Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080807d.jpg" align="left" border="0" height="265" width="353">
Weakness in industrial output is now a growing EU-wide
phenomenon based on the large countries&#8217; results. Among the early
reporting large countries Germany, Italy and the UK show negative
growth rates for real output in 2008-Q2. Only Spain with an
exceptionally wild output series shows a gain in Q2 and that is after
seeing output lower over six months and over 12-months. 
 

Frances results are plotted in the chart above but they lack a
timely update for June. Still the pattern in output is clear. Germany
is having the sharpest current drop. Italy has had the longest period
in which output has been declining (Yr/Yr). France had not had the
degree of output success of the others earlier in the expansion. It has
showed better resilience to declining forces than Italy over the past
year and has only just dropped to show Yr/Yr declines in output. 
 

The services sectors of these countries are showing weakened
performance as well although the monthly report for EMU showed a bit of
resilience. Inflation still dogs Europe &#8211; regardless of the domain of
the central bank. 
While the authorities in Japan have just opened the door to admitting
weakness and have gone so far as to admit that the economy could be in
recession even now, in the Europe a certain confidence is still exuded,
but by increasingly cautious policymakers. Today, German banking
association president Klaus-Peter Mueller said that there is no end in
sight for financial crisis. 2008 will remain a difficult year for all
banks he says. With banks so impeded and the ECB acting slowly (it
refrained from any rate changes at today&#8217;s meeting) Europe is going to
be under increasing downward pressure. The steady decline in the value
of the euro exchange rate speaks to what risks that have put in play. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="11" scope="col">Main E-zone Countries and UK IP in MFG </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo</td>
<td>Jun 08</td>
<td>May 08</td>
<td>Jun 08</td>
<td>May 08</td>
<td>Jun 08</td>
<td>May 08</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG Only</td>
<td>Jun 08</td>
<td>May 08</td>
<td>Apr 08</td>
<td>3Mo</td>
<td>3Mo</td>
<td>6mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Q-2 -Date</td>
</tr>
<tr>
<td class="firstcol">Germany:</td>
<td>0.5%</td>
<td>-1.9%</td>
<td>-0.3%</td>
<td>-6.9%</td>
<td>-9.2%</td>
<td>-2.2%</td>
<td>-0.8%</td>
<td>2.2%</td>
<td>1.3%</td>
<td>-6.1%</td>
</tr>
<tr>
<td class="firstcol">France: IP excl Construction</td>
<td>#N/A</td>
<td>-2.6%</td>
<td>1.5%</td>
<td>#N/A</td>
<td>-8.8%</td>
<td>#N/A</td>
<td>-1.7%</td>
<td>#N/A</td>
<td>-1.2%</td>
<td>#N/A</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>0.2%</td>
<td>-1.5%</td>
<td>0.4%</td>
<td>-3.3%</td>
<td>-4.9%</td>
<td>1.5%</td>
<td>1.1%</td>
<td>-2.0%</td>
<td>-2.6%</td>
<td>-2.5%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>-4.9%</td>
<td>-14.8%</td>
<td>27.5%</td>
<td>13.9%</td>
<td>-33.7%</td>
<td>-17.5%</td>
<td>-10.0%</td>
<td>-9.6%</td>
<td>-7.7%</td>
<td>2.2%</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>-0.5%</td>
<td>-0.6%</td>
<td>0.0%</td>
<td>-4.2%</td>
<td>-4.2%</td>
<td>-1.5%</td>
<td>-1.0%</td>
<td>-1.3%</td>
<td>-0.9%</td>
<td>-2.9%</td>
</tr>
</tbody>
</table>
</body></html>

Weakness in industrial output is now a growing EU-wide phenomenon based on the large countries’ results. Among the early reporting large countries Germany, Italy and the UK show negative growth rates for real output in 2008-Q2. Only [...]

Germany's Weakness in IP Does Not Stand Alone

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080807c.jpg" align="left" border="0" height="265" width="353">Larger order drop points to even worse performance in Q3.

Trends in German output are losing momentum across all sectors
despite a small rebound in the current month. Consumer goods output has
been weakening for some time but the softening in capital goods output
is a relatively new phenomenon.&gt;

Output of consumer goods and capital goods rose in June after
falling sporadically in earlier months intermediate goods output that
feeds both sectors, is simply declining. The sequential growth rates in
the table show that that the annual rate of decline is becoming
progressively weaker in the more recent periods- indicating cumulating
weakness across sectors.

In the quarter-to-date (now a complete Q2, but not yet fully
revised Q2), IP is dropping at a 6.4% pace led by a weak consumer
sector (-9.7%) MFG output is dropping at a 6.1% pace. MFG orders are
dropping at an even sharper 15.4% pace in the quarter, an ominous sign
for Q3.


