Carol Stone, CBE

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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>
UK's "Rightmove" House
Price Index in Second Year-to-Year Decline 
by <a href="/comment/Curley.html">Louise
Curley</a> August 18, 2008


<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 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

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080815c.jpg" width="353">
The University of Michigan&#39;s mid-August reading of consumer sentiment ticked up 0.8% from July to 61.7. The gain followed the 8.5% increase in July and the level about matched Consensus expectations for a reading of 62.0. The latest level of sentiment was the highest since March.
During the last ten years there has been a 47% correlation between the level of sentiment and the three month change in real consumer spending.
The expectations component of overall sentiment led the August improvement with a 6.2% rise after the 8.7% increase during July. Expectations for business conditions during the next year rose again as did expectations for conditions during the next five years. They made up nearly all of a sharp July decline.The expected change in personal finances fell modestly after a strong July increase.
The current conditions index was weak and fell 5.2%. That reversed most of the improvement during July. The decline was due to a sharp decline in the index of whether now is a good time to buy large household goods. It reversed the strength in the July reading. The view of current personal finances also fell (-31.1% y/y) early this month.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080815d.jpg" width="353">
The opinion of government policy, which apparently influences economic expectations, stabilized after a sharp decline in July. Only seven percent of respondents thought that a good job was being done.
The mean expected rate of inflation during the next twelve months fell further to 5.5%. During the next five years, however, the expected inflation rate rose to 3.8% .
The University of Michigan survey is not seasonally adjusted.The reading is based on telephone interviews with about 500 households at month-end; the mid-month results are based on about 300 interviews. The summary indexes are in Haver&#39;s USECON database, with details in the proprietary UMSCA database.
How Much Have U.S. House Prices Fallen? from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/net/20080801/cover.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><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/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">August (Prelim.)</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Aug. y/y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>61.7</td>
<td>61.2</td>
<td>56.4</td>
<td>-26.0% </td>
<td>85.6</td>
<td>87.3</td>
<td>88.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>69.3</td>
<td>73.1</td>
<td>67.6</td>
<td>-29.6%</td>
<td>101.2</td>
<td>105.1</td>
<td>105.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>56.8</td>
<td>53.5</td>
<td>49.2</td>
<td>-22.9%</td>
<td>75.6</td>
<td>75.9</td>
<td>77.4</td>
</tr>
</tbody>
</table>
</body>
</html>

The University of Michigan's mid-August reading of consumer sentiment ticked up 0.8% from July to 61.7. The gain followed the 8.5% increase in July and the level about matched Consensus expectations for a reading of 62.0. The latest [...]

