Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050705a.jpg" width="353">
US sales of light vehicles in June recovered all of recent months&#39; weakness and rose to the highest level in nearly four years, according to the Autodata Corporation. At 17.53M, sales rose 5.2% from May and rose 13.8% versus a depressed level one year ago.
Sales of light trucks surged 11.9% m/m to the highest level since 2001. The gain lifted the average level of truck sales so far this year 1.6% versus the first six months of 2004. Sales of US made trucks were notably strong, rising 13.2% m/m and 25.1% y/y. Domestics account for 88% of total light truck sales in the US.
Despite the drag on truck sales from higher gasoline prices, Bureau of Labor Statistics&#39; data indicates that truck prices firmed this year through May versus deflation from 2002 to 2004. Gasoline prices rose to an average $2.22 per gallon (15.3% y/y) during the latest week. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050705b.jpg" width="353"> 
Car sales fell for the second consecutive month in June and for the fourth month this year. The 2.9% m/m decline left the average level of car sales 1.6% above last year.
Imports&#39; share of the US market for new vehicles fell sharply to 19.6% in June versus 20.2 during the first five months of 2005.

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<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">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>17.53</td>
<td>16.67</td>
<td>13.8%</td>
<td>16.88</td>
<td>16.63</td>
<td>16.81</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>7.31</td>
<td>7.53</td>
<td>3.9%</td>
<td>7.49</td>
<td>7.62</td>
<td>8.07</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Trucks</td>
<td>10.22</td>
<td>9.14</td>
<td>22.1%</td>
<td>9.39</td>
<td>9.01</td>
<td>8.74</td>
</tr>
</tbody>
</table>
U.S. Factory Inventories Unchanged 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 5, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050705d.jpg" width="353">
Factory inventories were unchanged in May following a downwardly revised slight decline in April. Three month growth in inventories fell to 2.7% (AR) from the peak rate of growth near 12% in March and that slowdown explains much of the slowdown in factory output growth.
Slower rates of inventory accumulation continue notable in the furniture industry where three month growth fell to 2.3% from versus the high of 28.4% and in the electrical equipment industry where growth in inventories fell to 6.0% with outright decumulation in May. The level of computer inventories has been declining this year with three month growth at -4.6% versus a peak of 13% last summer.
Factory shipments were roughly unchanged in May but three month growth improved to 9.2% due to rebounds in computers and heavy duty trucks.
Orders to the factory sector jumped 2.9% due to the unrevised 5.5% surge in durable goods orders.
Unfilled orders jumped 1.9% due to the 10.6% spike in unfilled orders for aircraft &amp; parts. Less transportation altogether backlogs fell 0.1% (+7.6% y/y). The ratio of unfilled orders to shipments outside of transportation has moved sideways since early last year. 
Trends in Hours, Balanced Growth and the Role of Technology in the Business Cycle from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/review/05/07/Gali.pdf">here</a>.<a href="http://research.stlouisfed.org/publications/review/05/07/Gali.pdf"> </a><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050705c.jpg" width="353"> <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050705e.jpg" width="353">

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<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">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
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<td class="firstcol">Inventories</td>
<td>0.0%</td>
<td>-0.0%</td>
<td>7.7%</td>
<td>7.5%</td>
<td>-1.3%</td>
<td>-1.8%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>2.9%</td>
<td>0.7%</td>
<td>9.3%</td>
<td>10.9%</td>
<td>3.7%</td>
<td>-1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>-0.0%</td>
<td>0.7%</td>
<td>7.2%</td>
<td>10.5%</td>
<td>2.6%</td>
<td>-2.0%</td>
</tr>
<tr>
<td class="firstcol">Unfilled Orders</td>
<td>1.9%</td>
<td>-0.1%</td>
<td>7.5%</td>
<td>9.1%</td>
<td>4.2%</td>
<td>-6.1%</td>
</tr>
</tbody>
</table>
Revised German Retail Sales Data 
by <a href="/comment/Curley.html">Louise Curley</a> July 5, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050705f.jpg" width="353">
Retail sales provided another positive statistic for Germany in May. The volume of retail sales was up 1.2% in May on a seasonally adjusted basis from April and the value was up 1.8%. On a seasonally unadjusted basis, the volume of retail sales was 2.7% over May 2004 and the value was 3.2% over the same period.
The recently revised series for German retail sales shows a somewhat better picture over the past few years than that previously reported. For example the new data show that retail sales increased 1.2% in 2004 instead of declining 1.7% as reported earlier. For 2003 the difference was much smaller--a decline of 0.5% vs. one of 0.6% reported earlier.
The headline series excludes automobiles and gas stations and is shown seasonally adjusted and unadjusted for values and volumes. Data on automobiles and gas stations are released some weeks after the retail sales release. However, a memo item is included in the current release that shows total retail sales including estimated automobiles and gas stations on a seasonally adjusted bases in value and volume terms. The two value series are shown in the attached chart. It may seem strange that the total excluding automobiles and gas stations is at times higher than the total including these items. But these data are index numbers relative to the year 2003, not absolute levels. Except for the items just noted most of the data are not seasonally adjusted. .