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Total
German IP</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar except m/m</td>
<td>Jun-08</td>
<td>May-08</td>
<td>Apr-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Quarter -to-Date</td>
</tr>
<tr>
<td class="firstcol">IP total</td>
<td>0.2%</td>
<td>-1.8%</td>
<td>-0.2%</td>
<td>-7.2%</td>
<td>-2.3%</td>
<td>1.6%</td>
<td>-6.4%</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods</td>
<td>1.0%</td>
<td>-0.3%</td>
<td>-3.0%</td>
<td>-8.9%</td>
<td>-5.8%</td>
<td>-0.2%</td>
<td>-9.7%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>1.4%</td>
<td>-3.7%</td>
<td>2.7%</td>
<td>1.5%</td>
<td>2.1%</td>
<td>4.5%</td>
<td>-4.3%</td>
</tr>
<tr>
<td class="firstcol">Intermediary Goods</td>
<td>-0.6%</td>
<td>-1.0%</td>
<td>-1.9%</td>
<td>-12.9%</td>
<td>-4.5%</td>
<td>1.3%</td>
<td>-6.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Memo</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>-2.1%</td>
<td>2.4%</td>
<td>-3.5%</td>
<td>-12.3%</td>
<td>-6.4%</td>
<td>0.2%</td>
<td>-28.8%</td>
</tr>
<tr>
<td class="firstcol">MFG IP</td>
<td>0.5%</td>
<td>-1.9%</td>
<td>-0.3%</td>
<td>-6.9%</td>
<td>-2.2%</td>
<td>2.2%</td>
<td>-6.1%</td>
</tr>
<tr>
<td class="firstcol">MFG Orders</td>
<td>-2.9%</td>
<td>-1.4%</td>
<td>-1.7%</td>
<td>-21.7%</td>
<td>-14.6%</td>
<td>-8.4%</td>
<td>-15.4%</td>
</tr>
</tbody>
</table>
</body></html>

Larger order drop points to even worse performance in Q3. Trends in German output are losing momentum across all sectors despite a small rebound in the current month. Consumer goods output has been weakening for some time but the [...]

German IP Falls Sharply in Quarter Despite Rise in June

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080807b.jpg" width="353">
Initial claims for unemployment insurance rose again last week. The 7,000 increase to 455,000 followed the unrevised 45,000 surge during the week earlier. The latest level was the highest since March of 2002 and it surpassed Consensus expectations for a decline to 420,000 claims.
The Labor Department indicated that a program to locate people eligible for jobless benefits played a role in last week&#39;s increase in claims.
As a result of the latest jump in initial claims, the four-week moving average increased to 419,500 (34.5% y/y), the highest level since mid-2003. During July claims averaged 393,000.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080807a.jpg" width="353">
A claims level below 400,000 typically has been associated with growth in nonfarm payrolls. During the last ten years there has been a (negative) 76% correlation between the level of initial claims and the m/m change in nonfarm payroll employment. Over the longer period of time, the level of claims for jobless insurance has not trended higher with the size of the labor force due to a higher proportion of self-employed workers who are not eligible for benefits.
Continuing claims for unemployment insurance during the latest week rose 31,000 after a little revised 183,000 jump during the prior week. The four-week moving average of continuing claims surged to 3,201 which was its highest level since late-2003.
Continuing claims provide some indication of workers&#39; ability to find employment and they lag the initial claims figures by one week.
The insured rate of unemployment was stable at 2.5%, the highest level since early 2004.
How Much Have U.S. House Prices Fallen from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/net/20080801/netpub.pdf"> here</a>.
Unanchored Expectations? Interpreting the Evidence from Inflation Surveys from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2008/el2008-23.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">08/02/08</th>
<th scope="col">07/26/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;455</td>
<td>448</td>
<td>43.1%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,311</td>
<td>29.7%</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
</body>
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Initial claims for unemployment insurance rose again last week. The 7,000 increase to 455,000 followed the unrevised 45,000 surge during the week earlier. The latest level was the highest since March of 2002 and it surpassed Consensus [...]

