Robert Brusca

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070808h.jpg" width="353">
France trade deficit shrank in June compared to May but it still remained large. Quarter to quarter the deficit grew by &#128;770mn. In Q2 French imports rose at a 12.1% pace compared to exports that rose by a scant 1.8% annual rate. The chart on the left shows that the reason for that is that exports slid deeper into the quarter than did imports although both rose sharply in June at quarter&#146;s end. 
In June export and import growth rates are strong across all main commodity categories. But over three months we see that import growth has been strong across the board on growth rates ranging from 11% to 27%. For exports, strong consumer goods export flows helped to compensate for weak capital goods and dropping motor vehicle exports.
A French spokesman blamed the persisting deficit on structural problems not on a too-strong euro.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
 French Trade trends for goods
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="2">m/m%</td>
<td colspan="3">% Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td> Jun-07</td>
<td> May-07</td>
<td> 3M</td>
<td> 6M</td>
<td> 12M</td>
</tr>
<tr class="odd">
<td class="firstcol">Balance*</td>
<td>-&#128;&#128; 3,011.00</td>
<td>-&#128;&#128; 3,218.00</td>
<td>-&#128;&#128; 2,941.33</td>
<td>-&#128;&#128; 2,556.50</td>
<td>-&#128;&#128; 2,420.33</td>
</tr>
<tr class="odd">
<td class="firstcol"> Exports</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">All Exports</td>
<td>5.5%</td>
<td>-2.1%</td>
<td> 8.7%</td>
<td> 7.6%</td>
<td>4.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital goods</td>
<td>6.9%</td>
<td>-6.4%</td>
<td>2.7%</td>
<td> 10.0%</td>
<td>1.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Motor Vehicles</td>
<td>3.4%</td>
<td>-2.4%</td>
<td>-1.9%</td>
<td> 9.4%</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Goods</td>
<td>4.7%</td>
<td>-0.6%</td>
<td> 22.0%</td>
<td>1.7%</td>
<td>4.9%</td>
</tr>
<tr class="odd">
<td class="firstcol"> IMPORTS</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">All Imports</td>
<td>4.9%</td>
<td>-0.8%</td>
<td> 27.0%</td>
<td> 11.6%</td>
<td>8.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital goods</td>
<td>4.1%</td>
<td>1.1%</td>
<td> 22.5%</td>
<td> 13.5%</td>
<td>3.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Motor Vehicles</td>
<td>6.1%</td>
<td>-0.5%</td>
<td> 18.8%</td>
<td> 18.6%</td>
<td>14.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer goods</td>
<td>4.8%</td>
<td>-1.7%</td>
<td> 11.0%</td>
<td>5.4%</td>
<td>7.9%</td>
</tr>
<tr>
<td colspan="5"> *Mil euros; monthly or period average</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
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France trade deficit shrank in June compared to May but it still remained large. Quarter to quarter the deficit grew by 770mn. In Q2 French imports rose at a 12.1% pace compared to exports that rose by a scant 1.8% annual rate. The [...]

French Imports Out Jump Exports

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070808g.jpg" width="353">
Foreign demand for core machinery orders has spiked up now and gain in Japan, but domestic demand has remained consistently weak.
The three month &#145;spike&#146; in domestic machinery orders over three months is surprising. It mostly reflects a spike in April, with further growth in May offset by a drop in June. Over all core machinery orders, however, continue to show weakness Over three, six and twelve months core orders are contracting. The core orders figures exclude shipbuilding orders and electric power orders that tend to be lumpy and distort trends. Three-month trends for core orders are trying to make a comeback but so far the localized strength has not been able to move the six-month or Yr/Yr trends higher. On all tenors core orders are still declining. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Japan Machinery Orders
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">m/m %</td>
<td colspan="3">Saar %</td>
</tr>
<tr>
<td class="firstcol">SA</td>
<td>Jun-07</td>
<td>May-07</td>
<td>Apr-07</td>
<td>3-Mos</td>
<td>6-Mos</td>
<td>12-Mos</td>
</tr>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-6.5%</td>
<td>5.8%</td>
<td>16.0%</td>
<td>72.9%</td>
<td>17.9%</td>
<td>-4.7%</td>
</tr>
<tr>
<td class="firstcol">Core Orders*</td>
<td>-10.4%</td>
<td>5.9%</td>
<td>2.2%</td>
<td>-11.8%</td>
<td>-16.8%</td>
<td>-18.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign Demand</td>
<td>-5.9%</td>
<td>5.5%</td>
<td>8.1%</td>
<td>32.7%</td>
<td>49.0%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">Domestic Demand</td>
<td>-6.5%</td>
<td>5.9%</td>
<td>20.1%</td>
<td>100.0%</td>
<td>-1.0%</td>
<td>-9.3%</td>
</tr>
<tr class="odd">
<td colspan="6">* Excl ships and electric power; mil of yen</td>
<td>&nbsp;</td>
</tr>
</tbody>
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Foreign demand for core machinery orders has spiked up now and gain in Japan, but domestic demand has remained consistently weak. The three month spike in domestic machinery orders over three months is surprising. It mostly reflects [...]