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<th scope="col" class="firstcol">German Retail Sales ex Automobiles and Gas Stations</th>
<th scope="col">May 05</th>
<th scope="col">Apr 05</th>
<th scope="col">May 04</th>
<th scope="col">M/M%</th>
<th scope="col">Y/Y%</th>
<th scope="col">&nbsp;2004&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2003</th>
<th scope="col">&nbsp;2002</th>
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<td class="firstcol">Value (2003=100)</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>
<td class="firstcol">&nbsp;&nbsp; Not seasonally adjusted</td>
<td>98.8</td>
<td>103.4</td>
<td>95.8</td>
<td>-4.45</td>
<td>3.13</td>
<td>101.4</td>
<td>100.0</td>
<td>100.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Seasonally adjusted</td>
<td>102.2</td>
<td>100.4</td>
<td>98.1</td>
<td>1.79</td>
<td>4.18</td>
<td>100.7</td>
<td>100.1</td>
<td>100.5</td>
</tr>
<tr>
<td class="firstcol">SA Value incl autos &amp; gas stations</td>
<td>102.2</td>
<td>100.8</td>
<td>98.9</td>
<td>1.39</td>
<td>3.34</td>
<td>101.0</td>
<td>100.2</td>
<td>99.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Volume 2000 Prices (2003=100)</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>
<td class="firstcol">&nbsp;&nbsp; Not seasonally adjusted</td>
<td>98.0</td>
<td>102.7</td>
<td>95.4</td>
<td>94.58</td>
<td>2.73</td>
<td>101.2</td>
<td>100.0</td>
<td>100.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Seasonally adjusted</td>
<td>101.3</td>
<td>100.1</td>
<td>98.0</td>
<td>1.20</td>
<td>3.37</td>
<td>100.7</td>
<td>100.1</td>
<td>100.5</td>
</tr>
<tr>
<td class="firstcol">SA Value incl autos &amp; gas stations</td>
<td>100.9</td>
<td>100.0</td>
<td>98.3</td>
<td>0.90</td>
<td>2.64</td>
<td>100.6</td>
<td>100.2</td>
<td>100.2</td>
</tr>
<tr class="odd">
<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>
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<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
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<td>&nbsp;</td>
<td>&nbsp;</td>
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US sales of light vehicles in June recovered all of recent months' weakness and rose to the highest level in nearly four years, according to the Autodata Corporation. At 17.53M, sales rose 5.2% from May and rose 13.8% versus a [...]

U.S. Vehicle Sales Led Higher By Truck Rebound

Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050701e.jpg" width="353">
The Japanese labor market looks to be turning around. We last wrote about these employment data three months ago, and in that discussion, Louise Curley called them &quot;disappointing&quot; for February. Another weak performance followed in March. But April and May have seen strong gains in jobs, totaling 830,000, and the unemployment rate, at 4.4% in both months, is the lowest since late 1998. The number unemployed has been below 3.0 million in four of the last six months, also the lowest since that late 1998 period.
Further, overall labor force participation - employment plus unemployment as a percentage of the working age population - has started to rise. From a recent peak of just under 64% in early 1997, this ratio moved down steadily to a low of barely 60% just last November. It has since added 0.8 percentage point, an indication of rising consumer confidence.
Employment is seeing gains in both manufacturing and non-manufacturing sectors. Factory jobs are still lower than than a year ago, but they rose 300,000 in May, a large monthly gain. Nonmanufacturing employment touched 50.0 million for the first time in May, an increase of 270,000 on the month. [These figures cover nonagricultural employment only.]<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050701f.jpg" width="353">
These employment results bear out what business leaders told the Bank of Japan in the quarterly TANKAN survey. Its &quot;headline series&quot;, the diffusion index for large manufacturing companies, reached +18 in Q2, up 4 points from Q1 and also 4 points higher than the forecast these company managers had made three months ago. This is particularly encouraging after that Q1 result fell short of both the preceding quarter and its own forecast. The special linked TANKAN index Haver reports in the G10 database, which covers all enterprises in all industries, is hovering right around 0, also its best performance since late 1997.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/JAPAN1.HTM">Japan</a></th>
<th scope="col">May 2005</th>
<th scope="col">Apr 2005</th>
<th scope="col">Mar 2005</th>
<th scope="col">May 2004</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Employment (millions)</td>
<td>63.95</td>
<td>63.53</td>
<td>63.12</td>
<td>63.48</td>
<td>63.30</td>
<td>63.16</td>
<td>63.29</td>
</tr>
<tr>
<td class="firstcol">Change (thousands)</td>
<td>420</td>
<td>410</td>
<td>-270</td>
<td>0.7%</td>
<td>0.2%</td>
<td>-0.2%</td>
<td>-1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment (millions)</td>
<td>2.96</td>
<td>2.93</td>
<td>2.97</td>
<td>3.08</td>
<td>3.13</td>
<td>3.50</td>
<td>3.59</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>4.4</td>
<td>4.4</td>
<td>4.5</td>
<td>4.6</td>
<td>4.7</td>
<td>5.2</td>
<td>5.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Participation Rate* (%)</td>
<td>60.8</td>
<td>60.5</td>
<td>60.1</td>
<td>60.5</td>
<td>60.4</td>
<td>60.8</td>
<td>61.2</td>
</tr>
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The Japanese labor market looks to be turning around. We last wrote about these employment data three months ago, and in that discussion, Louise Curley called them "disappointing" for February. Another weak performance followed in [...]

