Robert Brusca

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

Carol Stone, CBE

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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/070802i.jpg" width="353">
Sweden&#39;s GDP expanded by a 1.0% quarterly amount in Q2, Statistics Sweden reported this morning, a pickup from 0.7% in Q1. Year-on-year growth was 3.5%, compared to 3.0% in Q1. The gain during 2006 was 4.2%.
Two demand sectors dominated: fixed investment and exports of services. Investment actually slowed a bit from Q1, but at 2.0%, still had a sizable gain; Q1 had been 3.2%. The later figure is 9.2% ahead of the year earlier. The growth was concentrated in the private sector, which saw a 10.2% gain from Q2 2006. Consumer spending by households rose 0.6% in both Q1 and Q2 and was ahead of early 2006 by 2.5%, in line with the last several years. In the graph here, the &quot;recession shading&quot; covers periods of recession in Sweden, one of 17 countries besides the United States included in the &quot;recession country&quot; feature of DLXVG3; this item is not new, it&#39;s been part of Haver&#39;sa software for several years. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070802j.jpg" width="353">
Sweden is a very &quot;open&quot; economy; its exports and imports added together made 97% of GDP in Q1, measured in nominal terms. For comparison, the EA-13 countries together have just over 80% of GDP involved with exports or imports, and in the US, the figure is a modest 28%. [All of these shares are calculated using nominal data in local currency.] So Sweden&#39;s trade is important. We see that the performance of exports during the first half of this year is divided: goods exports fell, by 0.2% in Q1 and 0.6% in Q2 [growth rates compare values in chained 2000 Swedish Kronor], while services surged by 3.1% in Q1 and 4.4% in Q2. These strong gains put Q2&#39;s volume of services exports more than 13% ahead of a year ago. They have increased at a double-digit year-on-year pace continuously since Q4 2003. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070802k.jpg" width="353">
On the import side, goods imports also fell in Q2, by 0.6%, although they had expanded 2.1% in Q1. Imports of services have also been growing, but not nearly as fast as exports. Their annualized growth has averaged 8.7% since the first quarter of 2005.
The detail in this early GDP report does not permit us to see which services exports are making for the category&#39;s strength. However, the data on value added by industry do show that the transportation &amp; communications sector and the hotel-restaurant sector have seen sizable increases. So have the construction and business services industries. So Swedish firms working abroad or working for international clients are adding significantly to growth in Sweden, and it looks that travel and tourism in Sweden are also on the rise. Notably, unlike a number of other countries&#39; economies, the finance and insurance sector has not experienced particularly vigorous expansion. It is keeping up, as seen in the last graph here, but it is not the growth leader as it is elsewhere. Sweden&#39;s comparative advantages lie in other areas. </div>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">SWEDEN</th>
Q2 2007
Q1 2007
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Qtr/Qtr*</td>
<td>Yr/Yr</td>
<td>Qtr/Qtr*</td>
<td>Yr/Yr</td>
</tr>
<tr>
<td class="firstcol">Total GDP, Bil.SEK</td>
<td colspan="2">668.2</td>
<td colspan="2">661.9</td>
<td>2595.6</td>
<td>2848.6</td>
<td>2415.1</td>
</tr>
<tr>
<td class="firstcol">1.0</td>
<td>3.5</td>
<td>0.7</td>
<td>3.0</td>
<td>4.2</td>
<td>2.9</td>
<td>4.1</td>
</tr>
<tr>
<td class="firstcol">Household Consumption</td>
<td>0.6</td>
<td>2.5</td>
<td>0.6</td>
<td>2.5</td>
<td>2.8</td>
<td>2.4</td>
<td>2.2</td>
</tr>
<tr>
<td class="firstcol">Gross Fixed Investment</td>
<td>2.0</td>
<td>9.2</td>
<td>3.2</td>
<td>12.7</td>
<td>7.9</td>
<td>8.1</td>
<td>6.4</td>
</tr>
<tr>
<td class="firstcol">Exports: Goods</td>
<td>-0.6</td>
<td>3.4</td>
<td>-0.2</td>
<td>3.8</td>
<td>8.0</td>
<td>5.1</td>
<td>10.2</td>
</tr>
<tr>
<td class="firstcol">Exports: Services</td>
<td>4.4</td>
<td>13.2</td>
<td>3.1</td>
<td>10.7</td>
<td>10.7</td>
<td>11.5</td>
<td>14.4</td>
</tr>
<tr>
<td class="firstcol">Imports: Goods</td>
<td>-0.6</td>
<td>7.4</td>
<td>2.1</td>
<td>10.6</td>
<td>7.7</td>
<td>7.9</td>
<td>7.6</td>
</tr>
<tr>
<td class="firstcol">Imports: Services</td>
<td>1.7</td>
<td>9.1</td>
<td>3.2</td>
<td>10.8</td>
<td>8.5</td>
<td>4.0</td>
<td>5.3</td>
</tr>
<tr>
<td class="firstcol">GVA: Industry</td>
<td>1.3</td>
<td>3.9</td>
<td>0.6</td>
<td>3.1</td>
<td>4.9</td>
<td>3.5</td>
<td>9.3</td>
</tr>
<tr>
<td class="firstcol">GVA: Services</td>
<td>1.6</td>
<td>4.3</td>
<td>0.7</td>
<td>3.8</td>
<td>5.5</td>
<td>3.8</td>
<td>2.7</td>
</tr>
</tbody>
</table>
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Sweden's GDP expanded by a 1.0% quarterly amount in Q2, Statistics Sweden reported this morning, a pickup from 0.7% in Q1. Year-on-year growth was 3.5%, compared to 3.0% in Q1. The gain during 2006 was 4.2%. Two demand sectors [...]

