Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080811a.jpg" align="left" border="0" height="265" width="353">
In June French IP fell by 0.4%, unexpected weakness. It has
now dropped in two of the past three months and is falling sharply in
the current quarter, at a -5.3% annual rate. Italy, like France, has
had a very weak May but managed some output increases in June. Still,
Italy&#8217;s IP is dropping in Q2 as well. 
 

The sequential growth rates in France shows a clear ongoing
deterioration. This is what the OECD trend-adjusted leading indicators
pointed to last week. France has more severe downward momentum that
most other EMU nations. 
 

Italy&#8217;s path lower is more jagged with a rise in output over
six months and an actual ongoing acceleration in the output of consumer
goods, 12mo to 6mo to 3mo. This is very odd since the export markets
seem to be declining for other EMU countries (like Germany) and Italy&#8217;s
own domestic demand for consumer goods is quite weak. Still it may be
that Italy&#8217;s consumer goods output is more volatile than it is strong.
The recent monthly results have been extremely choppy. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col"> French IP excluding construction</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">Saar except m/m</td>
<td>Jun-08</td>
<td>May-08</td>
<td>Apr-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Quarter-to-date</td>
</tr>
<tr class="grey3">
<td class="firstcol">IP total</td>
<td>-0.4%</td>
<td>-2.9%</td>
<td>1.3%</td>
<td>-7.8%</td>
<td>-4.9%</td>
<td>-1.6%</td>
<td>-5.3%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Consumer</td>
<td>0.5%</td>
<td>-1.5%</td>
<td>0.0%</td>
<td>-3.9%</td>
<td>-1.8%</td>
<td>-4.3%</td>
<td>-7.4%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Capital</td>
<td>-1.0%</td>
<td>-1.2%</td>
<td>2.4%</td>
<td>0.3%</td>
<td>1.2%</td>
<td>1.9%</td>
<td>3.5%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Intermediate</td>
<td>-0.4%</td>
<td>-2.9%</td>
<td>1.3%</td>
<td>-8.0%</td>
<td>-4.7%</td>
<td>-2.7%</td>
<td>-7.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan="8">Memo</td>
</tr>
<tr class="grey3">
<td class="firstcol">Auto</td>
<td>-2.9%</td>
<td>-7.6%</td>
<td>2.8%</td>
<td>-27.6%</td>
<td>-21.8%</td>
<td>-5.7%</td>
<td>-21.2%</td>
</tr>
<tr class="grey1">
<td colspan="8" class="firstcol">Italy IP excluding
construction</td>
</tr>
<tr class="grey4">
<td class="firstcol">Saar except m/m</td>
<td>Jun-08</td>
<td>May-08</td>
<td>Apr-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Quarter-to-date</td>
</tr>
<tr class="grey3">
<td class="firstcol">IP-MFG</td>
<td>0.2%</td>
<td>-1.5%</td>
<td>0.4%</td>
<td>-3.3%</td>
<td>1.5%</td>
<td>-2.0%</td>
<td>-2.5%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Consumer Goods</td>
<td>1.9%</td>
<td>-3.2%</td>
<td>2.9%</td>
<td>6.1%</td>
<td>3.7%</td>
<td>1.4%</td>
<td>-0.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Capital Goods</td>
<td>-0.8%</td>
<td>-2.5%</td>
<td>1.7%</td>
<td>-6.4%</td>
<td>8.3%</td>
<td>-1.9%</td>
<td>-2.3%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Intermediate</td>
<td>0.5%</td>
<td>-1.7%</td>
<td>0.5%</td>
<td>-2.5%</td>
<td>-1.3%</td>
<td>-3.7%</td>
<td>-3.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan="8">Memo</td>
</tr>
<tr class="grey3">
<td class="firstcol">Transportation</td>
<td>-1.3%</td>
<td>-1.5%</td>
<td>-0.5%</td>
<td>-12.3%</td>
<td>7.6%</td>
<td>-1.6%</td>
<td>1.1%</td>
</tr>
</tbody>
</table>
</body></html>

In June French IP fell by 0.4%, unexpected weakness. It has now dropped in two of the past three months and is falling sharply in the current quarter, at a -5.3% annual rate. Italy, like France, has had a very weak May but managed [...]

French IP is Losing Momentum Across Sectors

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080811a.jpg" align="left" border="0" height="265" width="353">
In June French IP fell by 0.4%, unexpected weakness. It has
now dropped in two of the past three months and is falling sharply in
the current quarter, at a -5.3% annual rate. Italy, like France, has
had a very weak May but managed some output increases in June. Still,
Italy&#8217;s IP is dropping in Q2 as well. 
 

