Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070817d.jpg" width="353">
We speak often about oil demand, in which regions it has grown and where it is more restrained and how can we use oil more efficiently. But price, of course, results from both demand AND supply. So discussion of oil markets is not really complete without some consideration of supply conditions. Even if we believe supply is exogenous to consumers, we still need to understand how much is coming from where.
These details are arrayed nicely in Haver&#39;s OMI database, furnished by our partner source, Energy Intelligence, as part of their publication &quot;Oil Market Intelligence&quot;. This company has representatives in fields around the world to assess the availability of this important resource.
In July total oil available from wellhead production was 83,530 thousand barrels/day, compared with 82,434 in June and 83,266 in July 2006. For this July, there were also refining processing gains of approximately 2,000 barrels/day, so the supply of products was about in line with the separately measured product demand, 85,482 thousand barrels/day. The increase in supply for the month was 1.33%, the largest monthly rise since 1.73% in June 2004.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070817e.jpg" width="353">
Among the leading producers, OPEC output was 35.3 million b/d, up from 34.8 mbd in June. It represents 42.2% of total world output. In recent years, OPEC&#39;s largest share was 44.3% in September 2005. For much of the time since 1990, their share hovered around 40%; it began to increase from that range during 2002.
In examining the other regions&#39; performance, it looks that higher prices are eliciting added output. Nearly every other major area of the world is participating, at least to some extent. Many of us tend to think that the &quot;oil is running out&quot;, but there seems still to be some more. The most distinctive example is the new UK field in the North Sea. For all of Europe, this appears to have halted the steep downtrend in output, making it just about steady in July with the year-ago figure, off a mere 1.3%, compared with year-on-year declines last autumn of 10% and more. In the Americas, production is climbing slowly after the plunge and rebound associated with 2005&#39;s hurricanes; it&#39;s even steady in the US, and &quot;other&quot; countries, though small, are growing rapidly.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070817f.jpg" width="353">
The main growth is in Asia. The OMI classifies Russia as an Asian producer. Its output is rising at about a 2.2% year-on-year pace and now accounts for about 11.6% of the world total. Other former Soviet republics are growing their output rapidly, albeit from a small base; they have enlarged their market share by 0.75% in just the past two years. In China, production is growing, but demand is growing so much faster. This imbalance is likely one reason for recent price spikes.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">World Oil Supply, Mil. Bbl/Day</th>
<th scope="col">July 2007</th>
<th scope="col">June 2007</th>
<th scope="col">May 2007</th>
<th scope="col">July 2006</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>83.5</td>
<td>82.4</td>
<td>82.6</td>
<td>83.3</td>
<td>82.9</td>
<td>82.4</td>
<td>81.4</td>
</tr>
<tr>
<td class="firstcol">OPEC</td>
<td>32.3</td>
<td>34.8</td>
<td>34.6</td>
<td>35.7</td>
<td>35.4</td>
<td>35.6</td>
<td>34.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Americas</td>
<td>15.6</td>
<td>15.3</td>
<td>15.6</td>
<td>15.5</td>
<td>15.6</td>
<td>15.4</td>
<td>15.5</td>
</tr>
<tr>
<td class="firstcol">Europe</td>
<td>4.6</td>
<td>4.4</td>
<td>4.6</td>
<td>4.7</td>
<td>4.7</td>
<td>5.2</td>
<td>5.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Russia</td>
<td>9.7</td>
<td>9.6</td>
<td>9.6</td>
<td>9.5</td>
<td>9.4</td>
<td>9.2</td>
<td>9.0</td>
</tr>
<tr>
<td class="firstcol">Other Asia</td>
<td>9.0</td>
<td>8.9</td>
<td>8.9</td>
<td>8.6</td>
<td>8.5</td>
<td>8.2</td>
<td>8.1</td>
</tr>
</tbody>
</table>
</body>
</html>

We speak often about oil demand, in which regions it has grown and where it is more restrained and how can we use oil more efficiently. But price, of course, results from both demand AND supply. So discussion of oil markets is not [...]

Where Does the Oil Come From?

Robert Brusca

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070817g.jpg" width="353">
Trends in German producer prices are partly favorable.
Excluding energy, manufacturing PPI trends are sideways. The year-over-year rate has showed a slight downtrend while the six-month rate has popped up and the 3-month rate has dropped from its month-ago pop-up. The three-month trend is unclear as despite its drop-off in the month it may still be in an uptrend that dates back to March. Prices of German manufacturing and mfg excluding energy show different forces are acting on them. As energy prices have ebbed overall German PPI inflation is dropping and has slowed to a 1.1% pace year/year. But the year/year pace for the Excl Energy Manufacturing PPI inflation rate is at 2.5% and is barely beginning to edge lower. With the ECB inflation ceiling for its HICP at 2% the PPI is not helping and the trend does not show the promise of much help to come, at least for nonenergy prices. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Germany PPI
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3"> M/M % Changes</td>
<td colspan="4"> %-SAAR</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td> Jul-07</td>
<td> Jun-07</td>
<td> May-07</td>
<td> 3-mo</td>
<td> 6-mo</td>
<td> 12-mo</td>
<td> 12-moY-Ago</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>-0.1%</td>
<td>0.3%</td>
<td>0.3%</td>
<td>2.0%</td>
<td>1.9%</td>
<td>1.1%</td>
<td>6.0%</td>
</tr>
<tr>
<td class="firstcol">Ex Energy</td>
<td>0.1%</td>
<td>0.4%</td>
<td>0.2%</td>
<td>2.6%</td>
<td>2.6%</td>
<td>2.5%</td>
<td>3.0%</td>
</tr>
<tr>
<td colspan="7">&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body>
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Trends in German producer prices are partly favorable. Excluding energy, manufacturing PPI trends are sideways. The year-over-year rate has showed a slight downtrend while the six-month rate has popped up and the 3-month rate has [...]

