Tom Moeller

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<div align="left"> <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070801e.jpg" width="353">
</div>

</body>
</html>

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<div align="left"> <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070801g.jpg" width="353">
The total number of mortgage applications ticked down 0.3% last week following the 3.6% decline the week prior, according to the Mortgage Bankers Association.
Purchase applications dropped another 1.8% after the prior week&rsquo;s 5.0% decline, the fifth decline in the last six weeks. The decline was to the lowest level since late April.
During the last ten years there has been a 58% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance recouped the prior week&rsquo;s decline with a 1.8% increase.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070801h.jpg" width="353">
The effective interest rate on a conventional 30-year mortgage fell another six basis points w/w to 6.84%. Rates averaged roughly 6.91% last month, up from 6.28% in December. The peak for 30 year financing was 6.92% in mid-June. Rates for 15-year financing similarly fell to 6.53% last week. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage.
The Mortgage Bankers Association surveys between 20 and 35 top lenders in the U.S. housing industry. Then it derives its refinance, purchase and market indexes. The weekly survey covers roughly 50% of all U.S. residential mortgage applications processed each week by mortgage banks, commercial banks and thrifts. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>. 
Higher Risk Does Bring Higher Returns in Stock Markets Worldwide from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/iet/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/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100) </a></th>
<th scope="col">7/27/07 </th>
<th scope="col">7/20/07 </th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>607.1</td>
<td>609.0</td>
<td>15.1%</td>
<td>584.2</td>
<td>708.6</td>
<td>735.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>416.6</td>
<td>424.2</td>
<td>10.7%</td>
<td>406.9</td>
<td>470.9</td>
<td>454.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,724.1</td>
<td>1,692.9</td>
<td>21.7%</td>
<td>1,633.0</td>
<td>2,092.3</td>
<td>2,366.8</td>
</tr>
</tbody>
</table>
</body>
</html>

The total number of mortgage applications ticked down 0.3% last week following the 3.6% decline the week prior, according to the Mortgage Bankers Association. Purchase applications dropped another 1.8% after the prior week’s 5.0% [...]

Mortgage Applications Down Again

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<div align="left"> <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070801f.jpg" width="353">
Challenger, Grey &amp; Christmas reported that job cut announcements in July fell to the lowest level in a year, and that was the lowest level since 2000. The 23.1% m/m decline to 42,897 announcements followed a 21.6% decline during June. 
Job cut announcements fell across most industries such as apparel (-32.0% y/y), chemical (-81.3% y/y), consumer goods (-43.9% y/y), industrial goods (-49.7% y/y), and services (-69.05 y/y. Increases in layoffs m/m occurred in the electronics, retail, and transportation industries.
During the last ten years there has been a 79% (inverse) correlation between the three month moving average of announced job cuts and the three month change payroll employment.
Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.
Challenger also reported that announced hiring plans nearly doubled last month versus June and they were up sharply from a year ago.</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/SURVEYS/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</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>
<td class="firstcol">Announced Job Cuts</td>
<td>42,897</td>
<td>55,726</td>
<td>12.0%</td>
<td>839,822</td>
<td>1,072,054</td>
<td>1,039,935</td>
</tr>
</tbody>
</table>
</body>
</html>

Challenger, Grey & Christmas reported that job cut announcements in July fell to the lowest level in a year, and that was the lowest level since 2000. The 23.1% m/m decline to 42,897 announcements followed a 21.6% decline during June. [...]

