Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070806e.jpg" width="353">
German new orders for manufacturing in nominal terms rose 4.65% in June from May. This was the largest month to month rise since December, 2004. The rise was due almost entirely to a rise in foreign orders, which rose 8.90% from May and 24.04% from June 2006. Domestic orders rose only 0.41% in June from May and were 11.75% above June 2006. Indexes for domestic and foreign new orders are shown in the first chart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070806f.jpg" width="353">
The rise in foreign orders came from a 22.39% increase in orders from other Euro Zone countries. Orders from non Euro Zone countries actually declined by 2.70% in June, due perhaps to the continued rise in the Euro. Indexes of new orders from Euro Zone countries and non Euro Zone countries are shown in the second chart
The composition of German manufacturing new orders is heavily weighted by capital goods, reflecting Germany&#39;s engineering expertise. Capital goods new orders increased 8.61% in June from May, while consumer goods new orders declined 1.48% in the same period. Manufacturing new orders of capital and consumer goods are shown in the third chart.
Manufacturing sales, in contrast to new orders, declined 0.77% in June from May and were 7.02% above June, 2006. Domestic manufacturing sales were down 1.21% in June, while foreign sales managed a small increase of 0.20%. Foreign sales continue to be more dynamic than domestic as can be seen in the fourth chart. The increase in sales to other Euro Zone countries was a mere 0.07% and sales to non Euro Zone countries declined 0.44%.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070806g.jpg" width="353"><img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070806h.jpg" width="353">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">GERMAN NEW ORDERS AND SALES (Nominal (2000=100))&nbsp;</th>
<th scope="col">Jun 07</th>
<th scope="col">May&nbsp; 07&nbsp;</th>
<th scope="col">Jun&nbsp; 06&nbsp;</th>
<th scope="col">M/M 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">New Orders</td>
<td>144.0</td>
<td>137.6</td>
<td>122.1</td>
<td>4.65</td>
<td>17.94</td>
<td>123.9</td>
<td>111.7</td>
<td>105.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Domestic</td>
<td>121.7</td>
<td>121.2</td>
<td>108.9</td>
<td>0.41</td>
<td>11.75</td>
<td>110.9</td>
<td>101.4</td>
<td>98.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Foreign</td>
<td>171.8</td>
<td>158.2</td>
<td>138.5</td>
<td>8.60</td>
<td>24.02</td>
<td>140.1</td>
<td>127.4</td>
<td>113.5</td>
</tr>
<tr>
<td class="firstcol"> &nbsp;&nbsp;&nbsp; Euro Zone </td>
<td>182.6</td>
<td>149.2</td>
<td>131.3</td>
<td>22.39</td>
<td>39.07</td>
<td>132.1</td>
<td>120.4</td>
<td>109.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Non Euro Zone</td>
<td>161.9</td>
<td>166.4</td>
<td>145.1</td>
<td>-2.70</td>
<td>11.58</td>
<td>147.4</td>
<td>128.6</td>
<td>117.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Capital Goods</td>
<td>156.5</td>
<td>144.1</td>
<td>123.9</td>
<td>8.61</td>
<td>26.31</td>
<td>127.5</td>
<td>116.1</td>
<td>107.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Consumer Goods</td>
<td>113.5</td>
<td>115.2</td>
<td>102.9</td>
<td>-1.48</td>
<td>10.30</td>
<td>105.7</td>
<td>99.8</td>
<td>95.1</td>
</tr>
<tr>
<td class="firstcol">Sales</td>
<td>128.1</td>
<td>129.1</td>
<td>119.7</td>
<td>-0.77</td>
<td>7.02</td>
<td>119.6</td>
<td>110.6</td>
<td>105.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Domestic</td>
<td>114.4</td>
<td>115.8</td>
<td>108.5</td>
<td>-1.21</td>
<td>5.44</td>
<td>108.8</td>
<td>102.7</td>
<td>99.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Foreign</td>
<td>151.3</td>
<td>151.6</td>
<td>138.5</td>
<td>-0.20</td>
<td>9.24</td>
<td>137.8</td>
<td>123.9</td>
<td>115.8</td>
</tr>
<tr class="odd">
<td class="firstcol"> &nbsp;&nbsp;&nbsp; Euro Zone </td>
<td>144.5</td>
<td>144.4</td>
<td>131.8</td>
<td>0.07</td>
<td>9.64</td>
<td>131.1</td>
<td>119.5</td>
<td>113.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Non Euro Zone</td>
<td>157.8</td>
<td>158.5</td>
<td>145.0</td>
<td>-0.44</td>
<td>8.83</td>
<td>144.2</td>
<td>128.1</td>
<td>118.1</td>
</tr>
</tbody>
</table>
Inflation Concerns are Forward Looking. Recent Trends Favorable 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 6, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070806c.jpg" width="353">
For all of the concern about rising prices that recently has been expressed in Washington by the Federal Reserve Board, the most recent price trends are quite favorable. That&#39;s even excluding the recent decline in gasoline prices
As on June, growth in the core (excluding food &amp; energy) PCE chain price index has decelerated on a three month basis to 1.6% (1.9% y/y). Which is nearly half its growth rate a year ago.
Many attribute the good pricing news to the recently weak growth in GDP. Perhaps. But price inflation is first and foremost a monetary phenomenon, and the latest news comes at a time of strong growth in M2 (6.2% y/y) and MZM (8.4% y/y). Both those growth rates are roughly double the growth during last year which was up or double the growth during 2005. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070806d.jpg" width="353">
Historically, the cash in one&#39;s pocket has mattered for pricing pressure as much as how fast the economy is growing. the Fed&#39;s vigilance of this is comforting.
To follow is a review of recent pricing patterns. To the upside has of course been the recent pressure on prices for food &amp; beverages (4.0% y/y), communication (-0.8% y/y) and personal care (3.1% y/y) led by faster growth in legal fees (5.1% y/y).
Easing price pressure is perhaps more pervasive. Growth in prices for durable goods are under downward pressure such as seen for prices of new vehicles (-1.0% y/y), household furniture (-0.8% y/y) and appliances (2.45 y/y).
Nondurables prices are showing easing price pressure as well in the apparel (-1.3% y/y) and shelter (3.7% y/y) areas.
To wrap up the areas where price pressure is easing are the medical care services (5.0% y/y), public transportation (-0.4% y/y), tenants &amp; household insurance (0.6 y/y), and education (5.7% y/y), notably tuition.
The U.S. economy always has been one where some areas experiencing rising pressure are offset by areas of slack. That suggests that one is always at risk to focus on one and not the other. The cries of &quot;depression&quot; in the economy several years ago ignored the strength that was then being seen in housing and personal income, although these latter areas were growing at slower rates. It&#39;s never easy.
When Did Inflation Persistence Change? from the Federal Reserve Bank of Cleveland is available <a href="http://www.clevelandfed.org/research/trends/2007/0807/01monpol_072607.cfm"> here</a>.