U.S. Unemployment Insurance Claims Rose Further

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080807e.jpg" align="left" border="0" height="265" width="353">
The National Association of Realtors reported that the June
level of pending sales of existing homes rose 5.3%. That reversed the
4.9% decline during May which was unrevised. The latest increase
compared to Consensus expectations for a 1.0% drop.
These figures are analogous to the new home sales data from
the Commerce Department in that they measure existing home sales when
the sales contract is signed, not at the time the sale is closed. The
series dates back to 2001.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080807f.jpg" align="right" border="0" height="265" width="353">
The regional sales figures indicated that sales in the South
recovered all of their May decline with a 9.3% increase while sales in
the Northeast nearly recovered two months of decline with a 3.4% rise.
Sales in the Midwest posted a weak 1.3% rise on the heels of a 6.0% May
drop and sales in the West continued to recover. They posted a 4.6%
gain to the highest level in twelve months.
The Realtors association indicated in an earlier report that
the number of homes on the market &amp; available for sale ticked
up a not seasonally adjusted 0.2% (2.8% y/y) after a 1.5% decline
during May.
At the current sales rate there was an 11.1 months' supply of
homes on the market versus an 8.9 months' average during all of last
year, a 6.5 months' supply in 2006 and a 4.5 months' supply in 2005.
The pending home sales data are available in Haver's PREALTOR
database and the number of homes on the market are in the REALTOR
database.
Rational Real Estate from the Federal
Reserve Bank of Richmond can be found <a href="http://www.richmondfed.org/publications/economic_research/region_focus/weekly_update/archive/2008/20080604.cfm">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Pending
Home Sales (2001=100)&nbsp;</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>89.0</td>
<td>&nbsp;84.5</td>
<td>&nbsp;&nbsp; -12.2%</td>
<td>95.7</td>
<td>112.1&nbsp;</td>
<td>124.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>79.6</td>
<td>77.0</td>
<td>-15.4</td>
<td>85.6</td>
<td>98.5</td>
<td>108.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>79.6</td>
<td>78.6</td>
<td>-13.3</td>
<td>89.6</td>
<td>102.0</td>
<td>116.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>92.4</td>
<td>84.5</td>
<td>-16.6</td>
<td>107.3</td>
<td>127.3</td>
<td>134.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>101.0</td>
<td>96.6</td>
<td>-1.8</td>
<td>92.1</td>
<td>109.5</td>
<td>128.6</td>
</tr>
</tbody>
</table>
U.S. Consumer Credit Growth Stable
in June, Still Stable With 2007 
by <a href="/comment/Moeller.html">Tom
Moeller</a> August 7, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080807g.jpg" align="left" border="0" height="265" width="353">
Consumer credit outstanding rose $14.3B during June following
moderate $8.0 and $9.0 billion increases during the prior two months.
On a percentage basis, the change in consumer credit over the
last three months averaged 5.0% (AR) and that was roughly stable. The
rate of gain was, however, up from 3.3% this passed February.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080807h.jpg" align="right" border="0" height="265" width="353">
Revolving credit outstanding rose $5.5B during June. Here
again, the three month rate of growth of 5.0% recently has been stable
but reduced from a 7.4% rise during all of last year.
Non-revolving credit, which accounts for nearly two thirds of
total consumer credit, rose a sharp $8.9B in June. The three month
annualized average growth rate, however, was 5.0% and that was up from
a 2.2% growth rate in February, 4.7% growth during all of last year and
3.6% growth in 2004.
These figures are the major input to the Fed's Flow of Funds
accounts for the household sector, released quarterly.
Credit card debt and payment use from the
Federal Reserve Bank of Boston can be found <a href="http://www.bos.frb.org/economic/wp/wp2008/wp0802.pdf">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Consumer
Credit (m/m Chg, SAAR)</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>$14.3B</td>
<td>&nbsp;$8.0B</td>
<td>5.6%</td>
<td>5.7%</td>
<td>4.5%</td>
<td>4.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revolving</td>
<td>$5.5B</td>
<td>$6.1B</td>
<td>7.2%</td>
<td>7.4%</td>
<td>6.1%</td>
<td>3.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-revolving</td>
<td>$8.9B</td>
<td>$1.9B</td>
<td>4.6%</td>
<td>4.7%</td>
<td>3.6%</td>
<td>4.9%</td>
</tr>
</tbody>
</table>
U.S. Unemployment Insurance Claims
Rose Further 
by <a href="/comment/Moeller.html">Tom
Moeller</a> August 7, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080807b.jpg" align="left" border="0" height="265" width="353">
Initial claims for unemployment insurance rose again last
week. The 7,000 increase to 455,000 followed the unrevised 45,000 surge
during the week earlier. The latest level was the highest since March
of 2002 and it surpassed Consensus expectations for a decline to
420,000 claims.
The Labor Department indicated that a program to locate people
eligible for jobless benefits played a role in last week's increase in
claims.
As a result of the latest jump in initial claims, the
four-week moving average increased to 419,500 (34.5% y/y), the highest
level since mid-2003. During July claims averaged 393,000.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080807a.jpg" align="right" border="0" height="265" width="353">
A claims level below 400,000 typically has been associated
with growth in nonfarm payrolls. During the last ten years there has
been a (negative) 76% correlation between the level of initial claims
and the m/m change in nonfarm payroll employment. Over the longer
period of time, the level of claims for jobless insurance has not
trended higher with the size of the labor force due to a higher
proportion of self-employed workers who are not eligible for benefits.
Continuing claims for unemployment insurance during the latest
week rose 31,000 after a little revised 183,000 jump during the prior
week. The four-week moving average of continuing claims surged to 3,201
which was its highest level since late-2003.
Continuing claims provide some indication of workers' ability
to find employment and they lag the initial claims figures by one week.
The insured rate of unemployment was stable at 2.5%, the
highest level since early 2004.
How Much Have U.S. House Prices Fallen from
the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/net/20080801/netpub.pdf">
here</a>.
Unanchored Expectations? Interpreting the
Evidence from Inflation Surveys from the Federal Reserve
Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2008/el2008-23.pdf">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment
Insurance (000s)</a>&nbsp;</th>
<th scope="col">08/02/08</th>
<th scope="col">07/26/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;455</td>
<td>448</td>
<td>43.1%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,311</td>
<td>29.7%</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
Germany's Weakness in IP Does NotStand Alone 
by <a href="/comment/Brusca.html">Robert
Brusca</a> August 7, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080807d.jpg" align="left" border="0" height="265" width="353">
Weakness in industrial output is now a growing EU-wide
phenomenon based on the large countries&#8217; results. Among the early
reporting large countries Germany, Italy and the UK show negative
growth rates for real output in 2008-Q2. Only Spain with an
exceptionally wild output series shows a gain in Q2 and that is after
seeing output lower over six months and over 12-months. 
 