The sequential growth rates in France shows a clear ongoing
deterioration. This is what the OECD trend-adjusted leading indicators
pointed to last week. France has more severe downward momentum that
most other EMU nations. 
 

Italy&#8217;s path lower is more jagged with a rise in output over
six months and an actual ongoing acceleration in the output of consumer
goods, 12mo to 6mo to 3mo. This is very odd since the export markets
seem to be declining for other EMU countries (like Germany) and Italy&#8217;s
own domestic demand for consumer goods is quite weak. Still it may be
that Italy&#8217;s consumer goods output is more volatile than it is strong.
The recent monthly results have been extremely choppy. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> French
IP excluding construction</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">Saar except m/m</td>
<td>Jun-08</td>
<td>May-08</td>
<td>Apr-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Quarter-to-date</td>
</tr>
<tr class="grey3">
<td class="firstcol">IP total</td>
<td>-0.4%</td>
<td>-2.9%</td>
<td>1.3%</td>
<td>-7.8%</td>
<td>-4.9%</td>
<td>-1.6%</td>
<td>-5.3%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Consumer</td>
<td>0.5%</td>
<td>-1.5%</td>
<td>0.0%</td>
<td>-3.9%</td>
<td>-1.8%</td>
<td>-4.3%</td>
<td>-7.4%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Capital</td>
<td>-1.0%</td>
<td>-1.2%</td>
<td>2.4%</td>
<td>0.3%</td>
<td>1.2%</td>
<td>1.9%</td>
<td>3.5%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Intermediate</td>
<td>-0.4%</td>
<td>-2.9%</td>
<td>1.3%</td>
<td>-8.0%</td>
<td>-4.7%</td>
<td>-2.7%</td>
<td>-7.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan="8">Memo</td>
</tr>
<tr class="grey3">
<td class="firstcol">Auto</td>
<td>-2.9%</td>
<td>-7.6%</td>
<td>2.8%</td>
<td>-27.6%</td>
<td>-21.8%</td>
<td>-5.7%</td>
<td>-21.2%</td>
</tr>
<tr class="grey1">
<td colspan="8" class="firstcol">Italy
IP excluding
construction</td>
</tr>
<tr class="grey4">
<td class="firstcol">Saar except m/m</td>
<td>Jun-08</td>
<td>May-08</td>
<td>Apr-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Quarter-to-date</td>
</tr>
<tr class="grey3">
<td class="firstcol">IP-MFG</td>
<td>0.2%</td>
<td>-1.5%</td>
<td>0.4%</td>
<td>-3.3%</td>
<td>1.5%</td>
<td>-2.0%</td>
<td>-2.5%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Consumer Goods</td>
<td>1.9%</td>
<td>-3.2%</td>
<td>2.9%</td>
<td>6.1%</td>
<td>3.7%</td>
<td>1.4%</td>
<td>-0.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Capital Goods</td>
<td>-0.8%</td>
<td>-2.5%</td>
<td>1.7%</td>
<td>-6.4%</td>
<td>8.3%</td>
<td>-1.9%</td>
<td>-2.3%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Intermediate</td>
<td>0.5%</td>
<td>-1.7%</td>
<td>0.5%</td>
<td>-2.5%</td>
<td>-1.3%</td>
<td>-3.7%</td>
<td>-3.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan="8">Memo</td>
</tr>
<tr class="grey3">
<td class="firstcol">Transportation</td>
<td>-1.3%</td>
<td>-1.5%</td>
<td>-0.5%</td>
<td>-12.3%</td>
<td>7.6%</td>
<td>-1.6%</td>
<td>1.1%</td>
</tr>
</tbody>
</table>
Evidence of Slow Down in Emerging
Markets Coming to
the Fore
 