Challenger Layoffs Retreated

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>

 



 <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070801e.jpg" width="353">
The ADP Nat&#39;l Employment Report, reported by the payroll processor, indicated that private nonfarm payrolls rose just 48,000 last month. The increase was the smallest since 2003. The U.S. Bureau of Labor Statistics employment figure will be published this Friday.
Last month, ADP&#39;s measure of private nonfarm payrolls Juneindicated a 143,000 increase in jobs that was followed by a 92,000 increase in private nonfarm payrolls. 
According to ADP and Macro Advisers, the correlation between the monthly percentage change in the ADP estimate and that in the BLS data is 0.90.
ADP compiled the estimate from its database of individual companies&#39; payroll information. Macroeconomic Advisers, LLC, the St. Louis economic consulting firm, developed the methodology for transforming the raw data into an economic indicator.
The ADP National Employment Report data is maintained in Haver&#39;s USECON database; historical data go back to December 2000. The figures in this report cover only private sector jobs and exclude employment in the public sector, which rose an average 11,083 during the last twelve months.
The full ADP National Employment Report can be found <a href="http://www.adpemploymentreport.com/PDF/NER_December_Release_FINAL.pdf">here</a>, and the ADP methodology is explained <a href="http://www.adpemploymentreport.com/PDF/ADPNERMethodology.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/@EB25/@EB25.HTM">LAXEPA@USECON</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>
<td class="firstcol">Nonfarm Private Payroll Employment (m/m Chg.)</td>
<td>48,000</td>
<td>143,000</td>
<td>1.2%</td>
<td>1.7%</td>
<td>1.8%</td>
<td>1.3%</td>
</tr>
</tbody>
</table>


</html>

The ADP Nat'l Employment Report, reported by the payroll processor, indicated that private nonfarm payrolls rose just 48,000 last month. The increase was the smallest since 2003. The U.S. Bureau of Labor Statistics employment figure [...]

ADP Report: Growth in Private Payrolls Eased

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<div align="left"> <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070801c.jpg" width="353">
The Institute of Supply Management (ISM) reported that the Composite Index of activity in the manufacturing sector fell sharply to 53.8 from 56.0 during June. Consensus expectations for a lesser dip to 55.5 and the decline reversed the moderate gains of the prior two months.</div><div align="left"> 
During the last twenty years there has been a 64% correlation between the level of the Composite Index and the three month growth in factory sector industrial production.</div><div align="left"> <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070801d.jpg" width="353">
Three of the index&#39;s five components fell last month, but the decline in the production index was a notable 7.3 points to the lowest level since March. The employment index also fell for the third month in a row to the lowest level since March. During the last twenty years there has been a 67% correlation between the level of the ISM employment Index and the three month growth in factory sector employment.</div><div align="left"> 
The new orders index fell 2.8 points to the lowest since April. The inventory index rose 3.2 points to 48.5 and the supplier deliveries index rose in July to 52.0.</div><div align="left"> 
Prices fell three points to 65.0. This third consecutive monthly decline lowered the price index eight points below the recent peak in March. During the last twenty years there has been a 77% correlation between the price index and the three month change in the PPI for intermediate goods.</div><div align="left"></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/@EF/@EF02/@EF02.HTM">ISM Manufacturing 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 class="odd">
<td class="firstcol">Composite Index</td>
<td>53.8</td>
<td>56.0</td>
<td>54.4</td>
<td>53.9</td>
<td>55.5</td>
<td>60.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>57.5</td>
<td>60.3</td>
<td>55.6</td>
<td>55.4</td>
<td>57.4</td>
<td>63.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>65.0</td>
<td>68.0</td>
<td>78.5</td>
<td>65.0</td>
<td>66.4</td>
<td>79.8</td>
</tr>
</tbody>
</table>
</body>
</html>

The Institute of Supply Management (ISM) reported that the Composite Index of activity in the manufacturing sector fell sharply to 53.8 from 56.0 during June. Consensus expectations for a lesser dip to 55.5 and the decline reversed [...]