Swedish GDP Grows 1.0% in Q2, Led by Fixed Investment and Exports of Services

Tom Moeller

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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/070802g.jpg" width="353">
Factory inventories rose 0.3% during June following a 0.4% gain during May. While moderate, the increases are up from the 0.1% three month average growth ended February.
Growth in primary metals inventories picked up during the past three months as did growth in light truck inventories. Growth in inventories of nondefense aircraft &amp; parts also has soared. In most other durable goods categories, however, growth in inventories has slowed recently. Many industries have seen outright decumulation such as in furniture and computers &amp; electronic products. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070802h.jpg" width="353">
A slowdown in growth of factory shipments caused the recent inventory back-up. Shipments have fallen in three of this year&rsquo;s months. For June the three month growth rate fell to 1.2%, helped by a 0.6% decline in June. The same pattern of recovery then a fall in growth is evident in shipments less the transportation sector.
Total factory orders rose 0.6% in June and that reversed the prior month&rsquo;s 0.5% decline. Durable goods orders jumped 1.3%. The rise, however, only recovered some of the prior month&rsquo;s 2.4% decline. Factory orders less transportation fell 0.5% (-1.3% y/y) while orders (shipments really) to petroleum refineries were unchanged (-5.5% y/y.
Unfilled orders continued their rise with a 1.4% gain during June. Less the transportation sector, where backlogs of civilian aircraft are up 43.3% y/y, backlogs rose 0.1% (9.6% y/y). </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/USECON/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory Survey</a> (NAICS)</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>0.3%</td>
<td>0.4%</td>
<td>3.7%</td>
<td>6.4%</td>
<td>8.9%</td>
<td>7.7%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>0.6%</td>
<td>-0.5%</td>
<td>-0.7%</td>
<td>5.1%</td>
<td>11.6%</td>
<td>6.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>-0.6%</td>
<td>0.8%</td>
<td>-0.9%</td>
<td>4.3%</td>
<td>10.3%</td>
<td>6.9%</td>
</tr>
<tr>
<td class="firstcol">Unfilled Orders</td>
<td>1.4%</td>
<td>0.9%</td>
<td>19.6%</td>
<td>20.0%</td>
<td>15.0%</td>
<td>3.9%</td>
</tr>
</tbody>
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Factory inventories rose 0.3% during June following a 0.4% gain during May. While moderate, the increases are up from the 0.1% three month average growth ended February. Growth in primary metals inventories picked up during the past [...]