by <a href="/comment/Curley.html">Louise
Curley</a> August 11, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080811b.jpg" align="left" border="0" height="265" width="353">
Second quarter data on the national accounts of the emerging
countries of the Pacific Rim are becoming available. More than two
weeks ago, South Korea announced that its seasonally unadjusted second
quarter GDP increased 4.8% over the corresponding quarter of last year,
down from a 5.8% increase in the first quarter. Today, Singapore
announced that its second quarter increase over the same quarter of
last year was up only 2.1%, compared with 6.9% for the first quarter.
The year over year changes in the seasonally unadjusted real GDP for
South Korea and Singapore are shown in the first chart.
On a seasonally adjusted basis, South Korea's GDP increased
0.83% from the first to the second quarter, the same as in the first
quarter from the fourth quarter of 2007. Singapore on the other hand,
experienced a 1.5% decline in its second quarter GDP, compared with an
increase of 3.72% in the first quarter, as shown in the second chart
showing the period to period change in the seasonally adjusted data.
Singapore published data on production "clusters" about two
weeks ago that suggested the slowing in the manufacturing sector would
affect the second quarter GDP adversely. The third chart shows the
indexes (2007=100) for three of the clusters: Electronics, Precision
Engineering and Transport. The transport cluster continued to forge
ahead in the second quarter but the Electronics and Precision
Engineering clusters declined.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080811c.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080811d.jpg" border="0" height="265" width="312">


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">SOUTH
KOREA AND SINGAPORE&nbsp;</th>
<th scope="col">Q2 08</th>
<th scope="col">Q1 08&nbsp;</th>
<th scope="col">Q2 07&nbsp;</th>
<th scope="col">Q/Q % chg&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" colspan="9">South
Korea Real GDP
(Bil 2000 Won)</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Seasonally
Unadjusted</td>
<td>206813</td>
<td>193700</td>
<td>197403</td>
<td>--</td>
<td>4.77</td>
<td>798057</td>
<td>760251</td>
<td>723127</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Seasonally
Adjusted</td>
<td>207532</td>
<td>205829</td>
<td>198125</td>
<td>0.83</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="9">&nbsp;Singapore
GDP (Mil Singapore Dollar)</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Seasonally
Unadjusted</td>
<td>58219</td>
<td>58503</td>
<td>57019</td>
<td>--</td>
<td>2.10</td>
<td>229090</td>
<td>212626</td>
<td>196474</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Seasonally
Adjusted</td>
<td>58558</td>
<td>59688</td>
<td>57535</td>
<td>-1.52</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
</body></html>

French IP is Losing MomentumAcross Sectors

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080808d.jpg" align="left" border="0" height="265" width="353">
The OECD Trend-restored LEIs tell a story that is now becoming
familiar in the markets. The US is still weakening. But Europe is
weakening faster. Just today Italy reported a DECLINE in GDP for
2008Q2. Nout Wellink, an ECB board member, said the European growth
would&#8230; &#8220;not look so good.&#8221; Europe has been slow to admit how much its
economy is being impacted by oil and the financial crisis and the
strong euro. Denial has its costs. 
 

I think we have finally heard the last from those poor souls
who argued that there was some sort of de-linkage going on in the
global economy. Europe would still grow, China, India ..etc. But
clearly the slowdown is hitting everyone. The Euro slowdown could
become more severe and that is part of the OECD warning this morning as
it sees a sharper slowing in the cards. OECD finds China and Brazil as
relative bright spots. The OECD said that while its leading indicators
point to slowdowns in the U.S., Japan, Germany, the U.K. and Canada,
they point to "strong" slowdowns in France and Italy. For Russia and
India, the leading indicators point to a downturn. Of course the
definition of downturn is not universal. To a fast growing economy it
could be just a big slowing in the growth rate. For most highly
developed economies it means there will be some decline in GDP. 
 

For now the OECD message is clear and that message is not
welcome. Yet, neither is it a surprise to those who have paid
attention. Europeans have for some time looked at the bright side of
the picture and ignored the encroaching darkness. The ECB was bound and
determined to hike rates due to its horrific inflation overshoot of its
target. The ECB needed to see the strong the side of the economy to
justify a rate hike. 
 

For now it seems to me the central banks have been put in a
very difficult position with a financial crises that crimped their
ability to act boldly. At the same time huge and ongoing increases in
oil prices struck. Exchange rates moved significantly as well. Looking
back, policy seems to have been well calibrated despite headline
inflation overshoot. The question may come to be asked if a core
inflation target might not work better in the future (since if we
assume the central banks more or less were really looking at core,
their actions are easier to understand). The ECB so badly has missed
its target it must have to wonder if wants to ever go though that
again. However, relative to a core inflation target it is has not done
so badly- nor has the Fed. We will have to see what lessons emerge from
this still evolving period. 
 