ISM Index Down Sharply

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<div align="left"> <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070801a.jpg" width="353">
Consumer confidence rebounded in July, according to the Conference Board Survey. The 6.9% increase recovered the 2.9% June decline and brought the index to its highest level since 2001.</div><div align="left"> 
The present conditions reading rose 7.2% as the percentage of respondents who viewed business conditions as good rose slightly but the percentage who viewed jobs as plentiful rose to the highest since 2001.</div><div align="left"> <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070801b.jpg" width="353">
The expectations index also rose a sharp 6.8% to the highest level since the end of last year. Plans to by carpet and an automobile improved. Expectations about future income rose while expectations about the inflation rate fell. However, not many more respondents saw more employment opportunities.</div><div align="left"> 
The expected inflation rate in twelve months ticked lower to 5.1%, equal to expectations during all of last year for inflation in twelve months.</div>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Conference Board &nbsp;(SA, 1985=100)</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">Consumer Confidence Index</td>
<td>112.6</td>
<td>105.3</td>
<td>5.2%</td>
<td>105.9</td>
<td>100.3</td>
<td>96.1</td>
</tr>
<tr>
<td class="firstcol">Present Conditions</td>
<td>139.2</td>
<td>129.9</td>
<td>3.7%</td>
<td>130.2</td>
<td>116.1</td>
<td>94.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Expectations</td>
<td>94.8</td>
<td>88.8</td>
<td>6.6%</td>
<td>89.7</td>
<td>89.7</td>
<td>96.9</td>
</tr>
</tbody>
</table>
</body>
</html>

Consumer confidence rebounded in July, according to the Conference Board Survey. The 6.9% increase recovered the 2.9% June decline and brought the index to its highest level since 2001. The present conditions reading rose 7.2% as the [...]

Consumer Confidence Rebounded

Robert Brusca

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070731h.jpg" width="353">
French household confidence stumbled by three points taking the aggregate reading to its lowest point since April of this year. The overall index resides near mid range among all values since 1990. Expected improvement in living standards and drops in unemployment are two of the factors boosting this index. Consumers say they have the ability to save over the next 12 months and that is an extremely strong response on their part, in the top 7 percent of this historic range. Consumers rate the times as slightly more favorable for spending than they did last month with a net response of -4 compared to -6, a value that ranks in about the top third of its range. Still, consumers rate their current financial situation as below average in only about the 42nd percentile of its range. That is a slippage from the 52nd percentile over the past 12 months; for the next 12 months, consumers expect an improvement putting their response in the 63rd percentile of its range near the upper third.