German PPI Steadies at Above 2% Pace

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070817a.jpg" width="353">
The University of Michigan&#39;s preliminary reading of consumer sentiment in August fell 7.9% m/m to 83.3. The decline was the largest m/m drop in over a year and, likewise, pulled the index to its lowest level since last August. Consensus expectations had been for a lesser decline to 87.
A 9.1% decline in consumer expectations led this month&#39;s decline in overall sentiment.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070817c.jpg" width="353">
Consumers worried that business conditions during the next six months would deteriorate and the index measuring these expectations fell 14.3% (+20.0% y/y). Expectations for business conditions during the next five years also fell (-7.3% m/m, +6.0% y/y). Finally, the index measuring the expected change in consumers&#39; finances fell 5.6% (+5.4% y/y) and reversed most of the prior month&#39;s increase.
Perceptions about current economic conditions also fell. The view of current personal finances fell 13.0% (-8.3% y/y) and consumers&#39; view of current buying conditions for large household goods fell 1.9% (-4.4% y/y).
The assessment of government policy fell a hard 7.0% m/m (-2.4% y/y) to the lowest level in over one year..<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070817b.jpg" width="353">
The University of Michigan survey is not seasonally adjusted.The reading is based on telephone interviews with about 500 households at month-end.
The U.S. Federal Reserve today took action to <a href="http://http://www.federalreserve.gov/boarddocs/press/monetary/2007/200708172/default.htm">reduce the Discount Rate</a>. An accompanying statement to this action can be found <a href="http://www.federalreserve.gov/boarddocs/press/monetary/2007/20070817/default.htm"> here</a>. Today&#39;s actionis meant toencourage the use of the discount window by specific banksthat need more liquidity without reducing the cost of funds toall banks, as an easing of the fed funds rate would do.
William Poole, President, Federal Reserve Bank of St. Louis, spoke today on U.S. Export Opportunities and his comments are available <a href="http://www.stlouisfed.org/news/speeches/2007/08_17_07.html"> 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/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a>&nbsp;</th>
<th scope="col">August (Prelim.)</th>
<th scope="col">July</th>
<th scope="col">Aug y/y </th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>83.3</td>
<td>90.4</td>
<td>1.6%</td>
<td>87.3</td>
<td>88.5</td>
<td>95.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>97.7</td>
<td>104.5</td>
<td>-5.9%</td>
<td>105.1</td>
<td>105.9</td>
<td>105.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Expectations</td>
<td>74.1</td>
<td>81.5</td>
<td>9.0%</td>
<td>75.9</td>
<td>77.4</td>
<td>88.5</td>
</tr>
</tbody>
</table>
</body>
</html>

The University of Michigan's preliminary reading of consumer sentiment in August fell 7.9% m/m to 83.3. The decline was the largest m/m drop in over a year and, likewise, pulled the index to its lowest level since last August. [...]