Japanese Employment, Unemployment and TANKAN All Show Improvement

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050701d.jpg" width="353">
The total value of construction put in place fell in May for the fourth month this year. The 0.9% decline followed a revised 1.1% drop in April. Consensus expectations had been for a 0.5% increase.
The 2004 increase in total construction spending was revised up to 11.1% from 8.9% as a result of a strengthened gain in residential building to 18.5% from 13.9%.
Since then private residential building activity has fallen sharply, down 4.9% during the last three months. The value of new single family building, however, has continued to rise by 0.5% (7.6% y/y) in May. Building on new multi-family units fell 0.9% (15.0% y/y).
Nonresidential building slipped 1.6% (+5.0% y/y) due to a 1.2% (+2.4% y/y) decline in office building.
Public construction spending rose 1.7% but the steam came out of spending on highways &amp; streets, nearly one third of the value of public construction spending, as y/y growth slowed to 5.4% from the high of 19.7% in February.
These more detailed categories represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for Automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E907/@E90701/@E90701.HTM">Construction Put-in-place</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
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<td class="firstcol">Total</td>
<td>-0.9%</td>
<td>-1.1%</td>
<td>8.2%</td>
<td>11.1%</td>
<td>5.4%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>-1.6%</td>
<td>-1.5%</td>
<td>7.0%</td>
<td>13.8%</td>
<td>6.3%</td>
<td>-0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>-1.7%</td>
<td>-2.2%</td>
<td>7.8%</td>
<td>18.5%</td>
<td>12.9%</td>
<td>8.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-1.6%</td>
<td>0.6%</td>
<td>5.0%</td>
<td>3.9%</td>
<td>-5.4%</td>
<td>-13.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>1.7%</td>
<td>0.2%</td>
<td>7.1%</td>
<td>2.5%</td>
<td>2.7%</td>
<td>5.7%</td>
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The total value of construction put in place fell in May for the fourth month this year. The 0.9% decline followed a revised 1.1% drop in April. Consensus expectations had been for a 0.5% increase. The 2004 increase in total [...]

U.S. Construction Spending Fell After Strengthened Gain Last Year

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050701c.jpg" width="353">
The University of Michigan&#39;s final reading of consumer sentiment in June extended the early-month improvement and rose 10.5% versus May to 96.0, the highest level this year. Consensus expectations had been for a lesser increase to 94.6.
During the last ten years there has been a 74% correlation between the level of consumer sentiment and the y/y change in real PCE, although the correlation has fallen in recent years.
The reading of current economic conditions improved sharply late in the month and for June overall rose 7.9% to the highest level since late 2000.
Consumer expectations added slightly to the gain earlier in the month and surged 12.9% following five months of decline.
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.
Consumption Taxes: Macroeconomic Effects and Policy Issues from the Federal Reserve Bank of Kansas City can be found <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/Pdf/2Q05garn.pdf"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
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<td class="firstcol">Consumer Sentiment</td>
<td>96.0</td>
<td>86.9</td>
<td>0.4%</td>
<td>95.2</td>
<td>87.6</td>
<td>89.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>113.2</td>
<td>104.9</td>
<td>6.1%</td>
<td>105.6</td>
<td>97.2</td>
<td>97.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Consumer Expectations</td>
<td>85.0</td>
<td>75.3</td>
<td>-4.0%</td>
<td>88.5</td>
<td>81.4</td>
<td>84.6</td>
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The University of Michigan's final reading of consumer sentiment in June extended the early-month improvement and rose 10.5% versus May to 96.0, the highest level this year. Consensus expectations had been for a lesser increase to [...]

U.S. Consumer Sentiment Extended Increase

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050701b.jpg" width="353">
In June, the Composite Index of activity in the manufacturing sector compiled by the Institute of Supply Management rose 2.4 points to 53.8 and recovered all of the prior month&#39;s decline. Consensus expectations had been for stability at 51.5.
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.
New orders recovered all of the decline during the prior two months with a 5.5 point rise to 57.2. The index of export orders, however, fell to the lowest since December 2001.
The employment index improved modestly to 49.9 but remained below the break even level of 50 for a second month. 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.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050701a.jpg" width="353">
The production index (55.6) rose moderately while the inventories index was unchanged and below 50 for the third consecutive month.
The prices paid index again fell sharply to the lowest since early 2002. During the last twenty years there has been an 81% correlation between vendor delivery speed and prices.

<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">June</th>
<th scope="col">May</th>
<th scope="col">June &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Index</td>
<td>53.8</td>
<td>51.4</td>
<td>61.2</td>
<td>60.5</td>
<td>53.3</td>
<td>52.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>57.2</td>
<td>51.7</td>
<td>61.8</td>
<td>63.5</td>
<td>57.9</td>
<td>56.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>50.5</td>
<td>58.0</td>
<td>81.0</td>
<td>79.8</td>
<td>59.6</td>
<td>57.6</td>
</tr>
</tbody>
</table>
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In June, the Composite Index of activity in the manufacturing sector compiled by the Institute of Supply Management rose 2.4 points to 53.8 and recovered all of the prior month's decline. Consensus expectations had been for stability [...]

