Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040607b.jpg" width="353">
Industrial production in emerging economies continues to out pace that of the countries of developed Europe. April industrial production data for two emerging countries--Malaysia and Slovakia--and two developed countries of Europe-- Denmark and Norway were released today. In the emerging countries, Slovakia showed a decline of 2.79% from March and Malaysia an increase of 1.74%. Similarly, in the developed countries, there was one up and one down. Denmark showed an increase of 2.88% and Norway a decrease of 4.85%
Since the month to month changes tend to be volatile, a clearer picture of the trends emerges when a three month moving average is used.
In the attached chart, industrial production for Denmark and Malaysia on a three month moving average is shown. Slovakia typifies the trend in the emerging economies, while Denmark typifies the trend in developed Europe. The contrast between the relatively flat trend of industrial production in Denmark and the rising trend in Slovakia is evident.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Industrial Production</th>
<th scope="col">Apr 04</th>
<th scope="col">Mar 04</th>
<th scope="col">Apr&nbsp; 03</th>
<th scope="col">M/M&nbsp;&nbsp;&nbsp; %</th>
<th scope="col">Y/Y&nbsp; %&nbsp;</th>
<th scope="col">2003 %</th>
<th scope="col">2002 %</th>
<th scope="col">2001 %</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Malaysia (1993=100)</td>
<td>228.5</td>
<td>224.6</td>
<td>200.4</td>
<td>1.74</td>
<td>14.02</td>
<td>9.31</td>
<td>4.59</td>
<td>-4.14</td>
</tr>
<tr>
<td class="firstcol">Denmark (2000=100)</td>
<td>107</td>
<td>104</td>
<td>103</td>
<td>2.88</td>
<td>3.88</td>
<td>-0.65</td>
<td>1.06</td>
<td>2.08</td>
</tr>
<tr class="odd">
<td class="firstcol">Norway (1995=100)</td>
<td>105.9</td>
<td>111.3</td>
<td>106.1</td>
<td>-4.85</td>
<td>-0.19</td>
<td>-4.11</td>
<td>1.04</td>
<td>-1.25</td>
</tr>
<tr>
<td class="firstcol">Slovakia (2000=100)</td>
<td>125.6</td>
<td>129.2</td>
<td>119.5</td>
<td>-2.79</td>
<td>5.10</td>
<td>6.18</td>
<td>6.49</td>
<td>6.95</td>
</tr>
</tbody>
</table>
</body>
</html>

Industrial production in emerging economies continues to out pace that of the countries of developed Europe. April industrial production data for two emerging countries--Malaysia and Slovakia--and two developed countries of Europe-- [...]

IP in Emerging Countries Outpaces that of Western Europe

Tom Moeller

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040607a.jpg">
The average price for unleaded regular gasoline in NY has fallen sharply the last three weeks to $1.15 on Friday from a peak of $1.40. Retail gasoline prices have yet to show much downward movement from the peak of $2.06 in the third week of May.
Lower spot crude oil prices have led the decline with the price of West Texas Intermediate crude at $38.60 on Friday versus its peak of $41.88 on May 24th.
Wholesale natural gas prices moved higher last week to $6.39/mmbtu (+2.1% y/y), up 26% versus the daily low in February of $5.08/mmbtu.
For the latest Short Term Energy Outlook from the US Department of Energy click <a href="http://www.eia.doe.gov/emeu/steo/pub/contents.html">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/daily/@D3/@D306/@D306.HTM">Energy Prices</a></th>
<th scope="col">06/04/04</th>
<th scope="col">12/31/03</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Unleaded Regular Gasoline, NY ($/Gal.)</td>
<td>$1.15</td>
<td>$0.96</td>
<td>39.2%</td>
<td>$0.88</td>
<td>$0.72</td>
<td>$0.74</td>
</tr>
<tr>
<td class="firstcol">Domestic Spot Market Price: West Texas Intermediate ($/Barrel)</td>
<td>$38.60</td>
<td>$32.55</td>
<td>35.1%</td>
<td>$31.10</td>
<td>$26.17</td>
<td>$25.97</td>
</tr>
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The average price for unleaded regular gasoline in NY has fallen sharply the last three weeks to $1.15 on Friday from a peak of $1.40. Retail gasoline prices have yet to show much downward movement from the peak of $2.06 in the third [...]