Michigan Consumer Sentiment Fell Sharply, Fed's Discount Rate Cut

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070817g.jpg" width="353">
Trends in German producer prices are partly favorable.
Excluding energy, manufacturing PPI trends are sideways. The year- over-year rate has showed a slight downtrend while the six- month rate has popped up and the 3-month rate has dropped from its month-ago pop-up. The three- month trend is unclear as despite its drop-off in the month it may still be in an uptrend that dates back to March. Prices of German manufacturing and mfg excluding energy show different forces are acting on them. As energy prices have ebbed overall German PPI inflation is dropping and has slowed to a 1.1% pace year/year. But the year/year pace for the Excl Energy Manufacturing PPI inflation rate is at 2.5% and is barely beginning to edge lower. With the ECB inflation ceiling for its HICP at 2% the PPI is not helping and the trend does not show the promise of much help to come, at least for nonenergy prices. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Germany PPI
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3"> M/M % Changes</td>
<td colspan="4"> %-SAAR</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td> Jul-07</td>
<td> Jun-07</td>
<td> May-07</td>
<td> 3-mo</td>
<td> 6-mo</td>
<td> 12-mo</td>
<td> 12-moY-Ago</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>-0.1%</td>
<td>0.3%</td>
<td>0.3%</td>
<td>2.0%</td>
<td>1.9%</td>
<td>1.1%</td>
<td>6.0%</td>
</tr>
<tr>
<td class="firstcol">Ex Energy</td>
<td>0.1%</td>
<td>0.4%</td>
<td>0.2%</td>
<td>2.6%</td>
<td>2.6%</td>
<td>2.5%</td>
<td>3.0%</td>
</tr>
<tr>
<td colspan="7">&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
Where Does the Oil Come From? 
by <a href="/comment/Stone.html">Carol Stone</a> August 17, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070817d.jpg" width="353">
We speak often about oil demand, in which regions it has grown and where it is more restrained and how can we use oil more efficiently. But price, of course, results from both demand AND supply. So discussion of oil markets is not really complete without some consideration of supply conditions. Even if we believe supply is exogenous to consumers, we still need to understand how much is coming from where.
These details are arrayed nicely in Haver&#39;s OMI database, furnished by our partner source, Energy Intelligence, as part of their publication &quot;Oil Market Intelligence&quot;. This company has representatives in fields around the world to assess the availability of this important resource.
In July total oil available from wellhead production was 83,530 thousand barrels/day, compared with 82,434 in June and 83,266 in July 2006. For this July, there were also refining processing gains of approximately 2,000 barrels/day, so the supply of products was about in line with the separately measured product demand, 85,482 thousand barrels/day. The increase in supply for the month was 1.33%, the largest monthly rise since 1.73% in June 2004.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070817e.jpg" width="353">
Among the leading producers, OPEC output was 35.3 million b/d, up from 34.8 mbd in June. It represents 42.2% of total world output. In recent years, OPEC&#39;s largest share was 44.3% in September 2005. For much of the time since 1990, their share hovered around 40%; it began to increase from that range during 2002.
In examining the other regions&#39; performance, it looks that higher prices are eliciting added output. Nearly every other major area of the world is participating, at least to some extent. Many of us tend to think that the &quot;oil is running out&quot;, but there seems still to be some more. The most distinctive example is the new UK field in the North Sea. For all of Europe, this appears to have halted the steep downtrend in output, making it just about steady in July with the year-ago figure, off a mere 1.3%, compared with year-on-year declines last autumn of 10% and more. In the Americas, production is climbing slowly after the plunge and rebound associated with 2005&#39;s hurricanes; it&#39;s even steady in the US, and &quot;other&quot; countries, though small, are growing rapidly.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070817f.jpg" width="353">
The main growth is in Asia. The OMI classifies Russia as an Asian producer. Its output is rising at about a 2.2% year-on-year pace and now accounts for about 11.6% of the world total. Other former Soviet republics are growing their output rapidly, albeit from a small base; they have enlarged their market share by 0.75% in just the past two years. In China, production is growing, but demand is growing so much faster. This imbalance is likely one reason for recent price spikes.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">World Oil Supply, Mil. Bbl/Day</th>
<th scope="col">July 2007</th>
<th scope="col">June 2007</th>
<th scope="col">May 2007</th>
<th scope="col">July 2006</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>83.5</td>
<td>82.4</td>
<td>82.6</td>
<td>83.3</td>
<td>82.9</td>
<td>82.4</td>
<td>81.4</td>
</tr>
<tr>
<td class="firstcol">OPEC</td>
<td>32.3</td>
<td>34.8</td>
<td>34.6</td>
<td>35.7</td>
<td>35.4</td>
<td>35.6</td>
<td>34.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Americas</td>
<td>15.6</td>
<td>15.3</td>
<td>15.6</td>
<td>15.5</td>
<td>15.6</td>
<td>15.4</td>
<td>15.5</td>
</tr>
<tr>
<td class="firstcol">Europe</td>
<td>4.6</td>
<td>4.4</td>
<td>4.6</td>
<td>4.7</td>
<td>4.7</td>
<td>5.2</td>
<td>5.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Russia</td>
<td>9.7</td>
<td>9.6</td>
<td>9.6</td>
<td>9.5</td>
<td>9.4</td>
<td>9.2</td>
<td>9.0</td>
</tr>
<tr>
<td class="firstcol">Other Asia</td>
<td>9.0</td>
<td>8.9</td>
<td>8.9</td>
<td>8.6</td>
<td>8.5</td>
<td>8.2</td>
<td>8.1</td>
</tr>
</tbody>
</table>
 Michigan Consumer Sentiment Fell Sharply, Fed's Discount Rate Cut 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 17, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070817a.jpg" width="353">
The University of Michigan&#39;s preliminary reading of consumer sentiment in August fell 7.9% m/m to 83.3. The decline was the largest m/m drop in over a year and, likewise, pulled the index to its lowest level since last August. Consensus expectations had been for a lesser decline to 87.
A 9.1% decline in consumer expectations led this month&#39;s decline in overall sentiment.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070817c.jpg" width="353">
Consumers worried that business conditions during the next six months would deteriorate and the index measuring these expectations fell 14.3% (+20.0% y/y). Expectations for business conditions during the next five years also fell (-7.3% m/m, +6.0% y/y). Finally, the index measuring the expected change in consumers&#39; finances fell 5.6% (+5.4% y/y) and reversed most of the prior month&#39;s increase.
Perceptions about current economic conditions also fell. The view of current personal finances fell 13.0% (-8.3% y/y) and consumers&#39; view of current buying conditions for large household goods fell 1.9% (-4.4% y/y).
The assessment of government policy fell a hard 7.0% m/m (-2.4% y/y) to the lowest level in over one year..<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070817b.jpg" width="353">
The University of Michigan survey is not seasonally adjusted.The reading is based on telephone interviews with about 500 households at month-end.
The U.S. Federal Reserve today took action to <a href="http://http://www.federalreserve.gov/boarddocs/press/monetary/2007/200708172/default.htm">reduce the Discount Rate</a>. An accompanying statement to this action can be found <a href="http://www.federalreserve.gov/boarddocs/press/monetary/2007/20070817/default.htm"> here</a>. Today&#39;s actionis meant toencourage the use of the discount window by specific banksthat need more liquidity without reducing the cost of funds toall banks, as an easing of the fed funds rate would do.
William Poole, President, Federal Reserve Bank of St. Louis, spoke today on U.S. Export Opportunities and his comments are available <a href="http://www.stlouisfed.org/news/speeches/2007/08_17_07.html"> 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/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a>&nbsp;</th>
<th scope="col">August (Prelim.)</th>
<th scope="col">July</th>
<th scope="col">Aug y/y </th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>83.3</td>
<td>90.4</td>
<td>1.6%</td>
<td>87.3</td>
<td>88.5</td>
<td>95.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>97.7</td>
<td>104.5</td>
<td>-5.9%</td>
<td>105.1</td>
<td>105.9</td>
<td>105.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Expectations</td>
<td>74.1</td>
<td>81.5</td>
<td>9.0%</td>
<td>75.9</td>
<td>77.4</td>
<td>88.5</td>
</tr>
</tbody>
</table>
</body>
</html>

Trends in German producer prices are partly favorable. Excluding energy, manufacturing PPI trends are sideways. The year- over-year rate has showed a slight downtrend while the six- month rate has popped up and the 3-month rate has [...]