ISM Factory Index Recovered Some

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050701b.jpg" width="353">
In June, the Composite Index of activity in the manufacturing sector compiled by the Institute of Supply Management rose 2.4 points to 53.8 and recovered all of the prior month&#39;s decline. Consensus expectations had been for stability at 51.5.
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.
New orders recovered all of the decline during the prior two months with a 5.5 point rise to 57.2. The index of export orders, however, fell to the lowest since December 2001.
The employment index improved modestly to 49.9 but remained below the break even level of 50 for a second month. 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.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050701a.jpg" width="353">
The production index (55.6) rose moderately while the inventories index was unchanged and below 50 for the third consecutive month.
The prices paid index again fell sharply to the lowest since early 2002. During the last twenty years there has been an 81% correlation between vendor delivery speed and prices.

<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">June</th>
<th scope="col">May</th>
<th scope="col">June &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Index</td>
<td>53.8</td>
<td>51.4</td>
<td>61.2</td>
<td>60.5</td>
<td>53.3</td>
<td>52.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>57.2</td>
<td>51.7</td>
<td>61.8</td>
<td>63.5</td>
<td>57.9</td>
<td>56.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>50.5</td>
<td>58.0</td>
<td>81.0</td>
<td>79.8</td>
<td>59.6</td>
<td>57.6</td>
</tr>
</tbody>
</table>
U.S. Consumer Sentiment Extended Increase 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 1, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050701c.jpg" width="353">
The University of Michigan&#39;s final reading of consumer sentiment in June extended the early-month improvement and rose 10.5% versus May to 96.0, the highest level this year. Consensus expectations had been for a lesser increase to 94.6.
During the last ten years there has been a 74% correlation between the level of consumer sentiment and the y/y change in real PCE, although the correlation has fallen in recent years.
The reading of current economic conditions improved sharply late in the month and for June overall rose 7.9% to the highest level since late 2000.
Consumer expectations added slightly to the gain earlier in the month and surged 12.9% following five months of decline.
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.
Consumption Taxes: Macroeconomic Effects and Policy Issues from the Federal Reserve Bank of Kansas City can be found <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/Pdf/2Q05garn.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/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>96.0</td>
<td>86.9</td>
<td>0.4%</td>
<td>95.2</td>
<td>87.6</td>
<td>89.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>113.2</td>
<td>104.9</td>
<td>6.1%</td>
<td>105.6</td>
<td>97.2</td>
<td>97.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Consumer Expectations</td>
<td>85.0</td>
<td>75.3</td>
<td>-4.0%</td>
<td>88.5</td>
<td>81.4</td>
<td>84.6</td>
</tr>
</tbody>
</table>
U.S. Construction Spending Fell After Strengthened Gain Last Year  
by <a href="/comment/Moeller.html">Tom Moeller</a> July 1, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050701d.jpg" width="353">
The total value of construction put in place fell in May for the fourth month this year. The 0.9% decline followed a revised 1.1% drop in April. Consensus expectations had been for a 0.5% increase.
The 2004 increase in total construction spending was revised up to 11.1% from 8.9% as a result of a strengthened gain in residential building to 18.5% from 13.9%.
Since then private residential building activity has fallen sharply, down 4.9% during the last three months. The value of new single family building, however, has continued to rise by 0.5% (7.6% y/y) in May. Building on new multi-family units fell 0.9% (15.0% y/y).
Nonresidential building slipped 1.6% (+5.0% y/y) due to a 1.2% (+2.4% y/y) decline in office building.
Public construction spending rose 1.7% but the steam came out of spending on highways &amp; streets, nearly one third of the value of public construction spending, as y/y growth slowed to 5.4% from the high of 19.7% in February.
These more detailed categories represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for Automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.

<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/@E9/@E907/@E90701/@E90701.HTM">Construction Put-in-place</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-0.9%</td>
<td>-1.1%</td>
<td>8.2%</td>
<td>11.1%</td>
<td>5.4%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>-1.6%</td>
<td>-1.5%</td>
<td>7.0%</td>
<td>13.8%</td>
<td>6.3%</td>
<td>-0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>-1.7%</td>
<td>-2.2%</td>
<td>7.8%</td>
<td>18.5%</td>
<td>12.9%</td>
<td>8.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-1.6%</td>
<td>0.6%</td>
<td>5.0%</td>
<td>3.9%</td>
<td>-5.4%</td>
<td>-13.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>1.7%</td>
<td>0.2%</td>
<td>7.1%</td>
<td>2.5%</td>
<td>2.7%</td>
<td>5.7%</td>
</tr>
</tbody>
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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050630e.jpg" width="353">
Unemployment is creeping higher in France, with the unemployment rate for May holding at April&#39;s 10.2% of the labor force, according to INSEE&#39;s monthly labor force survey, released today. The rate there, defined according to the ILO specifications used throughout the Euro-Zone, has been on a upward trend since the slowdown in economic activity began in late 2000 (there has been no &quot;official&quot; recession in France as there was in the US).
INSEE also published its household confidence survey for June, which showed a continuing erosion in the overall indicator. The current reading, -30, is the lowest since survey questions were revised in November 2003. More people reported that their living standards had deteriorated during the last year, that this is a poor time to make make major purchases and that they expect to have difficulty saving over the next year. On the less worrisome side, interestingly, their concerns over unemployment prospects actually diminished. And that variable has only weak correlation with the unemployment rate itself. The overall index and the assessment of the household&#39;s current financial condition are much more closely related to the current unemployment rate, as seen in the graph. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050630f.jpg" width="353">
Germany&#39;s unemployment situation continues to make news, although the figures reported today for May and June actually look better. The ILO-defined rate fell 0.3 percentage point in May to 9.3%. This is not &quot;low&quot;, but does give the impression that the climb in the rate that had begun in December may have run its course. &quot;Registered&quot; unemployment, the count of people registered with government unemployment offices, edged down in June to a rate of 11.7% from 11.8% in May; this rate peaked in March at 12.0%. Local observers, quoted in a Reuters news story, point out that the new &quot;Hartz IV&quot; regulations are starting to take effect, reducing unemployment benefits and requiring unemployed workers to accept new jobs more quickly. Thus, it is too early to conclude that these slight improvements in both unemployment rates mark a genuine firming of German economic activity. In fact, ever higher energy costs continue to cast a cloud on the economic outlook everywhere.