UK IP Restores Momentum 
by <a href="/comment/Brusca.html">Robert Brusca</a> August 6, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070806b.jpg" width="353">
Year-over-year and six-month trends in UK IP are steady at a pacifistic 1%. But over the past three months UK IP has now accelerated strongly to a pace of just under 4% (at 3.6%).
UK IP is up strongly in Q2 (see end of the table). The overall gain in MFG is a rate of 2.8% Capital goods are leading the growth in Q2 with a quarterly rise at a pace of 4.9%; Consumer durables are the trailing category with a pace of just +0.3% in Q2. Vehicle sales have been firm, propelling vehicle output up at a 13.4% pace in Q2. Mining activity has been strong at 3.1% in the quarter but its growth patterns seems to show some cooling. Electricity, gas and water output have been weak, at a pace of 0.1% in the quarter, but apart from that the sector&#146;s trends look solid.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
UK IP and MFG
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol"> SAAR except M/M</td>
<td colspan="3">M/M</td>
<td>Jun-07</td>
<td>May-07</td>
<td>Jun-07</td>
<td>May-07</td>
<td>Jun-07</td>
<td>May-07</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">UK MFG</td>
<td>Jun-07</td>
<td>May-07</td>
<td>Apr-07</td>
<td>3-Mo</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-mo</td>
<td>Q-to-Date</td>
</tr>
<tr class="even">
<td class="firstcol">MFG</td>
<td>0.2%</td>
<td>0.4%</td>
<td>0.3%</td>
<td>3.6%</td>
<td>4.8%</td>
<td>0.8%</td>
<td>0.8%</td>
<td>1.0%</td>
<td>1.0%</td>
<td> 2.8%</td>
</tr>
<tr class="even">
<td class="firstcol">Consumer Durables</td>
<td>3.4%</td>
<td>-0.9%</td>
<td>-1.5%</td>
<td>3.9%</td>
<td>-2.3%</td>
<td>-3.2%</td>
<td>-8.6%</td>
<td>0.5%</td>
<td>-3.1%</td>
<td> 0.3%</td>
</tr>
<tr class="even">
<td class="firstcol">Consumer Nondurables</td>
<td>-0.6%</td>
<td>0.6%</td>
<td>0.4%</td>
<td>1.6%</td>
<td>4.1%</td>
<td>-2.6%</td>
<td>0.2%</td>
<td>-0.2%</td>
<td>-0.1%</td>
<td> 1.4%</td>
</tr>
<tr class="even">
<td class="firstcol">Intermediate</td>
<td>0.2%</td>
<td>0.7%</td>
<td>0.0%</td>
<td>3.9%</td>
<td>2.6%</td>
<td>3.9%</td>
<td>1.3%</td>
<td>0.3%</td>
<td>-0.1%</td>
<td> 2.1%</td>
</tr>
<tr class="even">
<td class="firstcol">Capital</td>
<td>0.5%</td>
<td>0.5%</td>
<td>0.6%</td>
<td>6.4%</td>
<td>7.6%</td>
<td>3.0%</td>
<td>1.8%</td>
<td>3.0%</td>
<td>2.9%</td>
<td> 4.9%</td>
</tr>
<tr>
<td class="firstcol">Memo: Detail</td>
<td>1-Mo%</td>
<td>1-Mo%</td>
<td>1-Mo%</td>
<td>3-Mo</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-mo</td>
<td>Q-to-Date</td>
</tr>
<tr class="even">
<td class="firstcol">Food Drink &amp; Tobacco</td>
<td>-0.2%</td>
<td>0.3%</td>
<td>0.1%</td>
<td>0.8%</td>
<td>2.4%</td>
<td>-2.3%</td>
<td>0.0%</td>
<td>-0.4%</td>
<td>0.6%</td>
<td> 0.4%</td>
</tr>
<tr class="even">
<td class="firstcol">Textile &amp; Leather</td>
<td>1.4%</td>
<td>-0.9%</td>
<td>0.5%</td>
<td>3.8%</td>
<td>3.4%</td>
<td>0.0%</td>
<td>-0.7%</td>
<td>0.2%</td>
<td>-0.2%</td>
<td> 3.5%</td>
</tr>
<tr class="even">
<td class="firstcol">Motor Vehicles &amp; Trailer</td>
<td>2.1%</td>
<td>0.5%</td>
<td>1.3%</td>
<td>17.1%</td>
<td>17.0%</td>
<td>13.5%</td>
<td>9.5%</td>
<td>4.3%</td>
<td>2.7%</td>
<td>13.4%</td>
</tr>
<tr class="even">
<td class="firstcol">Mining and Quarry</td>
<td>-1.0%</td>
<td>1.3%</td>
<td>0.9%</td>
<td>4.9%</td>
<td>-1.0%</td>
<td>9.1%</td>
<td>2.1%</td>
<td>-0.4%</td>
<td>-2.7%</td>
<td> 3.1%</td>
</tr>
<tr class="even">
<td class="firstcol">Electricity, Gas &amp; Water</td>
<td>1.0%</td>
<td>2.4%</td>
<td>-1.2%</td>
<td>9.0%</td>
<td>0.8%</td>
<td>3.1%</td>
<td>1.0%</td>
<td>0.7%</td>
<td>0.1%</td>
<td> 0.1%</td>
</tr>
</tbody>
</table>
Italy’s IP Growth Sinks 
by <a href="/comment/Brusca.html">Robert Brusca</a> August 6, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070806a.jpg" width="353">
Unlike the strength in UK IP in June or the sharp rise in orders in Germany, Italy&#146;s MFG sector is showing a broad-based slowing.
Italy&#146;s three-month growth rates by sector tell the story of a slowdown across the board. Overall IP remains in a declining mode for both 3-month and 6-month growth rates and these are both much weaker even than its Y/Y decline. The consumer sector in Italy shows an accelerated decline in the output of both consumer durables and nondurable goods.. One minor exception is the three-month bounce back in intermediate goods, up by 2.1% over three months but still showing a six-month rate of decline of 3.4%. Transportation is the counter-trend sector with output up by a strong 9.5% over three months and up by 0.7% over six months; its Yr/yr pace stands at 4.2%.
Italy has been showing more irregularity than other Euro area countries for some time. While German industrial measures like its IFO survey show that Germany is well off peak, other measures like German orders (issued today) still show a lot strength - even acceleration. But Italy, one of the weaker EMU countries in terms of its competitiveness is showing its wear and tear more regularly. I wonder if this is the way the strong euro will undermine the Euro area, by gnawing away at its weakest members first&#133;