Gasoline & Crude Oil Prices Down

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/040604b.jpg" width="353">
The labor market in Canada extended its improvement in May, with yet another good rise in employment and a further retreat in unemployment. Employment went up 56,100, taking the employment rate up to 62.6% of the population aged 15 and over. Unemployment fell 14,100, with the unemployment rate at 7.2%, lowest since September 2001.
The industrial pattern of employment changes was notable in May for a continuing advance in construction, and also a rise of 12,000 in manufacturing. This pushed the year-on-year change in factory work to +0.1%, the first positive figure since February 2003. Other industries shared the gains, especially education services, which had fallen in April. Professional and technical services and &quot;other&quot; services also contributed. On the downside was a reversal in business support services from their April gain, along with declines in agriculture, information services and accommodation and food services.
As we noted here last month, the Canadian labor market has performed better than that in the US over the last couple of years. Evidence of this is seen in the chart, which illustrates monthly percent changes in employment in each of the two countries. The bars for the Canadian data show the sustained growth of jobs there in most months, an impressive development in light of the sluggish and irregular pattern of jobs in the US.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
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<tr>
<th scope="col" class="firstcol">Canada: Selected Labor Market Indicators</th>
<th scope="col">May 2004</th>
<th scope="col">Apr 2004</th>
<th scope="col">Mar 2004</th>
<th scope="col">Year/ Year</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Employment Change </td>
<td>+56K</td>
<td>+50K</td>
<td>-13K</td>
<td>2.0%</td>
<td>2.2%</td>
<td>2.2%</td>
<td>1.1%</td>
</tr>
<tr>
<td class="firstcol">Employment Rate </td>
<td>62.6%</td>
<td>62.5%</td>
<td>62.4%</td>
<td>62.2%</td>
<td>62.4%</td>
<td>61.8%</td>
<td>61.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Manufacturing Employment Change</td>
<td>+12K</td>
<td>+4K</td>
<td>+7K</td>
<td>+0.1%</td>
<td>-1.4%</td>
<td>+2.3%</td>
<td>-0.3%</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate</td>
<td>7.2%</td>
<td>7.3%</td>
<td>7.5%</td>
<td>7.9%</td>
<td>7.6%</td>
<td>7.6%</td>
<td>7.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Labor Force Change</td>
<td>+42K</td>
<td>+17K</td>
<td>+8K</td>
<td>1.3%</td>
<td>2.2%</td>
<td>2.7%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">Participation Rate</td>
<td>67.5%</td>
<td>67.4%</td>
<td>67.4%</td>
<td>67.5%</td>
<td>67.5%</td>
<td>66.9%</td>
<td>66.0%</td>
</tr>
</tbody>
</table>
</body>
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The labor market in Canada extended its improvement in May, with yet another good rise in employment and a further retreat in unemployment. Employment went up 56,100, taking the employment rate up to 62.6% of the population aged 15 [...]

Canada Labor Market Improves Further

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040604a.jpg">
Non-farm payrolls rose 248,000 in May. That about matched Consensus expectations for a 225,000 rise, but upward revisions to prior months added a further note of strength to recent reports. Payroll growth in April was revised to 346,000 from 288,000 and the March gain was revised to 353,000 from 337,000.
An increased breadth of hiring was indicated by the three-month diffusion index for private non-farm payrolls which jumped to 75.4% from 40.3% last year and from 37.0% in 2002. It was the strongest diffusion of employment growth since early 1998.
Manufacturing sector payrolls rose 32,000 following upwardly revised figures for the prior two months. Gains were widespread. The three-month diffusion index for manufacturing payrolls improved to 70.2% from just 18.6% last year and 15.5% in 2002.
Service producing payrolls rose 176,000 (1.2% y/y) despite a 27,000 worker decline in government employment (0.0% y/y). Private service payrolls rose 203,000 (1.5% y/y) and gains were broad based.
Construction jobs were strong again, up 37,000 (2.9% y/y).
The index of aggregate hours worked (employment times hours worked) rose 0.3% following an upwardly revised 0.4% April gain, up 3.1% (AR) versus 1Q.
Growth in average hourly earnings was steady at 0.3% (2.2% y/y). A 0.1% decline in factory sector earnings was offset by a 0.4% (2.1% y/y) gain in private services.
From the separate household survey the unemployment rate held steady at an expected 5.6%. Employment surged another 196,000 (0.9% y/y) and the labor force grew 233,000 (+0.3% y/y). The labor force participation rate was unchanged for the fourth month at 65.9% versus 67.1% averaged from 1997-2000.