Michigan Consumer Sentiment Rose Slightly Early in August

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080815e.jpg" width="353">
For July, industrial production rose 0.2% after an unrevised 0.5% gain during June. Consensus expectations had been for no change in output last month.
Utility output reversed its June increase and fell by 1.8% as the summer heat moderated.
Factory output increased 0.4% which was its best monthly increase since last September. In addition, the three-month rate change improved to 2.2% (AR) which was its best since since last September. Output of motor vehicles &amp; parts was strong during the last two months and rose 3.6% (-10.4% y/y) after a 4.8% June increase. The strike was settled at American Axel company.
The trend in output outside the high-tech sector has been decidedly weak due to that strike. Less high-tech, factory output did repeat its June rise of 0.2% and three-month output growth rose to 1.9% (AR). But the industry detail continued mixed. July output of furniture fell 0.9% and at a 7.0% rate during the last three months. Apparel output dropped 0.5% last month. To the upside was output of electrical equipment rose at a 4.2% rate during the last three months. Machinery output recovered some of its earlier weakness with a 2.5% rise during the last three months.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080815f.jpg" width="353">
Production in the high tech sector rose 0.3% (17.4% y/y) during July but that y/y growth was down from the peak in March of 27.6%. Production of computers &amp; office equipment rose 0.7% (15.4% y/y) but the three-month growth rate is slower at 6.9% (AR). Output of communications equipment fell 0.2% last month and three-month growth was a negative 1.4%.
Capacity utilization ticked up to 79.9%. Utilization in the factory sector rose to 77.8%, near its lowest also since late-2004.
Will Farmland Values Keep Booming? from the Federal Reserve Bank of Kansas City can be found <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/2q08henderson.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">INDUSTRIAL PRODUCTION (SA, %)</th>
<th scope="col">July</th>
<th scope="col">June</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 Output</td>
<td>0.2</td>
<td>0.5</td>
<td>-0.2</td>
<td>1.7</td>
<td>2.2</td>
<td>3.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Manufacturing</td>
<td>0.4</td>
<td>0.1</td>
<td>-1.1</td>
<td>1.7</td>
<td>2.4</td>
<td>4.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp; Consumer Goods</td>
<td>0.3</td>
<td>0.9</td>
<td>-1.1</td>
<td>1.7</td>
<td>0.3</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp; Business Equipment</td>
<td>0.8</td>
<td>0.2</td>
<td>1.2</td>
<td>3.3</td>
<td>10.4</td>
<td>7.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp; Construction Supplies</td>
<td>0.2</td>
<td>-0.2</td>
<td>-5.3</td>
<td>-2.5</td>
<td>2.2</td>
<td>4.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Utilities</td>
<td>-1.8</td>
<td>2.2</td>
<td>2.6</td>
<td>3.3</td>
<td>-0.6</td>
<td>2.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Capacity Utilization</td>
<td>79.9</td>
<td>79.8</td>
<td>81.4</td>
<td>81.0</td>
<td>80.9</td>
<td>80.2</td>
</tr>
</tbody>
</table>
</body>
</html>

For July, industrial production rose 0.2% after an unrevised 0.5% gain during June. Consensus expectations had been for no change in output last month. Utility output reversed its June increase and fell by 1.8% as the summer heat [...]

U.S. Industrial Production Rose

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080815a.jpg" width="353">
The Federal Reserve Bank of New York reported that its July index of manufacturing activity in the Empire State improved to a slightly positive 2.77 after having been at -4.92 during June. It was the first positive reading since April though the level of the index remained quite low. A reading of -4.2 for July had been the Consensus expectation.
The figure is a diffusion index. Since the series&#39; inception in 2001 there has been a 55% correlation between the index level and the three-month change in U.S. factory sector industrial production.
The subseries for new orders, shipments and the number of employees all remained negative last month while the series for inventories and the average employee workweek turned positive.
The employment index was near the most negative reading since 2003. In the (perhaps too) short seven year history of the NY employment index, there has been an 86% correlation between it and the three-month growth in overall factory sector employment.
Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question; it is not a weighted combination of the components.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080815b.jpg" width="353">
Pricing pressure eased to its lowest level since April after hitting a series&#39; high in June. Since inception in 2001 there has been an 81% correlation between the index of prices paid and the three-month change in the core intermediate materials PPI.
The Empire State index of expected business conditions in six months improved to its highest level this year after having fallen sharply in June. The subseries for new orders and shipments were up sharply while the employment series showed just a modest gain.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead.
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html">here</a>.
The Changing Nature of the U.S. Balance of Payments from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/current_issues/ci14-4.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/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">July &#39;07&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions (diffusion index, %)&nbsp;&nbsp;</td>
<td>2.77</td>
<td>-4.92</td>
<td>25.18</td>
<td>17.23</td>
<td>20.24</td>
<td>15.53</td>
</tr>
<tr>
<td class="firstcol">Prices Paid</td>
<td>65.17</td>
<td>77.89</td>
<td>34.41</td>
<td>35.64</td>
<td>41.88</td>
<td>44.74</td>
</tr>
</tbody>
</table>


</html>

The Federal Reserve Bank of New York reported that its July index of manufacturing activity in the Empire State improved to a slightly positive 2.77 after having been at -4.92 during June. It was the first positive reading since April [...]

