Robert Brusca

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In May the PPI excluding construction was dead flat. Year-over-year, the ex-construction PPI is down by 2%. But the ex-construction index has not so clearly made the turn to a rising inflation trend despite a net rise over three months.
</p><p>
Among the 10 EMU members in the table reporting ex-construction PPI data, six show declines in May. Six show declines in April. Four show declines over three months. And all of them show declines over six months and 12 months. However, there is no steady turn for inflation as most of these reporting EMU countries have deeper declines in their respective PPIs over six months than over 12 months. Still, all show inflation picking up over three months compared to six months.
</p><p>
So this is an incipient rise in inflation and it is still too soon to tell how much power and longevity it will have. Europe, after all, is still weak. Prices are lower on balance over the past year everywhere and for the year before that they are lower in seven of 10 countries. Europe has been a long time under the yoke of falling prices. Still, activity is not picking up very strongly either in Europe or in the global economy.
</p><p>
The EMU region does show some lasting pressure on capital goods prices, but it is not picking up. Downward pressure on consumer prices is slowly abating. But the pattern for intermediate goods prices is still not clear.
</p><p>
Of course, everyone is aware that the situation in Greece could create more chaos in Europe. It is not predestined, but it is possible. Even a Grexit could be controlled or could bring about spreading pressures. Right now there is risk as well as uncertainty. And if financial distress hits Europe, we can expect an impact on growth and inflation developments as well. Europe's inflation situation is not baked in cake; it is still to be determined.
</p>

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In May the PPI excluding construction was dead flat. Year-over-year, the ex-construction PPI is down by 2%. But the ex-construction index has not so clearly made the turn to a rising inflation trend despite a net rise over three [...]

Euro Area PPI Inflation Still Falls Year-on-Year

Tom Moeller

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<p><b>Total sales of light vehicles</b> declined 3.5% during June to 17.16 million units (+1.5% y/y)
following May's 7.8% jump to the highest level since July 2005.</p>

<p><b>Auto</b> sales declined 4.0% last month to 7.78 million units (-6.1 y/y)
after May's 10.1% increase. Domestic auto sales were off 4.5% to 5.61 million
(-4.9% y/y) after a 10.7% jump. Imported car sales eased 2.7% to 2.18 million (-9.2%
y/y) following an 8.6% rise.</p>

<p><b>Light truck</b> purchases fell 3.2% to 9.37 million units (+8.9% y/y),
giving back most of May's 5.9% increase. Trucks share of the total vehicle
market nudged up to 54.6%. Imported truck sales improved 2.7% to 1.36 million (21.2%
y/y) on the heels of four straight months of solid increase. Sales were at the
highest level since March 2008. Domestic light truck sales eased 4.1% to 8.01
million (+7.0% y/y) after a 6.3% rise.</p>

<p><b>Imports share</b> of the market for light vehicles improved to 20.6%, but
still was down versus a high of 30.7% in February 2009. Imports share of the
passenger car market notched up to 27.9%. Imports share of the light truck
market rose to 14.5%, the highest level since March 2012.</p>

<p>U.S. vehicle sales figures are published by Autodata and can be found in
Haver's<b> USECON </b>database.</p>

<p><b>Economy to Roll Along at a Solid Pace in 2015 and Accelerate Slightly in 2016 </b>from the Federal Reserve Bank
of Chicago can be found <a href="https://www.chicagofed.org/publications/chicago-fed-letter/2015/340">here</a>.</p>

<p><a href="/comment/150701r_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/150701r.png"></a>
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      <table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>
	
  <thead>
    <tr>
      <th class="firstcol" scope="col" >Light Vehicle Sales (SAAR,
        Mil. Units)</th>
      <th scope="col" ><b>Jun</b></th>
      <th scope="col" ><b>May</b></th>
      <th scope="col" ><b>Apr</b></th>
      <th scope="col" ><b>Y/Y %</b></th>
      <th scope="col" ><b>2014</b></th>
      <th scope="col" ><b>2013</b></th>
      <th scope="col" ><b>2012</b></th>
    </tr>
  </thead>
  <tbody>
    <tr>
      <td class="firstcol" >Total</td>
      <td  >17.16</td>
      <td  >17.79</td>
      <td  >16.50</td>
      <td  >1.5</td>
      <td  >16.49</td>
      <td  >15.58</td>
      <td  >14.48</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" >&nbsp;Autos</td>
      <td  >7.78</td>
      <td  >8.11</td>
      <td  >7.36</td>
      <td  >-6.1</td>
      <td  >7.91</td>
      <td  >7.78</td>
      <td  >7.42</td>
    </tr>
    <tr>
      <td class="firstcol" >&nbsp;&nbsp;Domestic</td>
      <td  >5.61</td>
      <td  >5.87</td>
      <td  >5.31</td>
      <td  >-4.9</td>
      <td  >5.68</td>
      <td  >5.48</td>
      <td  >5.10</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" >&nbsp;&nbsp;Imported</td>
      <td  >2.18</td>
      <td  >2.23</td>
      <td  >2.06</td>
      <td  >-9.2</td>
      <td  >2.23</td>
      <td  >2.30</td>
      <td  >2.32</td>
    </tr>
    <tr>
      <td class="firstcol" >&nbsp;Light Trucks</td>
      <td  >9.37</td>
      <td  >9.68</td>
      <td  >9.14</td>
      <td  >8.9</td>
      <td  >8.58</td>
      <td  >7.81</td>
      <td  >7.06</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" >&nbsp;&nbsp;Domestic</td>
      <td  >8.01</td>
      <td  >8.36</td>
      <td  >7.86</td>
      <td  >7.0</td>
      <td  >7.50</td>
      <td  >6.73</td>
      <td  >6.09</td>
    </tr>
    <tr>
      <td class="firstcol" >&nbsp;&nbsp;Imported</td>
      <td  >1.36</td>
      <td  >1.32</td>
      <td  >1.28</td>
      <td  >21.2</td>
      <td  >1.08</td>
      <td  >1.08</td>
      <td  >0.97</td>
     </tr>
              </tbody>
            </table>
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Total sales of light vehicles declined 3.5% during June to 17.16 million units (+1.5% y/y) following May's 7.8% jump to the highest level since July 2005. Auto sales declined 4.0% last month to 7.78 million units (-6.1 y/y) after [...]

U.S. Light Vehicle Sales Backpedal; Trucks Share Improves

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<p>The value of construction put-in-place increased 0.8% during May following a
little-revised 2.1% April gain. Three-month growth of 18.1% (AR) was the
strongest since mid-2012. A 0.3% May rise had been expected in the Action
Economics Forecast Survey. Figures back to 2013 were revised.</p>

<p>Building activity in the private sector improved 0.9% (10.3% y/y) and
increased at an 18.7% rate during the last three months. Nonresidential building
activity jumped 1.5% (12.7% y/y) after firmer gains in the prior two months. Residential
construction activity improved 0.3% (7.8% y/y). Single-family building remained
unchanged (11.4% y/y) and multi-family construction gained 0.2% (19.5% y/y). Spending
on improvements improved 0.9% (-1.9% y/y) and reversed the prior month's decline.</p>

<p>Public sector building gained 0.7% (2.8% y/y) and rose at a 16.8% rate during
the last three months. Office construction strengthened 13.7% (14.2% y/y) while
highway &amp; street construction increased 2.1% but was unchanged y/y. Educational
building slipped 0.7% (+3.2% y/y). Power construction eased 0.2% (-33.5% y/y)
while health care building was little-changed (-5.0% y/y).</p>