<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/@EB/@EB01/@EB01.HTM">Employment</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>248,000</td>
<td>346,000</td>
<td>1.0%</td>
<td>-0.3%</td>
<td>-1.1%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>32,000</td>
<td>29,000</td>
<td>-1.2%</td>
<td>-4.8%</td>
<td>-7.2%</td>
<td>-4.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.8</td>
<td>33.8</td>
<td>33.7</td>
<td>33.7</td>
<td>33.8</td>
<td>34.0</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.3%</td>
<td>0.3%</td>
<td>2.2%</td>
<td>2.7%</td>
<td>2.9%</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>5.6%</td>
<td>5.6%</td>
<td>6.1%</td>
<td>6.0%</td>
<td>5.8%</td>
<td>4.8%</td>
</tr>
</tbody>
</table>
</body>
</html>

Non-farm payrolls rose 248,000 in May. That about matched Consensus expectations for a 225,000 rise, but upward revisions to prior months added a further note of strength to recent reports. Payroll growth in April was revised to [...]

U.S. Non-farm Payroll Growth Strong & Broad Based

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040603g.jpg" width="353">
The Euro-Zone Purchasing Managers Index for the service industries gained 1.22 points last month. Employment, new business and expectations all contributed, while outstanding business slowed. These international PMI surveys are conducted by NTC-Research for Reuters, Inc.
Among the individual countries, France jumped 3.5 points, regaining the more buoyant amounts that prevailed around the turn of this year. Every component of the French index advanced. Italy&#39;s index also increased, that in Germany was basically flat and in Spain, down about a point.
Separate measures in the UK and Russia were mixed. The UK&#39;s index slowed, but maintained a favorable pace. Employment rose while new and outstanding business eased. Services activity in Russia, in its index compiled by Moscow Narodny Bank, gained somewhat with increases in new and outstanding business. The overall pace, however, remains well below levels during the second half of 2003.
A widespread characteristic of this month&#39;s service sector activity was faster rising prices. Input prices were up sharply in Germany, France, Spain and the UK; they rose modestly in Italy and were steady in Russia. Prices charged accelerated in France and the UK. They picked up in Italy and Germany, although at just under 49%, these prices are still falling, though more slowly than before. Price increases decelerated in Spain and Russia.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Purchasing Managers Index Percent (&gt;50 = expansion;&nbsp; &lt;50 = contraction)</th>
<th scope="col">May 2004</th>
<th scope="col">Apr 2004</th>
<th scope="col">Mar 2004</th>
<th scope="col">May 2003</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Euro Zone Total</td>
<td>55.76</td>
<td>54.54</td>
<td>54.40</td>
<td>47.89</td>
<td>51.36</td>
<td>51.58</td>
<td>51.63</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Employment</td>
<td>49.98</td>
<td>49.53</td>
<td>49.26</td>
<td>45.64</td>
<td>46.91</td>
<td>49.35</td>
<td>52.48</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; New Business</td>
<td>54.63</td>
<td>53.60</td>
<td>53.58</td>
<td>45.62</td>
<td>50.85</td>
<td>51.24</td>
<td>50.11</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Business Expectations</td>
<td>66.05</td>
<td>64.24</td>
<td>66.07</td>
<td>61.86</td>
<td>65.09</td>
<td>65.74</td>
<td>62.08</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>53.60</td>
<td>53.30</td>
<td>53.16</td>
<td>44.38</td>
<td>48.49</td>
<td>48.62</td>
<td>48.87</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>58.52</td>
<td>55.04</td>
<td>55.86</td>
<td>50.99</td>
<td>53.99</td>
<td>54.71</td>
<td>54.26</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>56.85</td>
<td>55.83</td>
<td>55.18</td>
<td>50.10</td>
<td>53.34</td>
<td>52.97</td>
<td>53.91</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>54.63</td>
<td>55.67</td>
<td>53.90</td>
<td>50.39</td>
<td>52.51</td>
<td>52.57</td>
<td>51.64</td>
</tr>
<tr class="odd">
<td class="firstcol">United Kingdom</td>
<td>57.40</td>
<td>58.99</td>
<td>58.74</td>
<td>51.86</td>
<td>54.84</td>
<td>54.37</td>
<td>51.41</td>
</tr>
<tr>
<td class="firstcol">Russia</td>
<td>60.00</td>
<td>59.43</td>
<td>55.84</td>
<td>61.82</td>
<td>61.84</td>
<td>58.08</td>
<td>61.20</td>
</tr>
</tbody>
</table>
</body>
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The Euro-Zone Purchasing Managers Index for the service industries gained 1.22 points last month. Employment, new business and expectations all contributed, while outstanding business slowed. These international PMI surveys are [...]

