Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090818d.jpg" width="353">
After two months of fairly strong increases, the momentum in the housing sector paused last month. Housing starts dipped to 581,000 (AR) units versus 587,000 during June, a level which was revised up slightly from the initial report. The latest figure fell somewhat short of Consensus expectations for 600,000 starts.
Despite the overall decline, starts of single-family homes rose 1.7% for the fifth straight month. The gains pushed the series 37.3% off the record low which dates back to 1959. During the last ten years, there has been an 84% correlation between the q/q change in single-family starts and their contribution to quarterly GDP growth.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090818e.jpg" width="353">
Starts of multi-family homes fell hard again to 91,000 which was the record low for the series. Starts of apartments, condominiums &amp; town houses remained down by roughly two-thirds from the 2006 peak.
By region starts of single-family units last month were mixed across the country. Single-family starts in the Northeast rose 14.0% to their highest level since October (-16.2% y/y). Starts in the West ticked up 1.9% for the fifth straight month of increase (-23.6% y/y) and in the South single-family starts also ticked up by 0.8% (-23.4% y/y). In the Midwest starts fell a modest 3.4% (-22.2% y/y) after five consecutive months of increase.
Overall, building permits fell 1.8% and gave back a piece of their 10.0% jump during June. Permits remained just above the record low and permits were down by roughly one-half from last May. As with starts, recent gains in building permits have been led by the single-family sector, a leading indicator of starts. During July, permits rose for the fourth straight month and were up 23.8% since December (-20.3% y/y). 
The housing starts figures can be found in Haver&#39;s USECON database.
Examining the Housing Crisis by Home Price Tier from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/mt/20090801/mtpub.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">Housing Starts (000s, SAAR)</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>581</td>
<td>587</td>
<td>-37.7%</td>
<td>900</td>
<td>1,342</td>
<td>1,812</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>490</td>
<td>482</td>
<td>-22.5</td>
<td>616</td>
<td>1,036</td>
<td>1,474</td>
</tr>
<tr>
<td class="firstcol">Multi-Family</td>
<td>91</td>
<td>105</td>
<td>-69.8</td>
<td>285</td>
<td>306</td>
<td>338</td>
</tr>
<tr class="odd">
<td class="firstcol">Building Permits</td>
<td>560</td>
<td>570</td>
<td>-39.4</td>
<td>895</td>
<td>1,392</td>
<td>1,844</td>
</tr>
</tbody>
</table>
</body>
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After two months of fairly strong increases, the momentum in the housing sector paused last month. Housing starts dipped to 581,000 (AR) units versus 587,000 during June, a level which was revised up slightly from the initial report. [...]

U.S. Housing Starts Dip During July After Two Months Of Strong Gains Multi-family Starts Revisit Record Low

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090818a.jpg" align="right" border="0" height="265" width="353">Pricing power reflected the weakness in the U.S. economy last
month as the PPI for finished goods fell 0.9%. That reversed half of
the 1.8% jump during June and left prices down 6.4% from the year ago
level. The decline also was deeper than Consensus expectations for a
0.3% drop. In addition, a 0.1% decline in PPI less food &amp;
energy contrasted with expectations for a 0.1% increase. That decline
pulled the y/y change to 2.6% which was the weakest increase since
early 2008.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090818b.jpg" align="right" border="0" height="265" width="353">
Lower energy prices led the decline in last month's PPI with a
2.4% drop (-29.6% y/y) after increases during the prior two months. The
July decline was led by a 10.2% fall in gasoline prices (-45.1% y/y)
which reversed most of the increase during June. Working the other way,
natural gas prices firmed again last month and posted a 3.3% (-30.9%
y/y) increase.
The PPI for finished consumer goods less food &amp; energy
fell by 0.1% (+3.1% y/y) after a firm 0.5% jump during June. Finished
durables prices reversed most of the June gain with a 0.5% decline
(+2.7% y/y). Posting a moderate increase were prices of core finished
nondurable goods. They gained 0.4% and the y/y increase of 3.5% is off
from the 5.9% rise as of the end of last year. Capital equipment prices
also reflected the weakness in demand and fell 0.2%. That pulled the
y/y increase to 1.9% after a 4.3% rise as of last December.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090818c.jpg" align="right" border="0" height="265" width="353">
Prices for intermediate goods ticked 0.2% lower led by a 2.0%
decline in food prices (-15.0% y/y). That decline was in addition to a
1.4% drop (-34.5% y/y) in energy prices. Less food &amp; energy,
intermediate goods prices ticked 0.2% higher for only the second
increase since last September.
The crude materials PPI reversed all of its June increase with
a 4.5% decline. That was led by a 6.1% (-25.7% y/y) drop in food prices
and a 6.2% decline in crude energy prices (-59.6% y/y). Core pricing
power at the crude level improved for the third straight month and
posted a 2.9% increase.
The producer price data is available in Haver's USECON
database. More detailed data is in the PPI and in
the PPIR databases.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer
Price Index</a> (%)</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Finished Goods</td>
<td>-0.9</td>
<td>1.8</td>
<td>-6.4</td>
<td>6.4</td>
<td>3.9</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-0.1</td>
<td>0.5</td>
<td>2.6</td>
<td>3.4</td>
<td>2.0</td>
<td>1.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>-0.2</td>
<td>1.9</td>
<td>-15.0</td>
<td>10.5</td>
<td>4.0</td>
<td>6.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.2</td>
<td>0.4</td>
<td>-8.2</td>
<td>7.4</td>
<td>2.8</td>
<td>6.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>-4.5</td>
<td>4.6</td>
<td>-45.0</td>
<td>21.4</td>
<td>11.9</td>
<td>1.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>2.9</td>
<td>2.6</td>
<td>&nbsp;-35.7</td>
<td>14.8</td>
<td>15.6</td>
<td>20.8</td>
</tr>
</tbody>
</table>
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Pricing power reflected the weakness in the U.S. economy last month as the PPI for finished goods fell 0.9%. That reversed half of the 1.8% jump during June and left prices down 6.4% from the year ago level. The decline also was [...]

U.S. PPI Posts Broad-Based Decline With Energy Prices Leading The Fall

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090818a.jpg" align="right" border="0" height="265" width="353">Pricing
power reflected the weakness in the U.S. economy last
month as the PPI for finished goods fell 0.9%. That reversed half of
the 1.8% jump during June and left prices down 6.4% from the year ago
level. The decline also was deeper than Consensus expectations for a
0.3% drop. In addition, a 0.1% decline in PPI less food &amp;
energy contrasted with expectations for a 0.1% increase. That decline
pulled the y/y change to 2.6% which was the weakest increase since
early 2008.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090818b.jpg" align="right" border="0" height="265" width="353">

