straight months without a decline--since the data began in 1986.

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<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Jul 04</th>
<th scope="col">Jun 04</th>
<th scope="col">Jul 03</th>
<th scope="col">M/M %</th>
<th scope="col">Y/Y&nbsp;%&nbsp;</th>
<th scope="col">2003 %</th>
<th scope="col">2002 %</th>
<th scope="col">&nbsp;2001 %</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Retail Sales Survey of Distributive Trades (Balance)</td>
<td>24</td>
<td>43</td>
<td>27</td>
<td>-19</td>
<td>-3</td>
<td>14</td>
<td>23</td>
<td>37</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Jun 04</td>
<td>May 04</td>
<td>Jun&nbsp;&nbsp; 03&nbsp;</td>
<td>M/M&nbsp; %</td>
<td>Y/Y&nbsp;%&nbsp;</td>
<td>2003 %</td>
<td>2002&nbsp; %</td>
<td>&nbsp;2001 %</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail Sales Office of National Statistics</td>
<td>120.3</td>
<td>119.7</td>
<td>113.7</td>
<td>0.92</td>
<td>6.24</td>
<td>114.1</td>
<td>111.8</td>
<td>105.9</td>
</tr>
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The Survey of the Distributive Trades conducted by the Confederation of British Industries (CBI) showed that the balance of outlets reporting increases in sales over a year ago in the UK fell from 43 in June to 24 in July. The survey [...]

Distributive Trades Survey in UK Suggests A Slowing or Even a Decline in Retail Sales

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040803c.jpg" width="353">
Chain store sales rose by 0.2% for the third consecutive week according to the International Council of Shopping Centers (ICSC)-UBS.
Sales for all of July rose 0.3% following two month of decline.
During the last ten years there has been a 59% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart. 

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<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM"> ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">07/31/04</th>
<th scope="col">07/24/04</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>441.0</td>
<td>440.2</td>
<td>3.1%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
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Chain store sales rose by 0.2% for the third consecutive week according to the International Council of Shopping Centers (ICSC)-UBS. Sales for all of July rose 0.3% following two month of decline. During the last ten years there has [...]

Chain Store Sales Up Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040803d.jpg" width="353">
Challenger, Gray &amp; Christmas reported that announced job cuts rose 8.1% to 69,572 last month. The gain followed a 12.3% m/m slide in June.
The three month moving average of job cut announcements slipped further to the lowest level since late 2000 (-2.9% y/y).
During the last ten years there has been an 86% (inverse) correlation between the three month moving average of announced job cuts and the three month change payroll employment.
Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.
A new series from Challenger indicated that announced hiring plans in July fell by nearly one-third versus June, but the series dates back only to May.

<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/@S3/@S301/@S301.HTM"> Challenger, Gray &amp; Christmas</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>69,572</td>
<td>64,343</td>
<td>-18.3%</td>
<td>1,236,426</td>
<td>1,431,052</td>
<td>1,956,876</td>
</tr>
</tbody>
</table>
</body>
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Challenger, Gray & Christmas reported that announced job cuts rose 8.1% to 69,572 last month. The gain followed a 12.3% m/m slide in June. The three month moving average of job cut announcements slipped further to the lowest level [...]

Challenger Layoffs Up A Bit

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040803a.jpg" width="353">
Personal income grew an expected 0.2% last month. The slim gain followed growth of 0.6% in the prior two months.
Wages &amp; salaries fell slightly (+4.8% y/y) following several months of strong gain. The decline reflected weakness across industries.
Personal disposable income grew 0.2% (6.2% y/y), down sharply from the gains of the prior several months. After accounting for a 2.5% y/y rise in prices, real disposable income rose 3.5%.
Consumer spending fell 0.7%, dragged lower by a 13.4% m/m skid in unit sales of light vehicles. No change in PCE had been expected. Non-durable goods spending also slipped by 0.3% (+8.4% y/y). Services rose 0.2% (4.9% y/y). <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040803b.jpg" width="353"> 
The PCE chain price index rose 0.2%. Less food &amp; energy prices rose the same 0.1% (1.5% y/y) as the downwardly revised May.
The savings rate fell to 2.0% and prior figures were revised down.
&quot;The Productivity and Jobs Connection: The Long and the Short Run of It&quot; from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2004/el2004-18.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM"> Disposition of Personal Income</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.2%</td>
<td>0.6%</td>
<td>5.4%</td>
<td>3.2%</td>
<td>1.8%</td>
<td>3.5%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>-0.7%</td>
<td>1.0%</td>
<td>5.3%</td>
<td>5.2%</td>
<td>4.6%</td>
<td>4.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>2.0%</td>
<td>1.2%</td>
<td>1.2%</td>
<td>1.4%</td>
<td>2.0%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.2%</td>
<td>0.4%</td>
<td>2.5%</td>
<td>1.9%</td>
<td>1.4%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