<html>
<head>
<style>
.odd{
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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070816k.jpg" width="353">
The US Treasury&#39;s monthly &quot;TIC&quot; data were reported yesterday for June. They indicate that foreign interest in US capital markets remained strong with the same magnitude of net flows into the US as occurred in May, the record period. Foreign investors bought $148.6 billion of US securities compared with $163.7 billion in May and &quot;just&quot; $91.8 billion in June 2006. At the same time, US investors bought $27.8 billion of foreign securities in June, noticeably less than May&#39;s $37.6 billion, but still historically large.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070816l.jpg" width="353">
The mix of US securities purchased by foreign investors shifted considerably from May to June. After May&#39;s outsized amount of corporate bonds, $72.6 billion, they bought only about one-third as much in June, $25.9 billion. Purchases of equities also decreased, from $42.0 billion in May to $28.8 billion. But net buying of federal agency and Treasury securities both established new records: agency debt advanced from $27.5 billion to $39.7 billion and Treasury purchases from $21.6 billion to $54.3 billion.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070816m.jpg" width="353">
Last month, we commented here on the increased participation by Chinese investors in US markets. This expanded further in June, with $20.2 billion in net purchases, up from $10.1 billion in May. The London markets reduced their US buying, but at $66.7 billion, it remained large compared with both most previous periods and other investment centers. Speaking of other investment centers, a number of them were active in June: Hong Kong investors bought, on net, a record $13.3 billion; the Cayman Islands, $11.1 billion, about average for them; and Russia $6.6 billion, also a record and following $6.0 billion in May. The one we found interesting was Brazil, whose investors purchased $10.1 billion in June and a total of $20 billion during the second quarter. The June amount was more than accounted for with $12.2 billion in Treasuries. Euro-Zone investors, by contrast, were net sellers of $20 billion in US securities markets in June, consisting of a large portion of foreign stock sales to US investors. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Net ForeignPurchases fromUS Residents, Bil $</th>
<th scope="col">June 2007</th>
<th scope="col">May 2007</th>
<th scope="col">June 2006</th>
Monthly Averages
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Last 12 Months</td>
<td>2006</td>
<td>2005</td>
<td>2004</td>
</tr>
<tr class="odd">
<td class="firstcol">&quot;Headline&quot;: Net Foreign Purchases &nbsp;= 1 + 2</td>
<td>120.9</td>
<td>126.0</td>
<td>83.5</td>
<td>81.4</td>
<td>73.7</td>
<td>69.9</td>
<td>63.6</td>
</tr>
<tr>
<td class="firstcol">Domestic Securities</td>
<td>148.6</td>
<td>163.7</td>
<td>91.8</td>
<td>107.0</td>
<td>94.6</td>
<td>84.3</td>
<td>76.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Treasuries</td>
<td>54.3</td>
<td>21.6</td>
<td>28.7</td>
<td>22.1</td>
<td>16.3</td>
<td>28.2</td>
<td>29.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Agencies</td>
<td>39.7</td>
<td>27.5</td>
<td>23.0</td>
<td>24.5</td>
<td>24.1</td>
<td>18.3</td>
<td>18.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Corporate Bonds</td>
<td>25.9</td>
<td>72.6</td>
<td>41.7</td>
<td>43.6</td>
<td>41.7</td>
<td>31.0</td>
<td>25.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Equities</td>
<td>28.8</td>
<td>42.0</td>
<td>-1.6</td>
<td>16.9</td>
<td>12.5</td>
<td>6.8</td>
<td>2.4</td>
</tr>
<tr>
<td class="firstcol">Foreign Securities&nbsp;</td>
<td>-27.8</td>
<td>-37.6</td>
<td>-8.3</td>
<td>-25.7</td>
<td>-20.9</td>
<td>-14.4</td>
<td>-12.7</td>
</tr>
<tr>
<td class="firstcol">Net Foreign Acquisition</td>
<td>107.0</td>
<td>112.5</td>
<td>67.8</td>
<td>67.9</td>
<td>60.7</td>
<td>58.3</td>
<td>60.4</td>
</tr>
<tr>
<td class="firstcol">Total TIC Flows&nbsp; </td>
<td>58.8</td>
<td>107.3</td>
<td>-2.6</td>
<td>73.6</td>
<td>87.4</td>
<td>55.7</td>
<td>81.6</td>
</tr>
<tr class="odd">
<td colspan="8">Select Countries Net Purchases of US Securities</td>
</tr>
<tr>
<td class="firstcol">China</td>
<td>20.2</td>
<td>10.1</td>
<td>12.2</td>
<td>11.0</td>
<td>9.1</td>
<td>7.2</td>
<td>3.9</td>
</tr>
<tr>
<td class="firstcol">United Kingdom</td>
<td>66.7</td>
<td>92.7</td>
<td>57.2</td>
<td>47.0</td>
<td>38.7</td>
<td>30.3</td>
<td>21.2</td>
</tr>
</tbody>
</table>
</body>
</html>

The US Treasury's monthly "TIC" data were reported yesterday for June. They indicate that foreign interest in US capital markets remained strong with the same magnitude of net flows into the US as occurred in May, the record period. [...]