Lower energy prices led the decline in last month's PPI with a
2.4% drop (-29.6% y/y) after increases during the prior two months. The
July decline was led by a 10.2% fall in gasoline prices (-45.1% y/y)
which reversed most of the increase during June. Working the other way,
natural gas prices firmed again last month and posted a 3.3% (-30.9%
y/y) increase.
The PPI for finished consumer goods less food &amp; energy
fell by 0.1% (+3.1% y/y) after a firm 0.5% jump during June. Finished
durables prices reversed most of the June gain with a 0.5% decline
(+2.7% y/y). Posting a moderate increase were prices of core finished
nondurable goods. They gained 0.4% and the y/y increase of 3.5% is off
from the 5.9% rise as of the end of last year. Capital equipment prices
also reflected the weakness in demand and fell 0.2%. That pulled the
y/y increase to 1.9% after a 4.3% rise as of last December.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090818c.jpg" align="right" border="0" height="265" width="353">
Prices for intermediate goods ticked 0.2% lower led by a 2.0%
decline in food prices (-15.0% y/y). That decline was in addition to a
1.4% drop (-34.5% y/y) in energy prices. Less food &amp; energy,
intermediate goods prices ticked 0.2% higher for only the second
increase since last September.
The crude materials PPI reversed all of its June increase with
a 4.5% decline. That was led by a 6.1% (-25.7% y/y) drop in food prices
and a 6.2% decline in crude energy prices (-59.6% y/y). Core pricing
power at the crude level improved for the third straight month and
posted a 2.9% increase.
The producer price data is available in Haver's USECON
database. More detailed data is in the PPI and in
the PPIR databases.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer
Price Index</a> (%)</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Finished Goods</td>
<td>-0.9</td>
<td>1.8</td>
<td>-6.4</td>
<td>6.4</td>
<td>3.9</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-0.1</td>
<td>0.5</td>
<td>2.6</td>
<td>3.4</td>
<td>2.0</td>
<td>1.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>-0.2</td>
<td>1.9</td>
<td>-15.0</td>
<td>10.5</td>
<td>4.0</td>
<td>6.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.2</td>
<td>0.4</td>
<td>-8.2</td>
<td>7.4</td>
<td>2.8</td>
<td>6.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>-4.5</td>
<td>4.6</td>
<td>-45.0</td>
<td>21.4</td>
<td>11.9</td>
<td>1.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>2.9</td>
<td>2.6</td>
<td>&nbsp;-35.7</td>
<td>14.8</td>
<td>15.6</td>
<td>20.8</td>
</tr>
</tbody>
</table>
U.S. Housing Starts Dip During
July After Two Months Of Strong Gains Multi-family Starts Revisit
Record Low 
by <a href="/comment/Moeller.html">Tom
Moeller</a> August 18, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090818d.jpg" align="left" border="0" height="265" width="353">
After two months of fairly strong increases, the momentum in
the housing sector paused last month. Housing starts dipped to 581,000
(AR) units versus 587,000 during June, a level which was revised up
slightly from the initial report. The latest figure fell somewhat short
of Consensus expectations for 600,000 starts.
Despite the overall decline, starts of single-family homes
rose 1.7% for the fifth straight month. The gains pushed the series
37.3% off the record low which dates back to 1959. During
the last ten years, there has been an 84% correlation between the q/q
change in single-family starts and their contribution to quarterly GDP
growth.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090818e.jpg" align="right" border="0" height="265" width="353">
Starts of multi-family homes fell hard again to 91,000 which
was the record low for the series. Starts of apartments, condominiums
&amp; town houses remained down by roughly two-thirds from the 2006
peak.
By region starts of single-family units last month were mixed
across the country. Single-family starts in the Northeast rose 14.0% to
their highest level since October (-16.2% y/y). Starts in the West
ticked up 1.9% for the fifth straight month of increase (-23.6% y/y)
and in the South single-family starts also ticked up by 0.8% (-23.4%
y/y). In the Midwest starts fell a modest 3.4% (-22.2% y/y) after five
consecutive months of increase.
Overall, building permits fell 1.8% and gave back a piece of
their 10.0% jump during June. Permits remained just above the record
low and permits were down by roughly one-half from last May. As with
starts, recent gains in building permits have been led by the
single-family sector, a leading indicator of starts. During
July, permits rose for the fourth straight month and were up 23.8%
since December (-20.3% y/y). 
The housing starts figures can be found in Haver's USECON
database.
Examining the Housing Crisis by Home Price Tier from
the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/mt/20090801/mtpub.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">Housing
Starts (000s, SAAR)</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>581</td>
<td>587</td>
<td>-37.7%</td>
<td>900</td>
<td>1,342</td>
<td>1,812</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>490</td>
<td>482</td>
<td>-22.5</td>
<td>616</td>
<td>1,036</td>
<td>1,474</td>
</tr>
<tr>
<td class="firstcol">Multi-Family</td>
<td>91</td>
<td>105</td>
<td>-69.8</td>
<td>285</td>
<td>306</td>
<td>338</td>
</tr>
<tr class="odd">
<td class="firstcol">Building Permits</td>
<td>560</td>
<td>570</td>
<td>-39.4</td>
<td>895</td>
<td>1,392</td>
<td>1,844</td>
</tr>
</tbody>
</table>
Gasoline Price Increase Stabilizes
After A One Dollar Rise This Year 
by <a href="/comment/Moeller.html">Tom
Moeller</a> August 18, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090818f.jpg" align="left" border="0" height="265" width="353">
The strong rise this year in gasoline prices stabilized last
week. The pump price for regular gasoline held at
an average $2.64 per gallon and that was down a nickel from last
month's high. Despite this w/w stability, however, prices remain
roughly one dollar (59%) higher versus the December low. Yesterday, the
cash market price for gasoline of $1.87 was down from last week and
down from the $1.99 averaged the week earlier. Nevertheless, gasoline
prices were up off the early-July low of $1.60. The figures are
reported by the U.S. Department of Energy and can be found in Haver's WEEKLY
&amp; DAILY databases.
Crude oil prices also are slightly off
their high. Light sweet crude oil prices (WTI) dipped last week to
$69.65 per barrel but they've roughly doubled this year. Yesterday the
spot market price for light sweet crude oil fell back again, to $66.75
per barrel. Prices had reached a daily high of $72.68 earlier in July.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090818g.jpg" align="right" border="0" height="265" width="353">
Of late, the demand for gasoline hit a plateau after an
earlier seasonal run-up. During the last four weeks since May, the
demand for gasoline has moved sideways and is down by 3.1% y/y. Though
that compares to a nearly 5% rate of decline last fall, the relative
strength is diminishing. Demand for distillate also is off a sharp
20.7% though residual fuel oil demand has moved higher. Finally, oil
remains plentiful as evidenced by a 14.1% y/y rise in inventories of
crude oil &amp; petroleum products. Inventories of gasoline
recently have firmed by 4.5% y/y and crude oil inventories less the SPR
are up by 18.7%. The figures on crude oil production and inventories
are available in Haver's OILWKLY database.
Natural gas prices continued their move sideways last week. At
an average of $3.44 per mmbtu (-62.8% y/y), the price was down by
three-quarters from the high reached in early-July of last year of
$13.19/mmbtu.

<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/@W4/@W4.HTM">Weekly
Prices</a></th>
<th scope="col">08/17/09</th>
<th scope="col">08/10/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per
Gallon, Regular)</td>
<td>2.64</td>
<td>2.65</td>
<td>-29.5%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil,
WTI&nbsp; ($ per bbl.)</td>
<td>69.65</td>
<td>71.57</td>
<td>-39.1%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
 Economic Sentiment In Germany'sFinancial Community Rises Sharply In August 
by <a href="/comment/Curley%3C.html">Louise
Curley</a> August 18, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090818h.jpg" align="right" border="0" height="265" width="353">
The participants in the ZEW survey--institutional investors
and analysts--have become much more positive about the outlook, six
months ahead. The ZEW Economic Sentiment indicator increased 16.6
points in August to reach a percent balance of 56.1, the highest since
April 2006 and well above the long term average of 26.5. At the same
time the appraisal of the current economic condition was somewhat <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090818i.jpg" align="right" border="0" height="265" width="353">
less
negative. The excess of pessimists regarding the current economic
situation was 77.2% compared with 89.3% in July. The two indicators are
shown in the first chart.
Recent data showing improvements in orders, production,
exports and an increase in Germany's second quarter GDP, no doubt,
influenced the improvement in both the appraisal of the current
situation and of the outlook.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090818j.jpg" align="right" border="0" height="265" width="353">
The continued high negative balance of
opinion regarding the current situation could suggest that the
financial community has yet to be convinced that recovery is underway,
but their positive view of the future suggests otherwise. (Opinions are
influenced by current economic conditions and opinions, through their
impact on "animal spirits" influence future economic conditions.)