Personal income grew an expected 0.2% last month. The slim gain followed growth of 0.6% in the prior two months. Wages & salaries fell slightly (+4.8% y/y) following several months of strong gain. The decline reflected weakness across [...]

U.S. Personal Income Growth Slowed

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040803a.jpg" width="353">
Personal income grew an expected 0.2% last month. The slim gain followed growth of 0.6% in the prior two months.
Wages &amp; salaries fell slightly (+4.8% y/y) following several months of strong gain. The decline reflected weakness across industries.
Personal disposable income grew 0.2% (6.2% y/y), down sharply from the gains of the prior several months. After accounting for a 2.5% y/y rise in prices, real disposable income rose 3.5%.
Consumer spending fell 0.7%, dragged lower by a 13.4% m/m skid in unit sales of light vehicle. No change in PCE had been expected. Non-durable goods spending also slipped by 0.3% (+8.4% y/y). Services rose 0.2% (4.9% y/y). <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040803b.jpg" width="353"> 
The PCE chain price index rose 0.2%. Less food &amp; energy prices rose the same 0.1% (1.5% y/y) as the downwardly revised May.
The savings rate fell to 2.0% and prior figures were revised down.
&quot;The Productivity and Jobs Connection: The Long and the Short Run of It&quot; from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2004/el2004-18.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM"> Disposition of Personal Income</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.2%</td>
<td>0.6%</td>
<td>5.4%</td>
<td>3.2%</td>
<td>1.8%</td>
<td>3.5%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>-0.7%</td>
<td>1.0%</td>
<td>5.3%</td>
<td>5.2%</td>
<td>4.6%</td>
<td>4.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>2.0%</td>
<td>1.2%</td>
<td>1.2%</td>
<td>1.4%</td>
<td>2.0%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.2%</td>
<td>0.4%</td>
<td>2.5%</td>
<td>1.9%</td>
<td>1.4%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
Challenger Layoffs Up A Bit 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 3, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040803d.jpg" width="353">
Challenger, Gray &amp; Christmas reported that announced job cuts rose 8.1% to 69,572 last month. The gain followed a 12.3% m/m slide in June.
The three month moving average of job cut announcements slipped further to the lowest level since late 2000 (-2.9% y/y).
During the last ten years there has been an 86% (inverse) correlation between the three month moving average of announced job cuts and the three month change payroll employment.
Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.
A new series from Challenger indicated that announced hiring plans in July fell by nearly one-third versus June, but the series dates back only to May.

<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/@S3/@S301/@S301.HTM"> Challenger, Gray &amp; Christmas</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>69,572</td>
<td>64,343</td>
<td>-18.3%</td>
<td>1,236,426</td>
<td>1,431,052</td>
<td>1,956,876</td>
</tr>
</tbody>
</table>
Chain Store Sales Up Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 3, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040803c.jpg" width="353">
Chain store sales rose by 0.2% for the third consecutive week according to the International Council of Shopping Centers (ICSC)-UBS.
Sales for all of July rose 0.3% following two month of decline.
During the last ten years there has been a 59% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM"> ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">07/31/04</th>
<th scope="col">07/24/04</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>441.0</td>
<td>440.2</td>
<td>3.1%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

Job openings less than the number unemployed in July for first time in current expansion

Reaccelerating goods price inflation along with sticky services inflation clouds the outlook

Falling oil prices aren't pulling down inflation expectations, pointing to a boost from increased tariffs

Equity market exuberance outpacing macroeconomic data

Apart from Japan, Blue Chip forecasters expect further sizable monetary easing

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

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Andrew Cates

**Gold prices and trade policy uncertainty**
This week’s record-breaking surge in gold prices has coincided with renewed volatility in trade policy uncertainty, reflecting the market’s heightened sensitivity to political and legal developments in Washington. A series of legislative challenges to the administration’s latest tariff measures has raised the prospect that parts of the policy framework could be overturned or significantly diluted. That possibility has injected another layer of uncertainty into an already fragile trade environment, amplifying demand for gold as a hedge. Investors appear to be weighing not only the inflationary risks of tariffs that remain in place but also the destabilizing effects of unpredictable policy reversals, leaving gold prices at historic highs and the trade policy uncertainty index elevated.