While policy may have done a good job it nonetheless has not
been able to avoid the scars and scrapes on banks and on the real
sector. Policy has done a good job but has worked no miracles. There is
room for improvement. But first there is a policy to implement in a
still nettlesome business cycle that is building downside strength. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="5" scope="col">OECD Trend-restored leading Indicators </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td colspan="5" class="firstcol">Growth progression-SAAR</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>3-Mos</td>
<td>6-Mos</td>
<td>12-Mos</td>
<td>Yr-Ago</td>
</tr>
<tr>
<td class="firstcol">OECD</td>
<td>-3.5%</td>
<td>-3.0%</td>
<td>-3.1%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">OECD7</td>
<td>-2.3%</td>
<td>-3.1%</td>
<td>-3.8%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">OECD Europe</td>
<td>-6.3%</td>
<td>-5.2%</td>
<td>-3.7%</td>
<td>1.1%</td>
</tr>
<tr>
<td class="firstcol">OECD Japan</td>
<td>3.2%</td>
<td>0.7%</td>
<td>-1.6%</td>
<td>-0.3%</td>
</tr>
<tr>
<td class="firstcol">OECD US</td>
<td>-1.2%</td>
<td>-3.0%</td>
<td>-4.1%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td colspan="5" class="firstcol">Six month readings at 6-Mo
Intervals:</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Recent six</td>
<td>6-Mos Ago</td>
<td>12-Mos Ago</td>
<td>18-Mos Ago</td>
</tr>
<tr>
<td class="firstcol">OECD</td>
<td>-3.0%</td>
<td>-3.1%</td>
<td>2.7%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">OECD7</td>
<td>-3.1%</td>
<td>-4.5%</td>
<td>2.2%</td>
<td>0.9%</td>
</tr>
<tr>
<td class="firstcol">OECD Europe</td>
<td>-5.2%</td>
<td>-2.2%</td>
<td>1.0%</td>
<td>1.2%</td>
</tr>
<tr>
<td class="firstcol">OECD Japan</td>
<td>0.7%</td>
<td>-3.9%</td>
<td>-1.9%</td>
<td>1.2%</td>
</tr>
<tr>
<td class="firstcol">OECD US</td>
<td>-3.0%</td>
<td>-5.3%</td>
<td>4.1%</td>
<td>1.3%</td>
</tr>
<tr>
<td colspan="5" class="firstcol">Slowdowns indicated by BOLD RED</td>
</tr>
</tbody>
</table>
</body></html>

The OECD Trend-restored LEIs tell a story that is now becoming familiar in the markets. The US is still weakening. But Europe is weakening faster. Just today Italy reported a DECLINE in GDP for 2008Q2. Nout Wellink, an ECB board [...]

OECD Indicators Do Not Point to Good News

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080808c.jpg" align="left" border="0" height="265" width="353">
Too much watching, not enough spending? 
 

Japan&#8217;s economy watchers index has dropped sharply. Its
components are all on 5-Year lows and have been that way for two months
running. The NTC MFG index is on a five year low. The Teikoku industry
readings are on five year lows. Japan&#8217;s own LEI has been weak but in
the OECD treatment the trend restored indices have Japan&#8217;s index on a
rising trend, but steady month-to-month. The readings in these
Japan-based reports are much weaker than the OECD&#8217;s. And Japan is
looking very weak. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">Key
Japanese surveys </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="4">Raw readings of each survey</td>
<td colspan="3">Percent of 5Yr range*</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Jul-08</td>
<td>Jun-08</td>
<td>May-08</td>
<td>Apr-08</td>
<td>Jul-08</td>
<td>Jun-08</td>
<td>May-08</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="8">Diffusion</td>
</tr>
<tr>
<td class="firstcol">Economy Watchers</td>
<td>29.3</td>
<td>29.5</td>
<td>32.1</td>
<td>35.5</td>
<td>7.0%</td>
<td>0.0%</td>
<td>1.2%</td>
</tr>
<tr>
<td class="firstcol">Employment</td>
<td>24.1</td>
<td>26.4</td>
<td>31.9</td>
<td>33.6</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Future</td>
<td>30.8</td>
<td>32.1</td>
<td>35.1</td>
<td>36.1</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">NTC MFG</td>
<td>47.1</td>
<td>46.5</td>
<td>47.7</td>
<td>48.6</td>
<td>5.3%</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="8">Econ
Trends
(Teikoku'/50 neutral/weighted diffusion)</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>32.9</td>
<td>34.4</td>
<td>35.6</td>
<td>36.9</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Retail</td>
<td>28.3</td>
<td>28.7</td>
<td>31.5</td>
<td>32.1</td>
<td>0.0%</td>
<td>0.0%</td>
<td>1.4%</td>
</tr>
<tr>
<td class="firstcol">Wholesale</td>
<td>31.0</td>
<td>32.4</td>
<td>33.9</td>
<td>34.5</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>36.2</td>
<td>37.5</td>
<td>39.7</td>
<td>40.4</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>25.5</td>
<td>26.9</td>
<td>27.1</td>
<td>28.0</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr class="grey2">
<td colspan="8" class="firstcol">100 is high;
Zero is low</td>
</tr>
</tbody>
</table>
</body></html>

Too much watching, not enough spending? Japan’s economy watchers index has dropped sharply. Its components are all on 5-Year lows and have been that way for two months running. The NTC MFG index is on a five year low. The Teikoku [...]