Frances results are plotted in the chart above but they lack a
timely update for June. Still the pattern in output is clear. Germany
is having the sharpest current drop. Italy has had the longest period
in which output has been declining (Yr/Yr). France had not had the
degree of output success of the others earlier in the expansion. It has
showed better resilience to declining forces than Italy over the past
year and has only just dropped to show Yr/Yr declines in output. 
 

The services sectors of these countries are showing weakened
performance as well although the monthly report for EMU showed a bit of
resilience. Inflation still dogs Europe &#8211; regardless of the domain of
the central bank. 
While the authorities in Japan have just opened the door to admitting
weakness and have gone so far as to admit that the economy could be in
recession even now, in the Europe a certain confidence is still exuded,
but by increasingly cautious policymakers. Today, German banking
association president Klaus-Peter Mueller said that there is no end in
sight for financial crisis. 2008 will remain a difficult year for all
banks he says. With banks so impeded and the ECB acting slowly (it
refrained from any rate changes at today&#8217;s meeting) Europe is going to
be under increasing downward pressure. The steady decline in the value
of the euro exchange rate speaks to what risks that have put in play. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="11" scope="col">Main
E-zone Countries and UK IP in MFG </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo</td>
<td>Jun 
08</td>
<td>May 
08</td>
<td>Jun 
08</td>
<td>May 
08</td>
<td>Jun 
08</td>
<td>May 
08</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG Only</td>
<td>Jun 
08</td>
<td>May 
08</td>
<td>Apr 
08</td>
<td>3Mo</td>
<td>3Mo</td>
<td>6mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Q-2 
-Date</td>
</tr>
<tr>
<td class="firstcol">Germany:</td>
<td>0.5%</td>
<td>-1.9%</td>
<td>-0.3%</td>
<td>-6.9%</td>
<td>-9.2%</td>
<td>-2.2%</td>
<td>-0.8%</td>
<td>2.2%</td>
<td>1.3%</td>
<td>-6.1%</td>
</tr>
<tr>
<td class="firstcol">France: IP excl Construction</td>
<td>#N/A</td>
<td>-2.6%</td>
<td>1.5%</td>
<td>#N/A</td>
<td>-8.8%</td>
<td>#N/A</td>
<td>-1.7%</td>
<td>#N/A</td>
<td>-1.2%</td>
<td>#N/A</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>0.2%</td>
<td>-1.5%</td>
<td>0.4%</td>
<td>-3.3%</td>
<td>-4.9%</td>
<td>1.5%</td>
<td>1.1%</td>
<td>-2.0%</td>
<td>-2.6%</td>
<td>-2.5%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>-4.9%</td>
<td>-14.8%</td>
<td>27.5%</td>
<td>13.9%</td>
<td>-33.7%</td>
<td>-17.5%</td>
<td>-10.0%</td>
<td>-9.6%</td>
<td>-7.7%</td>
<td>2.2%</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>-0.5%</td>
<td>-0.6%</td>
<td>0.0%</td>
<td>-4.2%</td>
<td>-4.2%</td>
<td>-1.5%</td>
<td>-1.0%</td>
<td>-1.3%</td>
<td>-0.9%</td>
<td>-2.9%</td>
</tr>
</tbody>
</table>
German IP Falls Sharply in
QuarterDespite Rise in June&nbsp; 
by <a href="/comment/Brusca.html">Robert
Brusca</a> August 7, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080807c.jpg" align="left" border="0" height="265" width="353">Larger order drop points to
even worse performance in Q3.

Trends in German output are losing momentum across all sectors
despite a small rebound in the current month. Consumer goods output has
been weakening for some time but the softening in capital goods output
is a relatively new phenomenon.&gt;

Output of consumer goods and capital goods rose in June after
falling sporadically in earlier months intermediate goods output that
feeds both sectors, is simply declining. The sequential growth rates in
the table show that that the annual rate of decline is becoming
progressively weaker in the more recent periods- indicating cumulating
weakness across sectors.

In the quarter-to-date (now a complete Q2, but not yet fully
revised Q2), IP is dropping at a 6.4% pace led by a weak consumer
sector (-9.7%) MFG output is dropping at a 6.1% pace. MFG orders are
dropping at an even sharper 15.4% pace in the quarter, an ominous sign
for Q3.