On balance, the responses by the French consumers are showing slippage. One of the main drivers holding things in place is the improvement that consumers have seen and continue to expect in unemployment. Consumers remain upbeat that their financial situation is going to improve despite this month&#146;s slippage in the overall index. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
INSEE Household Monthly Survey
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="4">&nbsp;</td>
<td colspan="2">Since Jan 1990</td>
<td colspan="4">Since Jan 1990</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jul-07</td>
<td>Jun-07</td>
<td>May-07</td>
<td>Apr-07</td>
<td>Percentile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
</tr>
<tr>
<td class="firstcol">Household Confidence</td>
<td>-15</td>
<td>-12</td>
<td>-13</td>
<td>-20</td>
<td>54.5</td>
<td>51</td>
<td>5</td>
<td>-39</td>
<td>44</td>
<td>-21</td>
</tr>
<tr>
<td colspan="11">Living Standards</td>
</tr>
<tr>
<td class="firstcol">past 12-Mos</td>
<td>-45</td>
<td>-45</td>
<td>-49</td>
<td>-55</td>
<td>39.5</td>
<td>60</td>
<td>1</td>
<td>-75</td>
<td>76</td>
<td>-50</td>
</tr>
<tr>
<td class="firstcol">Next 12-Mos</td>
<td>-9</td>
<td>-3</td>
<td>0</td>
<td>-16</td>
<td>71.4</td>
<td>33</td>
<td>7</td>
<td>-49</td>
<td>56</td>
<td>-25</td>
</tr>
<tr>
<td class="firstcol">Unemployment: Next 12</td>
<td>-9</td>
<td>-9</td>
<td>-12</td>
<td>4</td>
<td>16.2</td>
<td>193</td>
<td>84</td>
<td>-27</td>
<td>111</td>
<td>40</td>
</tr>
<tr>
<td colspan="11">Price Developments</td>
</tr>
<tr>
<td class="firstcol">Past 12-Mos</td>
<td>-2</td>
<td>-7</td>
<td>-4</td>
<td>0</td>
<td>69.3</td>
<td>58</td>
<td>29</td>
<td>-72</td>
<td>101</td>
<td>-32</td>
</tr>
<tr>
<td class="firstcol">Next 12-Mos</td>
<td>-28</td>
<td>-30</td>
<td>-43</td>
<td>-35</td>
<td>35.2</td>
<td>42</td>
<td>31</td>
<td>-60</td>
<td>91</td>
<td>-34</td>
</tr>
<tr>
<td colspan="11">Savings</td>
</tr>
<tr>
<td class="firstcol">Favorable to save</td>
<td>32</td>
<td>34</td>
<td>30</td>
<td>26</td>
<td>44.3</td>
<td>162</td>
<td>66</td>
<td>5</td>
<td>61</td>
<td>43</td>
</tr>
<tr>
<td class="firstcol">Ability to save Next 12</td>
<td>-4</td>
<td>-4</td>
<td>-2</td>
<td>-9</td>
<td>94.4</td>
<td>3</td>
<td>-2</td>
<td>-38</td>
<td>36</td>
<td>-20</td>
</tr>
<tr>
<td colspan="11">Spending</td>
</tr>
<tr>
<td class="firstcol">Favorable for major purchase</td>
<td>-4</td>
<td>-6</td>
<td>-9</td>
<td>-12</td>
<td>67.8</td>
<td>43</td>
<td>15</td>
<td>-44</td>
<td>59</td>
<td>-14</td>
</tr>
<tr>
<td colspan="11">Financial Situation</td>
</tr>
<tr>
<td class="firstcol">Current</td>
<td>14</td>
<td>14</td>
<td>16</td>
<td>12</td>
<td>42.9</td>
<td>79</td>
<td>26</td>
<td>5</td>
<td>21</td>
<td>14</td>
</tr>
<tr>
<td class="firstcol">Past 12-Mos</td>
<td>-14</td>
<td>-11</td>
<td>-15</td>
<td>-18</td>
<td>52.2</td>
<td>83</td>
<td>-3</td>
<td>-26</td>
<td>23</td>
<td>-14</td>
</tr>
<tr>
<td class="firstcol">Next 12-Mos</td>
<td>-1</td>
<td>3</td>
<td>7</td>
<td>-1</td>
<td>63.0</td>
<td>86</td>
<td>9</td>
<td>-18</td>
<td>27</td>
<td>-2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td colspan="4">Number of observations in the period</td>
<td>208</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body>
</html>