<p>The construction spending figures are in Haver's <b>USECON</b> database and
the expectations figure is contained in the <b>AS1REPNA</b> database.</p>

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	<colgroup><col><col><col><col><col><col><col><col></colgroup>
	
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      <th class="firstcol" scope="col" >Construction Put in Place (SA,
        s%)</th>
      <th scope="col" >May</th>
      <th scope="col" >Apr</th>
      <th scope="col" >Mar</th>
      <th scope="col" >May Y/Y</th>
      <th scope="col" >2014</th>
      <th scope="col" >2013</th>
      <th scope="col" >2012</th>
    </tr>
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      <td class="firstcol" >Total</td>
      <td  >0.8</td>
      <td  >2.1</td>
      <td  >1.3</td>
      <td  >7.9</td>
      <td  >4.8</td>
      <td  >6.6</td>
      <td  >9.2</td>
    </tr>
  </tbody>
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    <tr class="odd">
      <td class="firstcol" >&nbsp; Private</td>
      <td  >0.9</td>
      <td  >2.2</td>
      <td  >1.2</td>
      <td  >10.3</td>
      <td  >6.9</td>
      <td  >11.1</td>
      <td  >16.0</td>
    </tr>
  </tbody>
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    <tr>
      <td class="firstcol" >&nbsp;&nbsp;&nbsp; Residential</td>
      <td  >0.3</td>
      <td  >0.3</td>
      <td  >-0.8</td>
      <td  >7.8</td>
      <td  >1.5</td>
      <td  >20.2</td>
      <td  >14.4</td>
    </tr>
  </tbody>
  <tbody>
    <tr class="odd">
      <td class="firstcol" >&nbsp;&nbsp;&nbsp; Nonresidential</td>
      <td  >1.5</td>
      <td  >4.0</td>
      <td  >3.3</td>
      <td  >12.7</td>
      <td  >12.7</td>
      <td  >2.7</td>
      <td  >17.5</td>
    </tr>
  </tbody>
  <tbody>
    <tr>
      <td class="firstcol" >&nbsp; Public</td>
      <td  >0.7</td>
      <td  >1.7</td>
      <td  >1.5</td>
      <td  >2.8</td>
      <td  >1.8</td>
      <td  >-3.1</td>
      <td  >-2.8</td>
    </tr>
              </tbody>
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The value of construction put-in-place increased 0.8% during May following a little-revised 2.1% April gain. Three-month growth of 18.1% (AR) was the strongest since mid-2012. A 0.3% May rise had been expected in the Action Economics [...]

U.S. Construction Spending Growth Eases

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<p>The outplacement firm of Challenger, Gray &amp; Christmas reported that job
cut announcements during June increased to 44,842 (42.7% y/y) and added to May's
unrevised increase of 41,034. Layoffs increased in aerospace/defense, chemicals,
commodities, construction, consumer products, entertainment/leisure, insurance
and retail. Layoffs declined in apparel, automotive, computer, education,
electronics, energy, financial, food, government, health care, industrial goods,
legal, media, pharmaceutical, services, telecommunications and transportation.</p>

<p>During the last ten years there has been a 68% correlation between the level
of job cut announcements and the m/m change in payroll employment.</p>

<p>Challenger also samples firms' hiring plans. Hiring slipped last month to 11,176
(-28.0% y/y) from 12,598 in May. Hiring fell in the automotive, chemical,
computer, consumer products, food, retail, services and telecommunications
industries. Job creation occurred in the aerospace/defense, apparel,
construction, electronics, energy, financial, government/nonprofit, health care,
industrial goods and transportation industries.</p>

<p>The Challenger figures are available in Haver's <b>SURVEYS</b> database.</p>

<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

  <thead>
    <tr>
      <th class="firstcol" scope="col" >
        <p align="left">Challenger, Gray &amp; Christmas</p>
      </th>
      <th scope="col" ><b>Jun</b></th>
      <th scope="col" ><b>May</b></th>
      <th scope="col" ><b>Apr</b></th>
      <th scope="col" ><b>Y/Y %</b></th>
      <th scope="col" ><b>2014</b></th>
      <th scope="col" ><b>2013</b></th>
      <th scope="col" ><b>2012</b></th>
    </tr>
  </thead>
  <tbody>
    <tr>
      <td class="firstcol" >
        <p align="left">Announced Job Cuts</p>
      </td>
      <td  >44,842</td>
      <td  >41,034</td>
      <td  >61,582</td>
      <td  >42.7</td>
      <td  >483,171</td>
      <td  >509,051</td>
      <td  >523,362</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" >
        <p align="left">Announced Hiring Plans</p>
      </td>
      <td  >11,176</td>
      <td  >12,598</td>
      <td  >13,898</td>
      <td  >-28,000</td>
      <td  >821,506</td>
      <td  >764,206</td>
      <td  >630,447</td>
          </tr>
              </tbody>
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The outplacement firm of Challenger, Gray & Christmas reported that job cut announcements during June increased to 44,842 (42.7% y/y) and added to May's unrevised increase of 41,034. Layoffs increased in aerospace/defense, chemicals, [...]

Challenger Job Cut Announcements Improve

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<p>Factory sector activity is strengthening. The Composite Index from the
Institute for Supply Management (ISM) rose to 53.5 following an unrevised
increase to 52.8 in May. It was the highest level in five months. Nevertheless,
the latest figure remained below the August 2014 high of 58.1. Improvement to 53.1
had been expected in the Action Economics Forecast Survey. During the last ten
years, there has been a 73% correlation between the level of the index and the
q/q change in real GDP.</p>

<p>Leading last month's rise was strength in the employment index as it rose to
the highest level since December. During the last ten years, there has been an
89% correlation between the index level and the m/m change in factory sector
payrolls. The inventories reading also was strong as it increased to the highest
level in twelve months. The new orders index improved slightly but the
production series backed off. The supplier deliveries index fell and indicted
the quickest product delivery speeds since April 2012.</p>

<p>The prices reading held steady at the highest level since October. Fourteen
percent of respondents indicated higher prices while 15 percent reported them
lower. During the last ten years, there has been an 85% correlation between the
index and the m/m change in the core intermediate PPI.</p>

<p>The export order index fell to the lowest level in three months while imports
also backpedaled. The orders backlog series declined to the lowest level since
January.</p>

<p>The figures from the Institute For Supply Management (ISM) are diffusion
indexes. A reading above 50 represents growth in factory sector activity. They
can be found in Haver's <b>USECON</b> database. The expectations number is in
the <b>AS1REPNA</b> database.</p>

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	<colgroup><col><col><col><col><col><col><col><col></colgroup>
	