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Total
German IP</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar except m/m</td>
<td>Jun-08</td>
<td>May-08</td>
<td>Apr-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Quarter -to-Date</td>
</tr>
<tr>
<td class="firstcol">IP total</td>
<td>0.2%</td>
<td>-1.8%</td>
<td>-0.2%</td>
<td>-7.2%</td>
<td>-2.3%</td>
<td>1.6%</td>
<td>-6.4%</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods</td>
<td>1.0%</td>
<td>-0.3%</td>
<td>-3.0%</td>
<td>-8.9%</td>
<td>-5.8%</td>
<td>-0.2%</td>
<td>-9.7%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>1.4%</td>
<td>-3.7%</td>
<td>2.7%</td>
<td>1.5%</td>
<td>2.1%</td>
<td>4.5%</td>
<td>-4.3%</td>
</tr>
<tr>
<td class="firstcol">Intermediary Goods</td>
<td>-0.6%</td>
<td>-1.0%</td>
<td>-1.9%</td>
<td>-12.9%</td>
<td>-4.5%</td>
<td>1.3%</td>
<td>-6.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Memo</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>-2.1%</td>
<td>2.4%</td>
<td>-3.5%</td>
<td>-12.3%</td>
<td>-6.4%</td>
<td>0.2%</td>
<td>-28.8%</td>
</tr>
<tr>
<td class="firstcol">MFG IP</td>
<td>0.5%</td>
<td>-1.9%</td>
<td>-0.3%</td>
<td>-6.9%</td>
<td>-2.2%</td>
<td>2.2%</td>
<td>-6.1%</td>
</tr>
<tr>
<td class="firstcol">MFG Orders</td>
<td>-2.9%</td>
<td>-1.4%</td>
<td>-1.7%</td>
<td>-21.7%</td>
<td>-14.6%</td>
<td>-8.4%</td>
<td>-15.4%</td>
</tr>
</tbody>
</table>
</body></html>

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

U.S. Pending Home Sales Unexpectedly Rose

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080806e.jpg" align="left" border="0" height="265" width="353">
Japan&#8217;s leading economic index fell in June after having a
small uptick in May. Over three-months the index is higher but it is
deeply weaker over 24-, 12- and 6-months. The OECD index that is not
quite as up-to-date has been pointing to strength since late 2007. 
 

The Cabinet Office reported that the trend in the composite
coincident index points to a worsening of the economic cycle,
downgrading the view a month earlier that suggested a possible change
in the business cycle. The coincident index, which measures the current
state of the economy, fell sharply to 101.7 from 103.3, in line with
expectations. The leading index signals are not so clear cut with the
OECD&#8217;s and Japan&#8217;s own indicators pointing in very different directions
&#8211; a most unusual development. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Japan's
LEI and its trends</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Levels</td>
<td colspan="4">Growth (saar)</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jun-08</td>
<td>May-08</td>
<td>Apr-08</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>24Mo</td>
</tr>
<tr>
<td class="firstcol">LEI</td>
<td>91.2</td>
<td>92.9</td>
<td>92.8</td>
<td>1.8%</td>
<td>-5.5%</td>
<td>-8.0%</td>
<td>-11.5%</td>
</tr>
<tr>
<td class="firstcol">LEI: OECD</td>
<td>#N/A</td>
<td>105.7</td>
<td>104.9</td>
<td>1.1%</td>
<td>0.9%</td>
<td>-2.4%</td>
<td>-1.1%</td>
</tr>
</tbody>
</table>
</body></html>

Japan’s leading economic index fell in June after having a small uptick in May. Over three-months the index is higher but it is deeply weaker over 24-, 12- and 6-months. The OECD index that is not quite as up-to-date has been pointing [...]

Japan LEI Falls

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080806d.jpg" align="left" border="0" height="265" width="353">Historically German foreign orders have been the more volatile
of the two series (foreign and domestic orders for MFG goods). The
current drop is a steep one indeed. The aggressive growth rates show
that growth fore both domestic and foreign orders is getting weaker as
the time period to calculated growth gets shorter. This is accelerating
weakness.