<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">June 2005</th>
<th scope="col">May 2005</th>
<th scope="col">Apr 2005</th>
<th scope="col">Year Ago</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">France: Unemployment Rate (ILO, %)</td>
<td>--</td>
<td>10.2</td>
<td>10.2</td>
<td>10.0</td>
<td>10.0</td>
<td>9.8</td>
<td>9.1</td>
</tr>
<tr>
<td class="firstcol">Household Confidence (%)</td>
<td>-30</td>
<td>-29</td>
<td>-24</td>
<td>-23</td>
<td>-22</td>
<td>-27*</td>
<td>-16</td>
</tr>
<tr class="odd">
<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>
</tr>
<tr>
<td class="firstcol">Germany: Employment (Change, Thous)</td>
<td>--</td>
<td>-4</td>
<td>9</td>
<td>134</td>
<td>140</td>
<td>-356</td>
<td>-217</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate &nbsp;(ILO, %)</td>
<td>--</td>
<td>9.3</td>
<td>9.6</td>
<td>9.3</td>
<td>9.2</td>
<td>9.6</td>
<td>8.7</td>
</tr>
<tr>
<td class="firstcol">Registered Unemployment Rate (%)</td>
<td>11.7</td>
<td>11.8</td>
<td>11.8</td>
<td>10.6</td>
<td>10.6</td>
<td>10.5</td>
<td>9.8</td>
</tr>
</tbody>
</table>
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Unemployment is creeping higher in France, with the unemployment rate for May holding at April's 10.2% of the labor force, according to INSEE's monthly labor force survey, released today. The rate there, defined according to the ILO [...]

French Unemployment High, Consumer Confidence Low; Germany Sees Slight Declines in Unemployment

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/n:\\tina\\clientarea\\comment\\050630g.jpg" width="353">
The Federal Open Market Committee increased interest rates for the ninth time since last June. The target rate for federal funds was raised an expected 25 basis points to 3.25% and the discount rate was raised 25 basis points to 4.25%.
The decision was unanimous.
Today&#39;s press release from the Fed continued to contain a comment suggesting that rates could be raised again. &quot;The Committee believes that, even after this action, the stance of monetary policy remains accommodative ...&quot;
For emphasis the statement indicated that &quot;with appropriate monetary policy action, the upside and downside risks to the attainment of both sustainable growth and price stability should be kept roughly equal.&quot;
Discretion was indicated with the comment &quot;the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability.&quot;
For the complete text of the Fed&#39;s latest press release please click <a href="http://www.federalreserve.gov/boarddocs/press/monetary/2005/20050630/default.htm">here</a>.
A Search for a Structural Phillips Curve from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/staff_reports/sr203.pdf">here</a>.

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The Federal Open Market Committee increased interest rates for the ninth time since last June. The target rate for federal funds was raised an expected 25 basis points to 3.25% and the discount rate was raised 25 basis points to [...]

Fed Funds Rate Increased to 3.25%

Global freight costs are on the rise while supply chain pressures are contained

Accelerating positive economic surprises in the G10 are boosting the global economy

Considerably more monetary ease expected from US and UK as Japan tightens

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

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

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Initial claims for unemployment insurance dropped 10,000 to 214,000 in the week of December 20, from 224,000 during the week of December 13. The four-week moving average of initial claims was 216,750, a decrease of 750 from the prior week’s unrevised 217,500.

Federal government employees initially filed 805 (NSA) jobless insurance claims in the week ended December 13, after filing 1091 claims in the week ended December 6.

Continuing claims for unemployment insurance rose 38,000 to 1.923 million in the week ending December 13, after rising 55,000 to 1.885 million, revised from 1.897 million in the week ending December 6. The four-week moving average was 1.894 million in the week ending December 13, down 5,250 from 1.899 million, revised from 1,902,000 in the week ending December 6. The insured unemployment rate stood at 1.3% in the week of December 13, up from 1.2% in the week of December 6.