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      <th class="firstcol" scope="col" >ISM Mfg (SA)</th>
      <th scope="col"  >Jun</th>
      <th scope="col"  >May</th>
      <th scope="col"  >Apr</th>
      <th scope="col"  >Jun '14</th>
      <th scope="col"  >2014</th>
      <th scope="col"  >2013</th>
      <th scope="col"  >2012</th>
    </tr>
  </thead>
  <tbody>
    <tr>
      <td class="firstcol" >Composite Index</td>
      <td  >53.5</td>
      <td  >52.8</td>
      <td  >51.5</td>
      <td  >55.7</td>
      <td  >55.7</td>
      <td  >53.8</td>
      <td  >51.7</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" >&nbsp;New Orders</td>
      <td  >56.0</td>
      <td  >55.8</td>
      <td  >53.5</td>
      <td  >59.1</td>
      <td  >59.0</td>
      <td  >56.9</td>
      <td  >52.9</td>
    </tr>
    <tr>
      <td class="firstcol" >&nbsp;Production</td>
      <td  >54.0</td>
      <td  >54.5</td>
      <td  >56.0</td>
      <td  >59.9</td>
      <td  >59.2</td>
      <td  >57.5</td>
      <td  >53.7</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" >&nbsp;Employment</td>
      <td  >55.5</td>
      <td  >51.7</td>
      <td  >48.3</td>
      <td  >53.9</td>
      <td  >54.5</td>
      <td  >53.2</td>
      <td  >53.8</td>
    </tr>
    <tr>
      <td class="firstcol" >&nbsp;Supplier Deliveries</td>
      <td  >48.8</td>
      <td  >50.7</td>
      <td  >50.1</td>
      <td  >52.7</td>
      <td  >55.0</td>
      <td  >51.9</td>
      <td  >50.0</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" >&nbsp;Inventories</td>
      <td  >53.0</td>
      <td  >51.5</td>
      <td  >49.5</td>
      <td  >53.0</td>
      <td  >50.8</td>
      <td  >49.4</td>
      <td  >48.2</td>
    </tr>
    <tr>
      <td class="firstcol" >Prices Paid Index (NSA)</td>
      <td  >49.5</td>
      <td  >49.5</td>
      <td  >40.5</td>
      <td  >58.0</td>
      <td  >55.6</td>
      <td  >53.8</td>
      <td  >53.2</td>
      </tr>
              </tbody>
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Factory sector activity is strengthening. The Composite Index from the Institute for Supply Management (ISM) rose to 53.5 following an unrevised increase to 52.8 in May. It was the highest level in five months. Nevertheless, the [...]

U.S. ISM Manufacturing Index Improves to Best Level Since January

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Globally, the manufacturing PMI picture is mixed. Of the 10 countries or areas (excluding Germany and France as they are part of the EMU), six are below 50 in June. Except for China, these weak reporters are also relatively small countries. But the picture of an irregular manufacturing sector is real. Although the large countries tend to be expanding, their PMI values are uniformly low. The highest manufacturing PMI value in the table is the 52.5 reading in the EMU, followed by 52.2 for Vietnam. Manufacturing is strong nowhere in this table.
</p><p>
That story is also told by the percentile standings. These are somewhat less meaningful, however, since many of the countries in the table have very short-time series of data on their manufacturing PMI measures. For comparability, we chronicle all these values from 2008 or even later (Indonesia and Vietnam from 2013). A longer time series gives the percentile standing more meaning. Even for this truncated set of measures, we are measuring performance since 2008, which is a period of extreme economic duress, and still we get, by and large, relatively weak contemporaneous readings!
</p><p>
We see weak values being reported currently with few exceptions. Vietnam, with a very short history, appears strong (92nd percentile), but this on a diffusion value of only 52.2, for which such a high standing should be suspect. It is the product or a poor history for comparisons (a history of weakness) and what is a really a moderate current reading. Indonesia is moderate at a 72nd percentile. France, Germany and the EMU are moderate or weakly moderate. For the rest, we see the U.K., Japan and China in the lower one third of their respective queues since 2008. Russia and Taiwan are at the border on their lower 10% standing. And South Korea and Turkey are even weaker. 
</p><p>
These are poor standings in absolute terms and extremely poor standings for the times, in what should be the recovery period from a major recession. On top of that, there is very little upward momentum.
</p><p>
Greece failed to make payments to the IMF, but the credit rating agencies do not call it a default. Greece has tried to propose another deal. While Germany has said the door is open, it has registered skepticism over reports of this new proposal from Greece. Angela Merkel has already said she would not negotiate with Greece as long as there is a referendum pending. And there is a referendum pending. 
</p><p>
There is no surprise that markets are confused about all of this. Markets are trading higher on news that Greece has a new proposal. Nevertheless, we can be sure that Europe is not interested in negotiating with Alex Tsipras any more. Some think Europe would torpedo any new negotiations just to make Greece vote in its referendum on a proposal that, if it is rejected, would send Greece out of the euro area and, if it is accepted, would likely result in the ejection of the Tsipras government from power.
</p><p>
While that view may be a bit cynical, it is true that Merkel has said she would not negotiate with a referendum pending. To that extent, the Tsipras offering is totally rejecting conditions that a key European country has put on further negotiations. 
</p><p>
To say that market conditions are a mess is to downplay the state of uncertainty. Markets are coming up from sold off levels on what they hope will be good news. At the end of the day, no one really thinks Greece wants to leave the EMU, but these negotiations have been full of misappraisals or we would not be where we are now. Be careful using logical in an intrinsically illogical situation.
</p>

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Globally, the manufacturing PMI picture is mixed. Of the 10 countries or areas (excluding Germany and France as they are part of the EMU), six are below 50 in June. Except for China, these weak reporters are also relatively small [...]

Markit Manufacturing Indices Are Mixed in June; Conditions Turn Up in EMU

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<p><a href="/comment/150701c_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/150701c.png"></a>
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<p>The <b>ADP/Moody's National Employment Report</b> indicated that nonfarm
private sector payrolls improved 237,000 during June following a 203,000 May
increase, revised from 201,000. The latest rise was the firmest since December
and beat consensus expectations for a 218,000 increase in the Action Economics
Forecast Survey. During the last ten years there has been a 97% correlation
between the change in the ADP figure and the change in nonfarm private sector
payrolls.</p>

<p>The ADP survey is based on ADP's business payroll transaction system covering
411,000 companies and nearly 24 million employees. The data are processed by
Moody's Analytics Inc., then calibrated and aligned with the BLS establishment
survey data.</p>

<p>Small-sized payrolls improved another 120,000 (2.7% y/y), repeating the
firmest increase since December. Medium-sized payrolls rose an improved 86,000
(2.3% y/y). Large payrolls strengthened 12,000 (1.7% y/y), still down from the
80,000 increase nine months ago.</p>

<p>Employment in the goods-producing sector moved up 12,000 (1.9% y/y). Hiring
in construction remained firm and posted a 19,000 increase (5.0% y/y). Manufacturing
sector jobs rose 7,000 (1.0% y/y) following three straight months of decline.
Jobs in the service sector increased 225,000 (2.4% y/y), the strongest gain
since November. Jobs in professional &amp; business services improved 61,000
(2.8% y/y) and trade, transportation &amp; utilities employment increased 50,000
(2.0% y/y). Employment in the financial sector rose 18,000 (1.8% y/y), the
strongest increase since March 2006.</p>

<p>The ADP National Employment Report data are maintained in Haver's <b>USECON</b>
database; historical figures date back to April 2001. The figures in this report
cover jobs only in the private sector. The expectation figure is available in
Haver's <b>AS1REPNA</b> database.</p>

<p><a href="/comment/150701e_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/150701e.png"></a>
      <a href="/comment/150701f_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/150701f.png"></a></p>
      
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	<colgroup><col><col><col><col><col><col><col><col></colgroup>