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">ZEW</th>
<th scope="col">Aug 09</th>
<th scope="col">Jul 09</th>
<th scope="col">Aug 08</th>
<th scope="col">M/M chg&nbsp;</th>
<th scope="col">Y/Y chg</th>
<th scope="col">2008&nbsp;</th>
<th scope="col">2007 </th>
<th scope="col"> 2006 </th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Current Economic Situation (%
balance)&nbsp;&nbsp;</td>
<td>-77.2</td>
<td>-89.3</td>
<td>-9.2</td>
<td>12.1</td>
<td>-68.0</td>
<td>7.3</td>
<td>75.9</td>
<td>18.3</td>
</tr>
<tr>
<td class="firstcol">Economic Expectation (%
balance)&nbsp;</td>
<td>56.1</td>
<td>39.5</td>
<td>-55.5</td>
<td>16.6</td>
<td>111.6</td>
<td>-47.5</td>
<td>-3.0</td>
<td>22.3</td>
</tr>
</tbody>
</table>
</body></html>

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090817f.jpg" align="left" border="0" height="265" width="353">
As generally expected, Japan's GDP rose in the second quarter,
but the 3.7% annual rate of increase was below the 4-4.5% consensus
estimate and failed to impress the financial markets. Japan's Nikkei
225 stock price index greeted the rise with a resounding drop of 3.10%,
its worst one day drop since March 30.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090817g.jpg" align="right" border="0" height="265" width="353">
The quarter to quarter rise of 0.9% was accounted for by an
increases in net exports of 1.6 percentage points and in private
consumption of 0.5 percentage points. These positives were offset by a
0.6 point decline in gross fixed capital formation, a 0.5 point decline
in private inventories and a 0.1 pt decline in government consumption.
Except for the contribution of government consumption, the
contributions of the four other activities are shown in the first chart.
In spite of government's stimulus programs, the rise in
private consumption has not been large enough to offset the declines in
business investment. As a result, domestic demand, especially private
domestic demand, is still declining, casting doubts concerning the
sustainability of the upturn. Private and public contributions to
growth in domestic demand are shown in the second chart. Perhaps
another concern is the GDP deflator. Although the year over year change
is still positive, it was smaller than those of the previous two
quarters. The specter of deflation still hovers over the outlook.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Q2 09</th>
<th scope="col">Q1&nbsp; 09</th>
<th scope="col">Q4 08</th>
<th scope="col">Q3 08&nbsp;</th>
<th scope="col">Q2 08</th>
<th scope="col">Q1 08&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">Contribution to Quarterly
Changes in GDP (Percent Points)</td>
<td>0.9</td>
<td>-3.1</td>
<td>-3.5</td>
<td>-1.0</td>
<td>-1.1</td>
<td>1.0</td>
</tr>
<tr class="grey3">
<td class="firstcol">Net Exports</td>
<td>1.6</td>
<td>-0.9</td>
<td>-2.9</td>
<td>-0.2</td>
<td>-0.3</td>
<td>0.6</td>
</tr>
<tr class="grey2">
<td class="firstcol">Fixed Capital Formation</td>
<td>-0.6</td>
<td>-1.4</td>
<td>-0.9</td>
<td>-0.6</td>
<td>-0.5</td>
<td>0.2</td>
</tr>
<tr class="grey4">
<td class="firstcol">Change in Inventories</td>
<td>-0.5</td>
<td>-0.2</td>
<td>0.5</td>
<td>-0.2</td>
<td>0.3</td>
<td>-0.5</td>
</tr>
<tr class="grey3">
<td class="firstcol">Private Consumption</td>
<td>0.5</td>
<td>-0.7</td>
<td>-0.4</td>
<td>-0.1</td>
<td>-0.5</td>
<td>0.7</td>
</tr>
<tr class="grey2">
<td class="firstcol">Government Consumption</td>
<td>-0.1</td>
<td>0.0</td>
<td>0.3</td>
<td>0.0</td>
<td>-0.1</td>
<td>-0.1</td>
</tr>
<tr class="grey4">
<td class="firstcol">Contribution to Domestic Demand</td>
<td>-0.7</td>
<td>-2.2</td>
<td>-0.6</td>
<td>-0.8</td>
<td>-0.8</td>
<td>0.4</td>
</tr>
<tr class="grey3">
<td class="firstcol">Private Demand&nbsp;</td>
<td>-1.0</td>
<td>-2.3</td>
<td>-0.9</td>
<td>-0.8</td>
<td>-0.5</td>
<td>0.6</td>
</tr>
<tr class="grey2">
<td class="firstcol">Public Demand</td>
<td>0.3</td>
<td>0.1</td>
<td>0.3</td>
<td>0.0</td>
<td>-0.3</td>
<td>-0.2</td>
</tr>
<tr class="grey1">
<td class="firstcol">Year over Year&nbsp; Change
in GDP Deflator (%)</td>
<td>0.54</td>
<td>0.89</td>
<td>0.75</td>
<td>-1.55</td>
<td>-1.39</td>
<td>-1.32</td>
</tr>
</tbody>
</table>
</body></html>

As generally expected, Japan's GDP rose in the second quarter, but the 3.7% annual rate of increase was below the 4-4.5% consensus estimate and failed to impress the financial markets. Japan's Nikkei 225 stock price index greeted the [...]

Skepticism Greets Announcement Of Japan's 2nd Quarter GDP

Robert Brusca

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<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090817e.jpg" align="left" border="0" height="265" width="353">
Exports have the better trend among bad results 
EMU exports and imports are still on life support in terms of their
year-over-year drops. But exports are showing slightly more life in
recent months. Apart from splitting hairs, exports and imports were
roughly flat in June. 
 

The end of the end but where is the new beginning? 
Although there has been some pick up in orders for industrial goods,
exports themselves are not popping in Europe. Europe is getting ready
to exit recession based on the fact that the EMU&#8217;s GDP barely fell in
2009-Q2 as Germany and France posted positive GDP growth numbers.
Today, Japan posted an increase in its Q2 GDP so the list of countries
exiting recession is growing. Yet, some of those exiting recession do
not seem to have very good breadth or strength to the various key
economic sectors that need to drive and sustain a true recovery. 
 

Technical recovery 
The economies exiting recession are doing so rather narrowly on barely
positive GDP without much breadth or momentum to their turnaround
raising questions about the strength of recovery as well as about its
sustainability. The OECD leading indicators see a lot of momentum shift
in Europe, but not so much lift in Japan. Both Europe and Japan depend
a lot on trade for growth. The U is the sole country in this group of
four that has not yet posted positive GDP. But the US is, in contrast,
showing a lot of upward momentum as well as decreased downward
momentum; it has trimmed its deep negative growth rates across most
sectors and business cycle measures. US GDP only fell at a -1% annual
rate in 2009-Q2. It too, Like EMU, is on the brink of recovery. 
 

Searching for Mr. Good -Growth 
For Europe the end of recession is not being created by much if any
increase in consumer spending. Business fixed investment is still
chilled. And as we see here exports have the smallest of possible
upward gradients in train. While recessions have been deemed as
technically over in a number of countries I think we are still on the
outlook for a real recovery anywhere. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="7" scope="col"> E- Area&nbsp; 16-Trade trends for goods</th>
</tr>
</thead>
<tbody>
<tr class="grey5">
<td class="firstcol">&nbsp;</td>
<td colspan="2">M/M%</td>
<td colspan="4">% Saar</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td>Jun-09</td>
<td>May-09</td>
<td>3M</td>
<td>6M</td>
<td>12M</td>
<td>12M Ago</td>
</tr>
<tr class="grey3">
<td class="firstcol">Balance*</td>
<td>&#8364;&#8364; 1,042</td>
<td>&#8364;&#8364; 1,108</td>
<td>&#8364;&#8364; (2,399)</td>
<td>&#8364;&#8364; (1,142)</td>
<td>&#8364;&#8364; (481)</td>
<td>&#8364;&#8364; 698</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan="7">Exports</td>
</tr>
<tr class="grey1">
<td class="firstcol">All Exp</td>
<td>-0.1%</td>
<td>-1.8%</td>
<td>-10.3%</td>
<td>-24.8%</td>
<td>-22.8%</td>
<td>3.9%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Food and Drinks</td>
<td>0.0%</td>
<td>-2.0%</td>
<td>-7.6%</td>
<td>-16.6%</td>
<td>-9.9%</td>
<td>10.9%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Raw materials</td>
<td>0.4%</td>
<td>2.2%</td>
<td>16.0%</td>
<td>8.8%</td>
<td>-21.2%</td>
<td>7.7%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Other</td>
<td>-0.1%</td>
<td>-1.9%</td>
<td>-11.0%</td>
<td>-26.0%</td>
<td>-23.7%</td>
<td>3.4%</td>
</tr>
<tr class="grey1">
<td class="firstcol">&nbsp; MFG</td>
<td>-3.0%</td>
<td>-2.3%</td>
<td>-25.4%</td>
<td>-30.7%</td>
<td>-25.2%</td>
<td>1.0%</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan="7">IMPORTS</td>
</tr>
<tr class="grey1">
<td class="firstcol">All IMP</td>
<td>0.0%</td>
<td>-2.5%</td>
<td>-19.8%</td>
<td>-26.9%</td>
<td>-25.9%</td>
<td>9.8%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Food and Drinks</td>
<td>-2.8%</td>
<td>-2.6%</td>
<td>-34.5%</td>
<td>-15.3%</td>
<td>-8.8%</td>
<td>8.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Raw materials</td>
<td>-0.8%</td>
<td>-4.1%</td>
<td>-35.8%</td>
<td>-59.5%</td>
<td>-42.4%</td>
<td>4.8%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Other</td>
<td>0.2%</td>
<td>-2.5%</td>
<td>-17.7%</td>
<td>-25.7%</td>
<td>-26.0%</td>
<td>10.1%</td>
</tr>
<tr class="grey1">
<td class="firstcol">&nbsp; MFG</td>
<td>-2.5%</td>
<td>-1.7%</td>
<td>-29.8%</td>
<td>-29.1%</td>
<td>-23.2%</td>
<td>-0.2%</td>
</tr>
<tr class="grey4">
<td colspan="7" class="firstcol">*Eur mlns; mo or period
average</td>
</tr>
</tbody>
</table>
</body></html>