French household confidence stumbled by three points taking the aggregate reading to its lowest point since April of this year. The overall index resides near mid range among all values since 1990. Expected improvement in living [...]

French Household Confidence Reverses its Upswing

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070731g.jpg" width="353">
The main IFO gauges show that while the current readings for IFO are still very strong, the current indices are trending lower. As index numbers the index for expectations hit a bit of a ceiling and has formed what is essentially a double top. Expectations rarely get much stronger than an index reading of 105. The accompanying chart shows these indexes as percent changes and the downward slide of momentum is apparent.
Now, as the IFO gauges began to poster lower numbers, we look to see what the detail of the IFO report tells us about that step-back.
In terms of Y/Y percentage changes the current situation index continued to rise. However MFG is now lower Y/Y as it has been for two months running. Not shown in the table below is the detail for wholesaling which has fallen for the second straight month or construction, now off for three months in a row. Retailing is up in July after being off Yr/Yr in June.
Expectations are off across most main sectors with the MFG index off by 0.5% Yr/Yr and off on that basis for five of the past six months. Wholesaling expectations are off for one month in a row; retail is off for three months in a row and for five of the past six months.
Within MFG the overall sector shows a decline in activity Yr/Yr and that decline is seen in intermediate goods and consumer goods but capital goods activity rebounded in July after having made its first Y/Y drop in June.
Assessments of demand for MFG sectors are dropping in most sectors and have been dropping for five months more or less. The exception is the consumer sector where demand is seen as up in July; it was also up in May.
Also in MFG, orders on hand are somewhat mixed. The total is lower Y/r (-2.7%). But that is mostly weakness in intermediate goods since capital goods orders and consumer goods are still growing.
Foreign orders continue to grow, by 1.9% in all of MFG but intermediate orders are off. Foreign capital goods orders are up strongly but are slowing their rate of ascent; consumer goods orders are flat.
The outlook for three months ahead (bottom panel of table) is still mostly positive, but with some mixed trends. MFG export expectations are flat, despite good orders responses above. Orders expectations for retailing are on a long string of declines although the pace of decline is withering. Wholesale orders are positive but their strength is withering. Export expectations for three months ahead have turned flat for manufacturing in July. Employment expectations over the next three months do continue to be upbeat.
The German economy still is emitting a lot of very positive signals. However do not get lost in the high level of the indexes since they are also losing momentum. While retailing seems to be one improving sector its ability to offset slippage elsewhere has not been established. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
IFO Survey: Germany
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="5">Percent: Yr/Yr</td>
<td colspan="4">INDEX NUMBERS</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Jul-07</td>
<td>Jun-07</td>
<td>May-07</td>
<td>Apr-07</td>
<td>Mar-07</td>
<td>CURRENT</td>
<td>Average</td>
<td>Curr/Avg</td>
<td>Percentile</td>
</tr>
<tr class="grey2">
<td class="firstcol">Biz Climate</td>
<td>0.7%</td>
<td>0.2%</td>
<td>2.8%</td>
<td>2.6%</td>
<td>2.1%</td>
<td>106.4</td>
<td>95.7</td>
<td>111.2%</td>
<td>90.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Current Situation</td>
<td>2.4%</td>
<td>1.7%</td>
<td>4.7%</td>
<td>6.3%</td>
<td>6.7%</td>
<td>111.3</td>
<td>94.7</td>
<td>117.5%</td>
<td>87.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Biz Expectations: Next 6-Mos</td>
<td>-0.9%</td>
<td>-1.2%</td>
<td>0.9%</td>
<td>-0.9%</td>
<td>-2.3%</td>
<td>101.8</td>
<td>96.7</td>
<td>105.3%</td>
<td>82.9%</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Jul-07</td>
<td>Jun-07</td>
<td>May-07</td>
<td>Apr-07</td>
<td>Mar-07</td>
<td>CURRENT</td>
<td>Average</td>
<td>Curr/Avg</td>
<td>Percentile</td>
</tr>
<tr class="grey2">
<td colspan="10">Current Situation</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; MFG</td>
<td>4.5%</td>
<td>4.4%</td>
<td>6.6%</td>
<td>7.6%</td>
<td>9.4%</td>
<td>111.3</td>
<td>92.2</td>
<td>120.8%</td>
<td>95.3%</td>
</tr>