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Italy 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-month</td>
<td>6-month</td>
<td>12-month</td>
</tr>
<tr>
<td class="firstcol">IP-MFG</td>
<td>-0.7%</td>
<td>0.6%</td>
<td>-1.0%</td>
<td>-4.4%</td>
<td>-5.5%</td>
<td>-0.3%</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods</td>
<td>-1.5%</td>
<td>0.3%</td>
<td>-2.0%</td>
<td>-11.8%</td>
<td>-9.7%</td>
<td>-3.5%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>-1.0%</td>
<td>1.2%</td>
<td>-2.1%</td>
<td>-7.3%</td>
<td>-4.9%</td>
<td>1.2%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>0.4%</td>
<td>0.8%</td>
<td>-0.7%</td>
<td>2.1%</td>
<td>-3.4%</td>
<td>0.6%</td>
</tr>
<tr>
<td class="firstcol">Memo: Transportation</td>
<td>0.2%</td>
<td>5.5%</td>
<td>-3.2%</td>
<td>9.5%</td>
<td>0.7%</td>
<td>4.2%</td>
</tr>
</tbody>
</table>
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German new orders for manufacturing in nominal terms rose 4.65% in June from May. This was the largest month to month rise since December, 2004. The rise was due almost entirely to a rise in foreign orders, which rose 8.90% from May [...]