  <thead>
    <tr>
      <th class="firstcol" scope="col" >ADP/Moody's National
        Employment Report</th>
      <th scope="col" >Jun</th>
      <th scope="col" >May</th>
      <th scope="col" >Apr</th>
      <th scope="col" >Jun Y/Y</th>
      <th scope="col" >2014</th>
      <th scope="col" >2013</th>
      <th scope="col" >2012</th>
    </tr>
  </thead>
  <tbody>
    <tr>
      <td class="firstcol" >Nonfarm Private Payroll Employment (m/m
        chg, 000s)</td>
      <td  >237</td>
      <td  >203</td>
      <td  >179</td>
      <td  >2.3%</td>
      <td  >2.3%</td>
      <td  >1.9%</td>
      <td  >2.3%</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" >&nbsp;Small Payroll (1-49)</td>
      <td  >120</td>
      <td  >120</td>
      <td  >102</td>
      <td  >2.7</td>
      <td  >2.1</td>
      <td  >1.9</td>
      <td  >2.5</td>
    </tr>
    <tr>
      <td class="firstcol" >&nbsp;Medium Payroll (50-499)</td>
      <td  >86</td>
      <td  >63</td>
      <td  >70</td>
      <td  >2.3</td>
      <td  >2.8</td>
      <td  >2.2</td>
      <td  >2.1</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" >&nbsp;Large Payroll (&gt;500)</td>
      <td  >32</td>
      <td  >19</td>
      <td  >7</td>
      <td  >1.7</td>
      <td  >1.8</td>
      <td  >1.6</td>
      <td  >2.1</td>
    </tr>
    <tr>
      <td class="firstcol" >Goods-Producing</td>
      <td  >12</td>
      <td  >11</td>
      <td  >2</td>
      <td  >1.9</td>
      <td  >2.3</td>
      <td  >1.7</td>
      <td  >2.2</td>
    </tr>
    <tr>
      <td class="firstcol" >&nbsp; Construction</td>
      <td  >19</td>
      <td  >28</td>
      <td  >25</td>
      <td  >5.0</td>
      <td  >4.6</td>
      <td  >3.5</td>
      <td  >2.5</td>
    </tr>
    <tr>
      <td class="firstcol" >&nbsp; Manufacturing</td>
      <td  >7</td>
      <td  >-2</td>
      <td  >-6</td>
      <td  >1.0</td>
      <td  >1.2</td>
      <td  >0.9</td>
      <td  >1.6</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" >Service-Producing</td>
      <td  >225</td>
      <td  >192</td>
      <td  >177</td>
      <td  >2.4</td>
      <td  >2.3</td>
      <td  >2.0</td>
      <td  >2.3</td>
      </tr>
              </tbody>
            </table>
            </span>
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The ADP/Moody's National Employment Report indicated that nonfarm private sector payrolls improved 237,000 during June following a 203,000 May increase, revised from 201,000. The latest rise was the firmest since December and beat [...]