U.S. Factory Inventory Growth Recovered

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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/070802f.jpg" width="353">
Headline rise in June is +0.1% after +0.3% in May. 
Core trends pointing right directions but still at strong pace.
While the ECB may be happy with the direction for inflation, the pace is nonetheless too high and the rate of reduction is still slow (except in Italy where this partial &#145;core measure&#146; of inflation is falling from a much higher pace). 
For all of EMU, PPI excluding energy and construction peaked at 3.6% in August of 2006 and has edged lower to 3.1% in June of 2007. That&#146;s a reduction of 0.5% in the annual rate over a period of 10 months. That means it will take this quasi-core measure ( Q-core) about 22 months to get back to the CEILING rate of acceptability at 2%. That is a long wait for an inflation rate that already has been over the 2% limit for 36 months already. It would make one-half of a decade that the ECB &#145;allowed&#146; Q-core inflation to run at a pace above its expressed ceiling. 
The various key countries in the second graph do not have characteristics much different from this.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070802e.jpg" width="353"> 
The table below gives us a sense of some of the details of the EMU PPI and some country level trends for overall and excluding energy PPI inflation. We express in RED those inflation rates where the pace is lower than in the previous period provided in the table. For example, nearly all categories and countries show inflation lower over the recent 12 months than in the previous 12 months. But only the UK shows inflation lower in the recent six month compared to the previous 12 months as well. And while some countries show lower inflation in the past three months than in the past six months, the general speed up for inflation in the six month pace compared to a year-ago does not make the current step down look like it is part of a fundamental trend. And that is a problem.
For the EMU PPI categories, only capital goods prices are below the 2% mark over three months although capital goods almost makes the grade for six months and the index is well below 2% for the past and previous 12 months. But this category stands alone in those respects. Capital goods prices have remained well behaved and have only one small and technical violation of the 2% ceiling. Of course I don&#146;t mean to imply that the ECB &#145;targets&#146; inflation below 2% for each price category; the rate ceiling applies to only headline inflation. But it is instructive to look at member countries as well as various categories to see where the outliers are.
Among countries only the Non EMU member EU-member UK has sequentially lower inflation rates with inflation falling steadily across all horizons in the table. UK ex-energy inflation trend does not do so well but it is on a better track than any EMU member.
On balance, neither overall nor country level trends in the PPI can encourage the ECB on inflation. And theses figure are for the PPI; services sector inflation, a key ingredient in national CPI (HICP) inflation rates is generally a bit more stubborn.</div>

