Robert Brusca

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070813d.jpg" width="353">
PPI a bit unsteady but moving sideways.
PPI trends in the UK have gone essentially flat. Compared to a year ago the Y/Y pace is slightly lower and the recent 3-month and 6-month paces have been moderate but still above the point that the BOE (and the Fed and the ECB) regard as price stability. There does not seem to be any special problem in the making but inflation is hovering in the 2% to 2.5% range instead of the 1.5% to 2% range where the BOE would be more content. This does not seem to be actionable discrepancy nor is the PPI the rate that would be the deciding one for the BOE. The report was a touch on the high side but not a bad one. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
UK PPI
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">M/M % Change</td>
<td colspan="4">% Change-SAAR</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Jul-07</td>
<td>Jun-07</td>
<td>May-07</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-moY-Ago</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>0.2%</td>
<td>0.4%</td>
<td>0.4%</td>
<td>3.6%</td>
<td>3.6%</td>
<td>2.4%</td>
<td>2.9%</td>
</tr>
<tr>
<td class="firstcol">Core</td>
<td>0.2%</td>
<td>0.1%</td>
<td>0.2%</td>
<td>1.8%</td>
<td>2.4%</td>
<td>2.2%</td>
<td>2.5%</td>
</tr>
<tr>
<td colspan="7">Core: ex food beverages, tobacco &amp; Petroleum</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>


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UK PPI Trends are Pretty Flat

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070813c.jpg" width="353">
The U.S. federal government in July posted a deficit of $36.3B versus a surplus of $27.5B during June and a deficit of $33.2B last July.
The monthly figure was near Consensus expectations for a deficit of $35B. Analysts&#39; forecasts of the Federal budget benefit from access to the Government&#39;s Daily Treasury Statement, the data for which is available in Haver&#39;s DAILY database.
The administration&#39;s latest Midsession Review of the Budget can be found <a href="http://www.whitehouse.gov/omb/budget/fy2008/">here</a>
The July budget figures pulled the deficit for the ten months of FY07 to $157.3B, down from $239.6B during the first ten months of FY06. 
Net revenues grew 8.8% y/y during the first ten months of FY07. Individual income tax receipts (44% of total receipts) grew 9.0% as withheld taxes grew 9.7% during the first ten months but non-withheld taxes rose a stronger 13.6% due to estimated capital gains. Corporate income taxes (13% of total receipts) recovered a strong 10.7% y/y but estate &amp; gift taxes fell 7.0%. Higher employment levels raised employment contributions by 4.4%.
U.S. net outlays grew 2.9% during this fiscal year&#39;s first ten months. Defense spending (19% of total outlays) grew 6.3% and Medicare expenditures (12% of outlays) surged by14.4%. Social security spending (21% of outlays) rose 5.7% but the government&#39;s interest expense rose by 5.1% y/y. Holding back the overall gain in expenditures were large declines in spending on energy and agriculture as well as a 3.0% decline in spending on international affairs and a 7.9% drop in spending on natural resources &amp; environment. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E106/@E10602/@E106021.HTM">US Government Finance</a> &nbsp;</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">FYTD 2007</th>
<th scope="col">FY 2006</th>
<th scope="col">FY 2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>$-36.3B</td>
<td>$27.5B</td>
<td>$-33.2B (7/06)</td>
<td>-$247.7</td>
<td>-$318.7B</td>
<td>-$412.7B</td>
</tr>
<tr>
<td class="firstcol">Net Revenues</td>
<td>$170.4B</td>
<td>$276.5B</td>
<td>6.7%</td>
<td>7.5%</td>
<td>11.8%</td>
<td>14.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Net Outlays</td>
<td>$206.8B</td>
<td>$249.0B</td>
<td>7.2%</td>
<td>2.5%</td>
<td>7.4%</td>
<td>7.8%</td>
</tr>
</tbody>
</table>


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The U.S. federal government in July posted a deficit of $36.3B versus a surplus of $27.5B during June and a deficit of $33.2B last July. The monthly figure was near Consensus expectations for a deficit of $35B. Analysts' forecasts of [...]

U.S. Budget Deepened in July

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070813a.jpg" width="353">
U.S. retail sales in July rose 0.3% after a 0.7% decline in June that was revised slightly shallower versus the initial report. The July figure compared with Consensus expectations for a 0.1% decline.
Excluding autos, retail sales rose 0.4% and more than reversed a 0.2% June decline that also was revised slightly shallower.The July increase was double Consensus expectations for a 0.2% increase.
Nonauto retail sales less gasoline rose 0.6% (5.2% y/y) after an unchanged June reading that was revised up from a 0.3% decline reported at first.
Sales of discretionary items were generally firm last month. Furniture, home furnishings &amp; appliance stores recovered 0.8% (1.6% y/y of a 1.2% June decline that was half the shortfall initially estimated. Sales at general merchandise stores rose 0.9% (6.0% y/y) after rising a little revised 0.4% during the prior month.Apparel store sales rebounded 1.3% (5.8% y/y) following a 1.2% June drop that was little revised.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070813b.jpg" width="353">
Building material sales during July rose 0.2% (0.4% y/y) but recovered just a piece of the prior month&#39;s little revised 2.2% plunge. Sales of nonstore retailers (internet &amp; catalogue) rose 0.4% (7.3% y/y) after June&#39;s downwardly revised 0.6% increase and July restaurant &amp; bar sales jumped 1.3% (8.0% y/y), double the prior month&#39;s rise. 
Sales by motor vehicle &amp; parts dealers fell 0.3% (-1.2% y/y) as unit sales of new vehicles fell 2.6% m/m in July.
Gasoline service station sales fell 0.8% reflecting a 3.0% m/m decline in gas prices at the pump to an average $2.97 per gallon (-0.5% y/y). 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM">Retail Sales &amp; Food Services</a></td>
<td>0.3%</td>
<td>-0.7%</td>
<td>3.2%</td>
<td>6.2%</td>
<td>6.6%</td>
<td>6.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>0.4%</td>
<td>-0.2%</td>
<td>4.4%</td>
<td>7.3%</td>
<td>7.6%</td>
<td>7.1%</td>
</tr>
</tbody>
</table>


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U.S. retail sales in July rose 0.3% after a 0.7% decline in June that was revised slightly shallower versus the initial report. The July figure compared with Consensus expectations for a 0.1% decline. Excluding autos, retail sales [...]