TIC Data Show Sizable Foreign Interest in US Securities Even Through June; Hong Kong, Russia & Brazilian Investors [...]

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<div align="left"><img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070816j.jpg">
Inflation trends are peaking and falling in the Euro area with the key core measure. Still that core measure is hugging the 2% ceiling rate for the overall HICP. While Year/year inflation is lower and 3-month inflation is lower 6-month inflation is NOT.
Overall and core rate of inflation are mostly conforming to the ECB ceiling across major countries. There is no sense of accelerating inflation in this group and that is certainly good news. The bad news is that the trends for the components of inflation are more decidedly mixed. While goods price inflation is still falling (and that one contains oil and gas price effects), services inflation is high and accelerating. It may contain some energy price impacts as well, but the speed right now is over the top of acceptability. Internal inflation (services) can be more stubborn than goods inflation. These days, due to international competition, goods price inflation tends to be better behaved. Pressure from services prices tends to be longer lived while goods price oscillations may not be so permanent. As a result the drop in goods prices that helped to contain the overall HICP is to be closely watched in the coming months. We obviously want to see as well the service sector trends and how much they are able to deflate.</div>

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Trends in HICP
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">M/M % Change</td>
<td colspan="4">% SAAR</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jul-07</td>
<td>Jun-07</td>
<td>May-07</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
</tr>
<tr>
<td class="firstcol">EMU-13</td>
<td>0.1%</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.0%</td>
<td>2.6%</td>
<td>1.8%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">Core</td>
<td>0.1%</td>
<td>0.1%</td>
<td>0.1%</td>
<td>1.3%</td>
<td>2.0%</td>
<td>1.9%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">Goods</td>
<td>-1.0%</td>
<td>0.0%</td>
<td>0.2%</td>
<td>-2.9%</td>
<td>2.6%</td>
<td>1.2%</td>
<td>2.7%</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>0.8%</td>
<td>0.2%</td>
<td>0.2%</td>
<td>5.2%</td>
<td>4.5%</td>
<td>2.6%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">HICP</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>0.2%</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.3%</td>
<td>2.5%</td>
<td>2.0%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>0.0%</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.0%</td>
<td>2.1%</td>
<td>1.2%</td>
<td>2.2%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>-0.1%</td>
<td>0.3%</td>
<td>0.3%</td>
<td>1.9%</td>
<td>2.7%</td>
<td>1.7%</td>
<td>2.3%</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>-0.3%</td>
<td>0.3%</td>
<td>0.1%</td>
<td>0.4%</td>
<td>1.5%</td>
<td>1.9%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>0.2%</td>
<td>0.3%</td>
<td>0.3%</td>
<td>3.1%</td>
<td>3.4%</td>
<td>2.3%</td>
<td>4.0%</td>
</tr>
<tr>
<td class="firstcol">Core:xFE&amp;A</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>0.2%</td>
<td>0.1%</td>
<td>0.3%</td>
<td>2.4%</td>
<td>2.4%</td>
<td>2.1%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>0.0%</td>
<td>0.1%</td>
<td>0.1%</td>
<td>1.1%</td>
<td>1.3%</td>
<td>1.4%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>0.0%</td>
<td>0.1%</td>
<td>0.2%</td>
<td>1.2%</td>
<td>3.0%</td>
<td>1.8%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>0.3%</td>
<td>1.2%</td>
<td>1.6%</td>
<td>1.8%</td>
<td>1.2%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>0.2%</td>
<td>0.2%</td>
<td>0.1%</td>
<td>2.2%</td>
<td>2.3%</td>
<td>2.4%</td>
<td>3.2%</td>
</tr>
</tbody>
</table>
</body>
</html>

Inflation trends are peaking and falling in the Euro area with the key core measure. Still that core measure is hugging the 2% ceiling rate for the overall HICP. While Year/year inflation is lower and 3-month inflation is lower [...]

HICP is Losing Momentum

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<div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070816i.jpg" width="353">
In the new third quarter, UK real retail sales excluding autos were up strongly - in July. Real retail sales are rising at a 7% annual rate in the new quarter. Real ex-auto retail sales are ramping up in terms of 3-month and 6-month trends as well. The UK is one country in the EU where consumers seem to have stepped up. In Germany growth has been strong but the consumer has lagged. In France recent stock market events have been worse than in other countries and its business surveys have weakened. The consumer remains the key to the next leg up in growth in Europe and only in the UK do we have evidence that the consumer is ready to comply.</div>

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
UK Real and Nominal Retail Sales
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Nominal</td>
<td>Jul-07</td>
<td>Jun-07</td>
<td>May-07</td>
<td>3-MO</td>
<td>6-MO</td>
<td>12-MO</td>
<td>Yr Ago</td>
</tr>
<tr>
<td class="firstcol">Retail Total</td>
<td>-0.2%</td>
<td>0.3%</td>
<td>-0.1%</td>
<td>0.0%</td>
<td>6.5%</td>
<td>3.5%</td>
<td>3.3%</td>
</tr>
<tr>
<td class="firstcol">Food Beverages &amp; Tobacco</td>
<td>-0.4%</td>
<td>-0.5%</td>
<td>-0.3%</td>
<td>-4.4%</td>
<td>0.6%</td>
<td>0.8%</td>
<td>5.3%</td>
</tr>
<tr>
<td class="firstcol">Clothing Footwear</td>
<td>-0.5%</td>
<td>0.2%</td>
<td>-4.3%</td>
<td>-17.1%</td>
<td>9.7%</td>
<td>1.6%</td>
<td>5.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Real</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Retail ex auto</td>
<td>0.7%</td>
<td>0.4%</td>
<td>0.4%</td>
<td>6.4%</td>
<td>8.1%</td>
<td>4.4%</td>
<td>4.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

In the new third quarter, UK real retail sales excluding autos were up strongly - in July. Real retail sales are rising at a 7% annual rate in the new quarter. Real ex-auto retail sales are ramping up in terms of 3-month and 6-month [...]