Exports have the better trend among bad results EMU exports and imports are still on life support in terms of their year-over-year drops. But exports are showing slightly more life in recent months. Apart from splitting hairs, exports [...]

EMU Trade Surplus Is On An A Slight Up-Trend Signs Of Real Recovery Remain Elusive

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090817c.jpg" align="left" border="0" height="265" width="353">
According to the National Association of Home Builders, the
housing market continued its recent improvement during August. Their
Composite Housing Market Index rose to 18 which equaled the highest
level since June of last year, and it was up off the low of 8 this past
January. The index is compiled from survey questions asking builders to
rate market conditions as &#8220;good&#8221;, &#8220;fair&#8221;, &#8220;poor&#8221; or &#8220;very high&#8221; to
&#8220;very low&#8221;. The figure is a diffusion index,
therefore, numerical results over 50 indicate a predominance of &#8220;good&#8221;
readings.
Also showing improvement during all of the first quarter was
the Home Builders' Housing Opportunity Index, which is the share of
homes sold that could be considered affordable to a family earning the
median income. It jumped to a record high of 72.5% buoyed by lower home
prices, lower interest rates and higher income. (There is a break in
the series from 2002 to 2003.)<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090817d.jpg" align="right" border="0" height="265" width="353">
The Home Builders Association indicated that improvement in
the August figures was due to a rise in the sub-index of sales during
the next six months to the highest level since April '08. At a reading
of 30 the figure was double the lows of this past winter. The present
sales index was stable at 16.
The strength in the August composite index reading was led by
strong improvement in the Northeast to the highest level since November
2007. In the West the index also posted a firm gain to the highest
level since May of 2008. In the Midwest the index rose to its highest
since June '08 and in the South the index slipped after having risen
this past Spring.
The NAHB has compiled the Housing Market Index
since 1985. The weights assigned to the
individual index components are .5920 for single family detached sales,
present time; .1358 for single family detached sales, next six months;
and .2722 for traffic of prospective buyers. The results, along with
other housing and remodeling indexes from NAHB Economics, are included
in Haver&#8217;s SURVEYS database.
Strong Medicine for
an Ailing Economy from the Federal Reserve Bank of Atlanta
can be found <a href="http://www.frbatlanta.org/invoke.cfm?objectid=084C6ABC-5056-9F12-1274013344A169C9&amp;method=display_body">here.</a>


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat'l
Association of Home Builders</a></th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">&nbsp;August '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Housing Market Index
(All Good = 100)</td>
<td>18</td>
<td>17</td>
<td>16</td>
<td>16</td>
<td>27</td>
<td>42</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Single-Family Sales</td>
<td>16</td>
<td>16</td>
<td>16</td>
<td>16</td>
<td>27</td>
<td>45</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Single-Family Sales:
Next Six Months</td>
<td>30</td>
<td>26</td>
<td>24</td>
<td>25</td>
<td>37</td>
<td>51</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Traffic of
Prospective Buyers</td>
<td>16</td>
<td>13</td>
<td>13</td>
<td>14</td>
<td>21</td>
<td>30</td>
</tr>
</tbody>
</table>
</body></html>

According to the National Association of Home Builders, the housing market continued its recent improvement during August. Their Composite Housing Market Index rose to 18 which equaled the highest level since June of last year, and it [...]

U.S. Home Builders' Index Seems To Be Crawling Out of the Cellar

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090817a.jpg" width="353">
For August, the Federal Reserve Bank of New York reported that its Empire State Factory Index of General Business Conditions was positive and at its highest level in two years. The latest reading of 12.08 compares to sharply negative levels this past Winter and suggests positive growth in factory sector activity. The latest level was better than Consensus expectations for a reading of 3.0.
The figure is a diffusion index. Since the series&#39; inception in 2001, there has been a 75% correlation between its level and the three-month change in U.S. factory sector industrial production. Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to independent survey questions; it is not a weighted combination of the components. The series dates back only to 2001.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State. Participants from across the state in a variety of industries respond to a questionnaire and report the change in indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/survey/empire/Empire2009/empiresurvey_20090817.html">here.</a><img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090817b.jpg" width="353">
The new orders component paced the August index gain with a rise to the highest level in two years. The shipments index also improved to its highest since early-2008 while the employment index jumped m/m to its highest level since last October. In the history of the NY employment index, there has been an 87% correlation between the employment index and the three-month growth in overall U.S. factory sector employment as reported by the Labor Department. The workweek index also improved sharply as the unfilled orders, inventories and delivery times series rose modestly.
The price index firmed to its highest level since November. Nevertheless, the index level remained down sharply from last year. Since inception in 2001, there has been a 77% correlation between the index of prices paid and the three-month change in the core intermediate materials PPI.
The Empire State index of expected business conditions in six months rose during August to its highest level since early 2007. The subseries for new orders, shipments, employment and capital expenditures each ticked up.
The Empire State data is available in Haver&#39;s SURVEYS database.
Below the Line: Estimates of Negative Equity among Nonprime Mortgage Borrowers from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/epr/09v15n1/0907haug.pdf">here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a></th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">August &#39;08&nbsp;</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">General Business Conditions (diffusion index, %)&nbsp;&nbsp;</td>
<td>12.08</td>
<td>-0.55</td>
<td>-1.16</td>
<td>-10.10</td>
<td>17.23</td>
<td>20.24</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; New Orders</td>
<td>13.43</td>
<td>5.89</td>
<td>-3.50</td>
<td>-6.25</td>
<td>15.71</td>
<td>20.11</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Employment</td>
<td>-7.45</td>
<td>-20.83</td>
<td>-4.49</td>
<td>-5.36</td>
<td>11.28</td>
<td>12.62</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid</td>
<td>13.83</td>
<td>10.42</td>
<td>65.17</td>
<td>46.99</td>
<td>35.64</td>
<td>41.88</td>
</tr>
</tbody>
</table>


</html>

For August, the Federal Reserve Bank of New York reported that its Empire State Factory Index of General Business Conditions was positive and at its highest level in two years. The latest reading of 12.08 compares to sharply negative [...]