June manufacturing New Orders in Germany Rise Sharply While Sales Show a Small Decline

Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070803e.jpg" width="353">
Higher crude oil prices were a contributing factor in the recent stock price gyrations, as West Texas Intermediate (WTI) looked to be approaching $80/barrel. The high spot price came Tuesday, July 31, at $78.22; by yesterday, it had eased to $76.87. For UK Brent, yesterday&#39;s close was $76.29 after several days over the last couple of weeks that were above $78.00, with a high of $79.09 on July 20.
The most recent demand data show world petroleum use of 86.1 million barrels/day (mb/d) in June, up 2.1% from May and the fourth largest monthly amount ever. This estimate is from Oil Market Intelligence and is included in the OMI database that Haver markets in partnership with OMI&#39;s parent, Energy Intelligence. Generally, as seen in the second graph here, while the latest month&#39;s demand is up, the last 18 months or so have kept to a range around a fairly flat trend; growth over the year-ago period was a modest 0.6% in June.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070803f.jpg" width="353">
In the US, demand has been steady in recent weeks just over 20.9 mb/d, down from the spring&#39;s highs of about 21.3 mb/d. For July, this was about 1.0% above year-earlier amounts. As we have mentioned before here, US product demand, especially for gasoline, did not ease last winter as is usually the case. Thus, in the last three months, while US use of gasoline has remained higher than a year ago, that growth has slowed markedly from what it was in the mild wintertime. Even so, inventories have stayed tight, and the days&#39; supply measure remains at just 21.4, noticeably below anytime prior to last winter (except during severe hurricanes).
Despite higher crude prices and the tight supply of gasoline, the latest retail gasoline prices have been down a bit. In the July 30 week, the national average for regular was $2.876/gallon, off 8.2 cents from the prior week and below the year-ago $3.004. This combination impacts petroleum refiners. With gasoline prices a bit lower when crude is higher, there is considerable pressure on the refining margin, or the &quot;crack spread&quot;. In the July 27 week, it was $11.71/barrel, down from $20.50 just two weeks earlier and and an average of $22.85 across April, May and June. While this latest is much lower than just a few weeks ago, it is not &quot;low&quot; historically. Prior to 2004, this weekly figure had been above $10 only about half-a-dozen times. At the same time, on a percentage basis, the current number is more representative: it is 13.5% of the &quot;estimated product value&quot;, a ratio well within the range of the last five or six years and indeed below the customary amount in prior times.
Sometimes, when oil prices rise, the stock market can respond favorably, as oil companies may see higher profits. But the current restraint on gasoline prices and the squeeze on refining margins suggests that this may not necessarily be the present outcome.
The weekly oil-market data are contained in Haver&#39;s OILWKLY database, maintained in conjunction with the Oil and Gas Journal. Daily prices are in the DAILY database.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070803g.jpg" width="353"><img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070803h.jpg" width="353">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Select Oil Market Indicators</th>
<th scope="col">Aug 2 (Day)</th>
<th scope="col">July 27, 2007</th>
<th scope="col">July 20, 2007</th>
<th scope="col">July 28, 2006</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">Gasoline, US Regular Grade (cents/gal)</td>
<td>--</td>
<td>287.6</td>
<td>295.8</td>
<td>300.4</td>
<td>257.2</td>
<td>227.0</td>
<td>185.2</td>
</tr>
<tr>
<td class="firstcol">Crude: WTI ($/barrel)</td>
<td>76.87</td>
<td>75.24</td>
<td>74.95</td>
<td>73.97</td>
<td>66.13</td>
<td>56.50</td>
<td>41.33</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude: UK Brent ($/barrel)</td>
<td>76.29</td>
<td>77.22</td>
<td>78.35</td>
<td>73.39</td>
<td>65.19</td>
<td>54.58</td>
<td>38.10</td>
</tr>
<tr>
<td class="firstcol">Gasoline Stocks:&nbsp; Days&#39; Supply</td>
<td>--</td>
<td>21.4</td>
<td>21.4</td>
<td>22.2</td>
<td>22.7</td>
<td>22.8</td>
<td>23.2</td>
</tr>
</tbody>
</table>
</body>
</html>

Higher crude oil prices were a contributing factor in the recent stock price gyrations, as West Texas Intermediate (WTI) looked to be approaching $80/barrel. The high spot price came Tuesday, July 31, at $78.22; by yesterday, it had [...]