U.S. Empire State Index Slightly Positive

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080815a.jpg" width="353">
The Federal Reserve Bank of New York reported that its July index of manufacturing activity in the Empire State improved to a slightly positive 2.77 after having been at -4.92 during June. It was the first positive reading since April though the level of the index remained quite low. A reading of -4.2 for July had been the Consensus expectation.
The figure is a diffusion index. Since the series&#39; inception in 2001 there has been a 55% correlation between the index level and the three-month change in U.S. factory sector industrial production.
The subseries for new orders, shipments and the number of employees all remained negative last month while the series for inventories and the average employee workweek turned positive.
The employment index was near the most negative reading since 2003. In the (perhaps too) short seven year history of the NY employment index, there has been an 86% correlation between it and the three-month growth in overall factory sector employment.
Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question; it is not a weighted combination of the components.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080815b.jpg" width="353">
Pricing pressure eased to its lowest level since April after hitting a series&#39; high in June. Since inception in 2001 there has been an 81% correlation between the index of prices paid and the three-month change in the core intermediate materials PPI.
The Empire State index of expected business conditions in six months improved to its highest level this year after having fallen sharply in June. The subseries for new orders and shipments were up sharply while the employment series showed just a modest gain.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead.
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html">here</a>.
The Changing Nature of the U.S. Balance of Payments from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/current_issues/ci14-4.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/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">July &#39;07&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions (diffusion index, %)&nbsp;&nbsp;</td>
<td>2.77</td>
<td>-4.92</td>
<td>25.18</td>
<td>17.23</td>
<td>20.24</td>
<td>15.53</td>
</tr>
<tr>
<td class="firstcol">Prices Paid</td>
<td>65.17</td>
<td>77.89</td>
<td>34.41</td>
<td>35.64</td>
<td>41.88</td>
<td>44.74</td>
</tr>
</tbody>
</table>
U.S. Industrial Production Rose 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 15, 2008


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080815e.jpg" width="353">
For July, industrial production rose 0.2% after an unrevised 0.5% gain during June. Consensus expectations had been for no change in output last month.
Utility output reversed its June increase and fell by 1.8% as the summer heat moderated.
Factory output increased 0.4% which was its best monthly increase since last September. In addition, the three-month rate change improved to 2.2% (AR) which was its best since since last September. Output of motor vehicles &amp; parts was strong during the last two months and rose 3.6% (-10.4% y/y) after a 4.8% June increase. The strike was settled at American Axel company.
The trend in output outside the high-tech sector has been decidedly weak due to that strike. Less high-tech, factory output did repeat its June rise of 0.2% and three-month output growth rose to 1.9% (AR). But the industry detail continued mixed. July output of furniture fell 0.9% and at a 7.0% rate during the last three months. Apparel output dropped 0.5% last month. To the upside was output of electrical equipment rose at a 4.2% rate during the last three months. Machinery output recovered some of its earlier weakness with a 2.5% rise during the last three months.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080815f.jpg" width="353">
Production in the high tech sector rose 0.3% (17.4% y/y) during July but that y/y growth was down from the peak in March of 27.6%. Production of computers &amp; office equipment rose 0.7% (15.4% y/y) but the three-month growth rate is slower at 6.9% (AR). Output of communications equipment fell 0.2% last month and three-month growth was a negative 1.4%.
Capacity utilization ticked up to 79.9%. Utilization in the factory sector rose to 77.8%, near its lowest also since late-2004.
Will Farmland Values Keep Booming? from the Federal Reserve Bank of Kansas City can be found <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/2q08henderson.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">INDUSTRIAL PRODUCTION (SA, %)</th>
<th scope="col">July</th>
<th scope="col">June</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 Output</td>
<td>0.2</td>
<td>0.5</td>
<td>-0.2</td>
<td>1.7</td>
<td>2.2</td>
<td>3.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Manufacturing</td>
<td>0.4</td>
<td>0.1</td>
<td>-1.1</td>
<td>1.7</td>
<td>2.4</td>
<td>4.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp; Consumer Goods</td>
<td>0.3</td>
<td>0.9</td>
<td>-1.1</td>
<td>1.7</td>
<td>0.3</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp; Business Equipment</td>
<td>0.8</td>
<td>0.2</td>
<td>1.2</td>
<td>3.3</td>
<td>10.4</td>
<td>7.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp; Construction Supplies</td>
<td>0.2</td>
<td>-0.2</td>
<td>-5.3</td>
<td>-2.5</td>
<td>2.2</td>
<td>4.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Utilities</td>
<td>-1.8</td>
<td>2.2</td>
<td>2.6</td>
<td>3.3</td>
<td>-0.6</td>
<td>2.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Capacity Utilization</td>
<td>79.9</td>
<td>79.8</td>
<td>81.4</td>
<td>81.0</td>
<td>80.9</td>
<td>80.2</td>
</tr>
</tbody>
</table>
Michigan Consumer Sentiment Rose Slightly Early in August 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 15, 2008