U.S. ADP: Payroll Rise Is Strongest This Year

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<br>
<span id="byline0"><a href="http://haver.com/comment/Moeller.html">Tom
Moeller</a>&nbsp; June 30, 2015</span><span id="articletext">
<p>The Conference Board's Consumer Confidence Index increased 7.2% this month to
101.4 from 94.6 during May, revised from 95.4. It was the second firmest reading
during the economic expansion and stronger than forecasts for 96.8 in the Action
Economics Survey. During the last ten years, there has been a 45% correlation
between the level of confidence and the three-month change in real personal
consumption expenditures.</p>
<p>The consumer expectations component improved 9.7% to 94.6 (9.5% y/y) and
attained the highest level in three months. <span id="articletext">The
present situations figure gained 4.2% to 111.6 (29.3% y/y), the highest level in
four months.&nbsp;</span></p>
<p><span id="articletext">The percentage indicating that business conditions
would get better rose to 18.5%, the highest level since January. Eighteen
percent of respondents thought there would be more jobs, the most since last
August. The expected inflation rate ticked up to 5.1%, its highest level in
three months and 5.9% planned to buy a home, the most since November. Moving the
other way, 46.5% planned to purchase a major appliance, the fewest since
January.&nbsp;&nbsp;
<p>Respondents indicating that current business conditions were good rose to the
highest level in three months. Jobs were viewed as hard to get by a reduced
25.7% of respondents, just above the recovery low of 24.6%. Jobs were viewed as
not so plentiful by 52.9% of respondents, down from the high of 55.5 six months
ago.</p>
<p>Confidence rose in the two older age groups. Those over age 55 logged a 10.5%
improvement, 22.9% y/y. Respondents between the ages of 35 to 54 raised
confidence by 5.4% (15.7% y/y). In the younger age bracket 1.0% fewer
respondents (+10.0% y/y) were confident.&nbsp;&nbsp;&nbsp;</p>
<p>The Consumer Confidence data is available in Haver's <b>CBDB</b> database.
The total indexes appear in <b>USECON</b> and the market expectations are in <b>AS1REPNA.</b></p>
<p><b>The Simulative Effect of Redistribution </b>from the Federal Reserve Bank
of San Francisco can be found here <a href="http://www.frbsf.org/economic-research/publications/economic-letter/2015/june/income-redistribution-policy-economic-stimulus/">http://www.frbsf.org/economic-research/publications/economic-letter/2015/june/income-redistribution-policy-economic-stimulus/</a></p>
<table class="centered" border="0" cellspacing="0" width="1871">
  <thead>
    <tr>
      <th class="firstcol" scope="col" width="886">Conference Board (SA,
        1985=100)</th>
      <th scope="col" align="center" width="140">Jun</th>
      <th scope="col" align="center" width="140">May</th>
      <th scope="col" align="center" width="140">Apr</th>
      <th scope="col" align="center" width="140">Y/Y %</th>
      <th scope="col" align="center" width="140">2014</th>
      <th scope="col" align="center" width="140">2013</th>
      <th scope="col" align="center" width="141">2012</th>
    </tr>
  </thead>
  <tbody>
    <tr>
      <td class="firstcol" width="886">Consumer Confidence Index</td>
      <td align="center" width="140">101.4</td>
      <td align="center" width="140">94.6</td>
      <td align="center" width="140">94.3</td>
      <td align="center" width="140">17.4</td>
      <td align="center" width="140">86.9</td>
      <td align="center" width="140">73.2</td>
      <td align="center" width="141">67.1</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" width="886">&nbsp; Present Situation</td>
      <td align="center" width="140">111.6</td>
      <td align="center" width="140">107.1</td>
      <td align="center" width="140">105.1</td>
      <td align="center" width="140">29.3</td>
      <td align="center" width="140">87.3</td>
      <td align="center" width="140">67.6</td>
      <td align="center" width="141">49.8</td>
    </tr>
    <tr>
      <td class="firstcol" width="886">&nbsp; Expectations</td>
      <td align="center" width="140">94.6</td>
      <td align="center" width="140">86.2</td>
      <td align="center" width="140">87.1</td>
      <td align="center" width="140">9.5</td>
      <td align="center" width="140">86.6</td>
      <td align="center" width="140">77.0</td>
      <td align="center" width="141">78.6</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" width="886">Consumer Confidence By Age Group</td>
      <td align="center" width="140"></td>
      <td align="center" width="140"></td>
      <td align="center" width="140"></td>
      <td align="center" width="140"></td>
      <td align="center" width="140"></td>
      <td align="center" width="140"></td>
      <td align="center" width="141"></td>
    </tr>
    <tr>
      <td class="firstcol" width="886">&nbsp; Under 35 Years</td>
      <td align="center" width="140">116.1</td>
      <td align="center" width="140">117.3</td>
      <td align="center" width="140">115.1</td>
      <td align="center" width="140">10.0</td>
      <td align="center" width="140">106.6</td>
      <td align="center" width="140">93.1</td>
      <td align="center" width="141">86.5</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" width="886">&nbsp; Aged 35-54 Years</td>
      <td align="center" width="140">105.5</td>
      <td align="center" width="140">100.1</td>
      <td align="center" width="140">96.2</td>
      <td align="center" width="140">15.7</td>
      <td align="center" width="140">92.4</td>
      <td align="center" width="140">76.8</td>
      <td align="center" width="141">68.5</td>
    </tr>
    <tr>
      <td class="firstcol" width="886">&nbsp; Over 55 Years</td>
      <td align="center" width="140">90.3</td>
      <td align="center" width="140">81.7</td>
      <td align="center" width="140">80.7</td>
      <td align="center" width="140">22.9</td>
      <td align="center" width="140">73.8</td>
      <td align="center" width="140">61.2</td>
      <td align="center" width="141">56.7</td>
    </tr>
  </tbody>
</table>
</span>
</p><p>&nbsp;</p>
<span id="articletitle">Chicago Purchasing Managers Index Remains Below
Break-Even</span><br>
<span id="byline">by <a href="http://haver.com/comment/Moeller.html">Tom Moeller</a>&nbsp;&nbsp;June
30, 2015</span><span id="articletext">
<p>Chicago purchasing managers reported that their June Business Barometer Index
improved to 49.4 during June following an unrevised decline to 46.2 in May. It
was fourth month in the last five below 50, the break-even point between rising
and falling activity. It disappointed expectations for 50.0 in the Action
Economics Forecast Survey. <b>Haver Analytics </b>constructs an ISM-Adjusted
Index using the Chicago numbers, comparable to the overall ISM index to be released
tomorrow. Our figure deteriorated&nbsp; to 48.5, the third month below 50 this
year. During the last ten years, there has been a 61% correlation between the
adjusted Chicago Purchasing Managers index and real GDP growth.</p>
<p>Deterioration in the component series was all-inclusive this month. The
production series returned to nearly its lowest level of the recovery, as did
the employment reading. During the last ten years, there has been an 82%
correlation between the employment figure and the m/m change factory sector
employment. The new orders figure fell below break-even as did vendor delivery
speeds which indicated the quickest delivery speeds in just over two years.
Inventories accumulated at a slightly slower rate.</p>
<p>The index of prices paid recovered to the highest point this year. A slightly
higher 16 percent (NSA) of respondents paid higher prices but a sharply lower 10
percent reporting paying less, the least since December.</p>
<p>The MNI Chicago Report is produced by MNI/Deutsche Borse Group in partnership
with ISM-Chicago. The survey covers a sample of over 200 purchasing
professionals in the Chicago area with a monthly response rate of about 50%. The
ISM-Adjusted headline index is calculated by Haver Analytics using these data to
construct a figure with the ISM methodology. The figures can be found in Haver's
<b>SURVEYS</b> database. The Consensus expectations figure is available in <b>AS1REPNA</b>.</p>
<table class="centered" border="0" cellspacing="0" width="1871">
  <thead>
    <tr>
      <th class="firstcol" width="1034">Chicago Purchasing Managers Index (%,
        SA)</th>
      <th scope="col" width="119">Jun</th>
      <th scope="col" width="119">May</th>
      <th scope="col" width="119">Apr</th>
      <th scope="col" width="119">Jun'14</th>
      <th scope="col" width="119">2014</th>
      <th scope="col" width="119">2013</th>
      <th scope="col" width="119">2012</th>
    </tr>
  </thead>
  <tbody>
    <tr>
      <td class="firstcol" width="1034">ISM-Adjusted General Business Barometer</td>
      <td align="center" width="119">48.5</td>
      <td align="center" width="119">48.8</td>
      <td align="center" width="119">53.6</td>
      <td align="center" width="119">60.5</td>
      <td align="center" width="119">59.4</td>
      <td align="center" width="119">54.3</td>
      <td align="center" width="119">54.8</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" width="1034">General Business Barometer</td>
      <td align="center" width="119">49.4</td>
      <td align="center" width="119">46.2</td>
      <td align="center" width="119">52.3</td>
      <td align="center" width="119">63.5</td>
      <td align="center" width="119">60.7</td>
      <td align="center" width="119">56.0</td>
      <td align="center" width="119">54.7</td>
    </tr>
    <tr>
      <td class="firstcol" width="1034">&nbsp;&nbsp;Production</td>
      <td align="center" width="119">49.8</td>
      <td align="center" width="119">45.8</td>
      <td align="center" width="119">52.7</td>
      <td align="center" width="119">69.6</td>
      <td align="center" width="119">64.5</td>
      <td align="center" width="119">58.2</td>
      <td align="center" width="119">57.6</td>
    </tr>
    <tr>
      <td class="firstcol" width="1034">&nbsp;&nbsp;New Orders</td>
      <td align="center" width="119">51.7</td>
      <td align="center" width="119">47.5</td>
      <td align="center" width="119">55.1</td>
      <td align="center" width="119">66.0</td>
      <td align="center" width="119">63.8</td>
      <td align="center" width="119">59.0</td>
      <td align="center" width="119">55.2</td>
    </tr>
    <tr>
      <td class="firstcol" width="1034">&nbsp;&nbsp;Order Backlogs</td>
      <td align="center" width="119">41.0</td>
      <td align="center" width="119">47.3</td>
      <td align="center" width="119">48.5</td>
      <td align="center" width="119">56.7</td>
      <td align="center" width="119">54.2</td>
      <td align="center" width="119">48.8</td>
      <td align="center" width="119">48.1</td>
    </tr>
    <tr>
      <td class="firstcol" width="1034">&nbsp;&nbsp;Inventories</td>
      <td align="center" width="119">46.9</td>
      <td align="center" width="119">53.3</td>
      <td align="center" width="119">54.2</td>
      <td align="center" width="119">56.4</td>
      <td align="center" width="119">56.0</td>
      <td align="center" width="119">45.7</td>
      <td align="center" width="119">51.4</td>
    </tr>
    <tr>
      <td class="firstcol" width="1034">&nbsp;&nbsp;Employment</td>
      <td align="center" width="119">45.7</td>
      <td align="center" width="119">48.0</td>
      <td align="center" width="119">54.0</td>
      <td align="center" width="119">57.1</td>
      <td align="center" width="119">56.1</td>
      <td align="center" width="119">55.5</td>
      <td align="center" width="119">55.4</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" width="1034">&nbsp;&nbsp;Supplier Deliveries</td>
      <td align="center" width="119">48.5</td>
      <td align="center" width="119">49.5</td>
      <td align="center" width="119">51.9</td>
      <td align="center" width="119">53.6</td>
      <td align="center" width="119">56.5</td>
      <td align="center" width="119">52.5</td>
      <td align="center" width="119">54.8</td>
    </tr>
    <tr>
      <td class="firstcol" width="1034">&nbsp;&nbsp;Prices Paid</td>
      <td align="center" width="119">53.3</td>
      <td align="center" width="119">51.2</td>
      <td align="center" width="119">43.1</td>
      <td align="center" width="119">64.5</td>
      <td align="center" width="119">61.0</td>
      <td align="center" width="119">59.8</td>
      <td align="center" width="119">62.3</td>
    </tr>
  </tbody>
</table>
</span>
<p>&nbsp;</p>
<span id="articletitle">U.S. Gasoline Prices Remain Up From January Low</span><br>
<span id="byline">by <a href="http://haver.com/comment/Moeller.html">Tom Moeller</a>&nbsp;&nbsp;June
30, 2015</span></span> 
<p><b>Gasoline prices</b> eased last week to an average $2.80 per gallon at the
pump (-24.4% y/y) but remained higher than the low of $2.04 late in January.
Haver Analytics constructs factors adjusting for the seasonal variation in pump
prices. The seasonally adjusted price moved 2 cents higher to $2.71 per gallon.
They remained, however, below the cost at the pump since prices typically are
stronger during the summer driving season. Spot market gasoline prices held w/w
at $2.10 per gallon (-28.9% y/y).</p>
<p><b>WTI crude oil costs</b> firmed to an average $60.13 per barrel (-43.6%
y/y), up versus the March low of $44.39. Yesterday, prices eased to $58.33 per
barrel. These prices compare to a June 2014 high of $107.95. The seasonally
adjusted price, generated by Haver Analytics, improved last week to $58.88 per
barrel. Brent crude oil prices were fairly stable at $60.84 per barrel but fell
to $59.03 yesterday.</p>
<p><b>Natural gas</b> prices fell to $2.79 per mmbtu last week (-38.0% y/y) and
were $2.80 yesterday.</p>
<b>Gasoline demand </b>improved 4.5% y/y and demand for all petroleum
products rose 7.2% y/y. <span id="articletext"><b>Gasoline inventories </b>grew
1.6% y/y and inventories of all petroleum products increased 7.2% y/y. 
<p>The energy price data are reported by the U.S. Department of Energy. The
petroleum demand and inventory figures are from the Oil &amp; Gas Journal
Weekly. These data can be found in Haver's <b>WEEKLY </b>database. The daily
figures are in <b>DAILY</b> and greater detail on prices, demand and production,
along with regional breakdowns, are in <b>OILWKLY.</b></p>
<table class="centered" border="0" cellspacing="0" width="1871">
  <thead>
    <tr>
      <th class="firstcol" scope="col" width="864">Weekly Energy Prices</th>
      <th scope="col" width="143">06/29/15</th>
      <th scope="col" width="143">06/22/15</th>
      <th scope="col" width="143">06/15/15</th>
      <th scope="col" width="143">Y/Y%</th>
      <th scope="col" width="143">2014</th>
      <th scope="col" width="144">2013</th>
      <th scope="col" width="144">2012</th>
    </tr>
  </thead>
  <tbody>
    <tr>
      <td class="firstcol" width="864">Retail Gasoline ($ per Gallon, Regular)</td>
      <td align="center" width="143">2.80</td>
      <td align="center" width="143">2.81</td>
      <td align="center" width="143">2.84</td>
      <td align="center" width="143">-24.4</td>
      <td align="center" width="143">2.30</td>
      <td align="center" width="144">3.33</td>
      <td align="center" width="144">3.30</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" width="864">Light Sweet Crude Oil, WTI ($ per bbl.,
        WSJ)</td>
      <td align="center" width="143">60.13</td>
      <td align="center" width="143">59.89</td>
      <td align="center" width="143">60.07</td>
      <td align="center" width="143">-43.6</td>
      <td align="center" width="143">93.64</td>
      <td align="center" width="144">97.96</td>
      <td align="center" width="144">94.20</td>
    </tr>
    <tr>
      <td class="firstcol" width="864">Natural Gas ($/mmbtu, LA, WSJ)</td>
      <td align="center" width="143">2.79</td>
      <td align="center" width="143">2.88</td>
      <td align="center" width="143">2.81</td>
      <td align="center" width="143">-38.0</td>
      <td align="center" width="143">4.37</td>
      <td align="center" width="144">3.73</td>
      <td align="center" width="144">2.7</td>
    </tr>
  </tbody>
</table>
</span>