Federal government employees’ continuing benefits claims were 12,887 (NSA) in the week ending December 6, from 14,077 (NSA) in the week of November 29. 

The insured unemployment rate varied greatly across individual states and territories. In the week ending December 6, the highest unemployment rates were in New Jersey and Washington (both 2.40%), Massachusetts and Minnesota (both 2.10%), California and Rhode Island (both 2.00%). The lowest rates were in Florida (0.30%), and Alabama, Louisiana, North Carolina (all 0.40%). Rates in other notable states include New York (1.80%), Illinois and Pennsylvania (both 1.70%), and Texas (1.10%). These state data are not seasonally adjusted.

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


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- Initial claims declined from the prior week.
- Continuing claims rose from the prior week.
- The insured unemployment rate edged up.


U.S. Initial Claims for Unemployment Insurance Dropped in Latest Week

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Mortgage applications dropped 5.0% w/w (+49.8% y/y) in the week of December 19, after a drop of 3.8% w/w (+40.9% y/y) in the week of December 12, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications for loans to purchase a house fell 3.7% w/w (+15.9% y/y) in the latest week, the third consecutive weekly decline, following a drop of 2.8% w/w (+12.3% y/y) in the December 12 week. Applications for loan refinancing dropped 5.6% w/w (+110.1% y/y) in the December 19 week after a decline of 3.6% w/w (+86.0% y/y) in the week of December 12. 

The effective interest rate on a 30-year fixed-rate loan fell 8bps to 6.48% in the week ending December 19 from 6.56% in the week ending December 12. The rate on 15-year fixed-rate mortgages dropped 5bps to 5.86% in the latest week from 5.91% in the prior week. The 30-year Jumbo rate rose 8bps to 6.63% in the December 19 week from 6.55% in the December 12 week. The rate on a 5-year ARM jumped 20bps to 5.96% in the latest week from 5.76% in the December 12 week.

The share of applications for refinancing an existing loan edged up to 59.1% of total applications in the December19 week from 59.0% in the week ending December 12. The adjustable-rate mortgage (ARM) share of activity rose to 8.1% in the latest week from 7.2% in the December 12 week.

The average size of a mortgage loan edged down 0.1% w/w (+7.8% y/y) to $399,700 in the week ending December 19, following a rise of 1.5% w/w (6.4% y/y) to $400,000 in the December 12 week. The average size of a purchase loan rose 1.0% w/w (1.1% y/y) to $428,600 in the latest week, after rising 0.6% w/w (-0.3% y/y) to $424,200 in the prior week. The average size of a loan to refinance a mortgage declined 0.9% w/w (+24.9% y/y) to $379,700 in the December 19 week, following a rise of 2.3% w/w (19.8% y/y) to $383,300 in the week ending December 12.

The Mortgage Bankers Association Survey covers 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver’s **SURVEYS** database.


- Both purchase applications and refinancing loan applications fell in the latest week.
- Effective interest rate on 30-year fixed loans fell to 6.48%.
- Average loan size edged down.


U.S. Mortgage Applications Dropped in the Week of December 19

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Real GDP grew 4.3% (SAAR) during the third quarter following a 3.8% Q2 gain, revised from 3.3% reported initially. These increases followed a minimally revised 0.6% decline in Q1. A 3.0% rise had been expected in the Action Economics Forecast Survey. Growth during the last four quarters of 2.3% compared to 2.1% y/y in Q2 and remained below its most recent high of 3.4% in Q4 2023.

After-tax corporate profits without IVA & CCA adjustment surged 7.0% (4.2% y/y) last quarter after edging 0.6% higher in Q2. Before-tax earnings with IVA & CCA rose 4.2% (9.1% y/y) after improving 0.2% in Q2. Financial sector earnings rose 6.2% (21.1% y/y) after rising 1.1% in Q2. Nonfinancial corporate profits rose 2.5% (3.3% y/y) after edging 0.5% higher in Q2. Earnings from abroad jumped 10.6% (26.3% y/y) following a 2.9% Q2  decline.

Foreign trade balance improvement added 1.59 percentage points to growth last quarter after adding 4.83 percentage points in Q2. Real exports increased 2.1% (1.5% y/y) after falling 0.5% in Q2. Real imports declined 1.2% (-1.8% y/y) after declining 8.3% in Q2. Inventories subtracted 0.22 percentage points from growth after subtracting 3.44 percentage point from Q2 growth.

Real final sales to private domestic purchasers grew 3.0% (2.6% y/y) last quartter after rising 2.9% in Q2, revised from 1.6%. Personal consumption expenditures rose 3.5% (2.6% y/y) after a 2.5% rise, revised from 1.6%. Durable goods spending rose 1.6% (3.2% y/y) after increasing 2.3% in Q2. Motor vehicle purchases declined 6.7% (+1.6% y/y) after strengthening 9.7% in Q2. Spending on home furnishings & appliances weakened 4.2% (+0.7% y/y) following a 2.0% fall. Recreational goods & vehicle buying surged 15.7% (7.0% y/y) last quarter after falling 2.5% in Q2.