UK Real Retail Sales Pop in July

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<div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070816g.jpg" width="353">
The Philadelphia Federal Reserve Bank&#39;s Index of General Business Conditions in the manufacturing sector fell more than expected during August. The drop to 0.0 from 9.2 indicated that activity was &quot;steady,&quot; but Consensus expectations had been for a reading that was roughly unchanged from July at 10.
During the last ten years there has been a 65% correlation between the level of the Philadelphia Fed Business Conditions Index and three month growth in factory sector industrial production. There has been a 43% correlation with q/q growth in real GDP.
The sub indexes for new orders, shipments, unfilled orders and inventories all fell, the latter two into negative territory. The employment reading, however, improved to its best reading since 2004. During the last ten years there has been a 75% correlation between the employment index and the three month growth in factory payrolls.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070816h.jpg" width="353">
The business conditions index reflects a separate survey question, not the sub indexes.
The prices paid index fell for the third consecutive month, back to its lowest level since January. During the last ten years there has been a 76% correlation between the prices paid index and the three month growth in the intermediate goods PPI. There has been an 85% correlation with the change in core intermediate goods prices.
The separate index of expected business conditions in six months rose to its best level since late in 2004.
The latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found <a href="http://www.phil.frb.org/files/bos/bos0708.html">here</a>.
The latest Survey of Professional Forecasters from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/files/spf/survq307.html"> here</a>. </div>

<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/@S504/@S504.HTM">Philadelphia Fed Business Outlook</a></th>
<th scope="col">August</th>
<th scope="col">July &nbsp;</th>
<th scope="col">Aug. &#145;06</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>0.0&nbsp;</td>
<td>9.2</td>
<td>12.6&nbsp;</td>
<td>8.1</td>
<td>11.5</td>
<td>28.1</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>15.4&nbsp;</td>
<td>28.1&nbsp;</td>
<td>46.6&nbsp;</td>
<td>36.6</td>
<td>40.1</td>
<td>51.2</td>
</tr>
</tbody>
</table>
</body>
</html>

The Philadelphia Federal Reserve Bank's Index of General Business Conditions in the manufacturing sector fell more than expected during August. The drop to 0.0 from 9.2 indicated that activity was "steady," but Consensus expectations [...]

Philadelphia Fed Index Unexpectedly Steady

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

US productivity growth has been significantly faster than in other major economies

Consumers' short-term US inflation expectations still elevated while longer-term expectations of financial markets are steady

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

Job openings less than the number unemployed in July for first time since 2021

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

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Consumer credit outstanding increased $13.1 billion (2.3% y/y) in September after rising $3.1 billion in August, revised from $0.4 billion, and $17.7 billion in July, revised from $18.1 billion. A $10.0 billion rise had been expected in the Action Economics Forecast Survey.

Nonrevolving credit outstanding rose $11.4 billion (2.1% y/y) in September after increasing $9.2 billion in August, revised from $6.3 billion, and increasing $6.7 billion in July, revised from $6.9 billion. Nonrevolving credit held by depository institutions declined 6.8% y/y in September after falling 7.4% y/y in August. Finance company debt holdings fell 1.5% y/y after declining 1.3%, while credit union holdings rose an increased 12.8% y/y in September, the quickest growth since in two years. Nonrevolving debt of the federal government rose 3.6% y/y in September, the same as in August.

In September, revolving credit outstanding, which includes credit cards, rose $1.7 billion (2.6% y/y) after falling $6.1 billion in August, revised from a $6.0 billion decline, and rising $11.0 billion in July, revised from $11.2 billion. Revolving credit outstanding held by depository institutions fell 3.0% y/y. Revolving credit held by finance companies fell a steady 14.7% y/y in September, while credit union debt rose 4.5% y/y in September, up from 3.7% y/y in August.

The consumer credit figures from the Federal Reserve Board are break-adjusted and calculated by Haver Analytics. The breaks in the series in 2005, 2010 and 2015 are the result of the incorporation of data from the Census and the Survey of Finance Companies, as well as changes in the seasonal adjustment methodology. The consumer credit data are available in Haver’s **USECON** database. The Action Economics forecast figures are contained in the **AS1REPNA** database.

**AI and the Economy** is the title of today’s speech by Federal Reserve Vice Chair Philip N. Jefferson and it can be found [here](https://www.federalreserve.gov/newsevents/speech/jefferson20251107a.htm).

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- Notable gain in credit usage follows prior month’s slowdown.
- Nonrevolving credit usage strengthens and revolving turns positive.

U.S. Consumer Credit Strengthens in September

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The Industrial Materials Price Index from the Foundation for International Business and Economic Research (FIBER) eased 0.1% during the four weeks ended November 7, 2025 after improving 0.3% in the prior four-week period. The index increased 0.5% y/y following a 0.8% y/y gain at the end of October.

Prices in the **Textile** group increased 2.5% during the last four weeks and rose 3.3% y/y. The cost of burlap increased 23.8% in the last four weeks while surging 48.1% over the last year. Showing modest improvement, cotton prices rose 0.9% in four weeks but declined 5.6% y/y.