U.S. July Retail Sales Improved, June Revised Up

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070813g.jpg" width="353">
On July 12, Toshihiko Fukui, Governor of the Bank of Japan said that slow growth in the second quarter would not determine the outcome of the August 22 and 23 monetary policy meeting. However, the unexpectedly big slowdown in real GDP, from a revised 3.2% annual rate in the first quarter to 0.5% annual rate in the second quarter may weaken his resolve to raise the key overnight lending rate from 0.5%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070813h.jpg" width="353">
The disappointing report was the result of a decline in fixed capital formation, a deceleration in net exports of goods and services and private consumption. In addition, private sector inventories declined in the second quarter. The changes in the major components of real GDP are shown in the first chart.
While the GDP report gives little support for a rise in interest rates a determined BOJ could cite the rise in deflator for domestic demand, the preferred measure of inflation.The second chart shows the year to year changes in the total GDP deflator and those in the Domestic Demand Deflator. The total deflator has yet to show a year to year increase but the domestic demand deflator rose 0.1% in the second quarter, the third positive showing over the past seven years. Even so this hardly constitutes strong evidence that inflation is a near term threat.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Japan Gross Domestic Product</th>
<th scope="col">Q2 07</th>
<th scope="col">Q1 07&nbsp;</th>
<th scope="col">Q2 06&nbsp;</th>
<th scope="col">Q/Q Chg&nbsp;</th>
<th scope="col">Y/Y Chg&nbsp;</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Real GDP&nbsp; (Trillion 2000 Chained Yen&nbsp;</td>
<td>560.2</td>
<td>559.4</td>
<td>547.5</td>
<td>0.54</td>
<td>2.31</td>
<td>548.9</td>
<td>537.2</td>
<td>527.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Current GDP (Trillion Yen)</td>
<td>516.7</td>
<td>515.3</td>
<td>506.7</td>
<td>1.05</td>
<td>2.04</td>
<td>507.7</td>
<td>501.4</td>
<td>498.5</td>
</tr>
<tr>
<td colspan="9">Components of Real GDP</td>
</tr>
<tr class="odd">
<td class="firstcol"> &nbsp; Private Consumption&nbsp; (Trillion 2000 Chained Yen)</td>
<td>309.2</td>
<td>308.1</td>
<td>305.2</td>
<td>1.41</td>
<td>1.31</td>
<td>304.2</td>
<td>301.</td>
<td>297.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Fixed Capital Formation &nbsp;(Trillion 2000 Chained Yen)</td>
<td>130.0</td>
<td>130.1</td>
<td>127.0</td>
<td>-0.39</td>
<td>2.36</td>
<td>127.6</td>
<td>123.4</td>
<td>120.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Exports of Goods and Services &nbsp;(Trillion 2000 Chained Yen)</td>
<td>85.7</td>
<td>85.0</td>
<td>79.7</td>
<td>3.47</td>
<td>7.55</td>
<td>80.6</td>
<td>73.5</td>
<td>68.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports of Goods and Services &nbsp;(Trillion 2000 Chained Yen)</td>
<td>61.6</td>
<td>61.1</td>
<td>60.8</td>
<td>3.10</td>
<td>1.21</td>
<td>60.5</td>
<td>57.9</td>
<td>54.7</td>
</tr>
<tr>
<td colspan="9">Deflators (2000=100)</td>
</tr>
<tr class="odd">
<td class="firstcol">Total</td>
<td>93.7</td>
<td>91.0</td>
<td>93.9</td>
<td>--</td>
<td>-0.21</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol"> Domestic Demand </td>
<td>96.4</td>
<td>93.3</td>
<td>96.3</td>
<td>--</td>
<td>0.10</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
U.S. Inventory Accumulation Continued  
by <a href="/comment/Moeller.html">Tom Moeller</a> August 13, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070813e.jpg" width="353">
 Total business inventories in June rose 0.4% following the unrevised 0.5% increase the month prior. Together, the increases raised the three month growth accumulation rate to 5.3%, its fastest since last Autumn. The June increase exceeded Consensus expectations for a 0.3% one month rise.
Retail inventories rose 0.5% after the May gain of 0.7%. Auto inventories led the June gain and jumped 1.0% after moderate increases during the prior three months that were upwardly revised. General merchandise inventories increased 0.2% (6.5% y/y), half the May gain of 0.4% but clothing store inventories fell 0.2% (+6.7% y/y) after a 0.4% May gain that was revised down. Furniture inventories reversed the prior month&#39;s decline with a 0.6% (0.2% y/y) rise. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070813f.jpg" width="353">
Business sales fell 0.3% (+3.3% y/y) as retail sales slumped 0.9&amp; after the prior month&#39;s 1.7% surge. Less autos, retail sales fell 0.2% following the 1.7% jump during May. Factory shipments fell 0.6% (-0.9% y/y) but wholesale sales increased 0.6% (8.1% y/y) with the strength in U.S. imports. During the last ten years there has been an 87% correlation between the y/y change in wholesale sales and the change in merchandise imports. 
The inventory to sales ratio ticked up, off its low level during the prior month. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED06/@ED0601/@ED0601.HTM">Business Inventories</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.4%</td>
<td>0.5%</td>
<td>3.6%</td>
<td>5.9%</td>
<td>6.2%</td>
<td>7.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.5%</td>
<td>0.7%</td>
<td>1.3%</td>
<td>3.2%</td>
<td>2.8%</td>
<td>6.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Autos</td>
<td>0.2%</td>
<td>0.7%</td>
<td>4.0%</td>
<td>4.5%</td>
<td>4.5%</td>
<td>7.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>0.5%</td>
<td>0.5%</td>
<td>6.3%</td>
<td>8.6%</td>
<td>7.4%</td>
<td>9.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.3%</td>
<td>0.4%</td>
<td>3.7%</td>
<td>6.4%</td>
<td>7.9%</td>
<td>7.7%</td>
</tr>
</tbody>
</table>
UK PPI Trends are Pretty Flat 
by <a href="/comment/Brusca.html">Robert Brusca</a> August 13, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070813d.jpg" width="353">
PPI a bit unsteady but moving sideways.