Gasoline Prices Ease Further; Refining Margins Reduced

Robert Brusca

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070803j.jpg" width="353">
Service sector in clear slow down as the index drops from its peak.
The slowdown in the services sector indicated by the NTC service sector index is, in its character, much like that in the MFG sector with only some small shifts in the date of past cycle peaks. Like the MFG sector report, the service sector shows that a slowdown is in train. Also like the MFG report the services sector slowdown is at a slower pace than it has been in the past. Indeed on the chart the hopeful sign is that after its retrenchment services may once again be back in the growth channel and growing.
Right now the Euro area economy is 13 months past it service sector peak for this cycle. At this point the index is lower by 3.8%. In the previous three cycles at the 13 month mark the services index would have been down by 9.5% from that peak. That is to say that the slowdown would have been more severe by about one third. Although some of the past cycles peaked at a high point than this one has, due to the slower erosion of the service index, the current index not only has fallen by less, but it stands at a higher point than for any of the past cycles 13-months past their peak.
The UK continues to break the mold and to part company with EMU members as the drop in the UK service sector brings it to its lowest level since Sept of 2006. Most EMU countries are seeing the service sector rebound over the past two months; for the UK it&#146;s been erosion. For the main EU countries their services indexes were last lower in May or June of this year, very recently. So the rebound is very tentative.
Still, based on the range of values since early 2000 it is Germany with the relatively strongest service sector. Its 58.47 reading for the service sector is still in the top 15 percentile of its values over the period. As an individual country, the UK would be the second highest in its range for the grouping in terms of its service sector rank within its range, but for the whole of EMU the services index stands in the top 22 per cent of its range, above the UK on this score. In terms of raw services readings the UK reading of 57.0 is not strong, but comparisons across countries are better done with reference to each countries&#146; own range since variability characteristics are not standardized across countries.
Hold that pose - our picture of Europe. The picture we get of Europe is that the MFG indexes are sliding and so are the services measures. But the pace of slippage is less than what it has been in the past. At the same time employment conditions (unemployment) are improving. The labor market always lags activity so this is not telling yet. The interesting question for Europe is whether this slide will stop the improvement in unemployment or whether it is a minor meltdown that will permit unemployment progress to continue. If unemployment progress continues, there is some chance to pull the retail sector into the recovery it has not yet joined and to thereby extend the expansion.
Right now the performance of Europe is remarkable given the strength of the euro (and the pound) as those currencies have still been edging higher this year from already high levels. With exporters more &#145;up against it&#146; for competitiveness reasons, an improvement in domestic demand based on the consumer supported by a still improving job market is just what Europe needs. However, it is not clear if that is attainable especially with the ECB and BOE worried over inflation trends and with each block poised to hike rates. Lurking in the background, should recovery slip, is the pressure, right now emanating from France, to press more on China over trade issues. Protectionism is always more compelling when domestic growth weakens.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
NTC Services Indexes
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jul-07</td>
<td>Jun-07</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Percentile*</td>
</tr>
<tr>
<td class="firstcol">Euro-13</td>
<td>58.34</td>
<td>58.33</td>
<td>57.98</td>
<td>57.63</td>
<td>57.42</td>
<td>78.5%</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>58.47</td>
<td>58.88</td>
<td>58.27</td>
<td>57.90</td>
<td>56.91</td>
<td>85.8%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>58.93</td>
<td>58.98</td>
<td>58.61</td>
<td>58.77</td>
<td>59.40</td>
<td>60.7%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>58.46</td>
<td>57.92</td>
<td>57.64</td>
<td>56.18</td>
<td>55.81</td>
<td>71.8%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>56.33</td>
<td>55.31</td>
<td>55.95</td>
<td>55.91</td>
<td>56.94</td>
<td>68.4%</td>
</tr>
<tr>
<td class="firstcol">Ireland</td>
<td>56.19</td>
<td>56.93</td>
<td>56.00</td>
<td>58.37</td>
<td>59.49</td>
<td>47.9%</td>
</tr>
<tr>
<td class="firstcol">EU only</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>57.02</td>
<td>57.74</td>
<td>57.31</td>
<td>57.36</td>
<td>58.06</td>
<td>75.2%</td>
</tr>
<tr>
<td colspan="5">*Percentile is over range since May 2000</td>
<td></td>
<td></td>
</tr>
</tbody>
</table>
</body>
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Service sector in clear slow down as the index drops from its peak. The slowdown in the services sector indicated by the NTC service sector index is, in its character, much like that in the MFG sector with only some small shifts in [...]