Euro-Zone Services Activity Picks Up in May

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040603d.jpg" width="353">
The Institute for Supply Management reported that its Business Activity Index for the Nonmanufacturing Sector dipped last month to 65.2 from the record high of 68.4 in April. Consensus expectations had been for a lesser decline to 66.0.
Since the series&#39; inception in 1997 there has been a 59% correlation between the Business Activity Index and the q/q change in GDP services plus construction.
The employment index rose further to 56.3 as 23% of firms reported higher employment; up from 21% in April, 12% in 2002 and 17% last year. May was the tenth month in eleven the employment reading was above 50.
Since the series&#39; inception in 1997 there has been a 62% correlation between the level of the ISM non-manufacturing employment index and the m/m change in payroll employment in the service producing and construction industries.
The new orders index fell to 61.3 from 65.6 in April.
Business activity for the non-manufacturing sector is a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index weights the components.
The seasonally adjusted prices index rose to a series&#39; high of 74.4.
ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The non-manufacturing survey dates only to July 1997, therefore its seasonal adjustment should be viewed tentatively. 

<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/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">May &#39;03</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Business Activity Index</td>
<td>65.2</td>
<td>68.4</td>
<td>56.1</td>
<td>58.1</td>
<td>55.1</td>
<td>48.9</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>74.4</td>
<td>68.6</td>
<td>50.7</td>
<td>56.7</td>
<td>53.9</td>
<td>51.5</td>
</tr>
</tbody>
</table>
U.S. Light Vehicle Sales Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 3, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040603a.jpg" width="353">
Aggressive price discounting raised unit sales of light vehicles 8.7% last month to 17.84M (9.3% y/y). May was the highest monthly selling rate since last July. Consensus expectations were for sales of 16.6M.
Car sales jumped 8.9% to 8.01M. Sales of light trucks rose 8.5% to 9.82M.
Domestic light vehicle sales gained 8.9% m/m to 14.27M (+9.2% y/y). Imported vehicle sales rose 7.7% to 3.56M (9.6% y/y).
Imports&#39; share of the US market for new vehicles in May was 20.0%.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED09/@ED0901/@ED0901.HTM">Light Vehicle Sales (SAAR, Mil.Units)</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>17.84</td>
<td>16.41</td>
<td>9.3%</td>
<td>16.69</td>
<td>16.81</td>
<td>17.26</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>8.01</td>
<td>7.36</td>
<td>7.5%</td>
<td>7.63</td>
<td>8.07</td>
<td>8.48</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Trucks</td>
<td>9.82</td>
<td>9.06</td>
<td>10.7%</td>
<td>9.06</td>
<td>8.74</td>
<td>8.78</td>
</tr>
</tbody>
</table>
Initial Claims for Jobless Insurance Edge Lower 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 3, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040603c.jpg" width="353">
Initial claims for jobless insurance fell 6,000 last week to 339,000. The prior week was revised up slightly. Consensus expectations had been for 340,000 initial claims.
The 4-week moving average of initial claims rose for the second week to 341,000 (-19.6% y/y).
Continuing claims for unemployment insurance rose 65,000 but the prior week&#39;s increase was revised down.
The insured rate of unemployment ticked up to 2.4%.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">5/29/04</th>
<th scope="col">5/22/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;&nbsp; 339</td>
<td>345</td>
<td>-22.2%</td>
<td>403</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>&nbsp;&nbsp; --</td>
<td>3,003</td>
<td>-17.8%</td>
<td>3,533</td>
<td>3,573</td>
<td>3,023</td>
</tr>
</tbody>
</table>
1Q04 U.S. Productivity Revised Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 3, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040603b.jpg" width="353">
Non-farm labor productivity growth for 1Q04 was revised up to 3.8% from 3.5%, about as expected.
The revision reflected an upward revision to output growth to 5.4% (5.9% y/y) from 4.9%. Hours worked by all persons (employment times hours) were little revised, up 1.5% (0.4% y/y).
Growth in unit labor costs was revised up to 0.8% from 0.5% as compensation growth was revised to 4.6% from 4.0%.
Productivity growth in the nonfinancial corporate sector fell to 2.3% (6.4% y/y) from 4.3% in 4Q and 9.5% in 3Q. The slowdown lifted unit labor costs by 2.7% versus declines of 0.4% and 4.2% in the prior two quarters. Compensation growth was relatively stable at 5.1% (4.9% y/y).
During the last ten years there has been a 84% (negative) correlation between quarterly growth in unit labor costs and growth in unit profits in the nonfinancial corporate sector.
Productivity in the manufacturing sector was revised down to 2.9% (5.2% y/y) from 3.1%. Unit labor costs in the factory sector rose 3.1% (0.9% y/y) versus the initial report of 2.0% growth.