PPI trends in the UK have gone essentially flat. Compared to a year ago the Y/Y pace is slightly lower and the recent 3-month and 6-month paces have been moderate but still above the point that the BOE (and the Fed and the ECB) regard as price stability. There does not seem to be any special problem in the making but inflation is hovering in the 2% to 2.5% range instead of the 1.5% to 2% range where the BOE would be more content. This does not seem to be actionable discrepancy nor is the PPI the rate that would be the deciding one for the BOE. The report was a touch on the high side but not a bad one. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
UK PPI
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">M/M % Change</td>
<td colspan="4">% Change-SAAR</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Jul-07</td>
<td>Jun-07</td>
<td>May-07</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-moY-Ago</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>0.2%</td>
<td>0.4%</td>
<td>0.4%</td>
<td>3.6%</td>
<td>3.6%</td>
<td>2.4%</td>
<td>2.9%</td>
</tr>
<tr>
<td class="firstcol">Core</td>
<td>0.2%</td>
<td>0.1%</td>
<td>0.2%</td>
<td>1.8%</td>
<td>2.4%</td>
<td>2.2%</td>
<td>2.5%</td>
</tr>
<tr>
<td colspan="7">Core: ex food beverages, tobacco &amp; Petroleum</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
U.S. Budget Deepened in July 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 13, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070813c.jpg" width="353">
The U.S. federal government in July posted a deficit of $36.3B versus a surplus of $27.5B during June and a deficit of $33.2B last July.
The monthly figure was near Consensus expectations for a deficit of $35B. Analysts&#39; forecasts of the Federal budget benefit from access to the Government&#39;s Daily Treasury Statement, the data for which is available in Haver&#39;s DAILY database.
The administration&#39;s latest Midsession Review of the Budget can be found <a href="http://www.whitehouse.gov/omb/budget/fy2008/">here</a>
The July budget figures pulled the deficit for the ten months of FY07 to $157.3B, down from $239.6B during the first ten months of FY06. 
Net revenues grew 8.8% y/y during the first ten months of FY07. Individual income tax receipts (44% of total receipts) grew 9.0% as withheld taxes grew 9.7% during the first ten months but non-withheld taxes rose a stronger 13.6% due to estimated capital gains. Corporate income taxes (13% of total receipts) recovered a strong 10.7% y/y but estate &amp; gift taxes fell 7.0%. Higher employment levels raised employment contributions by 4.4%.
U.S. net outlays grew 2.9% during this fiscal year&#39;s first ten months. Defense spending (19% of total outlays) grew 6.3% and Medicare expenditures (12% of outlays) surged by14.4%. Social security spending (21% of outlays) rose 5.7% but the government&#39;s interest expense rose by 5.1% y/y. Holding back the overall gain in expenditures were large declines in spending on energy and agriculture as well as a 3.0% decline in spending on international affairs and a 7.9% drop in spending on natural resources &amp; environment. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E106/@E10602/@E106021.HTM">US Government Finance</a> &nbsp;</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">FYTD 2007</th>
<th scope="col">FY 2006</th>
<th scope="col">FY 2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>$-36.3B</td>
<td>$27.5B</td>
<td>$-33.2B (7/06)</td>
<td>-$247.7</td>
<td>-$318.7B</td>
<td>-$412.7B</td>
</tr>
<tr>
<td class="firstcol">Net Revenues</td>
<td>$170.4B</td>
<td>$276.5B</td>
<td>6.7%</td>
<td>7.5%</td>
<td>11.8%</td>
<td>14.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Net Outlays</td>
<td>$206.8B</td>
<td>$249.0B</td>
<td>7.2%</td>
<td>2.5%</td>
<td>7.4%</td>
<td>7.8%</td>
</tr>
</tbody>
</table>
U.S. July Retail Sales Improved, June Revised Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 13, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070813a.jpg" width="353">
U.S. retail sales in July rose 0.3% after a 0.7% decline in June that was revised slightly shallower versus the initial report. The July figure compared with Consensus expectations for a 0.1% decline.
Excluding autos, retail sales rose 0.4% and more than reversed a 0.2% June decline that also was revised slightly shallower.The July increase was double Consensus expectations for a 0.2% increase.
Nonauto retail sales less gasoline rose 0.6% (5.2% y/y) after an unchanged June reading that was revised up from a 0.3% decline reported at first.
Sales of discretionary items were generally firm last month. Furniture, home furnishings &amp; appliance stores recovered 0.8% (1.6% y/y of a 1.2% June decline that was half the shortfall initially estimated. Sales at general merchandise stores rose 0.9% (6.0% y/y) after rising a little revised 0.4% during the prior month.Apparel store sales rebounded 1.3% (5.8% y/y) following a 1.2% June drop that was little revised.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070813b.jpg" width="353">
Building material sales during July rose 0.2% (0.4% y/y) but recovered just a piece of the prior month&#39;s little revised 2.2% plunge. Sales of nonstore retailers (internet &amp; catalogue) rose 0.4% (7.3% y/y) after June&#39;s downwardly revised 0.6% increase and July restaurant &amp; bar sales jumped 1.3% (8.0% y/y), double the prior month&#39;s rise. 
Sales by motor vehicle &amp; parts dealers fell 0.3% (-1.2% y/y) as unit sales of new vehicles fell 2.6% m/m in July.
Gasoline service station sales fell 0.8% reflecting a 3.0% m/m decline in gas prices at the pump to an average $2.97 per gallon (-0.5% y/y). 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM">Retail Sales &amp; Food Services</a></td>
<td>0.3%</td>
<td>-0.7%</td>
<td>3.2%</td>
<td>6.2%</td>
<td>6.6%</td>
<td>6.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>0.4%</td>
<td>-0.2%</td>
<td>4.4%</td>
<td>7.3%</td>
<td>7.6%</td>
<td>7.1%</td>
</tr>
</tbody>
</table>