250904Z1.jpg

**US Tariffs**
Although the data in this chart extend only through June 2025, they clearly illustrate which trading partners would gain the most if US tariff policies were to be reversed. China stands out as the most heavily penalised, with effective tariff rates rising by more than 25 percentage points in just six months. Japan and South Korea have also faced significant tariff hikes, suggesting that their exporters would benefit substantially from any policy rollback. Taiwan, India, and the EU also feature prominently, though at more moderate levels. By contrast, ASEAN economies, Australia, and the UK have seen relatively smaller increases, leaving them less exposed. In aggregate, a broad reversal of tariffs would most immediately alleviate the pressure on East Asian exporters—particularly China—while also reducing costs for US importers and consumers who have been disproportionately affected by higher prices on goods from the region.

250904Z2.jpg

**The Indian economy and US trade policy** 
India faces a particularly sharp squeeze from the latest wave of US tariff hikes, given that the US now absorbs nearly one-fifth of its exports. The imposition of higher barriers has dealt a direct blow to key sectors, such as textiles and jewellery, while also undermining investor confidence. That pressure is clearly visible in the sharp depreciation of India’s trade-weighted currency, which has accelerated in 2025. Rather than offering a competitiveness boost, the weaker rupee has compounded difficulties by lifting import costs and stoking inflation at home. The result is that tariffs have both curtailed India’s export earnings and strained its domestic economy, leaving policymakers with limited options beyond seeking trade diversification and targeted support measures.

250904Z3.jpg

**Global monetary policy** 
The latest Blue Chip Financial Forecasts survey helps explain why equity markets have remained upbeat despite escalating geopolitical and trade tensions. The survey points to an expected sizeable policy easing over the coming year, particularly in the US and UK where forecasters anticipate close to a full percentage point of rate cuts. Australia and Canada are also projected to deliver meaningful reductions, while the euro area is expected to ease more modestly. Japan stands out as the exception, with expectations tilted toward further tightening. For equities, these projections of broad-based rate cuts provide a crucial cushion—supporting valuations, lowering discount rates, and reinforcing the sense that policymakers are prepared to offset the drag from tariffs and slowing global growth.

250904Z4.jpg

**Euro area inflation** 
By contrast with the US and UK, where forecasters in the latest Blue Chip Financial Forecasts survey anticipate close to a full percentage point of rate cuts, expectations for the ECB are more restrained. This reflects the fact that the ECB has already delivered a relatively large degree of policy easing, while headline inflation has now fallen back to levels close to its target. Even so, further rate reductions remain likely if underlying price pressures continue to moderate. As the chart shows, services inflation has begun to move lower in line with a clear decline in wage growth, suggesting that disinflationary momentum is building. Should this trend persist, the ECB will have scope to add to its easing cycle, though at a slower and more cautious pace than peers such as the Fed or the Bank of England.

250904Z5.jpg

**Prices and cost pressures in the US corporate sector** 
Corporate profitability has long been one of the best leading signals for US equity cycles, and the measure here (Non-financial corporate profits per unit of output – i.e. profit margins) has slipped from its late-2023 peak and moved sideways for much of the past year. That’s not a collapse, but it does raise questions about how long equities can keep rising without stronger profit momentum. The recent Q2 uptick—a 1.8% annualised gain—came despite a hefty rise in non-labour costs, with margins protected by modest pricing power and a notable 2.2% drop in unit labour costs. Whether that labour relief reflects softer wage pressures or a structural productivity boost—potentially tied to AI—will be crucial in determining if profits can remain resilient, or if this plateau is the prelude to a downturn.