Empire State Factory Conditions Improve To Highest Level in Two Years

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090817a.jpg" align="left" border="0" height="265" width="353">
For August, the Federal Reserve Bank of New York reported that
its Empire State Factory Index of General Business Conditions was
positive and at its highest level in two years. The latest reading of
12.08 compares to sharply negative levels this past Winter and suggests
positive growth in factory sector activity. The latest level was better
than Consensus expectations for a reading of 3.0.
The figure is a diffusion index. Since the series' inception
in 2001, there has been a 75% correlation between its level and the
three-month change in U.S. factory sector industrial production. Like
the Philadelphia Fed Index of General Business Conditions, the Empire
State Business Conditions Index reflects answers to independent survey
questions; it is not a weighted combination of the components. The
series dates back only to 2001.
The Empire State Manufacturing Survey is a monthly survey of
manufacturers in New York State. Participants from across the state in
a variety of industries respond to a questionnaire and report the
change in indicators from the previous month. Respondents also state
the likely direction of these same indicators six months ahead.
For more on the Empire State Manufacturing Survey, including
methodologies and the latest report, click <a href="http://www.newyorkfed.org/survey/empire/Empire2009/empiresurvey_20090817.html">here.</a><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090817b.jpg" align="right" border="0" height="265" width="353">
The new orders component paced the August index gain with a
rise to the highest level in two years. The shipments index also
improved to its highest since early-2008 while the employment index
jumped m/m to its highest level since last October. In the history of
the NY employment index, there has been an 87% correlation between the
employment index and the three-month growth in overall U.S. factory
sector employment as reported by the Labor Department. The workweek
index also improved sharply as the unfilled orders, inventories and
delivery times series rose modestly.
The price index firmed to its highest level since November.
Nevertheless, the index level remained down sharply from last year.
Since inception in 2001, there has been a 77% correlation between the
index of prices paid and the three-month change in the core
intermediate materials PPI.
The Empire State index of expected business
conditions in six months rose during August to its highest
level since early 2007. The subseries for new orders, shipments,
employment and capital expenditures each ticked up.
The Empire State data is available in Haver's SURVEYS
database.



Below the Line: Estimates of Negative Equity
among Nonprime Mortgage Borrowers from the Federal Reserve
Bank of New York can be found <a href="http://www.newyorkfed.org/research/epr/09v15n1/0907haug.pdf">here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM">Empire
State Manufacturing Survey</a></th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">August '08&nbsp;</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">General Business Conditions
(diffusion index, %)&nbsp;&nbsp;</td>
<td>12.08</td>
<td>-0.55</td>
<td>-1.16</td>
<td>-10.10</td>
<td>17.23</td>
<td>20.24</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; New Orders</td>
<td>13.43</td>
<td>5.89</td>
<td>-3.50</td>
<td>-6.25</td>
<td>15.71</td>
<td>20.11</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Employment</td>
<td>-7.45</td>
<td>-20.83</td>
<td>-4.49</td>
<td>-5.36</td>
<td>11.28</td>
<td>12.62</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid</td>
<td>13.83</td>
<td>10.42</td>
<td>65.17</td>
<td>46.99</td>
<td>35.64</td>
<td>41.88</td>
</tr>
</tbody>
</table>
U.S. Home Builders' Index Seems To
Be Crawling Out of the Cellar 
by <a href="/comment/Moeller.html">Tom
Moeller</a> August 17, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090817c.jpg" align="left" border="0" height="265" width="353">
According to the National Association of Home Builders, the
housing market continued its recent improvement during August. Their
Composite Housing Market Index rose to 18 which equaled the highest
level since June of last year, and it was up off the low of 8 this past
January. The index is compiled from survey questions asking builders to
rate market conditions as &#8220;good&#8221;, &#8220;fair&#8221;, &#8220;poor&#8221; or &#8220;very high&#8221; to
&#8220;very low&#8221;. The figure is a diffusion index,
therefore, numerical results over 50 indicate a predominance of &#8220;good&#8221;
readings.
Also showing improvement during all of the first quarter was
the Home Builders' Housing Opportunity Index, which is the share of
homes sold that could be considered affordable to a family earning the
median income. It jumped to a record high of 72.5% buoyed by lower home
prices, lower interest rates and higher income. (There is a break in
the series from 2002 to 2003.)<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090817d.jpg" align="right" border="0" height="265" width="353">
The Home Builders Association indicated that improvement in
the August figures was due to a rise in the sub-index of sales during
the next six months to the highest level since April '08. At a reading
of 30 the figure was double the lows of this past winter. The present
sales index was stable at 16.
The strength in the August composite index reading was led by
strong improvement in the Northeast to the highest level since November
2007. In the West the index also posted a firm gain to the highest
level since May of 2008. In the Midwest the index rose to its highest
since June '08 and in the South the index slipped after having risen
this past Spring.
The NAHB has compiled the Housing Market Index
since 1985. The weights assigned to the
individual index components are .5920 for single family detached sales,
present time; .1358 for single family detached sales, next six months;
and .2722 for traffic of prospective buyers. The results, along with
other housing and remodeling indexes from NAHB Economics, are included
in Haver&#8217;s SURVEYS database.
Strong Medicine for
an Ailing Economy from the Federal Reserve Bank of Atlanta
can be found <a href="http://www.frbatlanta.org/invoke.cfm?objectid=084C6ABC-5056-9F12-1274013344A169C9&amp;method=display_body">here.</a>


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat'l
Association of Home Builders</a></th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">&nbsp;August '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Housing Market Index
(All Good = 100)</td>
<td>18</td>
<td>17</td>
<td>16</td>
<td>16</td>
<td>27</td>
<td>42</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Single-Family Sales</td>
<td>16</td>
<td>16</td>
<td>16</td>
<td>16</td>
<td>27</td>
<td>45</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Single-Family Sales:
Next Six Months</td>
<td>30</td>
<td>26</td>
<td>24</td>
<td>25</td>
<td>37</td>
<td>51</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Traffic of
Prospective Buyers</td>
<td>16</td>
<td>13</td>
<td>13</td>
<td>14</td>
<td>21</td>
<td>30</td>
</tr>
</tbody>
</table>
EMU Trade Surplus Is On An ASlight
Up-Trend Signs Of Real Recovery Remain Elusive 
by <a href="/comment/Brusca.html">Robert
Brusca</a> August 17, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090817e.jpg" align="left" border="0" height="265" width="353">
Exports have the better trend among bad results 
EMU exports and imports are still on life support in terms of their
year-over-year drops. But exports are showing slightly more life in
recent months. Apart from splitting hairs, exports and imports were
roughly flat in June. 
 

The end of the end but where is the new beginning? 
Although there has been some pick up in orders for industrial goods,
exports themselves are not popping in Europe. Europe is getting ready
to exit recession based on the fact that the EMU&#8217;s GDP barely fell in
2009-Q2 as Germany and France posted positive GDP growth numbers.
Today, Japan posted an increase in its Q2 GDP so the list of countries
exiting recession is growing. Yet, some of those exiting recession do
not seem to have very good breadth or strength to the various key
economic sectors that need to drive and sustain a true recovery. 
 

Technical recovery 
The economies exiting recession are doing so rather narrowly on barely
positive GDP without much breadth or momentum to their turnaround
raising questions about the strength of recovery as well as about its
sustainability. The OECD leading indicators see a lot of momentum shift
in Europe, but not so much lift in Japan. Both Europe and Japan depend
a lot on trade for growth. The U is the sole country in this group of
four that has not yet posted positive GDP. But the US is, in contrast,
showing a lot of upward momentum as well as decreased downward
momentum; it has trimmed its deep negative growth rates across most
sectors and business cycle measures. US GDP only fell at a -1% annual
rate in 2009-Q2. It too, Like EMU, is on the brink of recovery. 
 