Nondurable goods outlays in constant dollars rose 3.9% (3.0% y/y) last quarter following 2.2% growth in Q2. Apparel spending strengthened 6.7% (7.0% y/y) following a 5.8% rise. Food & beverage buying gained 2.0% (1.3% y/y) after edging 0.2% higher. Gasoline & fuel oil purchases improved 1.3% (-0.2% y/y) after falling 2.8% in Q2.



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Real spending on services increased 3.7% (2.4% y/y) in Q3 after a 2.6% Q2 gain. Outlays on housing & utilities edged 0.3% higher (1.0% y/y) after easing 0.2% in Q2. Health care expenditures surged 6.8% (4.5% y/y) after a 4.8% increase. Transportation outlays gained 3.1% both  q/q and y/y after a 7.0% rise, while recreation spending jumped 6.6% (2.4% y/y) following a 3.9% rise. Restaurant & hotel expenditures increased 1.2% (2.0% y/y) after strengthening 5.9% in Q2. Financial services expenditures rose 2.6% both q/q and y/y following a 4.8% Q2 increase.

Business fixed investment in constant dollars increased 2.8% (3.9% y/y) last  quarter following a 7.3% Q2 rise, revised from 5.7%. Expenditures on structures declined 6.3% both q/q and y/y, after falling for six consecutive quarters. Expenditures on producers’ durable equipment increased 5.4% (7.4% y/y), after strengthening 8.5% in Q2. Outlays on information processing equipment rose 8.4% (18.6% y/y), after strengthening 11.7% during Q2. Industrial equipment investment rose 2.0% (3.4% y/y) after a 6.5% rise. Transportation equipment investment fell  2.7% (+3.0% y/y) after strengthening 25.2%. Intellectual property product spending rose 5.4% last quarter (6.4% y/y), after surging 15.0% in Q2.

Residential structures investment in real terms declined 5.1% (-1.8% y/y), the same as in Q2. It was the third consecutive quartly decline.

Government spending rose 2.2% (1.1% y/y) during the third quarter after an unrevised 0.1% easing in Q2. Federal government expenditures rose 2.9% (-1.0% y/y) after falling 5.3% in Q2. National defense expenditures increased 5.8% (1.0% y/y) after rising 0.9% in Q2. State & local government spending rose 1.8% (2.4% y/y) following a 3.1% rise.

The GDP chain price index rose 3.8% (3.0% y/y) last quarter vs. 2.1% in Q2. The PCE chain price index increased 2.8% (2.7% y/y) following a 2.1% rise. The PCE price index excluding food and energy rose 2.9% (2.9% y/y) after increasing 2.6% in Q2. The business fixed investment price index rose 5.2% (1.5% y/y) in Q3 after a 0.4% decline. The residential price index rose 4.5% (3.3% y/y) last quarter after a 2.2% rise, while the government price index increased 4.4% (3.5% y/y) following a 3.3% rise.

The GDP data can be found in Haver’s **USECON** and **USNA** databases. **USNA** contains virtually all of the Bureau of Economic Analysis detail in the national accounts. The Action Economics consensus estimates can be found in **AS1REPNA**.



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- Consumer spending strengthens; growth in business investment decelerates.
- Corporate profit growth led by earnings abroad.
- Rise in chain price index accelerates.


U.S. GDP Growth is Strong in Q3; Profits Jump

Sandy Batten

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Industrial production fell 0.1% m/m in October but rose 0.2% m/m (2.5% y/y) in November. The Action Economics Forecast Survey expected 0.1% monthly gains in both months. Manufacturing activity was tepid with manufacturing production falling 0.4% m/m in October and unchanged in November. Manufacturing output has not posted a monthly gain since July. Mining output fell 0.8% m/m in October but rebounded 1.7% m/m in November. Utilities output surged 2.6% m/m in October but fell 0.4% m/m in November. Compared to a year ago, manufacturing production is up 1.9%; mining output is up 3.9%; and utilities output is up 4.8%.

By market group, output of durable consumer goods plunged 2.6% m/m in October and fell another 0.2% in November. Production of durable consumer goods has declined in five of the previous six months. Production of nondurable consumer goods rose 0.5% m/m in both October and November. Compared to a year ago, durable consumer goods production has fallen 5.9% while nondurable consumer goods output has risen 2.7%. Business equipment production fell 0.3% m/m in October but rebounded 0.3% m/m in November and is up 11.2% y/y. Production of nonindustrial supplies fell 0.3% m/m in both October and November.

By industry group, output of durable goods fell 0.5% m/m in October and declined 0.1% m/m in November but were up 3.2% from a year ago. Motor vehicle and parts production slumped 5.1% m/m in October and declined 1.0% m/m in November to be down 5.6% from a year ago. Monthly motor vehicle output has declined in five of the previous six months. In contrast, production of computers and electronic products increased 1.5% m/m in October and rose 0.8% m/m in November. Aerospace production continued to rise, increasing 2.0% m/m in October and 1.1% m/m in November to be up 25.2% from a year ago. Output of nondurable goods fell 0.2% m/m in October and edged up 0.1% m/m in November. Their output is up 0.9% from a year ago. Apparel output fell 1.3% m/m in October but recovered in November, rising 2.3% m/m. Food and beverage output rose 0.3% m/m in October and another 1.2% in November.