Quarter-to-date the growth rates are terribly weak. This
series is now complete for Q2. In Q2 total orders are falling at a
15.4% annual lead by a 21.3% drop in Foreign orders. Sales are falling
too as Consumer sales are off at an 11% pace even capital goods real
sales are off at a 5.8% annual rate in the quarter. The German
economy&#8217;s factory sector is weakening at a rapid pace. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="9" scope="col">German Orders and Sales By Sector and Origin </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Real and SA</td>
<td colspan="3">% M/M</td>
<td colspan="5">% Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jun-08</td>
<td>May-08</td>
<td>Apr-08</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
<td>QTR-2-Date</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>-2.9%</td>
<td>-1.4%</td>
<td>-1.7%</td>
<td>-21.7%</td>
<td>-11.5%</td>
<td>-8.4%</td>
<td>16.9%</td>
<td>-15.4%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>-5.1%</td>
<td>0.1%</td>
<td>-3.7%</td>
<td>-30.0%</td>
<td>-16.3%</td>
<td>-14.1%</td>
<td>23.4%</td>
<td>-21.3%</td>
</tr>
<tr>
<td class="firstcol">Domestic</td>
<td>-0.6%</td>
<td>-2.8%</td>
<td>0.3%</td>
<td>-11.9%</td>
<td>-6.1%</td>
<td>-1.7%</td>
<td>10.2%</td>
<td>-8.8%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="9">Real Sector Sales</td>
</tr>
<tr>
<td class="firstcol">MFG/Mining</td>
<td>-0.6%</td>
<td>-0.4%</td>
<td>-1.0%</td>
<td>-7.7%</td>
<td>-3.9%</td>
<td>2.1%</td>
<td>5.9%</td>
<td>-7.2%</td>
</tr>
<tr>
<td class="firstcol">Consumer&nbsp;</td>
<td>-1.6%</td>
<td>0.2%</td>
<td>-2.0%</td>
<td>-12.8%</td>
<td>-6.6%</td>
<td>-2.9%</td>
<td>2.2%</td>
<td>-11.0%</td>
</tr>
<tr>
<td class="firstcol">Consumer Durables</td>
<td>2.0%</td>
<td>-3.7%</td>
<td>1.1%</td>
<td>-2.8%</td>
<td>-1.4%</td>
<td>-1.7%</td>
<td>4.6%</td>
<td>-5.7%</td>
</tr>
<tr>
<td class="firstcol">Consumer Non-Durable</td>
<td>-2.2%</td>
<td>1.1%</td>
<td>-2.6%</td>
<td>-14.0%</td>
<td>-7.2%</td>
<td>-3.1%</td>
<td>1.7%</td>
<td>-11.8%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>0.9%</td>
<td>-2.7%</td>
<td>2.1%</td>
<td>0.9%</td>
<td>0.4%</td>
<td>4.5%</td>
<td>7.3%</td>
<td>-5.8%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>-2.0%</td>
<td>2.0%</td>
<td>-4.0%</td>
<td>-15.3%</td>
<td>-8.0%</td>
<td>1.6%</td>
<td>6.5%</td>
<td>-7.0%</td>
</tr>
<tr>
<td class="firstcol">All MFG-Sales</td>
<td>-0.7%</td>
<td>-0.5%</td>
<td>-1.0%</td>
<td>-8.4%</td>
<td>-4.3%</td>
<td>1.5%</td>
<td>5.8%</td>
<td>-7.7%</td>
</tr>
</tbody>
</table>
</body></html>

Historically German foreign orders have been the more volatile of the two series (foreign and domestic orders for MFG goods). The current drop is a steep one indeed. The aggressive growth rates show that growth fore both domestic and [...]

German MFG Orders Have Turned Horrifically Weak

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080806b.jpg" width="353">
The total number of mortgage applications ticked up 2.8% last week, but that followed two weeks of sharp decline, according to the Mortgage Bankers Association. As a result, applications in early August were 11.1% below the July average. In July, applications fell 2.9% from June following sharper m/m declines during most of this year.
In early August, the level of all mortgage applications was down by one-third from the year-ago level.
Purchase applications fell 1.8% last week which made up just a piece of the prior three weeks&#39; sharp declines. That left applications for a mortgage to purchase a home, early this month, 8.0% below the July average.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080806a.jpg" width="353">
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 single family home sales.
Applications to refinance a home mortgage rose 4.4% after two weeks of strong decline. Applications began this month 15.7% below the July average.
The effective interest rate on a conventional 15-year mortgage ticked up w/w to 6.02% after two months when they averaged 5.94%. For a thirty year mortgage, rates were little changed at 6.41%. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10-year Treasury securities. For an adjustable rate 1-Year mortgage the rate slipped to 7.17% from a 7.20% average last month.
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080806c.jpg" width="353">
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 covers roughly 50% of all U.S. residential mortgage applications processed each week by mortgage banks, commercial banks and thrifts. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.
The Rise and Fall of Subprime Mortgages from the Federal Reserve Bank of Dallas can be found <a href="http://dallasfed.org/research/eclett/2007/el0711.html"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">08/01/08</th>
<th scope="col">07/25/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>432.6</td>
<td>420.8</td>
<td>-34.1%</td>
<td>652.6</td>
<td>584.2</td>
<td>708.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>315.2</td>
<td>309.5</td>
<td>-29.5%</td>
<td>424.9</td>
<td>406.9</td>
<td>470.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,121.8</td>
<td>1,074.4</td>
<td>-40.4%</td>
<td>1,997.9</td>
<td>1,634.0</td>
<td>2,092.3</td>
</tr>
</tbody>
</table>
</body>
</html>

The total number of mortgage applications ticked up 2.8% last week, but that followed two weeks of sharp decline, according to the Mortgage Bankers Association. As a result, applications in early August were 11.1% below the July [...]