Searching for Mr. Good -Growth 
For Europe the end of recession is not being created by much if any
increase in consumer spending. Business fixed investment is still
chilled. And as we see here exports have the smallest of possible
upward gradients in train. While recessions have been deemed as
technically over in a number of countries I think we are still on the
outlook for a real recovery anywhere. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col"> E-
Area&nbsp; 16-Trade trends for goods</th>
</tr>
</thead>
<tbody>
<tr class="grey5">
<td class="firstcol">&nbsp;</td>
<td colspan="2">M/M%</td>
<td colspan="4">% Saar</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td>Jun-09</td>
<td>May-09</td>
<td>3M</td>
<td>6M</td>
<td>12M</td>
<td>12M Ago</td>
</tr>
<tr class="grey3">
<td class="firstcol">Balance*</td>
<td>&#8364;&#8364; 1,042</td>
<td>&#8364;&#8364; 1,108</td>
<td>&#8364;&#8364; (2,399)</td>
<td>&#8364;&#8364; (1,142)</td>
<td>&#8364;&#8364; (481)</td>
<td>&#8364;&#8364; 698</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan="7">Exports</td>
</tr>
<tr class="grey1">
<td class="firstcol">All Exp</td>
<td>-0.1%</td>
<td>-1.8%</td>
<td>-10.3%</td>
<td>-24.8%</td>
<td>-22.8%</td>
<td>3.9%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Food and Drinks</td>
<td>0.0%</td>
<td>-2.0%</td>
<td>-7.6%</td>
<td>-16.6%</td>
<td>-9.9%</td>
<td>10.9%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Raw materials</td>
<td>0.4%</td>
<td>2.2%</td>
<td>16.0%</td>
<td>8.8%</td>
<td>-21.2%</td>
<td>7.7%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Other</td>
<td>-0.1%</td>
<td>-1.9%</td>
<td>-11.0%</td>
<td>-26.0%</td>
<td>-23.7%</td>
<td>3.4%</td>
</tr>
<tr class="grey1">
<td class="firstcol">&nbsp; MFG</td>
<td>-3.0%</td>
<td>-2.3%</td>
<td>-25.4%</td>
<td>-30.7%</td>
<td>-25.2%</td>
<td>1.0%</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan="7">IMPORTS</td>
</tr>
<tr class="grey1">
<td class="firstcol">All IMP</td>
<td>0.0%</td>
<td>-2.5%</td>
<td>-19.8%</td>
<td>-26.9%</td>
<td>-25.9%</td>
<td>9.8%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Food and Drinks</td>
<td>-2.8%</td>
<td>-2.6%</td>
<td>-34.5%</td>
<td>-15.3%</td>
<td>-8.8%</td>
<td>8.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Raw materials</td>
<td>-0.8%</td>
<td>-4.1%</td>
<td>-35.8%</td>
<td>-59.5%</td>
<td>-42.4%</td>
<td>4.8%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Other</td>
<td>0.2%</td>
<td>-2.5%</td>
<td>-17.7%</td>
<td>-25.7%</td>
<td>-26.0%</td>
<td>10.1%</td>
</tr>
<tr class="grey1">
<td class="firstcol">&nbsp; MFG</td>
<td>-2.5%</td>
<td>-1.7%</td>
<td>-29.8%</td>
<td>-29.1%</td>
<td>-23.2%</td>
<td>-0.2%</td>
</tr>
<tr class="grey4">
<td colspan="7" class="firstcol">*Eur
mlns; mo or period
average</td>
</tr>
</tbody>
</table>
Skepticism Greets Announcement Of
Japan's 2nd Quarter GDP 
by <a href="/comment/Curley.html">Louise
Curley</a> August 17, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090817f.jpg" align="left" border="0" height="265" width="353">
As generally expected, Japan's GDP rose in the second quarter,
but the 3.7% annual rate of increase was below the 4-4.5% consensus
estimate and failed to impress the financial markets. Japan's Nikkei
225 stock price index greeted the rise with a resounding drop of 3.10%,
its worst one day drop since March 30.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090817g.jpg" align="right" border="0" height="265" width="353">
The quarter to quarter rise of 0.9% was accounted for by an
increases in net exports of 1.6 percentage points and in private
consumption of 0.5 percentage points. These positives were offset by a
0.6 point decline in gross fixed capital formation, a 0.5 point decline
in private inventories and a 0.1 pt decline in government consumption.
Except for the contribution of government consumption, the
contributions of the four other activities are shown in the first chart.
In spite of government's stimulus programs, the rise in
private consumption has not been large enough to offset the declines in
business investment. As a result, domestic demand, especially private
domestic demand, is still declining, casting doubts concerning the
sustainability of the upturn. Private and public contributions to
growth in domestic demand are shown in the second chart. Perhaps
another concern is the GDP deflator. Although the year over year change
is still positive, it was smaller than those of the previous two
quarters. The specter of deflation still hovers over the outlook.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Q2 09</th>
<th scope="col">Q1&nbsp; 09</th>
<th scope="col">Q4 08</th>
<th scope="col">Q3 08&nbsp;</th>
<th scope="col">Q2 08</th>
<th scope="col">Q1 08&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">Contribution to Quarterly
Changes in GDP (Percent Points)</td>
<td>0.9</td>
<td>-3.1</td>
<td>-3.5</td>
<td>-1.0</td>
<td>-1.1</td>
<td>1.0</td>
</tr>
<tr class="grey3">
<td class="firstcol">Net Exports</td>
<td>1.6</td>
<td>-0.9</td>
<td>-2.9</td>
<td>-0.2</td>
<td>-0.3</td>
<td>0.6</td>
</tr>
<tr class="grey2">
<td class="firstcol">Fixed Capital Formation</td>
<td>-0.6</td>
<td>-1.4</td>
<td>-0.9</td>
<td>-0.6</td>
<td>-0.5</td>
<td>0.2</td>
</tr>
<tr class="grey4">
<td class="firstcol">Change in Inventories</td>
<td>-0.5</td>
<td>-0.2</td>
<td>0.5</td>
<td>-0.2</td>
<td>0.3</td>
<td>-0.5</td>
</tr>
<tr class="grey3">
<td class="firstcol">Private Consumption</td>
<td>0.5</td>
<td>-0.7</td>
<td>-0.4</td>
<td>-0.1</td>
<td>-0.5</td>
<td>0.7</td>
</tr>
<tr class="grey2">
<td class="firstcol">Government Consumption</td>
<td>-0.1</td>
<td>0.0</td>
<td>0.3</td>
<td>0.0</td>
<td>-0.1</td>
<td>-0.1</td>
</tr>
<tr class="grey4">
<td class="firstcol">Contribution to Domestic Demand</td>
<td>-0.7</td>
<td>-2.2</td>
<td>-0.6</td>
<td>-0.8</td>
<td>-0.8</td>
<td>0.4</td>
</tr>
<tr class="grey3">
<td class="firstcol">Private Demand&nbsp;</td>
<td>-1.0</td>
<td>-2.3</td>
<td>-0.9</td>
<td>-0.8</td>
<td>-0.5</td>
<td>0.6</td>
</tr>
<tr class="grey2">
<td class="firstcol">Public Demand</td>
<td>0.3</td>
<td>0.1</td>
<td>0.3</td>
<td>0.0</td>
<td>-0.3</td>
<td>-0.2</td>
</tr>
<tr class="grey1">
<td class="firstcol">Year over Year&nbsp; Change
in GDP Deflator (%)</td>
<td>0.54</td>
<td>0.89</td>
<td>0.75</td>
<td>-1.55</td>
<td>-1.39</td>
<td>-1.32</td>
</tr>
</tbody>
</table>
</body></html>

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?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

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Andrew Cates

**China-US shipping activity** 
The economic fallout from escalating US-China trade tensions is becoming increasingly visible in the data. A clear example is the chart below, which highlights a sharp drop in vessel arrivals at the ports of Los Angeles and Long Beach, along with a notable decline in ships waiting offshore. These trends point to a tangible weakening in bilateral trade flows, as the effects of tit-for-tat tariffs imposed by both countries begin to bite. Given the outsized role the US and China play in global commerce, this slowdown is likely to reverberate through global supply chains, weighing on trade volumes, dampening demand, and curbing economic growth worldwide.

250501Z1.jpg

**GDP growth in Q1**
Data this week showed that the US economy contracted, albeit modestly, in Q1 even as the euro area recorded a modest expansion—an unusual divergence. The contraction in US GDP can be largely attributed to a sharp increase in imports, as firms rushed to front-load purchases ahead of anticipated tariff hikes. In addition, domestic demand was subdued, with weaker contributions from both consumer spending and government consumption. This decoupling between the US and euro area economies is particularly striking given the current global focus on the US dollar. While the euro area has shown unexpected signs of resilience, the US downturn raises important questions about its underlying momentum, especially as trade dynamics and policy uncertainty continue to cloud the outlook.