</html>

The Conference Board's Consumer Confidence Index increased 7.2% this month to 101.4 from 94.6 during May, revised from 95.4. It was the second firmest reading during the economic expansion and stronger than forecasts for 96.8 in the [...]

U.S. Consumer Confidence Nears Expansion High

Sharply rising share of AI-related jobs

Inflationary impact of surge in oil prices larger in Europe than in the US

Futures market thinks the price of oil will recede significantly over the next six months

Recent pickup in US defense orders could help support overall growth ahead

Cost of transporting crude oil has soared to series high

Market-based inflation expectations have not yet reflected recent surge in oil prices

Global equity markets are fearing a major economic disruption from soaring oil prices

Is recent drop in sentiment signaling softer growth ahead?

With the Iran conflict, geopolitical risk has soared to alarming levels

Soaring AI-related investment in US underpinning strong contribution of business spending to overall growth

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

Global freight costs are on the rise while supply chain pressures are contained

Accelerating positive economic surprises in the G10 are boosting the global economy

Considerably more monetary ease expected from US and UK as Japan tightens

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

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Winnie Tapasanun

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The ISM U.S. manufacturing PMI held at a lower-than-expected 52.7 in April and March following a 0.2-point easing to 52.4 in February, data from the Institute for Supply Management showed. The April reading, above the 50 expansion-contraction dividing line, indicated the U.S. manufacturing sector expanded for the fourth successive month. A reading of 53.0 for April had been expected in the Action Economics Forecast Survey. The April manufacturing PMI, while above a contraction-level 48.8 in April 2025 and a low of 47.0 in October 2024, remained below a peak of 63.8 in March 2021.

The production index slipped to 53.4 in April from 55.1 in March, indicating production expanded for the sixth consecutive month but at the slowest pace since December. The index was above its recent low of 44.8 in April 2025 but below a peak of 66.5 in March 2021. In April, 28.3% (NSA) of respondents reported higher production while 13.0% reported lower production. The new orders index rebounded to 54.1 in April from 53.5 in March, signaling new orders grew for the fourth straight month following four successive months of contraction. The index remained well above a low of 41.8 in January 2023. In April, an increased 31.6% (NSA) of respondents reported higher new orders while 15.2% reported declines. The inventories index increased to 49.0 in April from 47.1 in March, marking the 12th straight month of contraction. The index was below its recent high of 52.7 in March 2025 but above a low of 43.8 in October 2024. Meanwhile, the supplier deliveries index rose to 60.6 in April from 58.9 in March, indicating slower delivery performance for the fifth consecutive month after faster deliveries in November. In April, 22.6% (NSA) of respondents reported slower delivery speeds while only 1.5% reported faster speeds.

On the labor front, the employment index slid to 46.4 in April from 48.7 in March, showing employment contracted for the 31st straight month and at the lowest level since December following a brief expansion in September 2023. The index was above its recent low of 44.1 in November 2025 but below a high of 49.7 in January 2025 and a high of 56.5 in March 2022. In April, 17.5% (NSA) of respondents reported higher employment while 20.2% reported less hiring.

On the pricing front, the prices paid index jumped to 84.6 (NSA) in April from 78.3 in March, indicating raw materials prices rose for the 19th consecutive month and at the fastest pace since April 2022. The index remained well above a low of 39.4 in December 2022 but below a high of 87.1 in March 2022 and a peak of 92.1 in June 2021. In April, an increased 70.3% (NSA) of respondents reported higher prices while only 1.2% reported price declines.

In other ISM series not included in the composite index, the new export orders index fell to 47.9 in April from 49.9 in March, indicating new export orders contracted for the second successive month after expanding in February and January. The index was up from a low of 40.1 in May 2025 but down from its recent high of 52.4 in January 2025 and a high of 57.1 in February 2022. The imports index decreased to 50.3 in April from 52.6 in March, suggesting imports expanded at the weakest pace in three months. The index was below its recent high of 54.9 in February but above a low of 39.9 in May 2025. The order backlog index declined to 51.4 (NSA) in April from 54.4 in March, showing backlog levels grew at the slowest pace in four months. The index was well above a low of 37.5 in May 2023 but far below a peak of 70.6 in May 2021.