250904Z6.jpg

Equity markets have lost a little ground in recent days and bond markets have been more jittery, as legal challenges to US tariff policies add to a tense backdrop of geopolitical meetings between China, Russia, and India. Gold’s surge to record highs arguably captures the search for safe havens amid this uncertainty (chart 1), while the possibility of tariff reversals keeps alive the prospect of relief for the most affected exporters, notably China, Japan, and South Korea (chart 2). India’s position looks more precarious, with its reliance on the US market colliding with a weakening trade-weighted currency as tariffs bite into growth and investor confidence (chart 3). Monetary policy expectations, however, continue to offer some support, with the latest Blue Chip Financial Forecasts survey pointing to sizeable easing in the US and UK (chart 4). The ECB is expected to tread more cautiously after earlier cuts and with headline inflation now near target. Still, if inflation continues to ease, further action remains possible (chart 5). In the US, corporate resilience is also helping offset some of the gloom: despite tariff-driven spikes in non-labour costs, falling unit labour costs—possibly aided by AI productivity gains—and firmer prices allowed profits per unit of output to rise in Q2 (chart 6).

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/0sd6yLt6aGEGOdVpZ2VZbW?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: A Few Cuts More

250904N12.jpg

250904O12.jpg

The U.S. ISM Services PMI increased to 52.0 in August after falling to 50.1 in July from 50.8 in June, according to the Institute for Supply Management. The index had been declining since it reached 53.5 in February. The index hit a recent high of 55.8 in October of last year and remains below the all-time high of 67.5 in November 2021. The Action Economics Forecast Survey expected a reading of 51.0 for August.

The ISM Composite Index combines the services index and the manufacturing index released on Tuesday. This index rose to 51.6 in August from 49.8 in July. This also was the highest level in six months.

Amongst the services component series, the business activity index rose to 55.0 last month after falling to 52.6 in July. Twenty-three percent (NSA) of respondents reported improved activity while 14.2% reported decline. The new orders index increased to 56.0 from 50.3 in July. Twenty-seven percent (NSA) of respondents reported improved orders while a lessened 16.2% reported decline. The employment series was little-changed in August at 46.5, after falling from 47.2 in June. A lessened 10.3% (NSA) of respondents reported increased employment while a lower 16.8% reported decline. Working lower, the supplier delivery series fell to 50.3 in August after rising to 51.0 in July. Four percent of respondents (NSA) reported faster delivery speeds while 4.5% reported slower speeds.

On the inflation front, the prices index eased to 69.2 after surging to 69.9 in July. A lessened 36.7% (NSA) of respondents reported higher prices while 2.6% reported lower prices. The index has increased from its December 2023 53.1.

Additionally, the new export orders index eased to 47.3 (NSA) in July following a decline to 47.9 in July. Twelve percent of survey respondents reported higher exports while 16.9% reported decline. The imports index surged to 54.6 last month after falling to 45.9 in July. A higher 18.9%% of respondents reported higher imports while a lessened 9.8% reported decline. The inventory change index rose to 53.2 from 51.8 and the order backlog index fell to 40.4 in August after rising to 44.3 in July. These series are not seasonally adjusted and not included in the ISM Services PMI total.

The ISM Services PMI is a composite index consisting of four equally weighted diffusion indexes: Business Activity, New Orders, Employment, and Supplier Deliveries. A reading above 50 indicates expansion in the services sector, while below 50 suggests contraction. Supplier Deliveries is the only ISM index that is inversed; a reading above 50 indicates slower deliveries.

The ISM figures are available in Haver's **USECON** database, with additional detail in the **SURVEYS** database. The expectations figure from Action Economics is in the **AS1REPNA** database.

250904P12.jpg

250904Q12.jpg

- Total index rebounds to six-month high.	
- Business activity and new orders improve.
- Prices index eases.

U.S. ISM Services PMI Increases in August

250904J5.jpg

250904K5.jpg

The ADP National Employment Report indicated that nonfarm private sector payrolls rose 54,000 (1.1% y/y) during August after increasing 106,000 in July, revised from 104,000 and declining an unrevised 23,000 in June. The Action Economic Forecast Survey expected a 75,000 increase in August.

Small business hiring (less than 50 employees) increased 12,000 (0.4% y/y) in August after an 8,000 July rise, revised from 12,000. Employment at medium-sized firms (50-499 employees) rose 25,000 (1.1% y/y) in August after increasing 53,000 in July, revised from 46,000. Large business hiring (500+ employees) gained 18,000 (2.4% y/y) following a 47,000 July increase, revised from 46,000.