Japan Core Machinery Orders Remain Lethargic

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070808f.jpg" width="353">
German trade trends are showing sharp wild swings in their interval growth rates. The trends on the accompanying chart show a more stable longer pattern from early 2006 through early mid-2007 import trends worked lower. Export trends worked lower from October 2006 through April of 2007. At mid-year German exports are showing some tendency for firmness while imports have jumped sharply. German chemical and machinery exports are continuing to hold up.
For the quarter exports have risen by 2.5% compared to a drop of 1.2% for imports. While these are nominal figures the inflation adjusted figures should show a contribution of net exports to GDP growth in 2007-Q2. But the surge in imports later in the second quarter could be laying the groundwork for a lasting import gain that could make net exports a drain on Q3 GDP. It is too soon to know about such things, but one thing Germany is continuing to look for is for the consumer sector to kick in to help out with second half growth. With the broad inflation adjusted euro at such a peak, more domestic demand help could be essential to maintaining the growth trend, especially if the import surge lasts.

<table border="0" cellspacing="0" width="100%">
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German Trade Trends for Goods
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="2">m/m%</td>
<td colspan="3">% Saar</td>
</tr>
<tr>
<td class="firstcol"></td>
<td>Jun-07</td>
<td>May-07</td>
<td>3M</td>
<td>6M</td>
<td>12M</td>
</tr>
<tr>
<td class="firstcol">Balance*</td>
<td>&#128;&#128; 14.88</td>
<td>&#128;&#128; 17.39</td>
<td>&#128;&#128; 16.04</td>
<td>&#128;&#128; 15.70</td>
<td>&#128;&#128; 15.30</td>
</tr>
<tr>
<td class="firstcol">EXPORTS</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">All Exports</td>
<td>2.1%</td>
<td>-0.9%</td>
<td>8.6%</td>
<td>6.4%</td>
<td>12.1%</td>
</tr>
<tr>
<td class="firstcol">Capital goods</td>
<td>--</td>
<td>1.0%</td>
<td>-6.6%</td>
<td>-6.5%</td>
<td>9.4%</td>
</tr>
<tr>
<td class="firstcol">Motor Vehicles</td>
<td>--</td>
<td>3.4%</td>
<td>1.9%</td>
<td>14.0%</td>
<td>7.7%</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods</td>
<td>--</td>
<td>-5.8%</td>
<td>-0.3%</td>
<td>7.2%</td>
<td>13.0%</td>
</tr>
<tr>
<td class="firstcol">IMPORTS</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">All Imports</td>
<td>6.7%</td>
<td>-3.6%</td>
<td>15.8%</td>
<td>6.0%</td>
<td>9.2%</td>
</tr>
<tr>
<td class="firstcol">Capital goods</td>
<td>--</td>
<td>-1.9%</td>
<td>-25.8%</td>
<td>-10.4%</td>
<td>6.5%</td>
</tr>
<tr>
<td class="firstcol">Motor Vehicles</td>
<td>--</td>
<td>6.4%</td>
<td>20.1%</td>
<td>8.2%</td>
<td>16.9%</td>
</tr>
<tr>
<td class="firstcol">Consumer goods</td>
<td>--</td>
<td>-7.3%</td>
<td>-29.0%</td>
<td>-2.1%</td>
<td>1.3%</td>
</tr>
<tr>
<td colspan="6">*Billions of euros; monthly or period average; Shaded area trends lag one month</td>
</tr>
</tbody>
</table>
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German trade trends are showing sharp wild swings in their interval growth rates. The trends on the accompanying chart show a more stable longer pattern from early 2006 through early mid-2007 import trends worked lower. Export trends [...]