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Euro area and UK PPI Trends
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="2">M/M</td>
<td colspan="4">SAAR</td>
</tr>
<tr>
<td class="firstcol">EA 13</td>
<td>Jun-07</td>
<td>May-07</td>
<td>3-Mo</td>
<td>6-MO</td>
<td>Yr/Yr</td>
<td>Y/Y Yr Ago</td>
</tr>
<tr>
<td class="firstcol">Total ex Construction</td>
<td>0.1%</td>
<td>0.3%</td>
<td>3.8%</td>
<td>3.8%</td>
<td>2.3%</td>
<td>5.8%</td>
</tr>
<tr>
<td class="firstcol">Excl Energy</td>
<td>0.1%</td>
<td>0.3%</td>
<td>3.6%</td>
<td>3.8%</td>
<td>3.1%</td>
<td>3.0%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>0.0%</td>
<td>0.1%</td>
<td>0.7%</td>
<td>2.1%</td>
<td>1.9%</td>
<td>1.3%</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.7%</td>
<td>2.6%</td>
<td>1.6%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Intermediate &amp;Capital Goods</td>
<td>0.1%</td>
<td>0.3%</td>
<td>3.8%</td>
<td>4.5%</td>
<td>3.9%</td>
<td>3.7%</td>
</tr>
<tr>
<td class="firstcol">Energy</td>
<td>0.1%</td>
<td>0.6%</td>
<td>4.9%</td>
<td>3.8%</td>
<td>-0.5%</td>
<td>15.9%</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>0.2%</td>
<td>0.4%</td>
<td>6.0%</td>
<td>5.1%</td>
<td>2.6%</td>
<td>3.9%</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>0.2%</td>
<td>0.3%</td>
<td>2.4%</td>
<td>2.2%</td>
<td>1.7%</td>
<td>6.1%</td>
</tr>
<tr>
<td class="firstcol">Ex Energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>3.3%</td>
<td>2.9%</td>
<td>2.8%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>0.2%</td>
<td>0.2%</td>
<td>3.6%</td>
<td>3.4%</td>
<td>1.9%</td>
<td>3.9%</td>
</tr>
<tr>
<td class="firstcol">Ex Energy</td>
<td>0.1%</td>
<td>0.2%</td>
<td>3.0%</td>
<td>3.0%</td>
<td>2.6%</td>
<td>2.3%</td>
</tr>
<tr>
<td class="firstcol">Itlay</td>
<td>0.2%</td>
<td>0.4%</td>
<td>4.4%</td>
<td>3.9%</td>
<td>2.8%</td>
<td>6.2%</td>
</tr>
<tr>
<td class="firstcol">Ex Energy</td>
<td>0.1%</td>
<td>0.3%</td>
<td>3.5%</td>
<td>4.1%</td>
<td>3.2%</td>
<td>3.7%</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>-0.2%</td>
<td>0.2%</td>
<td>-7.6%</td>
<td>-7.1%</td>
<td>0.6%</td>
<td>9.8%</td>
</tr>
<tr>
<td class="firstcol">Ex Energy</td>
<td>0.1%</td>
<td>0.2%</td>
<td>1.4%</td>
<td>3.6%</td>
<td>2.9%</td>
<td>3.1%</td>
</tr>
<tr>
<td colspan="4">EA 13 Harmonized PPI excluding Construction</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td colspan="6">The EA 13 countries are Austria, Belgium, Finland, France,&nbsp; Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Slovenia.</td>
<td></td>
</tr>
<tr>
<td class="firstcol">6COLSPAN</td>
<td></td>
</tr>
</tbody>
</table>
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Headline rise in June is +0.1% after +0.3% in May. Core trends pointing right directions but still at strong pace. While the ECB may be happy with the direction for inflation, the pace is nonetheless too high and the rate of reduction [...]

PPI Trends Flatten Out and Decline Across EMU

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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/070802c.jpg" width="353">
During July, U.S. sales of light vehicles fell for the seventh consecutive month this year. The decline was attributed by manufactures to spillover effects from weak housing &amp; construction activity.
The 0.4% m/m decline to an annualized selling rate of 15.5M units, according to the Autodata Corporation, was slight but it dropped sales nearly 10% below the year earlier level. The decline was to the lowest since October 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070802d.jpg" width="353">
Sales of imported vehicles dropped a very slight 0.2% m/m to 3.99M (-5.3% y/y), again propped up by sharp discounting. Sales of imported cars ticked up by 0.6% m/m but that was not enough to prevent an 8.6% decline versus a year ago. Sales of imported light trucks fell 1.7% m/m (+1.5% y/y).
Domestic car sales again suffered a steep decline with a hard 5.4%m/m drop (-11.2% y/y). Sales of domestic light trucks recovered a bit of the prior two month&#146;s steep declines with a 3.3% m/m increase (-10.8% y/y).
U.S Exporters: A Rare Breed from the Federal Reserve Bank of St. Louis is available <a href="http:/research.stlouisfed.org/publications/net/20070801/cover.pdf">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/USECON/@ED/@ED09/@ED0901/@ED0901.HTM">Light Vehicle Sales (SAAR, Mil. Units)</a> </th>
<th scope="col">June </th>
<th scope="col">May </th>
<th scope="col">Y/Y </th>
<th scope="col">2006 </th>
<th scope="col">2005 </th>
<th scope="col">2004 </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total </td>
<td>15.54 </td>
<td>15.60 </td>
<td>-9.6% </td>
<td>16.55 </td>
<td>16.96 </td>
<td>16.87 </td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos </td>
<td>7.37</td>
<td>7.63</td>
<td>-10.3% </td>
<td>7.77 </td>
<td>7.65 </td>
<td>7.49 </td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Trucks </td>
<td>8.16 </td>
<td>7.97 </td>
<td>-8.9% </td>
<td>8.78 </td>
<td>9.32 </td>
<td>9.37 </td>
</tr>
</tbody>
</table>
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During July, U.S. sales of light vehicles fell for the seventh consecutive month this year. The decline was attributed by manufactures to spillover effects from weak housing & construction activity. The 0.4% m/m decline to an [...]