Japan’s Economy Watcher’s Index Plunges

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080808a.jpg" width="353">
Labor productivity in the nonfarm business sector rose 2.2% at an annual rate last quarter. The increase fell short of Consensus expectations for a 2.5% rise while growth during 1Q and for all of last year was revised down.
Output growth last quarter did nearly double from 1Q to a still-modest 1.7% but the y/y rate of increase fell by roughly one percentage point to 1.8%. That was accompanied by a drop in total hours worked at a 0.5% annual rate (-1.0% y/y) which was one-third the 1Q rate of decline.
Growth in compensation per hour did slow to 3.6% from gains during the prior two quarters that were revised up. However, the y/y gain picked up moderately to 4.3% and that exceeded the accelerated rate of increase for all of last year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080808b.jpg" width="353">
Unit labor cost growth fell to 1.3% after the 2.5% gain during 1Q. Year-to-year growth in costs did pick up modestly, however, to 1.5% but that remained down compared to recent years.
In the factory sector, productivity fell at a 1.4% rate during 2Q (2.6% y/y) and the decline lowered year-to-year gain to its weakest since 1Q of last year. The deceleration occurred as y/y output growth slowed to roughly zero. As a result, unit labor costs rose at a 6.1% rate (1.9% y/y) and that q/q increase was the fastest since late 2006.
Multinationals Make the Most of IT from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/net/20080601/cover.pdf"> here</a>.
Creative Destruction, Documented from the Federal Reserve Bank of Richmond can be found <a href="http://www.richmondfed.org/publications/economic_research/region_focus/weekly_update/index.cfm">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/@EC/@EC02/@EC02.HTM">Nonfarm Business Sector</a> (SAAR, %)</th>
<th scope="col">2Q &#39;08</th>
<th scope="col">1Q &#39;08</th>
<th scope="col">4Q &#39;07</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">Output per Hour</td>
<td>2.2</td>
<td>2.6</td>
<td>0.8</td>
<td>2.8</td>
<td>1.4</td>
<td>1.0</td>
<td>1.7</td>
</tr>
<tr>
<td class="firstcol">Compensation per Hour</td>
<td>3.6</td>
<td>5.2</td>
<td>5.4</td>
<td>4.3</td>
<td>4.1</td>
<td>3.8</td>
<td>4.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor Costs</td>
<td>1.3</td>
<td>2.5</td>
<td>4.5</td>
<td>1.5</td>
<td>2.7</td>
<td>2.8</td>
<td>2.2</td>
</tr>
</tbody>
</table>
</body>
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Labor productivity in the nonfarm business sector rose 2.2% at an annual rate last quarter. The increase fell short of Consensus expectations for a 2.5% rise while growth during 1Q and for all of last year was revised down. Output [...]