German Surplus in Trade Remained in June but was Narrowed Sharply by Surging Imports

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070808d.jpg" width="353">
The Bureau of Labor Statistics reported in the Job Openings &amp; Labor Turnover Survey (JOLTS) that the June job openings rate increased slightly from the prior month to 3.0%, the highest level since January. The job openings rate is the number of job openings on the last business day of the month as a percent of total employment plus job openings.
The actual number of job openings rose 5.1% m/m to 4.305 million (7.8% y/y). Private sector openings rose 5.6% (8.3% y/y) reflecting a 22.5% m/m jump in professional &amp; business services (34.6% y/y). That made up a 29.9% (-34.5% y/y) drop in the number of construction jobs.
The hires rate fell m/m to 3.4%, its lowest level in three years. The hires rate is the number of hires during the month divided by employment.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070808e.jpg" width="353">
The actual number of hires decreased 4.6% (-4.7% y/y) to 4.752 million. Retail sector jobs fell by 15.7% (-19.3% y/y). Hires in the construction and the factory sectors offset each other with small changes.
The job separations rate in June was unchanged m/m at 3.3%. Separations include quits, layoffs, discharges, and other separations as well as retirements. The total separations, or turnover, rate is the total number of separations during the month divided by employment. The level of job separations fell a modest 0.7% (-3.0% y/y) from an upwardly revised level the prior month.
The survey dates only to December 2000 but has since followed the movement in nonfarm payrolls.
A description of the Jolts survey and the latest release from the U.S. Department of Labor is available <a href="http://www.bls.gov/news.release/jolts.nr0.htm">here</a>.
The FOMC in 1978 from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/mt/20070801/cover.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB14/@EB14.HTM">JOLTS</a> (Job Openings &amp; Labor &nbsp;Turnover Survey)</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June &#39;06</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Job Openings Rate: Total</td>
<td>3.0%</td>
<td>2.9%</td>
<td>2.9%</td>
<td>3.1%</td>
<td>2.8%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">Hires Rate: Total</td>
<td>3.4%</td>
<td>3.6%</td>
<td>3.7%</td>
<td>43.6%</td>
<td>43.1%</td>
<td>41.7%</td>
</tr>
</tbody>
</table>
</body>
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The Bureau of Labor Statistics reported in the Job Openings & Labor Turnover Survey (JOLTS) that the June job openings rate increased slightly from the prior month to 3.0%, the highest level since January. The job openings rate is the [...]

JOLTS: Job Openings Up, Hires Rate Down

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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/070808c.jpg" width="353">
Trends for Japan&#146;s economy-watchers index have turned lower and remain in a downtrend after having made a local peak between February and April, depending on the series. Even this local peak is part of an ongoing downtrend for the indexes whose true cycle peak dates to early 2006. Japan&#146;s policy markets do look at this index and it is considered reliable. One attribute of the index is that it is timely. The current and future portions of the index are turning lower and each displays three straight months of declines. The employment index &#145;triggered the slide&#146; with a huge drop three months ago followed by two months of begrudging gains. The index does tell a reassuring story of Japan&#146;s growth.</div>

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<colgroup></colgroup>
<thead>
<tr>
Key Japanese Surveys
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="4">Raw readings of each survey</td>
<td colspan="3">Percent of 5Yr range*</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Jul-07</td>
<td>Jun-07</td>
<td>May-07</td>
<td>Apr-07</td>
<td>Jul-07</td>
<td>Jun-07</td>
<td>May-07</td>
</tr>
<tr class="grey2">
<td colspan="8">Diffusion</td>
</tr>
<tr class="grey1">
<td class="firstcol">Economy Watchers</td>
<td>44.7</td>
<td>46.0</td>
<td>46.8</td>
<td>49.7</td>
<td>3.8%</td>
<td>25.7%</td>
<td>44.4%</td>
</tr>
<tr class="grey1">
<td class="firstcol">&nbsp; Employment</td>
<td>51.2</td>
<td>51.2</td>
<td>50.7</td>
<td>57.1</td>
<td>4.0%</td>
<td>27.5%</td>
<td>35.6%</td>
</tr>
<tr class="grey1">
<td class="firstcol">&nbsp; Future</td>
<td>46.7</td>
<td>48.4</td>
<td>50.0</td>
<td>51.9</td>
<td>21.4%</td>
<td>34.9%</td>
<td>52.9%</td>
</tr>
</tbody>
</table>
</body>
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Trends for Japans economy-watchers index have turned lower and remain in a downtrend after having made a local peak between February and April, depending on the series. Even this local peak is part of an ongoing downtrend for the [...]