Goods-producing employment rose 13,000 (1.3% y/y) after increasing 32,000 in July. Construction jobs increased 16,000 (2.4% y/y) following a 13,000 gain in July. Manufacturing jobs declined 7,000 (+0.1% y/y), after two months of moderate increase. Natural resources and mining jobs increased 4,000 (4.1% y/y) in August after rising 11,000 in July.

Service-producing jobs increased 42,000 (1.0% y/y) after a 74,000 July gain. Changes amongst industry sectors were mixed. Leisure & hospitality employment rose 50,000 (3.5% y/y) after increasing 45,000 in July. Professional & business jobs improved 15,000 (0.5% y/y) following a 9,000 increase. Information sector employment rose 7,000 (1.1% y/y) after increasing 9,000.  Working lower, trade, transportation & utilities employment fell 17,000 (+0.3% y/y) after rising 20,000 in July. Education & health services posted a 12,000 decline (+0.2% y/y) after falling 40,000 in July. This was the sixth decline in seven months. Financial activities employment slid 2,000 (+1.9% y/y) after a 28,000 strengthening.

By region, in the Northeast the number of jobs rose 15,000 (1.2% y/y) in August following four consecutive monthly declines. Jobs rose 14,000 (1.3% y/y) in the Midwest after increasing 12,000 in July. In the West, jobs rose 8,000 (0.8% y/y) following a 67,000 increase, and in the South, employment rose 4,000 (0.8% y/y) following a 40,000 July strengthening.

Wage growth for job-stayers continued to moderate in August as year/year growth of median annual pay weakened to 4.4% from 4.5% in July, the slowest pace since June 2021. The slowdown in wage growth for job-stayers was widespread across major industries. Wage growth for job-changers was steady at 7.1% y/y, but down from a high of 16.1% in April 2022.

The ADP National Employment Report and Pay Insights data can be found in Haver's **USECON** database. Historical figures date back to January 2010 for private employment. Pay data date back to October 2020. The expectation figure is available in Haver's **AS1REPNA** database.

250904L5.jpg

250904M5.jpg

- Private payroll job increase is half July’s gain.
- Goods-producing employment slows as factory hiring falls; service-sector jobs also moderate.
- Job-stayer wage growth eases.

U.S. ADP Employment Increase Slows in August

Sandy Batten

250904J8.jpg

250904K8.jpg

The U.S. trade deficit in goods and services (BOP basis) widened to $78.3 billion in July from a slightly downwardly revised $59.1 billion in June (previously -$60.2 billion), according to the U.S. Census Bureau. This was the largest trade shortfall since March. The Action Economics Forecast Survey expected a deficit of $78.6 billion. The goods deficit ballooned to $103.9 billion from $85.7 billion in June, while the services surplus narrowed to $25.6 billion, its smallest reading since January 2024, from $26.6 billion in June. The real (inflation-adjusted) trade deficit widened to $100.1 billion (2017$) from $84.6 billion in June. The surge in the deficit in July is a very poor beginning for Q3 GDP as it indicates that the trade deficit could once again be a big drag on real GDP growth after contributing nearly 5%-points in Q2.

The marked widening in the goods trade deficit was led by a 25.9% m/m surge in imports of industrial goods. This once again reflected an outsized jump in imports of nonmonetary gold but also contained a significant increase in copper imports. The jump in nonmonetary gold imports will not be included in the calculation of real GDP but the jump in copper imports will.

Goods exports were essentially unchanged in July (+3.2% y/y) after having fallen 0.6% m/m in June. Auto exports increased 2.7%, the third monthly gain. Capital goods exports excluding autos rose 0.9% m/m. In contrast, exports of industrial supplies fell 0.4% m/m, their third consecutive monthly decline. Exports of consumer goods excluding autos slid 0.9% m/m, their first decline in three months.

Goods imports jumped 7.0% m/m (+1.6% y/y) after having declined in each of the preceding three months. As noted above, the July jump was led by a surge in imports of industrial supplies. In this category, imports of nonmonetary gold surged more than $9 billion while copper rebounded. Capital goods imports rose a solid 5.1% m/m, and imports of consumer goods excluding autos increased 2.2% m/m after a 12.7% fall in June. In contrast, auto imports fell 4.0% m/m, their third monthly decline in the past four months.