U.S. Vehicle Sales Suffer Housing Market Woes

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 <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070802a.jpg" width="353">
Initial unemployment insurance claims rose slightly last week. The 4,000 increase to 307,000 was the first uptick in five weeks. It followed an upwardly revised no change w/w during the prior period. 
A claims level below 400,000 typically has been associated with growth in nonfarm payrolls. The jobs figure will be released tomorrow.
During the last ten years there has been a (negative) 78% correlation between the level of initial claims and the m/m change in nonfarm payroll employment. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070802b.jpg" width="353">
The four-week moving average of initial claims fell to 305,500 (-2.3% y/y).
Continuing claims for unemployment insurance fell 16,000 after a revised 22,000 decline during the prior week. The continuing claims numbers lag the initial claims figures by one week.
The insured rate of unemployment was stable at 1.9%. 
A Brain Drain or an Insufficient Brain Gain? from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/regional_economy/glance/upstate_glance1_07.pdf">here</a>. 
Consensus expectations had been for a rise to 310,000 claims. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a> </th>
<th scope="col">7/28/07 </th>
<th scope="col">07/21/07 </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>
<td class="firstcol">Initial Claims </td>
<td>&nbsp;307 </td>
<td>303 </td>
<td>-2.5% </td>
<td>313 </td>
<td>331 </td>
<td>343 </td>
</tr>
<tr>
<td class="firstcol">Continuing Claims </td>
<td>-- </td>
<td>2,525 </td>
<td>3.5%</td>
<td>2,545 </td>
<td>3.3% </td>
<td>2,459 </td>
</tr>
</tbody>
</table>


</html>

Initial unemployment insurance claims rose slightly last week. The 4,000 increase to 307,000 was the first uptick in five weeks. It followed an upwardly revised no change w/w during the prior period. A claims level below 400,000 [...]