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080815c.jpg" width="353">
The University of Michigan&#39;s mid-August reading of consumer sentiment ticked up 0.8% from July to 61.7. The gain followed the 8.5% increase in July and the level about matched Consensus expectations for a reading of 62.0. The latest level of sentiment was the highest since March.
During the last ten years there has been a 47% correlation between the level of sentiment and the three month change in real consumer spending.
The expectations component of overall sentiment led the August improvement with a 6.2% rise after the 8.7% increase during July. Expectations for business conditions during the next year rose again as did expectations for conditions during the next five years. They made up nearly all of a sharp July decline.The expected change in personal finances fell modestly after a strong July increase.
The current conditions index was weak and fell 5.2%. That reversed most of the improvement during July. The decline was due to a sharp decline in the index of whether now is a good time to buy large household goods. It reversed the strength in the July reading. The view of current personal finances also fell (-31.1% y/y) early this month.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080815d.jpg" width="353">
The opinion of government policy, which apparently influences economic expectations, stabilized after a sharp decline in July. Only seven percent of respondents thought that a good job was being done.
The mean expected rate of inflation during the next twelve months fell further to 5.5%. During the next five years, however, the expected inflation rate rose to 3.8% .
The University of Michigan survey is not seasonally adjusted.The reading is based on telephone interviews with about 500 households at month-end; the mid-month results are based on about 300 interviews. The summary indexes are in Haver&#39;s USECON database, with details in the proprietary UMSCA database.
How Much Have U.S. House Prices Fallen? from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/net/20080801/cover.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">August (Prelim.)</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Aug. y/y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>61.7</td>
<td>61.2</td>
<td>56.4</td>
<td>-26.0% </td>
<td>85.6</td>
<td>87.3</td>
<td>88.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>69.3</td>
<td>73.1</td>
<td>67.6</td>
<td>-29.6%</td>
<td>101.2</td>
<td>105.1</td>
<td>105.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>56.8</td>
<td>53.5</td>
<td>49.2</td>
<td>-22.9%</td>
<td>75.6</td>
<td>75.9</td>
<td>77.4</td>
</tr>
</tbody>
</table>


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Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080814f.jpg" align="left" border="0" height="265" width="353">
EMU GDP fell in 2008 Q2the first time since EMU-wide GDP data
have been collected. Declines were experienced across the main EMU
nations. Yr/Yr EMU growth is still 1.5% Italy&#8217;s growth is flat
year/year. Germany is still at 1.7% Yr/Yr. This was the first
quarter-on-quarter decline in EMU GDP since well before the euro was
launched in 1998. Eurostat has constructed a series for the 15 current
members of the euro zone that goes back to the start of 1995. The
weakest performance on record for that period had been the stagnant
second quarter of 2003. That now has been surpassed. 
 