The ISM figures are based on responses from over 400 purchasing and supply executives from 18 industries, which are weighted according to each industry’s contribution to GDP. These data are diffusion indexes where a reading above 50 indicates expansion; below 50 indicates contraction. The ISM Manufacturing PMI is a composite index based on the diffusion indexes of five of the indexes (seasonally adjusted) with equal weights: New Orders, Production, Employment, Supplier Deliveries, and Inventories. The figures from the Institute for Supply Management can be found in Haver’s **USECON** database; further detail is found in the **SURVEYS** database. The expectations number is available in Haver’s **AS1REPNA** database.

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- ISM Mfg. PMI at 52.7 in Apr. and Mar.; fourth consecutive month of expansion.
- Production (53.4) expands for the sixth straight mth.; new orders (54.1) for the fourth successive mth.
- Employment (46.4) contracts for the 31st straight mth.; at a four-month low.
- Prices Index (84.6) highest since Apr. ’22; prices rising for the 19th consecutive mth.
- Exports (47.9) contract; imports (50.3) still grow but at a three-month low.

U.S. ISM Manufacturing PMI Steady in April; New Orders and Production Growing; Employment Contracting

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GDP growth in Europe in the first quarter of 2026 continued to be weak. First-quarter annualized growth at 0.6% followed a fourth-quarter annualized growth rate at 0.8%. Year-over-year growth in the monetary union logged a 0.8% annual rate; that represents a slowdown from earlier quarters where the growth rates were generally above 1% and more on the order of 1.5% at an annual rate.

**Early GDP reporters in EMU**
Among the 8 early reporters of GDP in the first quarter, in the table, only three posted growth pickups compared to the previous quarter. Those were Belgium, with a growth rate in the first quarter annualized at 0.8%, up from 0.2% in Q4 2025; Germany, where the growth rate picked up to 1.3% in the first quarter from 1.0% in Q4; and Ireland, with a dubious acceleration of growth to a -7.8% annualized rate, improving from -14.5% annualized in Q4.

**Big country, small country**
The table also looks at growth divided into the four largest economies in the monetary union versus the rest of the monetary union. There we see a growth rate of 1% for the four largest economies, a slowdown from 1.3% in the fourth quarter. For the rest of the monetary union, the growth rate held at 0.5% in the first quarter, the same rate logged in the fourth quarter.

**Median growth**
The median growth rate among these reporters was 0.6%, the same as for the weighted growth rate in the EMU, while the median in the fourth quarter was 1.5% compared to a weighted growth rate for the monetary union at 0.8%.

**Ranking the growth rates vs. their own histories**
The ranking data on the far-right column rank growth in the first quarter on its year-over-year growth pace. On a historic profile, we see only three monetary union reporters with growth in the first quarter at a rate that exceeds median on data back to the 1990s. Those economies are Italy with a 52.2 percentile ranking, Spain with a 53.3 percentile ranking, and Portugal with a 65.2 percentile ranking. For the monetary union as a whole, the growth rate rank is 28.3%, placing it at a ranking between its lower 1/4 and lower 1/3. The median for the monetary union among these early reporting countries is a 32.6 percentile growth rate, and these compared to the United States where the growth rate has a 60.2 percentile standing.

Other data sources report that growth in the services sector has been extremely weak, while there actually has been some resilience in manufacturing. That is somewhat surprising given the Middle East War that affects the world trade and global supply chains. New disruptions because of war in the Middle East are a new fact of life. However, war itself sometimes is a stimulant to some forms of growth. These sector trends will be for us to watch, but for right now growth rates are not impressive and they're certainly not gaining momentum.

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Europe

GDP Remains Weak in EMU

Andrew Cates

**Front-End Yields Reflect Policy Reassessment**
Against a backdrop of key central bank meetings either having just taken place or imminent, short-dated government bond yields have moved decisively higher across most major economies since the escalation of the Middle East conflict, with the sharpest increase seen in the UK. The rise in 2-year yields reflects a repricing of near-term monetary policy expectations, as markets respond to the inflationary implications of higher energy prices and the growing likelihood that central banks will delay easing cycles. Moves have been most pronounced in economies where inflation is expected to be more persistent—most notably the UK—while increases have been more modest in the US and particularly Japan, where policy normalisation remains gradual. In effect, the front end of the curve is signalling a shift away from the “rate cuts soon” narrative that prevailed earlier in the year toward a more cautious, higher-for-longer policy outlook.

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**US Recession Risks Remain Contained—For Now**
Despite the recent deterioration in the macro backdrop, real-time recession risk indicators for the US remain relatively subdued. This is notable given the combination of softer growth momentum, higher bond yields and heightened geopolitical risk. The nowcast—derived from a blend of high-frequency activity data and financial stress measures—has historically tended to move sharply when conditions turn, rather than drift higher gradually. That asymmetry is important in the current environment. While recession risks are not yet flashing red, past cycles suggest they can reprice abruptly, and arguably at present if energy-driven inflation were to feed much more forcefully into financial conditions or begin to weigh more materially on demand.

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**Consumer Confidence Diverges: Europe and UK Slide, US Stabilises**
Consumer confidence has weakened across the major economies, but the deterioration has been more pronounced in the euro area and the UK than in the US. While sentiment in the US has recently edged up, it remains at relatively subdued levels. By contrast, confidence in Europe and the UK has fallen more sharply, reflecting greater exposure to higher energy costs and a more direct squeeze on real household incomes. This divergence is consistent with broader macro trends, suggesting that demand in Europe may prove more sensitive to the current shock, with weaker sentiment feeding more quickly into consumption.

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**Euro area Credit Conditions Turn More Restrictive**
The latest ECB lending survey points to a clear tightening in credit conditions across the euro area, with banks raising lending standards for both firms and households while loan demand weakens. This combination—more restrictive supply alongside softer demand—is typically associated with a cooling in activity, particularly in interest-sensitive sectors. Recent evidence suggests that higher perceived risks, rising funding costs and geopolitical uncertainty are all weighing on banks’ willingness to lend, while weaker confidence and reduced investment appetite are dampening borrowing needs. The result is a tightening in financial conditions that is likely to amplify the broader slowdown already evident in survey data, reinforcing the more fragile growth dynamics now emerging across the region.

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**An Intensifying AI Boom with Supply-Side Undercurrents**
Against the backdrop of surging AI-related investment, semiconductor prices are not just high—they are rising at an increasingly rapid pace. This chart shows a clear acceleration in both prices and export values, pointing to an intensifying boom in global chip demand. While this is in part a reflection of strong, structural demand, supply-side factors may also be playing a growing role. Although the Middle East is not a direct source of key chip-making minerals, it is central to the energy and petrochemical inputs that underpin semiconductor production. Ongoing geopolitical tensions are therefore likely feeding into higher costs and renewed frictions across supply chains. The combination of accelerating demand and tightening supply conditions suggests that semiconductor inflation could prove more persistent—and more globally consequential—than currently assumed.