U.S. Claims for Unemployment Insurance Rose Slightly

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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/070801h.jpg" width="353">
Today, August 1st, as we write at mid-afternoon, the stock market is hovering near yesterday&#39;s close, following its up-and-down lurches of recent days, as investors have been factoring more risk into their portfolios. In this note, we highlight a couple of indicators of risk that are available in Haver databases and a piece of new economic data pertinent to the current troubles.
Yesterday&#39;s 1.3% decline in the S&amp;P 500 index was the fifth daily fall in eight trading days since the July 19 all-time high close of 1,553.08 (and 14,000.41 in the Dow). It almost goes without saying that the day-to-day movements have been noticeably more volatile. One indication of this is that during June, the market drifted lower from the beginning of the month to the end. But it then reversed to set new highs just after mid-July and reversed again to show a decline of 3.2% for July as a whole and 6.3% from July 19 to month-end. Press reports have noted the greater volatility and called our attention to the &quot;VIX&quot; index, a measure based on the behavior of put-and-call options on the Standard &amp; Poor&#39;s 500 stocks. VIX, the ticker symbol for &quot;Volatility Index&quot;, is calculated from options prices on the Chicago Board Options Exchange, CBOE, and can be traded on its own without the complications of the actual options features. Daily changes in the VIX have an 87% negative correlation with daily movements in the S&amp;P 500 index. This index, along with other indicators of options trading, is in Haver&#39;s DAILY database, and is seen in the first graph here. From an average just under 15 in June, the VIX reached 23.52 yesterday.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070801i.jpg" width="353">
Also in DAILY, we carry a collection of Merrill Lynch fixed income yields. These are handy because they cover many sectors of the bond market and are calculated in standard ways, so they are all comparable with each other. Part of the markets&#39; distress relates to the rise in short-term interest rates and the impact they have on instruments carrying adjustable rates. The Merrill yields include the class of asset-backed securities (ABS) that have floating rates, and we can compare that with a risk-free fixed Treasury rate of roughly the same maturity. The credit quality of the ABS &quot;floaters&quot; is not low; they differ from ordinary ABS&#39;s only in their floating- rate feature. But we can see in the second graph that their spread to Treasury&#39;s has widened sharply in just the last few weeks. While the spread of a fixed-rate ABS has also widened, the increment is much smaller.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070801j.jpg" width="353">
Finally, yesterday, S&amp;P Case-Schiller reported its monthly house price index. This indicator of national home price movements edged down yet again in May, by 0.23% from April, a tenth consecutive monthly reduction. The Case-Schiller index has the advantage over other house price measures of using a collection of &quot;repeat sales&quot;. The compilers canvass records of deeds, so their index is not a sample; it covers all house sale transactions in a particular area that meet certain specifications. The repeat-sales feature means the index is measuring price change in the same house, so it only reflects price change, not bigger vs. smaller houses, houses with pools vs. houses with no pool and so on. We can see in the last graph that despite an upturn in the median price of existing home sales compiled by the National Association of Realtors, the actual &quot;price&quot; of a given house has not yet started to improve. This is exactly the problem facing real estate markets generally at the present time: sellers can&#39;t get their price. This too adds risk to financial markets and we are seeing how widespread are the ramifications of this shortfall. The S&amp;P Case-Schiller Index is in the USECON database and data for several cities appear in REGIONAL.</div>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">July 31</th>
<th scope="col">July 30</th>
<th scope="col">July 27</th>
<th scope="col">July 26</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Jan-May</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">S&amp;P 500*</td>
<td>1455.27</td>
<td>1473.91</td>
<td>1458.95</td>
<td>1482.66</td>
<td>1520.70</td>
<td>1514.49</td>
<td>1450.14</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; % Chg*</td>
<td>-1.3</td>
<td>+1.0</td>
<td>-1.6</td>
<td>-2.3</td>
<td>-3.2</td>
<td>-1.8</td>
<td>+1.5</td>
</tr>
<tr class="even">
<td class="firstcol">S&amp;P VIX</td>
<td>23.52</td>
<td>20.87</td>
<td>24.17</td>
<td>20.74</td>
<td>17.29</td>
<td>14.95</td>
<td>12.72</td>
</tr>
<tr class="even">
<td class="firstcol">Merrill Lynch Treasury: 3Yr</td>
<td>4.546</td>
<td>4.555</td>
<td>4.522</td>
<td>4.522</td>
<td>4.823</td>
<td>4.992</td>
<td>4.675</td>
</tr>
<tr class="even">
<td class="firstcol">Merrill Lynch Asset-Backed Floater</td>
<td>6.206</td>
<td>6.269</td>
<td>6.106</td>
<td>6.057</td>
<td>5.944</td>
<td>5.742</td>
<td>5.681</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Spread</td>
<td>1.660</td>
<td>1.714</td>
<td>1.584</td>
<td>1.535</td>
<td>1.121</td>
<td>0.750</td>
<td>1.005</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>May 2007</td>
<td>Apr 2007</td>
<td>Mar 2007</td>
<td>May 2006</td>
<td>2006</td>
<td>2005</td>
<td>2004</td>
</tr>
<tr class="even">
<td class="firstcol">S&amp;P Case- Schiller Home Price Index**</td>
<td>200.04</td>
<td>200.51</td>
<td>200.97</td>
<td>205.86</td>
<td>204.85</td>
<td>190.43</td>
<td>164.48</td>
</tr>
<tr class="even">
<td class="firstcol">-0.23</td>
<td>-0.23</td>
<td>-0.29</td>
<td>-2.83</td>
<td>+7.58</td>
<td>+15.78</td>
<td>+15.40</td>
</tr>
<tr class="even">
<td class="firstcol">NAR Existing Home Median Price Index**</td>
<td>159</td>
<td>159</td>
<td>155</td>
<td>164</td>
<td>159</td>
<td>156</td>
<td>138</td>
</tr>
<tr class="even">
<td class="firstcol">+1.2</td>
<td>+1.4</td>
<td>+1.8</td>
<td>-2.9</td>
<td>+2.0</td>
<td>+12.8</td>
<td>+8.1</td>
</tr>
</tbody>
</table>
</body>
</html>