<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">Non-farm Business Sector</a> (SAAR)</th>
<th scope="col">1Q &#39;04 (Revised)</th>
<th scope="col">1Q &#39;04 (Prelim)</th>
<th scope="col">4Q &#39;03 (Final)</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Output per Hour</td>
<td>3.8%</td>
<td>3.5%</td>
<td>2.5%</td>
<td>5.5%</td>
<td>4.4%</td>
<td>5.0%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">Compensation</td>
<td>4.6%</td>
<td>4.0%</td>
<td>4.2%</td>
<td>4.6%</td>
<td>3.5%</td>
<td>2.3%</td>
<td>3.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor Costs</td>
<td>0.8%</td>
<td>0.5%</td>
<td>1.7%</td>
<td>-0.8%</td>
<td>-0.9%</td>
<td>-2.5%</td>
<td>1.7%</td>
</tr>
</tbody>
</table>
Factory Inventory Accumulation Continued 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 3, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040603f.jpg" width="353">
Factory inventories rose for the fifth straight month in April. The 0.4% gain followed an upwardly revised March increase and pulled the y/y comparison positive for the first time since June 2003. Nondurable goods industries (mostly chemicals) have dominated the swing to inventory accumulation. The swing amongst durable industries has been scattered.
Factory orders fell 1.7% in April following an upwardly revised March gain. The decline was about as expected. It reflected a 3.2% decline in durable goods orders which was revised from the advance report of a 2.9% drop.
Non-durable goods orders (which equal shipments) were unchanged (11.2% y/y) following a 4.0% March jump.
Factory shipments fell 0.5%. Excluding the transportation sector shipments rose 0.2% (12.4% y/y).

<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/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory Survey</a> (NAICS)</th>
<th scope="col">April</th>
<th scope="col">Mar</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>0.4%</td>
<td>0.4%</td>
<td>0.2%</td>
<td>-1.3%</td>
<td>-1.8%</td>
<td>-6.1%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>-1.7%</td>
<td>5.0%</td>
<td>12.5%</td>
<td>3.7%</td>
<td>-1.9%</td>
<td>-6.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>-0.5%</td>
<td>4.2%</td>
<td>12.0%</td>
<td>2.6%</td>
<td>-2.0%</td>
<td>-5.4%</td>
</tr>
<tr>
<td class="firstcol">Unfilled Orders</td>
<td>0.5%</td>
<td>1.4%</td>
<td>7.2%</td>
<td>4.2%</td>
<td>-6.1%</td>
<td>-5.9%</td>
</tr>
</tbody>
</table>


</html>

The Institute for Supply Management reported that its Business Activity Index for the Nonmanufacturing Sector dipped last month to 65.2 from the record high of 68.4 in April. Consensus expectations had been for a lesser decline to [...]