Q2 was not a good one for the global economy with most of the
major economies showing Q/Q declines in GDP &#8211; the US and UK are
exceptions. The Bundesbank put out a statement warning Germans not to
get too pessimistic about growth: "The German economy has got to get
through a rough patch for growth in the coming months. But overall
there's no reason for excessive pessimism based on the development of
the first half of the year," the German central bank said in a
statement. Still the data are clear and the industrial trends still
point lower. EMU inflation was revised to be one tenth of one percent
less in July to 4% Yr/Yr. Still it si double the allowable ceiling for
the ECB. 
 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col">E-Zone and main G-10 country GDP Results </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Quarter over quarter-Saar</td>
<td colspan="4">Year/Year</td>
</tr>
<tr class="even">
<td class="firstcol">GDP</td>
<td>Q2-08</td>
<td>Q1-08</td>
<td>Q4-07</td>
<td>Q2-08</td>
<td>Q1-08</td>
<td>Q4-07</td>
<td>Q3-07</td>
</tr>
<tr class="odd">
<td class="firstcol">EMU-15</td>
<td>-0.8%</td>
<td>2.9%</td>
<td>1.5%</td>
<td>1.5%</td>
<td>2.1%</td>
<td>2.2%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>-1.2%</td>
<td>1.6%</td>
<td>1.5%</td>
<td>1.1%</td>
<td>2.0%</td>
<td>2.2%</td>
<td>2.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>-2.0%</td>
<td>5.2%</td>
<td>1.4%</td>
<td>1.7%</td>
<td>2.6%</td>
<td>1.7%</td>
<td>2.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>-1.1%</td>
<td>2.0%</td>
<td>-1.7%</td>
<td>0.0%</td>
<td>0.3%</td>
<td>0.2%</td>
<td>1.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">The Netherlands</td>
<td>-0.2%</td>
<td>1.5%</td>
<td>5.2%</td>
<td>2.8%</td>
<td>3.7%</td>
<td>4.1%</td>
<td>3.5%</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>0.7%</td>
<td>1.1%</td>
<td>2.5%</td>
<td>1.6%</td>
<td>2.3%</td>
<td>2.8%</td>
<td>3.0%</td>
</tr>
<tr>
<td class="firstcol">US</td>
<td>1.9%</td>
<td>0.9%</td>
<td>-0.2%</td>
<td>1.8%</td>
<td>2.5%</td>
<td>2.3%</td>
<td>2.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Japan</td>
<td>-2.4%</td>
<td>3.2%</td>
<td>2.4%</td>
<td>1.0%</td>
<td>1.2%</td>
<td>1.4%</td>
<td>1.8%</td>
</tr>
</tbody>
</table>
</body></html>

EMU GDP fell in 2008 Q2the first time since EMU-wide GDP data have been collected. Declines were experienced across the main EMU nations. Yr/Yr EMU growth is still 1.5% Italy’s growth is flat year/year. Germany is still at 1.7% Yr/Yr. [...]

EMU GDP in Clear Downtrend and Declining Across the Board

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080814d.jpg" width="353">
Initial claims for unemployment insurance dipped last week to 450,000 from an upwardly revised 460,000 during the prior week. The latest levels were the highest since March of 2002 and the most recent surpassed Consensus expectations for 432,000 claims.
A program to locate people eligible for jobless benefits may have continued to play a role in last week&#39;s elevated level of claims.
The four-week moving average increased to 440,500 (39.6% y/y), the highest level since near the end of the 2001 recession 2001. During July claims averaged 383,440.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080814e.jpg" width="353">
A claims level below 400,000 typically has been associated with growth in nonfarm payrolls. During the last ten years there has been a (negative) 76% correlation between the level of initial claims and the m/m change in nonfarm payroll employment. Over the longer period of time, the level of claims for jobless insurance has not trended higher with the size of the labor force due to a higher proportion of self-employed workers who are not eligible for benefits.
Continuing claims for unemployment insurance during the latest week jumped 114,000 after a little revised 25,000 rise during the prior week. The four-week moving average of continuing claims rose to 3,273,750 which was its highest level since late-2003.
Continuing claims provide some indication of workers&#39; ability to find employment and they lag the initial claims figures by one week.
The insured rate of unemployment rose further to 2.6%, the highest level since late-2003.
Thoughts About the Phillips Curve is a paper presented by Paul A. Samuelson and it is available <a href="http://www.bos.frb.org/economic/conf/conf53/papers/Samuelson.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">08/09/08</th>
<th scope="col">08/02/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;450</td>
<td>460</td>
<td>39.3%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,417</td>
<td>33.7%</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
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Initial claims for unemployment insurance dipped last week to 450,000 from an upwardly revised 460,000 during the prior week. The latest levels were the highest since March of 2002 and the most recent surpassed Consensus expectations [...]