250501Z2.jpg

**The US dollar versus yield differentials**
Chart 3 below illustrates a sharp breakdown in the correlation between the US-Germany 10-year yield differential and the EUR/USD exchange rate. Historically, the dollar has moved closely with interest rate spreads, as yield-seeking capital flowed into US assets. But since early 2025—and more acutely following the April tariff actions—the dollar has weakened markedly even as the yield spread has narrowed only modestly. This decoupling underscores a critical shift: capital markets are reacting not just to monetary policy, but to rising trade and geopolitical uncertainty. In other words, the exchange rate is now being driven as much by risk sentiment as by interest rate arbitrage.

250501Z3.jpg

**The US economy’s structural outperformance and the dollar**
A second dynamic, captured in the next chart, reveals a tight correlation between the US real effective exchange rate and the potential GDP growth differential between the US and euro area over the past 50-60 years. This raises the question: has dollar strength (until recently) merely been a reflection of US growth leadership—or are capital inflows themselves helping to sustain this growth outperformance? In effect, the tail may be wagging the dog. Global investors have long allocated capital to the US, attracted by its macroeconomic resilience, technological leadership, and deep, liquid financial markets. The danger now is that the US trade war may disrupt this equilibrium. A sharp or sustained reduction in capital inflows could undermine growth, weaken the dollar, and trigger broader financial instability. Moreover, reversing this dynamic is not straightforward—barring a credible structural resurgence in European (or Asian) growth, the global investment landscape remains tilted toward the US.

250501Z4.jpg

**US competitiveness versus Europe, China and Japan** 
The next chart below examines relative unit labour costs across major economies since 2011. The US and China have seen a broadly similar trajectory, with steady increases in relative cost structures, while the euro area has remained flat and Japan has seen dramatic improvement. This suggests that, from a cost competitiveness standpoint, the US is not uniquely disadvantaged vis-à-vis China. However, as we discuss further below, this parallel erosion of cost competitiveness is occurring at much higher nominal wage levels in the US, which blunts its ability to regain export share through tariff-related shifts alone. The trade war strategy—absent a corresponding improvement in productivity or structural reforms—risks imposing costs without delivering material competitiveness gains.

250501Z5.jpg

**Average wages in selected developed and developing economies**
This point is reinforced by the final chart, which shows estimates for average monthly wages across countries in 2024. US labour remains much more expensive than in peer or emerging economies. So even if China’s costs rise in tandem with the US, the global supply chain has ample alternatives. 'China plus one' strategies are accelerating, and the US remains structurally misaligned with low-cost production hubs. Tariffs aimed at reshoring supply chains are unlikely to deliver sustained gains unless accompanied by deep supply-side reforms, and risk further disincentivizing foreign direct investment if global firms perceive US trade policy as erratic or punitive.

250501Z6.jpg

Financial markets found a measure of calm this week, buoyed by some subtle shifts in tone from US policymakers. A softening in the administration’s rhetoric around trade tariffs coupled with a less confrontational stance toward Federal Reserve Chair Jerome Powell, helped ease tensions that had roiled markets earlier in the month. Equities rebounded modestly, and volatility indicators edged lower, reflecting cautious optimism that the worst of the policy shocks may be behind us. But beneath the surface, significant downside risks persist. New shipping data point to a pronounced slowdown in US-China trade flows (chart 1), suggesting the damage from recent tariff escalations is already rippling through global supply chains. Meanwhile, incoming data for the US revealed an unexpected contraction in the economy in Q1 and further signs of weakness in the labour market (chart 2). The US dollar, in the meantime, while long supported by superior growth and yield differentials, has begun to decouple from traditional drivers (charts 3 and 4) suggesting growing pressure on capital flows. At the same time, structural imbalances are drawing renewed scrutiny: unit labour cost comparisons show the US steadily losing competitiveness (chart 5), while nominal wage disparities remain stark versus China and other Asian economies, further complicating any effort to restore trade balance without broader reforms (chart 6). In short, while markets may be drawing temporary comfort from a pause in tariff brinkmanship, the deeper economic and financial vulnerabilities exposed this month remain unresolved—and increasingly central to the global macro narrative.

<iframe style="border-radius:12px" src="https://open.spotify.com/embed/episode/3PzXXKrkHcwtOLipohEdnB?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: Tariff Truce, Tenuous Trust

250501J5.jpg

250501K5.jpg

The ISM Purchasing Managers Index of activity in the manufacturing sector slipped to 48.7 in April from 49.0 during March and 50.3 in February. It remained up from a low of 46.9 in October of last year. A level of 50 is the break-even point between a rising and falling level of activity. The Action Economics Forecast Survey expected a reading of 47.8 for April. The series reached a monthly high of 63.8 in March 2021.

Two of the five component indexes weakened last month. The April production index fell to 44.0 after declining to 48.3 in March. It was the lowest level since May 2020. A lessened 19.8% (NSA) of respondents reported higher production while an increased 24.2% reported lower output. The inventories index declined to 50.8 last month from 53.4 in March. The index remained up from a low of 43.2 in October of last year.

Moving higher, the new orders index rose to 47.2 last month from 45.2 in March. The index remained below a January high of 55.1. Twenty-eight percent (NSA) of respondents reported higher new orders while 26.7% reported a decline. The employment index rose to 46.5 from 44.7 in March. It was below a high of 50.3 in January. A greater 13.1% (NSA) of respondents reported more hiring while a fewer 16.2% indicated less. The supplier delivery index rose to 55.2 from 53.5 in March. A higher 16.6% (NSA) of respondents reported slower delivery speeds while a fairly steady 6.2% reported a quickening.

The prices index, which is not part of the composite series, edged up to 69.8 (NSA) in April after increasing to 69.4 in March. It was the highest level since June 2022, up from a December 2022 low of 39.4. An increased 49.2% of respondents reported higher prices last month, up from 12.2% in November, while a higher 9.7% reported lower prices.

In other series, the export orders index plummeted to 43.1 in April from 49.6 during March. It was down from the high of 52.4 in January. The imports index fell sharply to 47.1 from 50.1 in March. It was the lowest reading since December 2023. The order backlog index dropped to 43.7 (NSA) last month from 44.5 in March. It was the lowest level in five months.

The ISM figures are based on responses from over 400 purchasing executives from 18 industries, which are weighted according to each industry’s contribution to GDP. These indexes are diffusion indexes where a reading above 50 indicates expansion and a reading below 50 points to contraction. 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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- Declines in last three months follow earlier improvement.
- Production & inventories account for m/m shortfall.
- Prices index edges up to another three-year high.

U.S. ISM Manufacturing Index Indicates Contraction in April

Winnie Tapasanun

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The value of construction put in place unexpectedly fell 0.5% m/m in March after rises of 0.6% in February (+0.7% initially) and 0.1% in January (-0.5% previously), data from the U.S. Census Bureau showed. The March reading was the first m/m fall following five straight m/m gains. A 0.3% m/m March rise had been expected in the Action Economics Forecast Survey. The year-on-year rate of increase decelerated to 2.8% in March, the lowest since May 2019, after registering at 3.4% in February and January. The latest y/y figure was lower than 8.7% in March 2024; thus, having remained below its recent high of 9.8% in January 2024 and a peak of 18.6% in April 2022.

Private construction slid 0.6% (+2.3% y/y) in March, down for the first time since September, following increases of 0.7% in February (+0.9% initially) and 0.1% in January (-0.7% previously). Residential private construction fell 0.4% (+2.8% y/y) in March, the first m/m fall in six months, after an unrevised 1.3% gain in February. Home improvement building dropped 1.2% (+13.4% y/y), the first m/m decline since December, following a 2.3% February gain; it was 41.1% of the residential private construction. Single-family building edged up 0.1% (-0.8% y/y), the smallest of seven consecutive m/m increases, after a 0.8% February rise; it was 46.6% of the residential private construction. Meanwhile, multi-family building was essentially unchanged m/m (-12.1% y/y) in March following 15 straight m/m decreases; it was 12.3% of the residential private construction.