ISM Non-Manufacturing Index Fell, Hiring Rose

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040602c.jpg" width="353">
Retail sales in Germany surged 2.8% in April, seasonally adjusted in current prices, according to data published today by the Deutsche Bundesbank. This increase halted a five-month string of declines that totaled 5.3%. These sales have never really recovered from the last recession and have been in generally declining trend since the beginning of 2002, so a rebound from the recent weakness is encouraging.
As seen in the table below, clothing stores were a strong source of the total sales gain in April. Motor vehicle sales are not yet available for the month, but the subtotal excluding autos rose only 1.2%, implying a large increase in the auto component. That would mark a notable turn from their recent sharp declines, which had pulled German vehicle sales to their lowest levels since early 1998.
While these latest data are encouraging, they are also given to fairly wide monthly swings. So it remains to be seen if the April gains will endure, particularly in the face of higher energy costs.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Seasonally Adjusted</th>
<th scope="col">Apr 2004</th>
<th scope="col">Mar 2004</th>
<th scope="col">Feb 2004</th>
<th scope="col">Year Ago</th>
Annual Average
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr>
<td class="firstcol">Retail Sales incl Autos(2000=100)</td>
<td>99.8</td>
<td>97.1</td>
<td>98.2</td>
<td>101.6</td>
<td>101.3</td>
<td>101.3</td>
<td>102.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;% Change&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>+2.8</td>
<td>-1.1</td>
<td>-0.9</td>
<td>-1.8</td>
<td colspan="3">December/December</td>
</tr>
<tr>
<td class="firstcol">-0.7</td>
<td>-1.4</td>
<td>+1.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Sales ex Autos &nbsp; %&nbsp; Change</td>
<td>+1.2</td>
<td>+0.4</td>
<td>-0.7</td>
<td>-1.6</td>
<td>-0.1</td>
<td>-2.0</td>
<td>+0.1</td>
</tr>
<tr>
<td class="firstcol">Clothing, Footwear, Leather Goods&nbsp; &nbsp;% Change</td>
<td>+6.5</td>
<td>-0.5</td>
<td>+1.0</td>
<td>+1.9</td>
<td>-8.6</td>
<td>-4.7</td>
<td>-3.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Motor Vehicles &nbsp;% Change</td>
<td>N.A.</td>
<td>-6.2</td>
<td>-1.7</td>
<td>-8.8</td>
<td>-2.8</td>
<td>+1.0</td>
<td>+7.5</td>
</tr>
</tbody>
</table>
</body>
</html>

Retail sales in Germany surged 2.8% in April, seasonally adjusted in current prices, according to data published today by the Deutsche Bundesbank. This increase halted a five-month string of declines that totaled 5.3%. These sales [...]

Rebound in German Retail Sales

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040602a.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association fell 1.2% (-66.4% y/y) last week. For the month of May applications fell 18.6% from April and were down 57.0% from May &#39;03.
Applications to refinance mortgages dropped 6.6% last week and the decline pulled the average level in May down 37.1% versus April, off 77.5% from May &#39;03.
Purchase applications rose 2.2% w/w and for the month rose 1.4% versus the April average, up 1.5% versus last May.
During the last ten years there has been a 61% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
The effective interest rate on a conventional 30-Year mortgage was little changed at 6.51%. The average for May was 6.53% versus 6.16% averaged in April. The effective rate on a 15-year mortgage also was little changed at 5.94. The May average was 5.97% versus 5.54% in April.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org"> here</a>.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM"> MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">05/28/04</th>
<th scope="col">05/21/04</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>624.6</td>
<td>632.4</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>459.8</td>
<td>449.8</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,583.6</td>
<td>1,694.9</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
</table>
Chain Store Sales Slip for Third Week in a Row 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 2, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040602b.jpg" width="353">
Chain store sales fell 0.5% last week following a like decline the week prior and a 0.8% decline the week before that, according to the International Council of Shopping Centers (ICSC)-UBS.
In May chain store sales rose 0.7% from the April average following a 0.4% rise during that month.
During the last ten years there has been a 59% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
Retail gasoline prices slipped to an average $2.05 per gallon last week (+39.2% y/y) but averaged $1.98 in May, up 10.3% from the April average of $1.80.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM"> ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">05/29/04</th>
<th scope="col">05/22/04</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>437.7</td>
<td>439.8</td>
<td>5.0%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

The index of mortgage applications compiled by the Mortgage Bankers Association fell 1.2% (-66.4% y/y) last week. For the month of May applications fell 18.6% from April and were down 57.0% from May '03. Applications to refinance [...]

Mortgage Applications Down Further

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.

250801C4.jpg

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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250801F4.jpg

- 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

Robert Brusca

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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: June 2004

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