U.S. Initial Claims for Unemployment Insurance Dipped

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080814a.jpg" width="353">
The consumer price index (CPI-U) for July rose 0.8%. That was down somewhat from the June increase of 1.1%, according to the Bureau of Labor Statistics, but the gain was double the Consensus expectation for a 0.4% rise. The Y/Y increase of 5.6% was the fastest since late 1990.
For June and July together, prices rose at an 11.8% annual rate. Except for a short-lived spike in mid-2005 that was the fastest rate of increase since 1982.
Energy prices jumped another 4.0% in July after increases of 6.6% and 4.4% during the prior two months. Fuel oil prices continued strong and posted a 1.3% (61.1% y/y) increase while natural gas &amp; electricity prices jumped 4.0% (15.0% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080814b.jpg" width="353">
Gasoline prices jumped a seasonally adjusted 4.1% in July and they were up 37.9% y/y. Not seasonally adjusted gasoline prices, however, rose just 0.7% m/m last month and they are down 5.2% m/m on average so far in August.
Food &amp; beverage prices continued strong. A 0.9% July increase lifted the y/y gain to 5.8% and that was the fastest since 1990. Prices for cereals &amp; bakery products rose at a 17.0% rate during the last three months while dairy and related products increased at a 13.2% rate. Prices for meats poultry &amp; fish showed increased upward pressure and they rose at an 8.1% rate while dairy product prices surged at an 13.2% rate during the last three months.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080814c.jpg" width="353">
Less food &amp; energy consumer prices beat expectations, slightly, with a 0.3% increase which matched the June rise. During the last three months the increase in core prices accelerated to a 3.5% annual rate which was the quickest since mid-2006.
Core goods prices jumped 0.5%, the fastest m/m increase since 1999. On a three-month basis prices rose at an accelerated 1.7% rate, the fastest since late 2004. Higher apparel prices led the recent strength with a 1.2% (0.7% y/y) increase. Prices for household furnishings &amp; operations also were firm and they rose 0.4% (0.8% y/y). Prices for new &amp; used motor vehicles nudged up 0.2% but they were down 0.3% year-to-year. In July, tobacco prices jumped 1.2% (7.7% y/y).
Core services prices again were firm and they rose 0.3%. That lifted the three-month growth rate to 4.1%, the fastest in two years. Public transportation prices remained strong. They posted a 1.1% July increase (14.5% y/y), rising at a 31.2% annual rate during the last three months. Medical care services prices rose a reduced 0.2% (4.1% y/y) and shelter prices also rose just 0.2% (2.5% y/y) in July. That was the weakest y/y gain since early 2006. Owners equivalent rent of primary residence, a measure not equivalent to other house price measures, nudged up 0.1% (2.6% y/y) and rents rose 0.3% (3.7% y/y). Education costs rose another 0.5% (5.7% y/y) after a 2.4% rise during all of 2007.
The chained CPI, which adjusts for shifts in consumption patterns, rose 0.4%. Less food and beverages chained prices rose 0.2%.