</html>

On July 12, Toshihiko Fukui, Governor of the Bank of Japan said that slow growth in the second quarter would not determine the outcome of the August 22 and 23 monetary policy meeting. However, the unexpectedly big slowdown in real [...]

Japan: Will the BOJ Raise Rates in the Face of a Bigger than Expected Drop in Real GDP and Only Little Progress on [...]

Carol Stone, CBE

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<div align="left" style="width: 971; height: 976"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070810g.jpg" width="353">
It&#39;s just past noon in New York as we&#39;re writing today and news services tell us stock markets have just turned positive on the day&#39;s trading. Current conditions in financial markets and among financial institutions suggest that we might benefit from a look at more of Haver&#39;s short-term financial data offerings besides the yield spreads we examined here about a week ago.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070810h.jpg" width="353">
Yesterday - Thursday - the federal funds rate spiked well above the Federal Reserve&#39;s target, with an effective rate for the day of 5.41%. Generally, as seen in the table and the first graph, this rate runs just a few basis points either side of the target. So even the seemingly modest 16 basis points was a major move and indicative of tightening conditions in money markets. At the same time, this very market stress was reflected in rising prices of federal funds rate futures. These higher prices correspond to lower rates, signaling that market participants are starting to price in an easing by the Fed, through a reduction in their target funds rate. Again, we see in the graph that the nearby contract has hardly budged since July 2006, when markets were still anticipating more tightening. So the little blip we see over the very last few days is the most movement there&#39;s been in a year and it shows markets are starting to look seriously for the Fed to ease. The performance of the December contract, pushing up through 95 yesterday, indicates that traders expect the rate to be moved to 5% by December and with a non-trivial chance for 4.75%. These series, along with other Fed funds futures contracts, are in the &quot;Interest Rates&quot; menus of Haver&#39;s DAILY database.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070810i.jpg" width="353">
In the WEEKLY database, we can find some information about altered trading patterns and credit aggregates. The Federal Reserve collects data on transactions volume from the group of security dealers it trades with, known as &quot;primary dealers&quot;. This dataset includes US Government securities, federal agency debt, the so-called &quot;agency&quot; mortgage-backeds (those issued by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation), and corporate securities. We show here the dealers&#39; trading volume in MBS and Governments. That in MBS has declined noticeably in the last three weeks. These figures are highly variable, but even using a four-week moving average, we see that the recent experience has the lowest turnover since January, which is typically a slow month. In contrast, trading in Governments has increased; the latest week, ended August 1, averaged $513.1 billion a day with customers (&quot;Others&quot; in this dataset, in contrast to inter-dealer brokers). This is a record by far, but with variability here, the four-week average does not yet exhibit such an extreme. It seems unlikely, though, that trading in Treasuries would have been much reduced in the subsequent periods. We&#39;ll watch that data closely next week to be sure.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070810j.jpg" width="353">
Finally, some packaged bonds and loans are financed in the short-term money markets through the vehicle of asset-backed commercial paper. Traditionally, commercial paper was unsecured debt issued by businesses to finance inventories or other aspects of daily operations. In the last several years, though, asset-backed paper has grown rapidly and is now larger than the more customary type of paper. The risks, even if only perceived risks, in asset-backed credit now involve this segment of the money markets, as well as the bond markets.</div>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">DAILY</th>
<th scope="col">Aug 9</th>
<th scope="col">Aug 8</th>
<th scope="col">Aug 7</th>
<th scope="col">Week Ago</th>
<th scope="col">Month Ago</th>
<th scope="col">3 Mos. Ago</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Fed Funds Rate</td>
<td>5.41</td>
<td>5.27</td>
<td>5.26</td>
<td>5.24</td>
<td>5.22</td>
<td>5.21</td>
</tr>
<tr class="odd">
<td class="firstcol">Fed FundsFutures Price: Sept</td>
<td>94.875</td>
<td>94.775</td>
<td>94.755</td>
<td>94.785</td>
<td>94.760</td>
<td>94.795</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp; Dec</td>
<td>95.100</td>
<td>94.940</td>
<td>94.965</td>
<td>94.965</td>
<td>94.765</td>
<td>94.920</td>
</tr>
<tr>
<td colspan="7">&nbsp;</td>
</tr>
<tr>
<td class="firstcol">WEEKLY</td>
<td>Aug 8</td>
<td>Aug 1</td>
<td>July 25</td>
<td colspan="3">4-Week Averages ending</td>
</tr>
<tr>
<td class="firstcol">June 27</td>
<td>May 30</td>
<td>Jan 3</td>
</tr>
<tr class="odd">
<td class="firstcol">Primary Dealer Transactions in Gov&#39;t Securities</td>
<td>--*</td>
<td>513.1</td>
<td>290.1</td>
<td>371.4</td>
<td>270.3</td>
<td>246.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Primary Dealer Transactions in MBS</td>
<td>--*</td>
<td>205.1</td>
<td>135.7</td>
<td>312.3</td>
<td>248.1</td>
<td>167.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Commercial Paper Outstanding</td>
<td>2223.5</td>
<td>2212.7</td>
<td>2224.6</td>
<td>2127.4</td>
<td>2092.4</td>
<td>1970.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Asset-Backed</td>
<td>1182.9</td>
<td>1180.8</td>
<td>1177.7</td>
<td>1143.5</td>
<td>1113.8</td>
<td>1038.6</td>
</tr>
</tbody>
</table>
</body>
</html>