**Metals** group prices increased 1.5% (5.9% y/y) in the last four weeks as the cost of aluminum rose 4.9	% (10.3% y/y). Zinc prices moved up 3.6% (5.4% y/y) and the cost of steel scrap rose 1.4% (-5.9% y/y). Lead prices increased 1.1% (-0.2% y/y) in four weeks and the cost of copper scrap rose 0.6% (13.9% y/y). Working lower, tin prices declined 2.2% (+13.8% y/y) in four weeks.

**Miscellaneous** group prices weakened 2.9% in the last four weeks and were off 1.0% y/y, as framing lumber prices fell 11.3% (-4.3% y/y). The cost of tallow, used for frying & baking, declined 9.0% (+10.5% y/y) in four weeks. Offsetting this weakness, natural rubber prices rose 2.0% in four weeks, but were off 6.6% y/y.

Prices in the **crude oil & benzene** group declined 1.6% (-10.8% y/y) in the last four weeks. The cost of West Texas Intermediate crude oil fell 2.2% in four weeks to $60.31 per barrel and declined 15.6% y/y. The price was increased from a low of $58.47 in the third week of last month. The price of the petro-chemical benzene fell 3.8% (-23.2% y/y) in four weeks.

**Excluding crude oil**, the industrial commodity price index was unchanged (+1.5% y/y) over the last four weeks after rising 0.5% during the prior four weeks.

The Foundation for International Business and Economic Research (FIBER) develops economic measurement techniques as applied to business cycles and inflation in the U.S. and other market economies. The commodity price data can be found in Haver's **DAILY**, **WEEKLY**, **USECON** and **CMDTY** databases.

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- Textile and metals prices strengthen.
- Framing lumber costs plummet.
- Crude oil prices weaken.

FIBER: Industrial Commodity Price Index Moves Sideways in Latest Four Weeks

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The chart provides a good overview for German trade trend. The table breaks trade trends down by categories and provides growth rates on shorter horizons of 3 months, 6 months and 12 months. But the chart depicts the overarching trends well. It shows the German surplus being diminished on a gradual path and not altogether in a clear monotonic fashion. Export and import lines on the chart move mostly sideways (horizontal). The export line is below the import line since late last year. These two series plots on the right-hand scale and they depict growth rates (year-over-year). So sideways movements mean roughly steady growth. Exports have been growth steadily year-over-year at a weak pace that on occasion has been a decline in terms of their year-on-year value. Generally, the green line is in positive territory. The red import line has been stronger, indicating somewhat better, steadier import growth over the period.

While exports had a good September, export growth sequenced from 12-months to 6-months, to 3-months has been weakening. Imports also put in a strong September but are showing some erosion from 12-month to 6-months to 3-months in terms of annualized rates of growth. Still, import growth rates remain quite strong and consistent; the sense of erosion is clear but also moderate – it’s a moderate erosion in progress for imports.

Capital goods exports from Germany are improving- this observation is based on lagged data with a one-month lag built in. But consumer goods and vehicle exports are slowing and rather sharply- likely as a result of U.S. tariffs.

Import side trends, with the same lag, are not as clear cut. Capital goods imports are growing, and motor vehicle imports are improving and accelerating. Consumer goods imports have erratically slowed.

Real exports and imports on sequential lagged data show exports contracting on most horizons while imports generate consistent positive growth in real terms. There is a big difference in these two trends expressed in real terms.

On balance, German trade trends are shifting. The trade balance is gradually eroding. Change is in play.

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Germany

German Trade Surplus Shrinks Despite Strong Exports

Andrew Cates

**The global growth cycle**
The new orders-to-inventory spread in the global manufacturing PMI is often been viewed as one of the most reliable forward-looking indicators of the global economic cycle. When new orders are rising relative to inventories, it typically signals that demand is firming, production pipelines are beginning to refill, and industrial momentum is building. Conversely, when inventories accumulate faster than orders, it often foreshadows a slowdown. As the chart shows, this spread has been holding up relatively well in recent months, suggesting that despite ongoing headwinds—US tariff policies, uneven global demand, and geopolitical uncertainty—the underlying pulse of global manufacturing remains resilient.

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**US credit standards**
The latest Senior Loan Officer Opinion Survey (SLOOS) from the Federal Reserve suggests that credit conditions remain tight but are no longer worsening, marking a tentative stabilization after several quarters of tightening. Banks reported modest easing in standards for some categories of corporate and commercial real estate loans, though mortgage lending remains constrained. Demand for business credit continues to soften, reflecting both higher borrowing costs and a cautious corporate outlook. Historically, periods of widespread tightening—like those seen in 2008 and 2020—have coincided with sharp rises in the private sector savings balance (a proxy for deleveraging), as firms and households retrench simultaneously. The current configuration, shown in the chart, indicates lingering deleveraging pressures, but not a collapse in credit availability.

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**China**
Moving to China, the latest official and Caixin PMI releases for October painted a mixed picture of activity. Both manufacturing indices softened, suggesting that the industrial rebound which underpinned much of China’s recent growth may be losing some traction. The official non-manufacturing PMI, by contrast, edged higher, hinting at continued resilience in construction and public-sector-linked services, while the Caixin services measure—which tends to reflect smaller, private-sector firms—slipped modestly. The divergence underscores China’s two-speed recovery: industrial production and exports have carried the economy, while household spending and smaller enterprises remain subdued. If manufacturing momentum fades in the coming months, the economy could face a renewed loss of balance, with fewer reliable growth engines. Still, overall performance this year has surpassed expectations, and the government’s 5% growth target remains within reach, provided activity holds steady through year-end. Looking ahead, marginal policy support and improved external sentiment—helped by selective tariff relief from the US—could offer limited, though welcome, cushioning.