Mortgage Applications Down By One-third

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080806b.jpg" align="left" border="0" height="265" width="353">
The total number of mortgage applications ticked up 2.8% last
week, but that followed two weeks of sharp decline, according to the
Mortgage Bankers Association. As a result, applications in early August
were 11.1% below the July average. In July, applications fell 2.9% from
June following sharper m/m declines during most of this year.
In early August, the level of all mortgage applications was
down by one-third from the year-ago level.
Purchase applications fell 1.8% last week which made up just a
piece of the prior three weeks' sharp declines. That left applications
for a mortgage to purchase a home, early this month, 8.0% below the
July average.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080806a.jpg" align="right" border="0" height="265" width="353">
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 single family home sales.
Applications to refinance a home mortgage rose 4.4% after two
weeks of strong decline. Applications began this month 15.7% below the
July average.
The effective interest rate on a conventional 15-year mortgage
ticked up w/w to 6.02% after two months when they averaged 5.94%. For a
thirty year mortgage, rates were little changed at 6.41%. Interest
rates on 15 and 30 year mortgages are closely correlated (&gt;90%)
with the rate on 10-year Treasury securities. For an adjustable rate
1-Year mortgage the rate slipped to 7.17% from a 7.20% average last
month.
During the last ten years there has been a (negative) 79%
correlation between the level of applications for purchase and the
effective interest rate on a 30-year mortgage.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080806c.jpg" align="left" border="0" height="265" width="353">
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 covers roughly 50% of
all U.S. residential mortgage applications processed each week by
mortgage banks, commercial banks and thrifts. Visit the Mortgage
Bankers Association site <a href="http://www.mbaa.org">here</a>.
The Rise and Fall
of Subprime Mortgages from the Federal Reserve Bank of Dallas
can be found <a href="http://dallasfed.org/research/eclett/2007/el0711.html">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA
Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">08/01/08</th>
<th scope="col">07/25/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>432.6</td>
<td>420.8</td>
<td>-34.1%</td>
<td>652.6</td>
<td>584.2</td>
<td>708.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>315.2</td>
<td>309.5</td>
<td>-29.5%</td>
<td>424.9</td>
<td>406.9</td>
<td>470.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,121.8</td>
<td>1,074.4</td>
<td>-40.4%</td>
<td>1,997.9</td>
<td>1,634.0</td>
<td>2,092.3</td>
</tr>
</tbody>
</table>
German MFG Orders Have
TurnedHorrifically Weak 
by <a href="/comment/Brusca.html">Robert
Brusca</a> August
6, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080806d.jpg" align="left" border="0" height="265" width="353">Historically German foreign
orders have been the more volatile
of the two series (foreign and domestic orders for MFG goods). The
current drop is a steep one indeed. The aggressive growth rates show
that growth fore both domestic and foreign orders is getting weaker as
the time period to calculated growth gets shorter. This is accelerating
weakness.

Quarter-to-date the growth rates are terribly weak. This
series is now complete for Q2. In Q2 total orders are falling at a
15.4% annual lead by a 21.3% drop in Foreign orders. Sales are falling
too as Consumer sales are off at an 11% pace even capital goods real
sales are off at a 5.8% annual rate in the quarter. The German
economy&#8217;s factory sector is weakening at a rapid pace. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">German
Orders and Sales By Sector and Origin </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Real and SA</td>
<td colspan="3">% M/M</td>
<td colspan="5">% Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jun-08</td>
<td>May-08</td>
<td>Apr-08</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
<td>QTR-2-Date</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>-2.9%</td>
<td>-1.4%</td>
<td>-1.7%</td>
<td>-21.7%</td>
<td>-11.5%</td>
<td>-8.4%</td>
<td>16.9%</td>
<td>-15.4%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>-5.1%</td>
<td>0.1%</td>
<td>-3.7%</td>
<td>-30.0%</td>
<td>-16.3%</td>
<td>-14.1%</td>
<td>23.4%</td>
<td>-21.3%</td>
</tr>
<tr>
<td class="firstcol">Domestic</td>
<td>-0.6%</td>
<td>-2.8%</td>
<td>0.3%</td>
<td>-11.9%</td>
<td>-6.1%</td>
<td>-1.7%</td>
<td>10.2%</td>
<td>-8.8%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="9">Real
Sector Sales</td>
</tr>
<tr>
<td class="firstcol">MFG/Mining</td>
<td>-0.6%</td>
<td>-0.4%</td>
<td>-1.0%</td>
<td>-7.7%</td>
<td>-3.9%</td>
<td>2.1%</td>
<td>5.9%</td>
<td>-7.2%</td>
</tr>
<tr>
<td class="firstcol">Consumer&nbsp;</td>
<td>-1.6%</td>
<td>0.2%</td>
<td>-2.0%</td>
<td>-12.8%</td>
<td>-6.6%</td>
<td>-2.9%</td>
<td>2.2%</td>
<td>-11.0%</td>
</tr>
<tr>
<td class="firstcol">Consumer Durables</td>
<td>2.0%</td>
<td>-3.7%</td>
<td>1.1%</td>
<td>-2.8%</td>
<td>-1.4%</td>
<td>-1.7%</td>
<td>4.6%</td>
<td>-5.7%</td>
</tr>
<tr>
<td class="firstcol">Consumer Non-Durable</td>
<td>-2.2%</td>
<td>1.1%</td>
<td>-2.6%</td>
<td>-14.0%</td>
<td>-7.2%</td>
<td>-3.1%</td>
<td>1.7%</td>
<td>-11.8%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>0.9%</td>
<td>-2.7%</td>
<td>2.1%</td>
<td>0.9%</td>
<td>0.4%</td>
<td>4.5%</td>
<td>7.3%</td>
<td>-5.8%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>-2.0%</td>
<td>2.0%</td>
<td>-4.0%</td>
<td>-15.3%</td>
<td>-8.0%</td>
<td>1.6%</td>
<td>6.5%</td>
<td>-7.0%</td>
</tr>
<tr>
<td class="firstcol">All MFG-Sales</td>
<td>-0.7%</td>
<td>-0.5%</td>
<td>-1.0%</td>
<td>-8.4%</td>
<td>-4.3%</td>
<td>1.5%</td>
<td>5.8%</td>
<td>-7.7%</td>
</tr>
</tbody>
</table>
Japan LEI Falls 
by <a href="/comment/Brusca.html">Robert
Brusca</a> August 6, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080806e.jpg" align="left" border="0" height="265" width="353">
Japan&#8217;s leading economic index fell in June after having a
small uptick in May. Over three-months the index is higher but it is
deeply weaker over 24-, 12- and 6-months. The OECD index that is not
quite as up-to-date has been pointing to strength since late 2007. 
 