It's just past noon in New York as we're writing today and news services tell us stock markets have just turned positive on the day's trading. Current conditions in financial markets and among financial institutions suggest that we [...]

Fed Funds Futures Price in Easing, Dealer Trading Volume Favors Treasuries: More on Haver's Short-Term Financial Data

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<div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070810f.jpg" width="353">
Industrial production in Japan has clearly been slowing down. But the three-month pace is showing more lift. Still, this is the volatile measure and its greater lift does not mean that will remain force. For the time being Japan appears to be doing better, but its momentum remains uncertain. By sector, manufacturing is strong over three months but still lower over 6 months and one year and its gain is based on the first monthly rise in four months. Investment and mining categories have a bit more of an uptrend in place; mining is up over 3-month, 6-month and one-year period. This sector does not look solid enough to justify a rate hike anytime soon. </div>

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Japan Industrial Production Trends
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">m/m %</td>
<td colspan="3">Saar %</td>
<td>Yr/Yr</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jun-07</td>
<td>May-07</td>
<td>Apr-07</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Yr-Ago</td>
</tr>
<tr>
<td class="firstcol">Mining &amp; Manufacturing</td>
<td>1.3%</td>
<td>-0.3%</td>
<td>-0.2%</td>
<td>3.4%</td>
<td>-2.0%</td>
<td>2.3%</td>
<td>5.3%</td>
</tr>
<tr>
<td class="firstcol">Total Industry</td>
<td>1.2%</td>
<td>-0.6%</td>
<td>0.3%</td>
<td>3.4%</td>
<td>-2.7%</td>
<td>2.3%</td>
<td>4.9%</td>
</tr>
<tr>
<td class="firstcol">Manufacturing</td>
<td>1.3%</td>
<td>-0.3%</td>
<td>-0.2%</td>
<td>3.4%</td>
<td>-1.8%</td>
<td>2.3%</td>
<td>5.3%</td>
</tr>
<tr>
<td class="firstcol">Food &amp; Tobacco</td>
<td>-1.5%</td>
<td>0.7%</td>
<td>-0.6%</td>
<td>-5.4%</td>
<td>-0.9%</td>
<td>-0.7%</td>
<td>-0.3%</td>
</tr>
<tr>
<td class="firstcol">Textiles</td>
<td>1.1%</td>
<td>0.2%</td>
<td>0.0%</td>
<td>5.3%</td>
<td>-1.6%</td>
<td>-3.7%</td>
<td>-2.9%</td>
</tr>
<tr>
<td class="firstcol">Transportation</td>
<td>0.7%</td>
<td>4.2%</td>
<td>-2.4%</td>
<td>9.5%</td>
<td>-5.4%</td>
<td>5.8%</td>
<td>6.4%</td>
</tr>
<tr class="odd">
<td colspan="8">Product</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods</td>
<td>3.5%</td>
<td>-3.4%</td>
<td>0.6%</td>
<td>2.4%</td>
<td>-2.5%</td>
<td>0.8%</td>
<td>4.2%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>1.3%</td>
<td>-0.5%</td>
<td>-0.3%</td>
<td>1.7%</td>
<td>-0.7%</td>
<td>4.4%</td>
<td>5.7%</td>
</tr>
<tr>
<td class="firstcol">Investment Goods</td>
<td>0.1%</td>
<td>2.0%</td>
<td>0.6%</td>
<td>11.4%</td>
<td>0.0%</td>
<td>-1.2%</td>
<td>5.7%</td>
</tr>
<tr>
<td class="firstcol">Mining</td>
<td>4.1%</td>
<td>0.6%</td>
<td>0.4%</td>
<td>21.9%</td>
<td>18.5%</td>
<td>9.1%</td>
<td>5.5%</td>
</tr>
<tr>
<td class="firstcol">Electricity &amp; Gas</td>
<td>0.3%</td>
<td>-2.6%</td>
<td>2.0%</td>
<td>-1.4%</td>
<td>-1.7%</td>
<td>2.9%</td>
<td>1.4%</td>
</tr>
</tbody>
</table>
</body>
</html>

Industrial production in Japan has clearly been slowing down. But the three-month pace is showing more lift. Still, this is the volatile measure and its greater lift does not mean that will remain force. For the time being Japan [...]