Euro Area Services Sector Points to Slow Down but Slower Slow Down

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070803i.jpg" width="353">
With Q2 data complete, at least preliminarily, Euro area retail sales are continuing to show lethargy. For the quarter as a whole, retail sales volumes are up by only 0.6% at an annual rate over Q1. This follows a 0.2% result in Q1. Food purchases are off by 0.1% at an annual rate in Q2. Nonfood is doing somewhat better with a Q/Q annual rate gain of 1.4%. Still, this is no growth leader.
Germany is poised for a normal &#145;German recovery&#146; to take hold &#150; or so officials continue to say. This means that after a trade-led rebound with a strong capital goods sector, the consumer joins the party late. So far there is little evidence that Germany has turned that corner. The VAT hike at year end has surely been a part of the reason. But we are now at mid-year and German sales in Q2 are compared to a VAT distorted and weak Q1. And while Germany&#146;s retail volumes are up at a strong-seeming 6.5% annual rate in Q2/Q1 that compares to a -15.8% drop in Q1, it isn&#146;t really much of a rebound. Year-over-year German sales volumes are off by 0.7%. For all of the Euro area the Y/Y sales gain is 1.0%; nearly twice that for nonfoods at a 1.8% annual rate.
Within Europe the UK (not an EMU member but an EU member and one with a still strong exchange rate) continues to show strong retail sales results. The UK housing market is still strong. The Bank of England, like the ECB, is still warning about inflation pressures and probably is headed for another rate hike. But the UK consumer has been much more active that the typical Euro area consumer. In EMU, unemployment rates are still high, but they have been falling steadily. The proximity to low cost Eastern Europe may be one factor holding back consumer optimism. But one thing is clear, as surely as Europe has had a solid recovery underway, the consumer has been left behind. If Euro area job market improvement continues, this should change, but so far there is little evidence of it and leading economic barometers are showing that a tendency to slow is in the pipeline.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
 Euro area&nbsp; Retail Sales Volume
</tr>
</thead>
<tbody>
<tr class="grey4">
<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>
</tr>
<tr class="grey3">
<td class="firstcol">Euro area 13 Total</td>
<td>0.4%</td>
<td>-0.7%</td>
<td>-0.1%</td>
<td>-1.3%</td>
<td>-0.6%</td>
<td>0.9%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Food</td>
<td>0.0%</td>
<td>-0.7%</td>
<td>-0.1%</td>
<td>-3.3%</td>
<td>-0.5%</td>
<td>-0.7%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Nonfood</td>
<td>0.8%</td>
<td>-0.7%</td>
<td>0.1%</td>
<td>0.6%</td>
<td>0.0%</td>
<td>2.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Textiles</td>
<td>#N/A</td>
<td>-3.1%</td>
<td>1.4%</td>
<td>-6.5%</td>
<td>-1.3%</td>
<td>0.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">HH Goods</td>
<td>#N/A</td>
<td>-0.4%</td>
<td>-1.0%</td>
<td>-1.8%</td>
<td>-2.5%</td>
<td>1.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Books news, etc</td>
<td>#N/A</td>
<td>-0.7%</td>
<td>-0.3%</td>
<td>-1.1%</td>
<td>-0.6%</td>
<td>0.3%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Pharma</td>
<td>#N/A</td>
<td>0.5%</td>
<td>0.1%</td>
<td>3.7%</td>
<td>3.4%</td>
<td>3.4%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Other NonSpec</td>
<td>#N/A</td>
<td>-0.7%</td>
<td>-0.8%</td>
<td>-3.3%</td>
<td>-2.1%</td>
<td>-1.6%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Mail Order</td>
<td>#N/A</td>
<td>1.4%</td>
<td>0.7%</td>
<td>1.7%</td>
<td>3.1%</td>
<td>0.0%</td>
</tr>
<tr class="grey2">
<td colspan="7">NonFood Country detail;Volume</td>
</tr>
<tr class="grey1">
<td class="firstcol">Germany</td>
<td>1.6%</td>
<td>-3.4%</td>
<td>2.2%</td>
<td>1.2%</td>
<td>-10.0%</td>
<td>-1.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">France</td>
<td>#N/A</td>
<td>0.0%</td>
<td>0.1%</td>
<td>3.6%</td>
<td>4.3%</td>
<td>4.2%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Italy (Total; Value)</td>
<td>#N/A</td>
<td>-0.2%</td>
<td>-0.5%</td>
<td>-2.1%</td>
<td>-2.2%</td>
<td>-1.6%</td>
</tr>
<tr class="grey3">
<td class="firstcol">UK (EU)</td>
<td>0.9%</td>
<td>0.3%</td>
<td>-0.1%</td>
<td>4.7%</td>
<td>5.2%</td>
<td>6.4%</td>
</tr>
<tr class="grey3">
<td colspan="7">Shaded areas calculated on a one-month lag due to lagging data.</td>
</tr>
<tr class="grey3">
<td colspan="7">The EA 13 countries are Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Slovenia and Spain.</td>
</tr>
<tr class="grey3">
<td class="firstcol">7COLSPAN</td>
</tr>
</tbody>
</table>
</body>
</html>

With Q2 data complete, at least preliminarily, Euro area retail sales are continuing to show lethargy. For the quarter as a whole, retail sales volumes are up by only 0.6% at an annual rate over Q1. This follows a 0.2% result in Q1. [...]