U.S. 2Q Productivity Growth Weakened, Costs Still Under Control

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080808a.jpg" align="left" border="0" height="265" width="353">
Labor productivity in the nonfarm business sector rose 2.2% at
an annual rate last quarter. The increase fell short of Consensus
expectations for a 2.5% rise while growth during 1Q and for all of last
year was revised down.
Output growth last quarter did nearly double from 1Q to a
still-modest 1.7% but the y/y rate of increase fell by roughly one
percentage point to 1.8%. That was accompanied by a drop in total hours
worked at a 0.5% annual rate (-1.0% y/y) which was one-third the 1Q
rate of decline.
Growth in compensation per hour did slow to 3.6% from gains
during the prior two quarters that were revised up. However, the y/y
gain picked up moderately to 4.3% and that exceeded the accelerated
rate of increase for all of last year.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080808b.jpg" align="right" border="0" height="265" width="353">
Unit labor cost growth fell to 1.3% after the 2.5% gain during
1Q. Year-to-year growth in costs did pick up modestly, however, to 1.5%
but that remained down compared to recent years.
In the factory sector, productivity fell at a 1.4% rate during
2Q (2.6% y/y) and the decline lowered year-to-year gain to its weakest
since 1Q of last year. The deceleration occurred as y/y output growth
slowed to roughly zero. As a result, unit labor costs rose at a 6.1%
rate (1.9% y/y) and that q/q increase was the fastest since late 2006.
Multinationals Make the Most of IT from
the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/net/20080601/cover.pdf">
here</a>.
Creative Destruction, Documented from the
Federal Reserve Bank of Richmond can be found <a href="http://www.richmondfed.org/publications/economic_research/region_focus/weekly_update/index.cfm">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/@EC/@EC02/@EC02.HTM">Nonfarm
Business Sector</a> (SAAR, %)</th>
<th scope="col">2Q '08</th>
<th scope="col">1Q '08</th>
<th scope="col">4Q '07</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">Output per
Hour</td>
<td>2.2</td>
<td>2.6</td>
<td>0.8</td>
<td>2.8</td>
<td>1.4</td>
<td>1.0</td>
<td>1.7</td>
</tr>
<tr>
<td class="firstcol">Compensation
per Hour</td>
<td>3.6</td>
<td>5.2</td>
<td>5.4</td>
<td>4.3</td>
<td>4.1</td>
<td>3.8</td>
<td>4.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor
Costs</td>
<td>1.3</td>
<td>2.5</td>
<td>4.5</td>
<td>1.5</td>
<td>2.7</td>
<td>2.8</td>
<td>2.2</td>
</tr>
</tbody>
</table>
OECD Indicators Do Not Point toGood News 
by <a href="/comment/Brusca.html">Robert
Brusca</a> August 8, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080808d.jpg" align="left" border="0" height="265" width="353">
The OECD Trend-restored LEIs tell a story that is now becoming
familiar in the markets. The US is still weakening. But Europe is
weakening faster. Just today Italy reported a DECLINE in GDP for
2008Q2. Nout Wellink, an ECB board member, said the European growth
would&#8230; &#8220;not look so good.&#8221; Europe has been slow to admit how much its
economy is being impacted by oil and the financial crisis and the
strong euro. Denial has its costs. 
 

I think we have finally heard the last from those poor souls
who argued that there was some sort of de-linkage going on in the
global economy. Europe would still grow, China, India ..etc. But
clearly the slowdown is hitting everyone. The Euro slowdown could
become more severe and that is part of the OECD warning this morning as
it sees a sharper slowing in the cards. OECD finds China and Brazil as
relative bright spots. The OECD said that while its leading indicators
point to slowdowns in the U.S., Japan, Germany, the U.K. and Canada,
they point to "strong" slowdowns in France and Italy. For Russia and
India, the leading indicators point to a downturn. Of course the
definition of downturn is not universal. To a fast growing economy it
could be just a big slowing in the growth rate. For most highly
developed economies it means there will be some decline in GDP. 
 

For now the OECD message is clear and that message is not
welcome. Yet, neither is it a surprise to those who have paid
attention. Europeans have for some time looked at the bright side of
the picture and ignored the encroaching darkness. The ECB was bound and
determined to hike rates due to its horrific inflation overshoot of its
target. The ECB needed to see the strong the side of the economy to
justify a rate hike. 
 

For now it seems to me the central banks have been put in a
very difficult position with a financial crises that crimped their
ability to act boldly. At the same time huge and ongoing increases in
oil prices struck. Exchange rates moved significantly as well. Looking
back, policy seems to have been well calibrated despite headline
inflation overshoot. The question may come to be asked if a core
inflation target might not work better in the future (since if we
assume the central banks more or less were really looking at core,
their actions are easier to understand). The ECB so badly has missed
its target it must have to wonder if wants to ever go though that
again. However, relative to a core inflation target it is has not done
so badly- nor has the Fed. We will have to see what lessons emerge from
this still evolving period. 
 