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**Australia** 
In Australia, the RBA left the cash rate unchanged at its November meeting, maintaining a cautious stance amid a still-complex inflation and growth backdrop. The case for further easing has become less compelling as core inflation (trimmed mean CPI) remains above target and labour market conditions—while gradually softening—continue to show resilience. The unemployment rate has edged higher but remains low by historical standards, consistent with lingering wage and services price pressures. Recent data also hint at a tentative pickup in activity, supported by strong population growth and stabilising commodity exports. Against that backdrop, the RBA has stressed that the path for policy remains finely balanced, with a strong focus on incoming inflation data and global financial conditions. While downside risks persist—particularly from China’s slowdown and weak global trade—the persistence of domestic price pressures means the bar for renewed rate cuts remains relatively high.

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**Argentina**
Turning to Argentina, markets continue to digest the implications of President Milei’s midterm election victory amid deepening economic and financial imbalances. The peso’s broad nominal effective exchange rate has remained under heavy pressure, extending its long-running slide as investors weigh the challenges of implementing fiscal consolidation and monetary reform in a fragile political and social environment. In stark contrast, the Buenos Aires stock index has surged to record highs, reflecting optimism that Milei’s reformist agenda—anchored in deregulation, privatisation, and fiscal restraint—may eventually stabilise the economy and attract renewed capital inflows. The divergence between a falling currency and soaring equity prices highlights the tension between near-term macro risks and longer-term reform hopes. Going forward, investor confidence will hinge on the government’s ability to deliver credible policy execution while managing the inflationary fallout from ongoing peso weakness.

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**Global CO2 emissions**
Shifting focus to more structural issues, the chart underscores how decarbonisation challenges remain deeply concentrated in a few heavy-emitting sectors. Energy production alone accounts for nearly 40% of global CO₂ emissions, with manufacturing, households, and transport together contributing another 50%. This composition highlights the complex trade-offs of the energy transition: the very sectors that underpin modern living standards—power generation, industrial output, mobility, and housing—are also those most difficult to decarbonise. Climate change is therefore not just an environmental issue but a structural economic one, shaping investment, infrastructure, and pricing systems for decades to come. The tension between sustaining growth and cutting emissions will remain a defining challenge for policymakers, particularly as clean technologies face constraints in scaling fast enough to offset rising global demand for energy-intensive goods and services.

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Recent financial market developments have been shaped by a renewed bout of volatility, with heightened concerns about stretched AI valuations triggering a big correction across parts of the tech sector. This comes against a backdrop of lingering uncertainty in Washington, where the US government shutdown has continued to delay the release of several key economic reports, clouding visibility on near-term momentum. Still, the broader macro signals offer a mixed but nuanced picture. Global manufacturing PMIs have continued to hold up, hinting that underlying industrial momentum remains resilient (chart 1). The latest US Senior Loan Officer Survey points to a stabilisation in credit conditions—banks remain cautious, but the most intense phase of tightening may have now passed (chart 2). In China, the October PMIs reflected renewed softness in manufacturing alongside a still-steady services sector, tentatively suggesting that growth may be rebalancing, albeit at a weaker aggregate pace of growth (chart 3). Australia’s inflation and labour market data, meanwhile, have complicated the case for near-term policy easing, with the RBA opting to stay on hold this week as core inflation remain sticky. In Argentina, currency weakness persists even as equity markets rally, highlighting the policy and market tension surrounding President Milei’s reform agenda (chart 5). And finally, at a more structural level, latest global emissions data serve as a reminder that energy, manufacturing, transport, and households remain the principal sources of CO₂—illustrating how the climate and energy transition will continue to shape the macro landscape well beyond the current economic cycle (chart 6).

Charts of the Week: Uneven But Unbroken

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Initial claims for unemployment insurance fell 12,643 during the week ended October 25 to 219,520 (+0.6% y/y) and mostly reversed the prior week’s increase to 232,163. The four-week moving average of initial claims eased to 226,766 from 227,953. They have trended higher this year, after weakening late in 2024. The four-week average hit a low of 200,323 in January 2024.

Federal government employees initially filed 9,435 jobless insurance claims last week after 10,062 in the prior week. These figures are increased from 588 at the end of September.

Continuing claims for unemployment insurance rose to 1.957 million (5.5% y/y) in the week ended October 18 from 1.947 million in the prior week. The four-week moving average rose to 1.940 million from 1.931 million. It was the highest level since the last week of August.	

Federal government employees continuing benefits rose to 23,188 in the week ended October 18 from 14,472 in the prior week. These figures are increased from 8,680 at the end of September.

The insured unemployment rate varied greatly across individual states and territories. In the week ended October 18, the highest unemployment rates were in New Jersey (2.14%), Washington (2.03%), California (1.93%), Massachusetts (1.84%), the District of Columbia (1.86%) and Connecticut (1.70%). The lowest were in South Dakota (0.25%), Florida (0.36%), North Carolina & Louisiana (0.41%), Nebraska (0.44%) and Virginia (0.49%). Rates in other notable states include New York (1.51%), Illinois (1.50%), Pennsylvania (1.39%), and Texas (1.11%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986.

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- Decline in initial claims reverses earlier gain.
- Continuing claims move higher.
- State unemployment rates vary.

Economy in Brief: 2007

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