Nonresidential private construction fell 0.8% (+1.6% y/y) in March after a 0.1% increase in February (+0.4% initially) and a 0.1% easing in January (-0.2% previously). The March fall reflected m/m drops in the following nonresidential private constructions. These included religious (-2.9%; +16.4% y/y), health care (-2.2%; -5.2% y/y), office (-1.8%; +2.7% y/y), educational (-1.7%; -4.2% y/y), lodging (-1.6%; -1.0% y/y), commercial (-1.0%; -5.8% y/y), manufacturing (-0.4%; +3.6% y/y), communication (-0.3%; +2.2% y/y), and utilities (-0.1%; +7.0% y/y). In contrast, private constructions for amusement & recreation (1.5%; 7.0% y/y) and transportation (0.7%; 10.2% y/y) rose m/m in March.

The value of public construction declined 0.2% (+4.7% y/y) in March after holding steady in February (+0.2% initially), reflecting a 0.2% increase (-1.9% y/y) in residential public construction and a 0.2% easing (+4.8% y/y) in nonresidential public construction. The March decline reflected m/m drops in the following nonresidential public constructions. These included utilities (-4.8%; -12.8% y/y), commercial (-1.6%; +40.3% y/y), amusement & recreation (-1.0%; +19.1% y/y), educational (-0.6%; +7.6% y/y), sewage & waste disposal (-0.6%; +10.6% y/y), and health care (-0.4%; +13.0% y/y). Notably, spending on highways & streets, which made up 28.7% of public construction spending, fell 0.5% (-2.4% y/y) in March, the first m/m fall since October, following a 0.9% increase in February. To the upside, the following public constructions rose m/m in March: office (1.6%; 6.0% y/y), transportation (1.4%; 7.3% y/y), public safety (0.7%; 4.1% y/y), conservation & development (0.6%; 4.7% y/y), and water supply (0.6%; 12.2% y/y).

The construction figures can be found in Haver's **USECON** database. The expectations figure is from the Action Economics Forecast Survey in **AS1REPNA**.

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- March construction spending -0.5% m/m; +2.8% y/y, the lowest y/y rate since May ’19.
- Residential private construction -0.4% m/m, led by a 1.2% drop in home improvement building.
- Nonresidential private construction -0.8% m/m, down for the second month in three.
- Public sector construction -0.2% m/m, reflecting a 0.2% decline in nonresidential public building.

U.S. Construction Spending Unexpectedly Drops in March, the First M/M Fall Since September

Carol Stone, CBE

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Initial claims for unemployment insurance rose 18,000 in the week ended April 26 to 241,000, seasonally adjusted.  This is higher by 16,000 than the Action Economics Forecast Survey amount of 225,000 and is the largest amount since the week of February 22. The previous week’s actual count was revised up by 1,000 to 223,000, from 222,000 reported initially.

The total number of unemployment insurance beneficiaries – also known as “continuing claims” – in the week ended April 19 was 1.916 million, up 83,000 from the prior week’s 1.833 million; that earlier amount was revised down by 8,000.

The insured unemployment rate, that is, the number of beneficiaries as a percentage of covered employment, was 1.3% in the April 19 week, following 1.2% continuously since the week of January 6, 2024.

Economic conditions vary widely across states and territories.  In the week ended April 12, the highest unemployment rates were in New Jersey (2.39%), California (2.24%), Washington (2.19%), Rhode Island (2.17%) and Massachusetts (1.93%).  The lowest rates were in Florida (0.35%), South Dakota (0.40%), Alabama (0.41%), Virginia (0.45%) and Tennessee (0.48%).  Rates in other notable states include the Illinois (1.85%), New York (1.71%), Pennsylvania (1.54%) and Texas (1.09%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in U**SECON**. Data for individual states are in **REGIONW** back to December 1986. The expectations figure is from the Action Economics Forecast Survey in the **AS1REPNA** database.

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- Actual initial claims amount is 16,000 more than forecast.
- Total beneficiaries rose by 83,000.
- Insured unemployment rate ticked up to 1.3% after 15 months at 1.2%.

U.S. Initial Jobless Claims Rise Notably in April 28 Week

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Real GDP eased 0.3% SAAR (+2.1% y/y) during the first quarter of 2025 after increasing 2.4% in Q4’24 and 3.1% in Q3’24. A 0.4% increase had been expected in the Action Economics Forecast Survey. It was the first decline since Q1 2022.

Foreign trade subtracted 4.83 percentage points from growth last quarter as imports surged 41.3% (13.4% y/y) ahead of tariffs, which began to come into effect in the first quarter. The rise followed a 1.9% decline in Q4’24. Exports rose 1.8% (3.0% y/y) after easing 0.2% in Q4. Inventories added 2.25 percentage points to growth after subtracting 0.84 percentage point from Q4 growth.

Real final sales to domestic purchasers grew 2.3% (2.9% y/y) in Q1 after rising 3.0% in Q4. Personal consumption expenditures rose 1.8% (3.1% y/y) following a 4.0% gain. Durable goods spending fell 3.4% (+5.3% y/y) after surging 12.4% in Q4. Motor vehicle purchases declined 11.1% (+5.5% y/y) after strengthening 19.7% in Q4. Spending on home furnishings & appliances gained 1.5% (6.1% y/y) following a 5.4% rise. Recreational goods & vehicle outlays rose 2.5% (7.0% y/y) last quarter after a 13.9% Q4 increase.

Nondurable goods outlays rose 2.7% (3.0% y/y) following 3.1% growth in Q4. Apparel spending increased 6.7% (2.5% y/y) following a 5.0% rise. Food & beverage buying gained 2.5% (2.3% y/y) after a 1.8% increase. Gasoline & fuel oil purchases increased 4.6% (3.4% y/y) after falling 2.0% in Q4.

Spending on services increased 2.4% last quarter (2.7% y/y) after a 3.0% gain. Outlays on housing & utilities increased 3.4% (1.8% y/y) after rising 1.1% in Q4. Health care expenditures rose 4.0% (4.8% y/y) following a 4.7% strengthening. Transportation outlays increased 5.3% (4.6% y/y) after a 3.7% rise while recreation spending rose 4.7% (2.8% y/y) following a 4.5% rise. Restaurant & hotel expenditures declined 2.1% (+0.5% y/y) following a 2.8% rise. Financial services expenditures rose 1.9% (2.0% y/y) after a 3.1% Q4 increase.

Business fixed investment increased 9.8% (3.6% y/y) following a 3.0% decline in Q4. Expenditures on structures rose 0.4% (-0.4% y/y) after a 2.9% increase. Expenditures on producers’ durable equipment jumped 22.5% (8.0% y/y) after falling 8.7%.  Outlays on information processing equipment soared 69.3% (18.9% y/y) following a 7.3% decline. Industrial equipment investment fell 1.4% (-0.3% y/y) after easing 0.9%. Intellectual property product spending rose 4.1% (1.8% y/y) following a 0.5% decline. 

Residential structures investment increased 1.3% (-0.1% y/y) in Q1 after a 5.5% Q4 rise.

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Government spending fell 1.5% (+2.4% y/y) after a 3.1% Q4 rise. Federal government expenditures declined 5.1% (+2.9% y/y) after rising 4.0% in Q4. National defense expenditures declined 8.0% (+4.0% y/y) after increasing 4.8% in Q4. State & local government spending rose 0.8% (2.1% y/y) following a 2.5% rise.

The GDP price index rose 3.7% (2.6% y/y) after increasing 2.3% in Q4. It was the largest increase since Q4’22. A 2.4% increase had been expected. The PCE chain price index increased 3.6% (2.5% y/y) following a 2.4% rise. The PCE price index excluding food and energy rose 3.5% (2.8% y/y) after increasing 2.6% in Q4. The business fixed investment price index rose 0.4% (1.8% y/y) after 1.5% rise. The residential price index strengthened 3.9% (3.2% y/y) after a 1.9% rise while the government price index increased 4.7% (2.8% y/y) following a 2.1% rise.

The GDP data can be found in Haver’s **USECON** and **USNA** databases. **USNA** contains virtually all of the Bureau of Economic Analysis detail in the national accounts. The Action Economics consensus estimates can be found in **AS1REPNA**.

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- Decline in GDP is first in three years.
- Foreign trade subtracts substantially ahead of tariffs.
- Domestic final demand growth weakens.
- Price index strengthens with higher core PCE prices.

Economy in Brief: August 2009

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