<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/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a> (%)</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Total&nbsp;</td>
<td>0.8</td>
<td>1.1</td>
<td>5.6</td>
<td>2.9</td>
<td>3.2</td>
<td>3.4</td>
</tr>
<tr class="even">
<td class="firstcol">Total less Food &amp; Energy</td>
<td>0.3</td>
<td>0.3</td>
<td>2.5</td>
<td>2.3</td>
<td>2.5</td>
<td>2.2</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>0.5</td>
<td>0.1</td>
<td>0.6</td>
<td>-0.4</td>
<td>0.2</td>
<td>0.5</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Services less Energy</td>
<td>0.3</td>
<td>0.4</td>
<td>3.3</td>
<td>3.4</td>
<td>3.4</td>
<td>2.8</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Energy</td>
<td>4.0</td>
<td>6.6</td>
<td>29.3</td>
<td>5.6</td>
<td>11.0</td>
<td>17.0</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Food &amp; Beverages</td>
<td>0.9</td>
<td>0.7</td>
<td>5.8</td>
<td>4.0</td>
<td>2.3</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a>&nbsp;</td>
<td>0.4</td>
<td>0.8</td>
<td>4.8 </td>
<td>2.5</td>
<td>2.9 </td>
<td>2.9</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;Total less Food &amp; Energy&nbsp;</td>
<td>0.2</td>
<td>0.1</td>
<td>2.2</td>
<td>2.0</td>
<td>2.2</td>
<td>1.9</td>
</tr>
</tbody>
</table>
</body>
</html>

The consumer price index (CPI-U) for July rose 0.8%. That was down somewhat from the June increase of 1.1%, according to the Bureau of Labor Statistics, but the gain was double the Consensus expectation for a 0.4% rise. The Y/Y [...]

U.S. CPI Up 0.8% in July, Y/Y by 5.6%. Boost from Gasoline Prices Now 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

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

Only modest evidence of AI-related surge in US productivity growth

Previous Trump tariffs fading. A boost from new tariffs ahead?

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Nonfarm payrolls increased 73,000 during July after rising 14,000 in June, revised from 147,000, and 19,000 in May, revised from 144,000. Expectations had been for a 102,000 rise in the Action Economics Forecast Survey. The three-month average change in payrolls of 35,000 compared to 64,000 in June. The Bureau of Labor Statistics indicates that monthly revisions result from additional reports received from businesses and government agencies since the last published estimates.

Average hourly earnings rose an expected 0.3% during July after unrevised gains of 0.2% and 0.4% in June & May. Earnings growth of 3.9% y/y is little changed over twelve months, but has been trending lower from its 5.9% high in March 2022.

The unemployment rate, measured in the household survey, edged up m/m to an expected 4.2% from 4.1% and compared to 4.2% in the previous three months. It reached a low of 3.4% in April 2023. The unemployment rate, including employees working part-time for economic reasons plus all marginally-attached workers, rose to 7.9% last month from 7.7% In June. It was 6.6% in April 2023.

In the **establishment survey**, private-sector employment in July rose 83,000, factory sector jobs declined 11,000, off for the third straight month. Construction sector employment increased 2,000, after rising 3,000 in June. The number of mining & logging industry jobs declined 4,000 after falling in both of the prior two months. 

Private service sector employment increased 96,000 July after improving 16,000 in June. Increases varied greatly amongst service sector categories. Private education & health sector employment rose 79,000 last month, following a 52,000 increase in June. The number of trade, transportation & utilities jobs gained 11,000, following a 22,000 decline and financial activities employment improved 15,000 after a 2,000 drop, while leisure & hospitality employment rose just 5,000 after a 4,000 gain. The number of professional & business services jobs fell 14,000, down for the third straight month.  Information sector employment fell 2,000, after holding steady in June.

Government sector payrolls declined 10,000 last month and revered June’s 11,000 rise. Federal government employment weakened 12,000 and has fallen for six straight months. Local government employment eased 3,000 after rising 10,000 in June while state government payrolls rose 5,000 after increasing 10,000.

Private-sector average hourly earnings rose 0.3% (3.9% y/y) in July. Earnings in the goods-producing sector edged up 0.1% (3.6% y/y). In construction, earnings rose 0.2% (3.7% y/y) following a 0.4% rise, but factory sector earnings eased 0.1% (+3.6% y/y). In the service sector, earnings rose 0.4% (4.0% y/y) in July after increasing 0.2% in June.

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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

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