Output of selected high-technology industries rebounded in October and November. After having declined 1.0% m/m in both August and September, production jumped 1.9% m/m in October and 1.1% m/m in November to stand 11.8% higher than a year ago. Manufacturing output excluding selected high-tech industries fell 0.4% m/m in October and was unchanged in November. It has risen only 1.6% over the past year. Manufacturing excluding motor vehicle production was unchanged in October and edged up 0.1% m/m in November; it is up 2.6% y/y.

Total industry capacity utilization edged down to 75.9% in October from 76.0% in September and then recovered the decline in November, edging up to 76.0%. In the manufacturing sector, the utilization rate slumped to 75.4% in October from 75.8% in September and remained at 75.4% in November. The October/November reading is the lowest since January.

Industrial production and capacity data are in Haver’s **USECON** database. Additional detail on production and capacity utilization can be found in the **IP** database. The expectations figures come from the **AS1REPNA** database.



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- Today’s release contained figures for both October and November that had been delayed by the federal government shutdown.
- IP fell in October but recovered in November.
- Manufacturing output was tepid, falling in October and unchanged in November.
- A surge in utilities output in October prevented a larger decline in total production.
- A jump in mining output in November accounted for all of the increase in total production.


U.S. Industrial Production Fell in October and Recovered in November

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New orders for durable goods fell a more-than-expected 2.2% (+4.8% y/y) in October following an upwardly revised 0.7% m/m rise in September (previously +0.5% m/m) and a 3.0% monthly jump in August. The Action Economics Forecast Survey expected a 1.5% m/m decline. A 23.7% m/m drop in aircraft orders more than accounted for the overall decline. Orders excluding aircraft increased 0.2% m/m (4.0% y/y) in October on top of a 0.5% monthly increase in September.

More generally, transportation orders fell 6.5% m/m (+7.3% y/y) in October following a 0.6% m/m increase in September and an 8.0% monthly jump in August. In addition to the drop in aircraft orders, orders for motor vehicles and parts edged up 0.1% m/m in October, their sixth consecutive monthly increase. Across other sectors, orders for primary metals fell 0.7% m/m, their first monthly decline in ten months. Orders for electrical equipment and appliances slumped 1.5% m/m, their first monthly decline in seven months. In contrast, orders for fabricated metal products rose 0.5% m/m, their fourth consecutive monthly gain. Machinery orders increased 0.8% m/m, their eighth consecutive monthly rise. Orders for computers and electronic products increased a solid 1.0% m/m on top of a 1.2% monthly increase in September.

Shipments of core capital goods (nondefense capital goods shipments excluding aircraft) are a reliable coincident indicator of business spending on equipment in the national accounts. They rose 0.7% m/m in October following an upwardly revised 1.2% monthly gain in September (previously +0.9%). The was the second consecutive monthly increase and the fifth in the past six months. The strong end to Q3 and the continued rise in the first month of Q4 provides a solid starting point for all of Q4. The October shipments figure was 5.9% at an annual rate above the Q3 average. Core capital goods orders rose 0.5% m/m in October on top of an upwardly revised 1.1% m/m increase in September (previously +0.9%). This was the fourth consecutive monthly rise.

Total manufacturing shipments edged up 0.1% m/m (+2.8% y/y) in October after having been essentially unchanged in September. Shipments of durable goods increased 0.6% m/m (5.9% y/y), led by 1.4% monthly jump in transportation shipments. However, apart from a 0.1% m/m decline in shipments of other durable goods, all of the other major sectors posted monthly gains in October. In contrast, shipments of nondurable goods fell 0.4% m/m (-0.3% y/y) in October for their third consecutive monthly decline. The monthly decline was led by a 2.4% m/m fall in shipments of petroleum and coal products although it was relatively widely spread across major sectors. The one exception was a 2.1% m/m increase in leather product shipments, but this came after four consecutive sizeable monthly declines.

Unfilled durable goods orders increased 0.2% m/m (7.9% y/y) in October for their third consecutive monthly gain following a 0.8% m/m rise in September and a 0.7% m/m increase in August. Total factory inventories were unchanged in October (+1.4% y/y) following 0.1% monthly declines in both August and September. Durable goods inventories edged up 0.1% m/m in October while inventories of nondurable goods fell 0.2% m/m, the third consecutive monthly decline.

The factory sector data are available in Haver’s **USECON** database. The Action Economics Forecast Survey is in the **AS1REPNA** database.



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- New orders for durable goods slumped 2.2% m/m in October following increases in both August and September
- A 24% monthly drop in aircraft orders drove the overall decline
- Orders excluding aircraft rose 0.2% m/m in October
- Core capital goods shipments and orders continued to rise in October with small upward revisions to September


Economy in Brief: 2005

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U.S. Vehicle Sales Led Higher By Truck Rebound

Japanese Employment, Unemployment and TANKAN All Show Improvement

U.S. Construction Spending Fell After Strengthened Gain Last Year

U.S. Consumer Sentiment Extended Increase

ISM Factory Index Recovered Some

ISM Factory Index Recovered Some

French Unemployment High, Consumer Confidence Low; Germany Sees Slight Declines in Unemployment

Fed Funds Rate Increased to 3.25%