Japan IP Rebounds in June but still has Uncertain Momentum

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<div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070810e.jpg" width="353">
For the second quarter as whole, industrial production is off in France at a 1% pace. This drop is led by weakness in auto output that has fallen at a 9.2% annual rate in the quarter. But the output of consumer goods and intermediate goods has gone flat in the quarter. Capital goods output is still expanding at a slightly slower 1.3% annual rate in Q2 over Q1. IP had risen by 3.8% (saar) in Q1 with auto output up by 10.7 (saar) in the quarter.
For June itself the intermediate goods sector is the most surprising with output falling by 1.4% adding to the weakness in often volatile autos where output is off by an even sharper 2.3%. For autos it is the second monthly drop in a row. For intermediate goods the drop comes after a gain of 0.7% in May. </div>

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
French IP Excluding construction
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar except m/m</td>
<td>Jun-07</td>
<td>May-07</td>
<td>Apr-07</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
</tr>
<tr>
<td class="firstcol">IP total</td>
<td>-0.5%</td>
<td>0.5%</td>
<td>-1.0%</td>
<td>-3.8%</td>
<td>-0.2%</td>
<td>-0.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer goods</td>
<td>0.2%</td>
<td>1.0%</td>
<td>-1.1%</td>
<td>0.0%</td>
<td>2.7%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Capital goods</td>
<td>0.9%</td>
<td>0.1%</td>
<td>-0.7%</td>
<td>1.1%</td>
<td>3.3%</td>
<td>0.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Intermediate goods</td>
<td>-1.4%</td>
<td>0.7%</td>
<td>-0.5%</td>
<td>-4.8%</td>
<td>-2.4%</td>
<td>-1.3%</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>
</tr>
<tr>
<td class="firstcol">Auto</td>
<td>-2.3%</td>
<td>-2.7%</td>
<td>0.7%</td>
<td>-16.2%</td>
<td>-4.4%</td>
<td>-6.9%</td>
</tr>
</tbody>
</table>
</body>
</html>

For the second quarter as whole, industrial production is off in France at a 1% pace. This drop is led by weakness in auto output that has fallen at a 9.2% annual rate in the quarter. But the output of consumer goods and intermediate [...]

Industrial Production Slips and Slows in France

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<div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070810d.jpg" width="353">
Upswing is widespread.
The OECD area is on an upswing led by the United States. That is the message from the OECD leading indicators. It is a reassuring one in the face of global credit concerns and equity market meltdown. Indicators show the upswing in the US is the clearest and strongest. It is nearly as strong as the expansion signaled in early 2006. Europe is in an upswing but its acceleration is very mild. Japan has recovery from a very weak set of showings early in 2006 and is now more clearly on the upswing. The OECD prefers its six month signal as the most reliable. Six-month percent changes are plotted in the chart on the left. </div>

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
OECD Trend-Restored Leading Indicators
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="5">Growth Progression-SAAR</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>3Mos</td>
<td>6Mos</td>
<td>12mos</td>
<td>Yr-Ago</td>
</tr>
<tr>
<td class="firstcol">OECD</td>
<td>5.1%</td>
<td>3.4%</td>
<td>2.3%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">OECD7</td>
<td>5.5%</td>
<td>3.1%</td>
<td>1.8%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">OECD Europe</td>
<td>1.5%</td>
<td>1.2%</td>
<td>1.1%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">OECD Japan</td>
<td>3.4%</td>
<td>0.3%</td>
<td>0.5%</td>
<td>2.9%</td>
</tr>
<tr>
<td class="firstcol">OECD US</td>
<td>8.2%</td>
<td>4.9%</td>
<td>2.9%</td>
<td>2.3%</td>
</tr>
</tbody>
</table>
</body>
</html>

Upswing is widespread. The OECD area is on an upswing led by the United States. That is the message from the OECD leading indicators. It is a reassuring one in the face of global credit concerns and equity market meltdown. Indicators [...]

OECD Leading Indicators Point the Way Higher

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

US productivity growth has been significantly faster than in other major economies

Consumers' short-term US inflation expectations still elevated while longer-term expectations of financial markets are steady

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

Job openings less than the number unemployed in July for first time since 2021

Reaccelerating goods price inflation along with sticky services inflation clouds the outlook

Falling oil prices aren't pulling down inflation expectations, pointing to a boost from increased tariffs

Equity market exuberance outpacing macroeconomic data

Apart from Japan, Blue Chip forecasters expect further sizable monetary easing

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

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Consumer credit outstanding increased $13.1 billion (2.3% y/y) in September after rising $3.1 billion in August, revised from $0.4 billion, and $17.7 billion in July, revised from $18.1 billion. A $10.0 billion rise had been expected in the Action Economics Forecast Survey.

Nonrevolving credit outstanding rose $11.4 billion (2.1% y/y) in September after increasing $9.2 billion in August, revised from $6.3 billion, and increasing $6.7 billion in July, revised from $6.9 billion. Nonrevolving credit held by depository institutions declined 6.8% y/y in September after falling 7.4% y/y in August. Finance company debt holdings fell 1.5% y/y after declining 1.3%, while credit union holdings rose an increased 12.8% y/y in September, the quickest growth since in two years. Nonrevolving debt of the federal government rose 3.6% y/y in September, the same as in August.

In September, revolving credit outstanding, which includes credit cards, rose $1.7 billion (2.6% y/y) after falling $6.1 billion in August, revised from a $6.0 billion decline, and rising $11.0 billion in July, revised from $11.2 billion. Revolving credit outstanding held by depository institutions fell 3.0% y/y. Revolving credit held by finance companies fell a steady 14.7% y/y in September, while credit union debt rose 4.5% y/y in September, up from 3.7% y/y in August.

The consumer credit figures from the Federal Reserve Board are break-adjusted and calculated by Haver Analytics. The breaks in the series in 2005, 2010 and 2015 are the result of the incorporation of data from the Census and the Survey of Finance Companies, as well as changes in the seasonal adjustment methodology. The consumer credit data are available in Haver’s **USECON** database. The Action Economics forecast figures are contained in the **AS1REPNA** database.

**AI and the Economy** is the title of today’s speech by Federal Reserve Vice Chair Philip N. Jefferson and it can be found [here](https://www.federalreserve.gov/newsevents/speech/jefferson20251107a.htm).

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- Notable gain in credit usage follows prior month’s slowdown.
- Nonrevolving credit usage strengthens and revolving turns positive.