While policy may have done a good job it nonetheless has not
been able to avoid the scars and scrapes on banks and on the real
sector. Policy has done a good job but has worked no miracles. There is
room for improvement. But first there is a policy to implement in a
still nettlesome business cycle that is building downside strength. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="5" scope="col">OECD
Trend-restored leading Indicators </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td colspan="5" class="firstcol">Growth
progression-SAAR</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>3-Mos</td>
<td>6-Mos</td>
<td>12-Mos</td>
<td>Yr-Ago</td>
</tr>
<tr>
<td class="firstcol">OECD</td>
<td>-3.5%</td>
<td>-3.0%</td>
<td>-3.1%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">OECD7</td>
<td>-2.3%</td>
<td>-3.1%</td>
<td>-3.8%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">OECD Europe</td>
<td>-6.3%</td>
<td>-5.2%</td>
<td>-3.7%</td>
<td>1.1%</td>
</tr>
<tr>
<td class="firstcol">OECD Japan</td>
<td>3.2%</td>
<td>0.7%</td>
<td>-1.6%</td>
<td>-0.3%</td>
</tr>
<tr>
<td class="firstcol">OECD US</td>
<td>-1.2%</td>
<td>-3.0%</td>
<td>-4.1%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td colspan="5" class="firstcol">Six
month readings at 6-Mo
Intervals:</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Recent six</td>
<td>6-Mos Ago</td>
<td>12-Mos Ago</td>
<td>18-Mos Ago</td>
</tr>
<tr>
<td class="firstcol">OECD</td>
<td>-3.0%</td>
<td>-3.1%</td>
<td>2.7%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">OECD7</td>
<td>-3.1%</td>
<td>-4.5%</td>
<td>2.2%</td>
<td>0.9%</td>
</tr>
<tr>
<td class="firstcol">OECD Europe</td>
<td>-5.2%</td>
<td>-2.2%</td>
<td>1.0%</td>
<td>1.2%</td>
</tr>
<tr>
<td class="firstcol">OECD Japan</td>
<td>0.7%</td>
<td>-3.9%</td>
<td>-1.9%</td>
<td>1.2%</td>
</tr>
<tr>
<td class="firstcol">OECD US</td>
<td>-3.0%</td>
<td>-5.3%</td>
<td>4.1%</td>
<td>1.3%</td>
</tr>
<tr>
<td colspan="5" class="firstcol">Slowdowns
indicated by BOLD RED</td>
</tr>
</tbody>
</table>
Japan&#8217;s Economy Watcher&#8217;s
IndexPlunges 
by <a href="/comment/Brusca.html">Robert
Brusca</a> August 8, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080808c.jpg" align="left" border="0" height="265" width="353">
Too much watching, not enough spending? 
 

Japan&#8217;s economy watchers index has dropped sharply. Its
components are all on 5-Year lows and have been that way for two months
running. The NTC MFG index is on a five year low. The Teikoku industry
readings are on five year lows. Japan&#8217;s own LEI has been weak but in
the OECD treatment the trend restored indices have Japan&#8217;s index on a
rising trend, but steady month-to-month. The readings in these
Japan-based reports are much weaker than the OECD&#8217;s. And Japan is
looking very weak. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">Key
Japanese surveys </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="4">Raw readings of each survey</td>
<td colspan="3">Percent of 5Yr range*</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Jul-08</td>
<td>Jun-08</td>
<td>May-08</td>
<td>Apr-08</td>
<td>Jul-08</td>
<td>Jun-08</td>
<td>May-08</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="8">Diffusion</td>
</tr>
<tr>
<td class="firstcol">Economy Watchers</td>
<td>29.3</td>
<td>29.5</td>
<td>32.1</td>
<td>35.5</td>
<td>7.0%</td>
<td>0.0%</td>
<td>1.2%</td>
</tr>
<tr>
<td class="firstcol">Employment</td>
<td>24.1</td>
<td>26.4</td>
<td>31.9</td>
<td>33.6</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Future</td>
<td>30.8</td>
<td>32.1</td>
<td>35.1</td>
<td>36.1</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">NTC MFG</td>
<td>47.1</td>
<td>46.5</td>
<td>47.7</td>
<td>48.6</td>
<td>5.3%</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="8">Econ
Trends
(Teikoku'/50 neutral/weighted diffusion)</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>32.9</td>
<td>34.4</td>
<td>35.6</td>
<td>36.9</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Retail</td>
<td>28.3</td>
<td>28.7</td>
<td>31.5</td>
<td>32.1</td>
<td>0.0%</td>
<td>0.0%</td>
<td>1.4%</td>
</tr>
<tr>
<td class="firstcol">Wholesale</td>
<td>31.0</td>
<td>32.4</td>
<td>33.9</td>
<td>34.5</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>36.2</td>
<td>37.5</td>
<td>39.7</td>
<td>40.4</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>25.5</td>
<td>26.9</td>
<td>27.1</td>
<td>28.0</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr class="grey2">
<td colspan="8" class="firstcol">100 is high;
Zero is low</td>
</tr>
</tbody>
</table>
</body></html>