Today, August 1st, as we write at mid-afternoon, the stock market is hovering near yesterday's close, following its up-and-down lurches of recent days, as investors have been factoring more risk into their portfolios. In this note, we [...]

Greater Risk Evident in (1) More Stock Options Volatility, (2) Wider Yield Spreads and (3) Sluggish House Prices

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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Tian Yong Woon

This week, we review key developments across several Asian economies as the year nears its close. On balance, many of investors’ and policymakers’ worst fears did not materialize. Despite US tariffs, regional exports have shown resilience (chart 1), partly supported by stronger intra-Asia trade, even as exports to the US declined in some cases.

In China, factors including importer front-loading, stronger exports to non-US markets, and government efforts to boost consumption—albeit with potentially one-off effects—have kept the economy on track to meet its 5% growth target this year (chart 2), barring a substantial slowdown in Q4. In Japan, political uncertainty has eased following Prime Minister Takaichi’s rise, though her pro-growth, pro-loose monetary stance has contributed to further yen weakness (chart 3). India, while still likely Asia’s fastest-growing major economy this year, has seen trade setbacks (chart 4) as US–India discussions continue, though recent progress suggests a deal may be near.

However, not all developments in Asia have avoided worst-case outcomes. For example, the Philippines, which has already been hit by a string of storms this year, continues to reel from the effects of Typhoons Fung-wong and Kalmaegi. These storms have highlighted corruption in the Philippines’ flood control systems, rattling investors and pressuring the peso (chart 5), in a manner reminiscent of the rupiah’s decline during Indonesia’s political turmoil earlier this year. In Thailand, political uncertainty continues ahead of general elections eyed at next March, while the expected full return of Chinese tourists has yet to materialize (chart 6).

**Trade in Asia**
For Asia, the year has ultimately not played out as bleakly as investors once feared, particularly on the trade front. Despite US President Trump’s tariffs and a persistent backdrop of uncertainty, export performance in several Asian economies has proven more resilient than expected. This is most clearly reflected in export growth readings for China and key Southeast Asian economies (chart 1), which have remained firm—and at times exceeded expectations—even as China’s shipments to the US fell sharply. Much of this resilience reflects a redirection of exports toward other markets, often within the region. India, however, has seen more limited gains, with exports in US dollar terms struggling to materially surpass last year’s levels.

251110T1.jpg

**China**
Among the main investor concerns earlier this year was China, which once again came under close scrutiny as President Trump sought to address issues ranging from the large US–China trade imbalance to intensifying AI competition and perceived overcapacity. Yet China’s growth—particularly on the export front—has proven more resilient than expected, with increased shipments to other markets more than offsetting reduced trade with the US. Earlier front-loading by importers ahead of anticipated tariff hikes also temporarily supported export figures. Domestically, government initiatives to stimulate consumption led to a brief lift in retail spending, though signs suggest these effects may be fading, indicating their largely one-off nature. Even so, China has maintained year-to-date growth above its 5% annual target (chart 2), keeping that goal within reach provided momentum does not weaken significantly in Q4. Meanwhile, the more conciliatory tone in recent US–China discussions, including the halving of US fentanyl-related tariffs, offers a modest further relief. That said, longer-term structural issues still loom, including the difficult shift toward a more consumption-led economy, demographic pressures, and questions around sustained overcapacity in key industries.