U.S. Consumer Credit Strengthens in September

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The Industrial Materials Price Index from the Foundation for International Business and Economic Research (FIBER) eased 0.1% during the four weeks ended November 7, 2025 after improving 0.3% in the prior four-week period. The index increased 0.5% y/y following a 0.8% y/y gain at the end of October.

Prices in the **Textile** group increased 2.5% during the last four weeks and rose 3.3% y/y. The cost of burlap increased 23.8% in the last four weeks while surging 48.1% over the last year. Showing modest improvement, cotton prices rose 0.9% in four weeks but declined 5.6% y/y.

**Metals** group prices increased 1.5% (5.9% y/y) in the last four weeks as the cost of aluminum rose 4.9	% (10.3% y/y). Zinc prices moved up 3.6% (5.4% y/y) and the cost of steel scrap rose 1.4% (-5.9% y/y). Lead prices increased 1.1% (-0.2% y/y) in four weeks and the cost of copper scrap rose 0.6% (13.9% y/y). Working lower, tin prices declined 2.2% (+13.8% y/y) in four weeks.

**Miscellaneous** group prices weakened 2.9% in the last four weeks and were off 1.0% y/y, as framing lumber prices fell 11.3% (-4.3% y/y). The cost of tallow, used for frying & baking, declined 9.0% (+10.5% y/y) in four weeks. Offsetting this weakness, natural rubber prices rose 2.0% in four weeks, but were off 6.6% y/y.

Prices in the **crude oil & benzene** group declined 1.6% (-10.8% y/y) in the last four weeks. The cost of West Texas Intermediate crude oil fell 2.2% in four weeks to $60.31 per barrel and declined 15.6% y/y. The price was increased from a low of $58.47 in the third week of last month. The price of the petro-chemical benzene fell 3.8% (-23.2% y/y) in four weeks.

**Excluding crude oil**, the industrial commodity price index was unchanged (+1.5% y/y) over the last four weeks after rising 0.5% during the prior four weeks.

The Foundation for International Business and Economic Research (FIBER) develops economic measurement techniques as applied to business cycles and inflation in the U.S. and other market economies. The commodity price data can be found in Haver's **DAILY**, **WEEKLY**, **USECON** and **CMDTY** databases.

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- Textile and metals prices strengthen.
- Framing lumber costs plummet.
- Crude oil prices weaken.

FIBER: Industrial Commodity Price Index Moves Sideways in Latest Four Weeks

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The chart provides a good overview for German trade trend. The table breaks trade trends down by categories and provides growth rates on shorter horizons of 3 months, 6 months and 12 months. But the chart depicts the overarching trends well. It shows the German surplus being diminished on a gradual path and not altogether in a clear monotonic fashion. Export and import lines on the chart move mostly sideways (horizontal). The export line is below the import line since late last year. These two series plots on the right-hand scale and they depict growth rates (year-over-year). So sideways movements mean roughly steady growth. Exports have been growth steadily year-over-year at a weak pace that on occasion has been a decline in terms of their year-on-year value. Generally, the green line is in positive territory. The red import line has been stronger, indicating somewhat better, steadier import growth over the period.

While exports had a good September, export growth sequenced from 12-months to 6-months, to 3-months has been weakening. Imports also put in a strong September but are showing some erosion from 12-month to 6-months to 3-months in terms of annualized rates of growth. Still, import growth rates remain quite strong and consistent; the sense of erosion is clear but also moderate – it’s a moderate erosion in progress for imports.

Capital goods exports from Germany are improving- this observation is based on lagged data with a one-month lag built in. But consumer goods and vehicle exports are slowing and rather sharply- likely as a result of U.S. tariffs.

Import side trends, with the same lag, are not as clear cut. Capital goods imports are growing, and motor vehicle imports are improving and accelerating. Consumer goods imports have erratically slowed.

Real exports and imports on sequential lagged data show exports contracting on most horizons while imports generate consistent positive growth in real terms. There is a big difference in these two trends expressed in real terms.

On balance, German trade trends are shifting. The trade balance is gradually eroding. Change is in play.

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Germany

German Trade Surplus Shrinks Despite Strong Exports

Andrew Cates

**The global growth cycle**
The new orders-to-inventory spread in the global manufacturing PMI is often been viewed as one of the most reliable forward-looking indicators of the global economic cycle. When new orders are rising relative to inventories, it typically signals that demand is firming, production pipelines are beginning to refill, and industrial momentum is building. Conversely, when inventories accumulate faster than orders, it often foreshadows a slowdown. As the chart shows, this spread has been holding up relatively well in recent months, suggesting that despite ongoing headwinds—US tariff policies, uneven global demand, and geopolitical uncertainty—the underlying pulse of global manufacturing remains resilient.

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**US credit standards**
The latest Senior Loan Officer Opinion Survey (SLOOS) from the Federal Reserve suggests that credit conditions remain tight but are no longer worsening, marking a tentative stabilization after several quarters of tightening. Banks reported modest easing in standards for some categories of corporate and commercial real estate loans, though mortgage lending remains constrained. Demand for business credit continues to soften, reflecting both higher borrowing costs and a cautious corporate outlook. Historically, periods of widespread tightening—like those seen in 2008 and 2020—have coincided with sharp rises in the private sector savings balance (a proxy for deleveraging), as firms and households retrench simultaneously. The current configuration, shown in the chart, indicates lingering deleveraging pressures, but not a collapse in credit availability.