Euro Area Retail Sales Stay in Slowdown Mode

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070803d.jpg" width="353">
The non-manufacturing sector Business Activity Index for July fell back to 55.8 from an unrevised 60.7 during the prior month according to the Institute for Supply Management.
Since the series&#39; inception in 1997 there has been a 46% correlation between the level of the Business Activity Index and the Q/Q change in real GDP for services plus construction.
The employment sub index also fell to 51.7 from the high of 55.0 in June. Since the series&#39; inception in 1997 there has been a 56% correlation between the level of the ISM non-manufacturing employment index and the m/m change in payroll employment in the service producing plus the construction industries.
The new orders index also fell m/m to 52.8 from 56.9 in June, down for the second month in a row but the latest still indicates growth in new orders.
Pricing power also slipped for the second month, but by a hard 4.2 points to 61.3, the lowest level since February. Since inception eight years ago, there has been a 70% correlation between the price index and the y/y change in the GDP services chain price index.
ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The non-manufacturing survey dates back to July 1997.
Business Activity Index for the non-manufacturing sector reflects a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index is a weighted average five components.. 

<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/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">July &#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">Business Activity Index</td>
<td>55.8</td>
<td>60.7</td>
<td>55.7</td>
<td>58.0</td>
<td>60.2</td>
<td>62.5</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>61.3</td>
<td>65.5</td>
<td>72.1</td>
<td>65.2</td>
<td>68.0</td>
<td>68.8</td>
</tr>
</tbody>
</table>


</html>

The non-manufacturing sector Business Activity Index for July fell back to 55.8 from an unrevised 60.7 during the prior month according to the Institute for Supply Management. Since the series' inception in 1997 there has been a 46% [...]

ISM Nonmanufacturing July Index Below Forecasts

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070803c.jpg" width="353">
Nonfarm payrolls grew 92,000 during July. The increase was a bit below the Consensus forecast for a 128,000 rise and the prior two months&#39; gains were revised slightly downward.
The three month change in payrolls slowed to 135,000 on average. That&#39;s about equal to the 136,000 average change so far this year but below the average of 189,000 last year and 212,000 during 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070803a.jpg" width="353">
The unemployment rate moved up to 4.6% last month from 4.5% during June. Household employment fell 30,000 (+1.2%) following a 197,000 rise during June. The labor force jumped another 159,000 (1.1% y/y). The labor force participation rate held steady at 66.1%.
From the establishment survey, private service sector jobs posted a 132,000 (2.0%) gain after a 114,000 June rise which was revised slightly higher. Last year&#146;s average gain was 159,000 per month. Retail employment actually fell a modest 1,200 (+0.5% y/y) during July and the average this year has been just 8,000 per month after an outright decline of 2,700 per month during 2006. In the financial sector, jobs recovered from the prior month&#39;s 2,000 decline and grew 27,000 (1.4% y/y) for an average gain of 7,000 this year versus 16,000 last year. Professional &amp; business services employment rose 26,000 after June&#39;s upwardly revised 7,000 increase. The average gain this year has been 19,000 per month, off from last year&#39;s average of 42,000.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070803b.jpg" width="353">
Factory sector payrolls fell 2,000 (-1.2 y/y) and jobs have fallen in every month during the last twelve. Construction employment reversed the prior month&#39;s downwardly revised 3,000 increase with a 12,000 (-0.7% y/y) decline. Construction jobs have fallen 5,000 per month this year versus an average 11,000 increase per month during 2006.
Government payrolls fell 28,000 (+1.1% y/y) and in 2007 have risen an average 16,000, near the per month average last year of 20,000.
Average hourly earnings increased 0.3% and the 0.4% gain in June was upwardly revised. Factory sector earnings rose 0.3% (3.0% y/y) and private service producing earnings rose a firm 0.4% (4.1% y/y) after June&#39;s upwardly revised 0.5% increase. The monthly average increase in overall average hourly earnings this year has been 0.3% versus, down from 0.4% per month last year.
Phillips Curve Instability and Optimal Monetary Policy from the Federal Reserve Bank Of Kansas City is available <a href="http://www.kansascityfed.org/Publicat/Reswkpap/PDF/RWP07-04.pdf"> here</a>. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB01/@EB01.HTM">Employment</a></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 class="odd">
<td class="firstcol">Payroll Employment</td>
<td>92,000</td>
<td>126,000</td>
<td>1.4%</td>
<td>1.9%</td>
<td>1.7%</td>
<td>1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-2,000</td>
<td>-13,000</td>
<td>-1.2%</td>
<td>-0.2%</td>
<td>-0.6%</td>
<td>-1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.8</td>
<td>33.9</td>
<td>33.9 (July &#39;06)</td>
<td>33.8</td>
<td>33.8</td>
<td>33.7</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.3%</td>
<td>0.4%</td>
<td>3.9%</td>
<td>3.9%</td>
<td>2.8%</td>
<td>2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>4.6%</td>
<td>4.5%</td>
<td>4.8% (July &#39;06)</td>
<td>4.6%</td>
<td>5.1%</td>
<td>5.5%</td>
</tr>
</tbody>
</table>
</body>
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Nonfarm payrolls grew 92,000 during July. The increase was a bit below the Consensus forecast for a 128,000 rise and the prior two months' gains were revised slightly downward. The three month change in payrolls slowed to 135,000 on [...]