251110T2.jpg

**Japan**
In Japan, the political uncertainty that followed the Liberal Democratic Party’s weak election performances earlier in the year has largely eased with Takaichi’s appointment as the country’s first female Prime Minister. Attention now turns to her supplementary budget—reported to be around $65 billion—which aims to address the rising cost of living while also bolstering defence and diplomatic capabilities. Investors, however, are already contemplating the policy implications. In particular, expectations that Takaichi’s agenda could make it harder for the Bank of Japan to pursue further significant tightening have added renewed pressure on the yen, pushing it to multi-year lows (chart 3). And while a weaker yen could, in theory, support tourism, forthcoming measures to curb overtourism—such as Kyoto’s planned 900% increase in accommodation taxes—may act as offsetting factors.

251110T3.jpg

**India**
Turning to India, the economy remains on track to be the region’s fastest-growing major economy. Growth forecasts were downgraded earlier in the year by the IMF and Blue Chip survey panellists, but these revisions were later reversed. These early-year downgrades reflected India’s heavy exposure to US trade, a concern that materialized when the US raised its reciprocal tariff rate on India from 25% to 50%. This contrasts with the situation of many other Asian economies, who successfully negotiated lower rates below the “Liberation Day” baseline. Although India managed to expand exports to other trading partners, this gain resulted in only a muted net impact on overall exports and, in turn, GDP growth. That said, US–India discussions have made some progress over the year, particularly on previously contentious issues such as India’s purchases of Russian crude. While these developments bring India closer to a potential trade deal, the benefits are likely to materialize beyond this year, meaning current growth readings still largely reflect the impact of the steep US tariffs in place today.

251110T4.jpg

**The Philippines**
Moving to the Philippines, the country is grappling with the impact of Typhoon Fung-wong, which struck the northern regions on Sunday, forcing over a million people to evacuate and causing widespread landslides and damaged roads. Fung-wong follows a string of storms this year, including Typhoon Kalmaegi, which also inflicted substantial damage just a few days ago. The disasters have reignited concerns over longstanding corruption in the country’s flood control systems, spooking investors and prompting capital outflows, which have weighed on the Philippine peso (chart 5). The currency’s weakness has been compounded by the central bank’s ongoing easing, which has cut the policy rate from last year’s peak of 6.5% to 4.75%—nearly 200 basis points—and with markets still pricing in further cuts.

251110T5.jpg

**Thailand**
Lastly, Thailand’s economy continues to struggle to regain the footing it had before the pandemic, weighed down by both domestic and external factors. Politically, the country remains in a transitional phase, with new Prime Minister Anutin under scrutiny to deliver on his pledge to hold general elections soon. Deputy Prime Minister indications suggest March 29, 2026 as a likely date, leaving a period of uncertainty in the meantime, as the durability of policies enacted during this interim phase remains unclear. Externally, tourism—which should have been a key growth driver—has underperformed, as the return of Chinese visitors to pre-pandemic levels did not materialize, partly due to tourism-related scares. In contrast, Vietnam appears to have captured a larger share of Chinese tourists this year (chart 6).

251110T6.jpg

Asia

Economic Letter from Asia: As the Dust Settles

251107F5.jpg

251107G5.jpg

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).

251107H5.jpg

251107I5.jpg

- 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

251107A2.jpg

251107D2.jpg

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.

251107C2.jpg

251107B2.jpg

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

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

251107E.jpg

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.

251106Z1.jpg

**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.

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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).

Economy in Brief: 2007

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NTC Shows Euro MFG is Slowing… but oh so slowly

Swedish GDP Grows 1.0% in Q2, Led by Fixed Investment and Exports of Services

U.S. Factory Inventory Growth Recovered

PPI Trends Flatten Out and Decline Across EMU

U.S. Vehicle Sales Suffer Housing Market Woes

U.S. Claims for Unemployment Insurance Rose Slightly

Swedish GDP Grows 1.0% in Q2, Led by Fixed Investment and Exports of Services

Greater Risk Evident in (1) More Stock Options Volatility, (2) Wider Yield Spreads and (3) Sluggish House Prices