Japan Economy Watchers Index in Steady Decline

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<div align="left"><img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070808a.jpg">
The total number of mortgage applications surged 8.1% last week following declines during the prior two weeks, according to the Mortgage Bankers Association.
Strongest was a 9.1% gain in applications to refinance which rose after a 1.8% increase during the prior week.
Purchase applications also were strong and rose 7.4%. The gain followed steady declines during five of the previous six weeks. It was to the highest level since early July.
During the last ten years there has been a 58% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070808b.jpg" width="353">
The effective interest rate on a conventional 30-year mortgage dropped a sharp ten basis points w/w to 6.74%, the lowest since early June. Rates averaged 6.91% during July, up from 6.28% in December. Rates for 15-year financing similarly fell sharply to 6.45% last week. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage.
The Mortgage Bankers Association surveys between 20 and 35 top lenders in the U.S. housing industry. Then it derives its refinance, purchase and market indexes. The weekly survey covers roughly 50% of all U.S. residential mortgage applications processed each week by mortgage banks, commercial banks and thrifts. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>. 
For yesterday&#39;s statement by the FOMC follow this <a href="http://www.federalreserve.gov/boarddocs/press/monetary/2007/20070807/default.htm">link</a>.
The U.S. Economy and Monetary Policy from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/news/speeches/2007/0712.html">here</a>.</div>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">08/03/07</th>
<th scope="col">7/27/07</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 Market Index</td>
<td>656.5</td>
<td>607.1</td>
<td>18.7%</td>
<td>584.2</td>
<td>708.6</td>
<td>735.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>447.4</td>
<td>416.6</td>
<td>15.0%</td>
<td>406.9</td>
<td>470.9</td>
<td>454.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,881.1</td>
<td>1,724.1</td>
<td>23.9%</td>
<td>1,633.0</td>
<td>2,092.3</td>
<td>2,366.8</td>
</tr>
</tbody>
</table>
</body>
</html>

The total number of mortgage applications surged 8.1% last week following declines during the prior two weeks, according to the Mortgage Bankers Association. Strongest was a 9.1% gain in applications to refinance which rose after a [...]

U.S. Mortgage Applications Surge

Carol Stone, CBE

Consumer price behavior varies widely in Central and Eastern Europe, apparently depending on the degree of development in various economies. In the Czech Republic, inflation is slow and restrained, much like that in Western Europe, [...]

CPI Inflation Restrained in Czech Republic, Moderate in Lithuania and Very Fast in Latvia

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070807e.jpg" width="353">
A number of Euro Area countries have reported wavering business confidence in July. Today, France&#39;s INSEE (Institute National de la Statistiques et des Etudes Economiques) released its measure of business confidence for the area as a whole. The measure declined in July to 112 from 113 in June and is below the recent peak of 114 last seen in September, 2006. Confidence, however, appears to be plateauing rather than declining sharply as at previous peaks, as can be seen in the first chart.
One of the reasons that might explain the fact that business confidence in the Euro Area has not gone off the cliff is that such factors as the slowdown in the U. S. and the rise in the Euro, which would ordinarily weaken confidence, have been offset by the rise in the demand for European exports from Asia. The second chart shows the Euro Area exports to Asia and to the U. S. In addition, as we noted yesterday German manufacturing orders from other Euro Area countries have recently risen sharply. This suggests that intra Euro Area activity, which is not affected by changes in the euro, is increasing. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070807f.jpg" width="353">
Note: The European Business Confidence measure is based on six balance of opinion indicators: production over the past three months, production forecast for the next three months, inventories, order books, foreign order book and selling price expectations. The data are gathered from surveys in France, Germany, Italy, Spain, the Netherlands and Belgium. These six countries account for about 90% of the total Euro Area&#39;s GDP. The measure is conducted so that its average is 100 and has a standard deviation of 10..

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">EURO AREA&nbsp;</th>
<th scope="col">Jul&nbsp; 07</th>
<th scope="col">Jun 07&nbsp;</th>
<th scope="col">May&nbsp; 06&nbsp;</th>
<th scope="col">Apr 06&nbsp;</th>
<th scope="col">Mar 06&nbsp;</th>
<th scope="col">Feb 06</th>
<th scope="col">Jan 06</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">Business Confidence</td>
<td>112</td>
<td>113</td>
<td>112</td>
<td>113</td>
<td>111</td>
<td>111</td>
<td>111</td>
<td>112</td>
<td>102</td>
<td>106</td>
</tr>
<tr>
<td colspan="11">Euro Area&nbsp; Exports&nbsp; (Mil Euro)</td>
</tr>
<tr class="odd">
<td class="firstcol">To Asia</td>
<td>--</td>
<td>--</td>
<td>&nbsp; 24275</td>
<td>23754</td>
<td>23970</td>
<td>23915</td>
<td>24004</td>
<td>277184</td>
<td>243246</td>
<td>233896</td>
</tr>
<tr class="odd">
<td class="firstcol"> To U. S. </td>
<td>--</td>
<td>--</td>
<td>16603</td>
<td>16320</td>
<td>16099</td>
<td>16754</td>
<td>15743</td>
<td>199521</td>
<td>184992</td>
<td>172546</td>
</tr>
</tbody>
</table>
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A number of Euro Area countries have reported wavering business confidence in July. Today, France's INSEE (Institute National de la Statistiques et des Etudes Economiques) released its measure of business confidence for the area as a [...]

Business Confidence in the Euro Area Falls in July but Is Still Healthy

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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