July Payrolls a Bit Light, Revisions Minor

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070803l.jpg" width="353">
The NTC MFG survey shows that among EMU members in the table only Austria and Greece saw their MFG sectors improve month to month in July. Over three months you can add The Netherlands to that list. Over six months while EMU-wide MFG conditions eased in terms of the NTC index, only four EMU countries in the table saw their MFG sectors weaken (Germany, Italy, Spain and Austria). Over 12-months, however, all EMU members in this table except Greece are weaker. To be sure the slowdown in the EMU MFG sector is real and is widespread. It is also one that is in slow motion so that the overall MFG reading is still a relatively strong reading in the top 32 percent of its range (range since March of 2000). Previously the average EMU-wide drop in the NTC MFG index 13-months from its peak was 8%. In 2007 the drop 13-months after its peak is just 4.8%, the smallest by far. And although other cycles had peaked at a higher point (in 2000, for example) since 2000 this is still the highest index reading for Euro MFG 13 months after it had peaked. So the Euro-economy is proving itself to be very resilient even though the MFG slowing is quite widespread.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
NTC MFG Indexes
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jul-07</td>
<td>Jun-07</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Percentile*</td>
</tr>
<tr>
<td class="firstcol">Euro-13</td>
<td>54.90</td>
<td>55.56</td>
<td>55.16</td>
<td>55.31</td>
<td>55.89</td>
<td>68.2%</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>56.75</td>
<td>57.33</td>
<td>56.71</td>
<td>56.88</td>
<td>57.71</td>
<td>78.0%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>53.34</td>
<td>53.75</td>
<td>53.80</td>
<td>53.75</td>
<td>54.50</td>
<td>49.6%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>53.34</td>
<td>53.98</td>
<td>54.11</td>
<td>54.05</td>
<td>54.44</td>
<td>60.2%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>53.22</td>
<td>55.05</td>
<td>53.86</td>
<td>54.87</td>
<td>55.50</td>
<td>69.6%</td>
</tr>
<tr>
<td class="firstcol">Austria</td>
<td>53.81</td>
<td>53.54</td>
<td>53.80</td>
<td>54.61</td>
<td>56.07</td>
<td>67.5%</td>
</tr>
<tr>
<td class="firstcol">Greece</td>
<td>53.95</td>
<td>53.48</td>
<td>53.84</td>
<td>53.76</td>
<td>53.04</td>
<td>54.3%</td>
</tr>
<tr>
<td class="firstcol">Ireland</td>
<td>53.09</td>
<td>53.98</td>
<td>53.00</td>
<td>52.89</td>
<td>52.98</td>
<td>69.2%</td>
</tr>
<tr>
<td class="firstcol">Netherlands</td>
<td>58.19</td>
<td>58.84</td>
<td>57.72</td>
<td>57.66</td>
<td>57.09</td>
<td>90.3%</td>
</tr>
<tr>
<td class="firstcol">EU</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>55.74</td>
<td>54.74</td>
<td>55.11</td>
<td>54.85</td>
<td>54.00</td>
<td>95.2%</td>
</tr>
<tr>
<td colspan="5">*Percentile is over range since March 2000</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body>
</html>

The NTC MFG survey shows that among EMU members in the table only Austria and Greece saw their MFG sectors improve month to month in July. Over three months you can add The Netherlands to that list. Over six months while EMU-wide MFG [...]

NTC Shows Euro MFG is Slowing… but oh so slowly

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.

251107.jpg

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.

251106Z2.jpg

**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.

251106Z3.jpg

**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.

251106Z4.jpg

**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.

251106Z5.jpg

**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

Jump to:

June manufacturing New Orders in Germany Rise Sharply While Sales Show a Small Decline

Gasoline Prices Ease Further; Refining Margins Reduced

Euro Area Services Sector Points to Slow Down but Slower Slow Down

Euro Area Retail Sales Stay in Slowdown Mode

ISM Nonmanufacturing July Index Below Forecasts

July Payrolls a Bit Light, Revisions Minor

Gasoline Prices Ease Further; Refining Margins Reduced

NTC Shows Euro MFG is Slowing… but oh so slowly