The Cabinet Office reported that the trend in the composite
coincident index points to a worsening of the economic cycle,
downgrading the view a month earlier that suggested a possible change
in the business cycle. The coincident index, which measures the current
state of the economy, fell sharply to 101.7 from 103.3, in line with
expectations. The leading index signals are not so clear cut with the
OECD&#8217;s and Japan&#8217;s own indicators pointing in very different directions
&#8211; a most unusual development. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Japan's
LEI and its trends</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Levels</td>
<td colspan="4">Growth (saar)</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jun-08</td>
<td>May-08</td>
<td>Apr-08</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>24Mo</td>
</tr>
<tr>
<td class="firstcol">LEI</td>
<td>91.2</td>
<td>92.9</td>
<td>92.8</td>
<td>1.8%</td>
<td>-5.5%</td>
<td>-8.0%</td>
<td>-11.5%</td>
</tr>
<tr>
<td class="firstcol">LEI: OECD</td>
<td>#N/A</td>
<td>105.7</td>
<td>104.9</td>
<td>1.1%</td>
<td>0.9%</td>
<td>-2.4%</td>
<td>-1.1%</td>
</tr>
</tbody>
</table>
</body></html>

U.S. Mortgage Applications Down By One-third

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.

250801X4.jpg

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

250801F20.jpg

250801G20.jpg

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.

250801H20.jpg

250801I20.jpg

- 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

250801A.jpg

250801B.jpg

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.

250801C.jpg

250801D.jpg

- 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

250801N40.jpg

250801O40.jpg

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.

250801P40.jpg

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

250801E.jpg

Manufacturing PMIs in the S&P framework were mixed in July. However, the median reading edged slightly higher rising to 48.6 in July from 48.5 in June. But both of these are significantly weaker than the 49.1 reading in May. Manufacturing continues to post PMI readings that are below 50 indicating sector contraction on a fairly broad basis in July among the 17 reporting countries in the table plus the euro area. Only India and Vietnam reported PMI readings above 50 indicating sector expansion in July. In June, three of these jurisdictions showed readings above 50; in May, only three had readings above 50 as well. It remains a difficult time for manufacturing globally.

The readings for the manufacturing PMIs also show slippage in the medians from 12-months to six-months to three-months. The 12-month median is 49.2, the six-month median at 48.8, and the three-month median at 48.7. The bottom line is that most manufacturing sectors show contraction, and the contractions are generally getting slightly worse.

However, on an individual basis over three months about two-thirds of the reporters showed an improvement. Over six months just under 40% showed improvement and over a year about 44% of them showed improvement compared to the year before. Only the three-month versus six-month comparison shows a majority of reporters indicating better performance in July.

The ranked or queue standings metrics that place these individual readings for July in their queue of data over the last 4 ½ years, show standings above 50% which put the individual readings above their medians for this period. And only six of these eighteen reporting jurisdictions sported readings above 50%. Those were for the euro area, Germany, France, and India. India has a rating well above 50% at its 96th percentile; Malaysia has a reading above 50% and Vietnam has a reading well above 50% at its 74th percentile.

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The global economy has been put through the ringer with shocks from a war in Ukraine, stepped up military action in the Middle East, threats in the Straits of Hormuz, and an aggressive tariff policy from the United States, affecting global trade- a significant factor for manufacturing. These events have wrong-footed manufacturing globally. During this period, the inflation threat has dissipated; however, in most countries, inflation still slightly overshoots its target where central banks have such targets.

The U.S. has a particularly large number of policy changes afoot. Its manufacturing sector is still struggling. And recent employment data there indicate what appears to be a broader slowdown in the economy. Job growth in the U.S. has slowed and U.S. trends now show consumer spending slowing along with weaker and downwardly revised job growth. Put together, these are signals to watch closely.

Economy in Brief: 2008

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