Services exports edged up 0.6% m/m (4.8% y/y) in July. Transport services exports rose 3.1% m/m; charges for use of intellectual property increased 1.5% m/m; exports of government goods and services jumped 5.5% m/m, the first monthly gain in ten months. In contrast, travel exports fell 1.7% m/m. Services imports increased 2.3% m/m (+6.7% y/y) in July. The monthly increase was widespread across major sectors. Travel increased 3.4% m/m; transport services rose 4.7% m/m; imported construction services gained 3.4% m/m, their first monthly gain in seven months; imports of telecommunications and information services increased 1.9% m/m.

After having narrowed in each of the previous five months, the goods trade deficit with China in July widened to $14.7 billion from $9.4 billion in June. Exports to China edged down 0.2% m/m while imports from China jumped 27.3% m/m, their largest monthly increase since 2020. The trade deficit with the European Union narrowed further to $8.6 billion in July from $9.5 billion in June. The deficit with Japan narrowed further to $4.8 billion from $5.7 billion in June.

The international trade data can be found in Haver’s **USECON** database. Detailed figures on international trade are available in the **USINT** and **USTRADE** databases. The expectations figures are from the Action Economics Forecast Survey in **AS1REPNA**.

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- The trade deficit widened to $78.3 billion in July from $59.1 billion in June.
- This was the largest deficit since March.
- Exports rebounded, increasing by 0.3% m/m after a 0.3% m/m decline in June.
- Imports surged, rising 5.9% following a 3.6% decline in June.
- The July import surge was led by imports of industrial supplies.

U.S. Trade Deficit Widened in July

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In the second estimate, nonfarm business labor productivity in Q2 jumped 3.3%q/q saar, up from the 2.4% increase in the advance report and a sharp rebound from the 1.8% quarterly decline in Q1. The revised Q2 reading was the strongest quarterly growth since Q4 2023. The Action Economics Forecast Survey expected a slight upward revision to 2.6% quarterly growth. Compared with a year ago, productivity growth picked up to 1.5% from 1.2% in Q1.

Nonfarm business output growth was revised up to 4.4% from 3.7% in the advance report and up markedly from a 0.6% quarterly decline in Q1. Growth of hours worked was revised down to 1.1% from 1.3%, about the same as the 1.2% increase in Q1. Compensation growth was revised up to 4.3% from 4.0% in the advance report, but a slowdown from the 5.0% quarterly gain in Q1 and 5.5% surge in last year’s Q4. The marked upward revision to output growth more than offset the upward revision to compensation. Consequently, unit labor cost growth slowed to 1.0% from 1.6% in the advance report and a 6.9% quarterly surge in Q1. Compared to a year ago, growth of unit labor costs picked up to 2.5% from 2.0% in Q1.

Factory sector productivity growth in Q2 was also revised up, to 2.5% from 2.1% in the advance report but a slowdown from 3.1% in Q1. Growth of factory output was revised up slightly to 2.4% from 2.3%, while hours worked were revised down significantly to a 0.1% quarterly decline from a 0.3% quarterly increase in the advance report. Factory compensation growth in Q2 was revised up to 4.5% from 3.8% previously. The upward revision to compensation overwhelmed the upward revision to factory productivity. As a result, growth in factory unit labor costs was revied up to 2.0% from 1.7% previously but still down from the 3.1% quarterly increase posted in Q1.

The productivity and labor cost data are available in Haver’s **USECON** database. The Action Economics expectations figures are in the **AS1REPNA** database.

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- Productivity jumped 3.3% saar in Q2, up markedly from 2.4% in the advance report.
- This is the largest quarterly rise in productivity since Q4 2023.
- Growth in nonfarm output was revised up to 4.4% from 3.7% previously while growth of hours worked was revised down to 1.1% from 1.3%.
- Compensation growth was revised up but the large upward revision to productivity still enabled growth of unit labor costs to be revised down.

Economy in Brief: 2004

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July U.S. Light Vehicle Sales Rebounded

July U.S. Light Vehicle Sales Rebounded

Factory Inventories Up, Bottlenecks Are Few

Distributive Trades Survey in UK Suggests A Slowing or Even a Decline in Retail Sales

Chain Store Sales Up Again

Challenger Layoffs Up A Bit

U.S. Personal Income Growth Slowed

U.S. Personal Income Growth Slowed