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080807g.jpg" width="353">
Consumer credit outstanding rose $14.3B during June following moderate $8.0 and $9.0 billion increases during the prior two months.
On a percentage basis, the change in consumer credit over the last three months averaged 5.0% (AR) and that was roughly stable. The rate of gain was, however, up from 3.3% this passed February.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080807h.jpg" width="353">
Revolving credit outstanding rose $5.5B during June. Here again, the three month rate of growth of 5.0% recently has been stable but reduced from a 7.4% rise during all of last year.
Non-revolving credit, which accounts for nearly two thirds of total consumer credit, rose a sharp $8.9B in June. The three month annualized average growth rate, however, was 5.0% and that was up from a 2.2% growth rate in February, 4.7% growth during all of last year and 3.6% growth in 2004.
These figures are the major input to the Fed&#39;s Flow of Funds accounts for the household sector, released quarterly.
Credit card debt and payment use from the Federal Reserve Bank of Boston can be found <a href="http://www.bos.frb.org/economic/wp/wp2008/wp0802.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">Consumer Credit (m/m Chg, SAAR)</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>$14.3B</td>
<td>&nbsp;$8.0B</td>
<td>5.6%</td>
<td>5.7%</td>
<td>4.5%</td>
<td>4.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revolving</td>
<td>$5.5B</td>
<td>$6.1B</td>
<td>7.2%</td>
<td>7.4%</td>
<td>6.1%</td>
<td>3.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-revolving</td>
<td>$8.9B</td>
<td>$1.9B</td>
<td>4.6%</td>
<td>4.7%</td>
<td>3.6%</td>
<td>4.9%</td>
</tr>
</tbody>
</table>
</body>
</html>

Consumer credit outstanding rose $14.3B during June following moderate $8.0 and $9.0 billion increases during the prior two months. On a percentage basis, the change in consumer credit over the last three months averaged 5.0% (AR) and [...]

U.S. Consumer Credit Growth Stable in June, Still Stable With 2007

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080807e.jpg" width="353">
The National Association of Realtors reported that the June level of pending sales of existing homes rose 5.3%. That reversed the 4.9% decline during May which was unrevised. The latest increase compared to Consensus expectations for a 1.0% drop.
These figures are analogous to the new home sales data from the Commerce Department in that they measure existing home sales when the sales contract is signed, not at the time the sale is closed. The series dates back to 2001.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080807f.jpg" width="353">
The regional sales figures indicated that sales in the South recovered all of their May decline with a 9.3% increase while sales in the Northeast nearly recovered two months of decline with a 3.4% rise. Sales in the Midwest posted a weak 1.3% rise on the heels of a 6.0% May drop and sales in the West continued to recover. They posted a 4.6% gain to the highest level in twelve months.
The Realtors association indicated in an earlier report that the number of homes on the market &amp; available for sale ticked up a not seasonally adjusted 0.2% (2.8% y/y) after a 1.5% decline during May.
At the current sales rate there was an 11.1 months&#39; supply of homes on the market versus an 8.9 months&#39; average during all of last year, a 6.5 months&#39; supply in 2006 and a 4.5 months&#39; supply in 2005.
The pending home sales data are available in Haver&#39;s PREALTOR database and the number of homes on the market are in the REALTOR database.
Rational Real Estate from the Federal Reserve Bank of Richmond can be found <a href="http://www.richmondfed.org/publications/economic_research/region_focus/weekly_update/archive/2008/20080604.cfm"> 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">Pending Home Sales (2001=100)&nbsp;</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>89.0</td>
<td>&nbsp;84.5</td>
<td>&nbsp;&nbsp; -12.2%</td>
<td>95.7</td>
<td>112.1&nbsp;</td>
<td>124.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>79.6</td>
<td>77.0</td>
<td>-15.4</td>
<td>85.6</td>
<td>98.5</td>
<td>108.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>79.6</td>
<td>78.6</td>
<td>-13.3</td>
<td>89.6</td>
<td>102.0</td>
<td>116.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>92.4</td>
<td>84.5</td>
<td>-16.6</td>
<td>107.3</td>
<td>127.3</td>
<td>134.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>101.0</td>
<td>96.6</td>
<td>-1.8</td>
<td>92.1</td>
<td>109.5</td>
<td>128.6</td>
</tr>
</tbody>
</table>
</body>
</html>

The National Association of Realtors reported that the June level of pending sales of existing homes rose 5.3%. That reversed the 4.9% decline during May which was unrevised. The latest increase compared to Consensus expectations for [...]

U.S. Pending Home Sales Unexpectedly Rose

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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U.S. Consumer Credit Growth Stable in June, Still Stable With 2007

U.S. Pending Home Sales Unexpectedly Rose