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**China**
Moving to China, the latest official and Caixin PMI releases for October painted a mixed picture of activity. Both manufacturing indices softened, suggesting that the industrial rebound which underpinned much of China’s recent growth may be losing some traction. The official non-manufacturing PMI, by contrast, edged higher, hinting at continued resilience in construction and public-sector-linked services, while the Caixin services measure—which tends to reflect smaller, private-sector firms—slipped modestly. The divergence underscores China’s two-speed recovery: industrial production and exports have carried the economy, while household spending and smaller enterprises remain subdued. If manufacturing momentum fades in the coming months, the economy could face a renewed loss of balance, with fewer reliable growth engines. Still, overall performance this year has surpassed expectations, and the government’s 5% growth target remains within reach, provided activity holds steady through year-end. Looking ahead, marginal policy support and improved external sentiment—helped by selective tariff relief from the US—could offer limited, though welcome, cushioning.

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**Australia** 
In Australia, the RBA left the cash rate unchanged at its November meeting, maintaining a cautious stance amid a still-complex inflation and growth backdrop. The case for further easing has become less compelling as core inflation (trimmed mean CPI) remains above target and labour market conditions—while gradually softening—continue to show resilience. The unemployment rate has edged higher but remains low by historical standards, consistent with lingering wage and services price pressures. Recent data also hint at a tentative pickup in activity, supported by strong population growth and stabilising commodity exports. Against that backdrop, the RBA has stressed that the path for policy remains finely balanced, with a strong focus on incoming inflation data and global financial conditions. While downside risks persist—particularly from China’s slowdown and weak global trade—the persistence of domestic price pressures means the bar for renewed rate cuts remains relatively high.

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**Argentina**
Turning to Argentina, markets continue to digest the implications of President Milei’s midterm election victory amid deepening economic and financial imbalances. The peso’s broad nominal effective exchange rate has remained under heavy pressure, extending its long-running slide as investors weigh the challenges of implementing fiscal consolidation and monetary reform in a fragile political and social environment. In stark contrast, the Buenos Aires stock index has surged to record highs, reflecting optimism that Milei’s reformist agenda—anchored in deregulation, privatisation, and fiscal restraint—may eventually stabilise the economy and attract renewed capital inflows. The divergence between a falling currency and soaring equity prices highlights the tension between near-term macro risks and longer-term reform hopes. Going forward, investor confidence will hinge on the government’s ability to deliver credible policy execution while managing the inflationary fallout from ongoing peso weakness.

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**Global CO2 emissions**
Shifting focus to more structural issues, the chart underscores how decarbonisation challenges remain deeply concentrated in a few heavy-emitting sectors. Energy production alone accounts for nearly 40% of global CO₂ emissions, with manufacturing, households, and transport together contributing another 50%. This composition highlights the complex trade-offs of the energy transition: the very sectors that underpin modern living standards—power generation, industrial output, mobility, and housing—are also those most difficult to decarbonise. Climate change is therefore not just an environmental issue but a structural economic one, shaping investment, infrastructure, and pricing systems for decades to come. The tension between sustaining growth and cutting emissions will remain a defining challenge for policymakers, particularly as clean technologies face constraints in scaling fast enough to offset rising global demand for energy-intensive goods and services.

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Recent financial market developments have been shaped by a renewed bout of volatility, with heightened concerns about stretched AI valuations triggering a big correction across parts of the tech sector. This comes against a backdrop of lingering uncertainty in Washington, where the US government shutdown has continued to delay the release of several key economic reports, clouding visibility on near-term momentum. Still, the broader macro signals offer a mixed but nuanced picture. Global manufacturing PMIs have continued to hold up, hinting that underlying industrial momentum remains resilient (chart 1). The latest US Senior Loan Officer Survey points to a stabilisation in credit conditions—banks remain cautious, but the most intense phase of tightening may have now passed (chart 2). In China, the October PMIs reflected renewed softness in manufacturing alongside a still-steady services sector, tentatively suggesting that growth may be rebalancing, albeit at a weaker aggregate pace of growth (chart 3). Australia’s inflation and labour market data, meanwhile, have complicated the case for near-term policy easing, with the RBA opting to stay on hold this week as core inflation remain sticky. In Argentina, currency weakness persists even as equity markets rally, highlighting the policy and market tension surrounding President Milei’s reform agenda (chart 5). And finally, at a more structural level, latest global emissions data serve as a reminder that energy, manufacturing, transport, and households remain the principal sources of CO₂—illustrating how the climate and energy transition will continue to shape the macro landscape well beyond the current economic cycle (chart 6).

Charts of the Week: Uneven But Unbroken

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Initial claims for unemployment insurance fell 12,643 during the week ended October 25 to 219,520 (+0.6% y/y) and mostly reversed the prior week’s increase to 232,163. The four-week moving average of initial claims eased to 226,766 from 227,953. They have trended higher this year, after weakening late in 2024. The four-week average hit a low of 200,323 in January 2024.

Federal government employees initially filed 9,435 jobless insurance claims last week after 10,062 in the prior week. These figures are increased from 588 at the end of September.

Continuing claims for unemployment insurance rose to 1.957 million (5.5% y/y) in the week ended October 18 from 1.947 million in the prior week. The four-week moving average rose to 1.940 million from 1.931 million. It was the highest level since the last week of August.	

Federal government employees continuing benefits rose to 23,188 in the week ended October 18 from 14,472 in the prior week. These figures are increased from 8,680 at the end of September.

The insured unemployment rate varied greatly across individual states and territories. In the week ended October 18, the highest unemployment rates were in New Jersey (2.14%), Washington (2.03%), California (1.93%), Massachusetts (1.84%), the District of Columbia (1.86%) and Connecticut (1.70%). The lowest were in South Dakota (0.25%), Florida (0.36%), North Carolina & Louisiana (0.41%), Nebraska (0.44%) and Virginia (0.49%). Rates in other notable states include New York (1.51%), Illinois (1.50%), Pennsylvania (1.39%), and Texas (1.11%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986.

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- Decline in initial claims reverses earlier gain.
- Continuing claims move higher.
- State unemployment rates vary.

Economy in Brief: 2007

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