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**Labour Markets Reflect the AI Acceleration**
Our final chart this week highlights the extent to which the current AI boom is now feeding through into labour markets. This high-frequency indicator—based on the share of job listings containing AI-related keywords—shows a sharp and sustained increase since the widespread adoption of generative AI tools in late 2022. What began as a more traditional build-out in machine learning roles has evolved into a broader and more intense wave of hiring tied to generative AI capabilities, with demand accelerating markedly across multiple economies. The scale and persistence of this trend point to a structural shift rather than a cyclical upswing, reinforcing the view that AI is becoming an increasingly important driver of investment, productivity expectations and, potentially, broader macroeconomic dynamics.

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Against a backdrop of persistent geopolitical tensions, firmer energy prices and a busy week of central bank meetings—including the Fed, ECB, BoE and BoJ—financial markets have remained notably resilient, even as the macro narrative has softened at the margin. The message from this week’s charts is one of growing tension beneath that surface calm. Front-end bond yields have moved higher, signalling a shift toward a more cautious, “higher-for-longer” policy outlook (chart 1). At the same time, real-time recession indicators for the United States suggest risks remain contained for now (chart 2). Consumer confidence data paint a more uneven picture, with sharper declines in the euro area and UK than in the US, highlighting regional vulnerabilities to the current energy shock (chart 3). The ECB’s latest bank lending survey reinforces this, pointing to tighter credit conditions and weaker demand—factors that are likely to weigh further on European growth (chart 4). By contrast, developments in the semiconductor sector underline a different dynamic: an intensifying global boom, with accelerating price pressures reflecting both strong AI-driven demand and emerging supply-side constraints linked indirectly to energy and logistics disruptions (chart 5). Finally, labour market data confirm that the AI surge is not merely a market narrative but a tangible structural shift, with hiring for AI-related roles accelerating across economies (chart 6). Taken together, these signals point to a more complex macro environment—one in which resilient markets coexist with softening growth, more persistent inflation risks and increasingly delicate policy trade-offs.

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Charts of the Week: Tension Beneath the Surface

Michael J. Moran

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Real GDP grew at an annual rate of 2.0% in the first quarter of 2026, almost identical to the expected advance of 2.1%. The latest change was comfortably within the range of recent observations and close to the economy’s potential rate of growth. The year-over-year change totaled 2.7%, but that shift reflected what might be viewed as a special factor (robust growth in the second and third quarters that offset a trade-tariff-induced drop in 2025-Q1 GDP).

Business fixed investment was the star of the show in the first quarter, registering growth of 10.4%. Outlays for information processing equipment and software were especially strong, while outlays for industrial equipment and Research & Development contributed positively as well. Outlays for structures remained decidedly soft, dropping for the ninth consecutive quarter. Building of data centers have been vigorous, but softness in offices and manufacturing facilities has dwarfed the strength in this new area.

Federal spending surged 9.4% in Q1, but the rise reflected the reopening of most federal agencies after their closure during much of the fourth quarter. Excluding this noise, support from the federal government has been softening. Nondefense outlays peaked in the fourth quarter of 2024, and they were 6.9% shy of that total in the first quarter. Defense spending also peaked in 2024-Q4 and has eased 2.4% since then. Defense spending most likely will grow in coming quarters because of the efforts in the Middle East. Orders for defense goods have already started to rise.

Consumer spending rose 1.5% in the first quarter, a bit shy of the 2.1% pace over the four quarters of last year and less than half the rates in 2023 and 2024. Consumer spending showed signs of softening in late 2025 and January of this year, but activity picked up in February and March. Firm tax refunds might have provided a boost to household spending in the latest months. Some of the tax cuts from the One Big Beautiful Bill were applied retroactively to 2025, but withholding schedules were not adjusted last year. Thus, many households are receiving larger-than-normal tax refunds.

International trade acted as a drag on economic growth in Q1, with net exports subtracting 1.3 percentage points from the GDP increase. Exports did well in the first quarter with growth of 12.9%, but imports were even stronger with a jump of 21.4%. The real trade deficit of $1.1 trillion was noticeably smaller than the shortfall of $1.4 trillion in 2025-Q1 when importers were rushing to get goods into the US before the imposition of tariffs. Still, the trade shortfall was sizeable and its effect on growth noticeable.

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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- Robust business investment led the advance; moderate support from consumers.
- Government spending jumped with the reopening of most federal agencies.
- The trade sector remained volatile, making a sizeable negative contribution in Q1.

Q1 GDP: Weathering the Challenges; Trend-Like Growth

Sandy Batten

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This monthly report contains a wealth of information concerning the state of the consumer. The anticipation ahead of today’s report centered on how much the surge in energy prices since the escalation of the US-Iran conflict in early March would push up overall PCE inflation. Prices of energy goods and services jumped 11.6% m/m not annualized in March. This was the largest monthly increase since September 2005. As a result, the headline PCE price index increased 0.7% m/m (3.5% y/y versus 2.8% y/y in February), the largest monthly gain since July 2022 but in line with expectations of the Action Economics Forecast Survey.

The core index (that is, excluding food and energy prices) rose by a more modest 0.3% m/m in March, down from a 0.4% monthly increase in February and in line with expectations. However, the yearly rate rose further to 3.2% y/y in March from 3.0% in February, well above and moving away from the Fed’s 2% target. The FOMC left its fed funds rate target unchanged at yesterday’s meeting, but some committee members dissented, opposing the implied easing bias contained in the statement. Chair Powell, in his press conference, noted that a number of members have become more concerned over the inflation outlook and the possible need for a Fed response.

Nominal personal income posted a solid 0.6% m/m (3.7% y/y) increase in March following an upwardly revised unchanged reading in February (previously -0.1% m/m). The March increase was twice the 0.3% monthly gain expected by the Action Economics Forecast Survey. However, after adjusting for inflation, real personal income slipped 0.1% m/m in March on top of a 0.4% m/m decline in February.

Employee compensation continued to be a major driver of personal income in March. It rose 0.4% m/m (4.1% y/y) in March after a 0.2% monthly increase in February. In March, proprietors’ income jumped 2.8%. This outsized increase reflected payments to farmers from the federal government’s Farmer Bridge Assistance Program. Rental income rose a solid 0.7% m/m, the same gain as in February. Income from financial assets increased 0.4% m/m following a 0.9% m/m decline in February. Personal current transfer payments edged up 0.1% m/m versus a 0.3% m/m decline in February.

Nominal consumption expenditures jumped 0.9% m/m (5.7% y/y) in March following an upwardly revised 0.6% monthly gain in February (previously +0.5% m/m). Spending on goods rose 2.0% m/m (4.5% y/y) while spending on services increased 0.4% m/m (6.3% y/y). As for overall inflation, the surge in energy prices also accounted for a large portion of the March gain in nominal spending. After adjusting for overall inflation, real PCE rose a more modest 0.2% m/m following an upwardly revised 0.3% m/m increase in February (previously +0.1% m/m). Still, the solid gains in February and March provide a strong starting point for Q2. The March level is 1.5% at an annual rate above the Q1 average. For all of Q1, real PCE rose 1.6% q/q saar.

The personal income and consumption figures are available in Haver’s **USECON** database with detail in the **USNA** database. The Action Economics forecasts are in **AS1REPNA**.

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- The PCE price index jumped 0.7%, reflecting an 11.6% m/m surge in energy prices.
- The core index was up 0.3%, in line with expectations but still well above the Fed’s target.
- Personal income increased 0.6% m/m, led by a 0.4% m/m rise in compensation.
- Personal consumption jumped 0.9% m/m with a slight upward revision to February.
- However, much of the March gain in nominal consumption also reflected the jump in energy prices.
- Real consumption rose by a more modest 0.2% m/m.

Economy in Brief: 2015

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