<tr class="grey2">
<td colspan="10">Biz Expectations: Next 6-Mos</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; MFG</td>
<td>-0.5%</td>
<td>-2.8%</td>
<td>0.9%</td>
<td>-1.4%</td>
<td>-3.0%</td>
<td>100.9</td>
<td>96.4</td>
<td>104.7%</td>
<td>79.1%</td>
</tr>
<tr class="grey2">
<td colspan="10">Activity (m/m)</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; MFG</td>
<td>-1.8%</td>
<td>-3.7%</td>
<td>2.0%</td>
<td>-0.5%</td>
<td>0.4%</td>
<td>102.9</td>
<td>96.9</td>
<td>106.2%</td>
<td>77.8%</td>
</tr>
<tr class="grey2">
<td colspan="10">Demand M/M</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; MFG</td>
<td>-3.3%</td>
<td>-7.1%</td>
<td>0.4%</td>
<td>-3.6%</td>
<td>-1.7%</td>
<td>101.2</td>
<td>97.0</td>
<td>104.3%</td>
<td>68.5%</td>
</tr>
<tr class="grey2">
<td colspan="10">Orders on hand</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; MFG</td>
<td>-2.7%</td>
<td>-3.6%</td>
<td>-0.9%</td>
<td>-3.0%</td>
<td>-2.7%</td>
<td>104.0</td>
<td>96.4</td>
<td>107.9%</td>
<td>79.0%</td>
</tr>
<tr class="grey2">
<td colspan="10">Foreign orders on hand</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; MFG</td>
<td>1.9%</td>
<td>2.0%</td>
<td>2.5%</td>
<td>1.9%</td>
<td>5.4%</td>
<td>111.5</td>
<td>94.2</td>
<td>118.3%</td>
<td>96.5%</td>
</tr>
<tr class="grey2">
<td colspan="10">Yr/Yr percentage changes in underlying Indices</td>
</tr>
<tr class="grey1">
<td colspan="10">IFO outlook for 3-Months ahead</td>
</tr>
<tr class="grey4">
<td class="firstcol">3-Mos ahead</td>
<td colspan="5">Percent: Yr/Yr</td>
<td colspan="4">INDEX NUMBERS</td>
</tr>
<tr class="grey3">
<td class="firstcol">Expected Activity</td>
<td>Jul-07</td>
<td>Jun-07</td>
<td>May-07</td>
<td>Apr-07</td>
<td>Mar-07</td>
<td>CURRENT</td>
<td>Average</td>
<td>Curr/Avg</td>
<td>Percentile</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; MFG</td>
<td>1.0%</td>
<td>3.4%</td>
<td>0.5%</td>
<td>0.7%</td>
<td>-1.6%</td>
<td>103.0</td>
<td>96.7</td>
<td>106.5%</td>
<td>94.0%</td>
</tr>
<tr class="grey2">
<td colspan="10">Orders expectations</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Retail Order Expectations</td>
<td>-1.2%</td>
<td>-10.8%</td>
<td>-4.6%</td>
<td>-10.9%</td>
<td>-10.0%</td>
<td>-11.6</td>
<td>-17.5</td>
<td>66.5%</td>
<td>70.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Wholesale</td>
<td>0.7%</td>
<td>5.7%</td>
<td>15.7%</td>
<td>15.0%</td>
<td>10.7%</td>
<td>7.1</td>
<td>-14.0</td>
<td>-50.7%</td>
<td>83.1%</td>
</tr>
<tr class="grey2">
<td colspan="10">EXPORT Biz Expectations</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; MFG</td>
<td>0.0%</td>
<td>0.4%</td>
<td>-0.5%</td>
<td>-1.1%</td>
<td>-1.9%</td>
<td>103.5</td>
<td>98.3</td>
<td>105.3%</td>
<td>89.4%</td>
</tr>
<tr class="grey2">
<td colspan="10">Employment Expectations</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; MFG</td>
<td>7.4%</td>
<td>8.4%</td>
<td>7.5%</td>
<td>6.4%</td>
<td>8.2%</td>
<td>105.9</td>
<td>95.9</td>
<td>110.4%</td>
<td>100.0%</td>
</tr>
</tbody>
</table>
</body>
</html>

The main IFO gauges show that while the current readings for IFO are still very strong, the current indices are trending lower. As index numbers the index for expectations hit a bit of a ceiling and has formed what is essentially a [...]

IFO Detail Fills in the Missing Pieces for Germany’s Trends…Strong but Slowing

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

Our global data offering is unparalleled in terms of coverage, quality, and organization. We offer 290+ databases from 2500 government and private sources, a wealth of key survey and forecast data covering the world’s economies, and a robust offering of archive databases that drive machine learning for big data applications.

Optimized for precision analytics, our data is seamlessly integrated with Microsoft Office and all leading statistical packages through our DLX® software and platform independent HaverView™ website. We further offer direct database feeds, client server or cloud-based delivery, and RESTful API.


Privacy Policy

Disclaimer

Contact us

A premier time series data platform for the global strategy, research, and quant communities. 

London

Singapore

Tokyo

New York

Economy in Brief

Viewpoints

Contact Us

Our Data

Our Products

What We Do

Our Authors

About Us

Data News

Resources

Release Calendars

Training Center

Webinars

Newsletters

Download Software

For Clients

Live Updates

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.

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.

251106Z6.jpg

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

Jump to: