Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070731d.jpg" width="353">
For private industry workers, the employment cost index rose an expected 0.9% last quarter. The gain followed a more modest 0.6% 1Q increase that was held back by a 0.3% decline in benefits costs.
Benefit costs rebounded 1.1% from the prior quarter&#146;s move down. The cost of health benefits increased 4.8% y/y, continuing the slowdown of the last four years.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070731e.jpg" width="353">
Wage and salary growth at 0.8% was lower than the 1.1% the prior quarter but the y/y growth of 3.4% was near the strongest of the last five years. Wages account for roughly 70% of the compensation index. 

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB08/@EB08.HTM">ECI- Private Industry Workers</a></th>
<th scope="col">2Q</th>
<th scope="col">1Q</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
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</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Compensation</td>
<td>0.9%</td>
<td>0.6%</td>
<td>3.1%</td>
<td>2.9%</td>
<td>3.1%</td>
<td>3.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wages &amp; Salaries</td>
<td>0.8%</td>
<td>1.1%</td>
<td>3.4%</td>
<td>2.9%</td>
<td>2.5%</td>
<td>4.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Benefit Costs</td>
<td>1.1%</td>
<td>-0.3%</td>
<td>2.7%</td>
<td>2.9%</td>
<td>4.6%</td>
<td>6.8%</td>
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For private industry workers, the employment cost index rose an expected 0.9% last quarter. The gain followed a more modest 0.6% 1Q increase that was held back by a 0.3% decline in benefits costs. Benefit costs rebounded 1.1% from the [...]

U.S. Employment Cost Index Up an Expected 0.9%

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070731a.jpg" width="353">
Personal income rose 0.4% last month, the same as during May. The June increase about matched Consensus expectations for a 0.5% gain. The June increase at 6.1% y/y left income growing near the rate of increase during the last three years.
The report of a 0.1% increase in the PCE chain price index during June brought with it a 0.1% rise in the core PCE price measure, the fourth 0.1% increase in a row. It was slightly below expectations for a 0.2% gain. annualized, the gain in core prices came in at 1.6% over the last three months. The increase in the total PCE price index was 3.8% during the same three months (AR): down from the 5.0% three month gain during May. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070731c.jpg" width="353">
Wages &amp; salaries increased 0.5% (6.7% y/y) and factory sector wages rose the same 0.5% (5.6% y/y) after a 0.1% May rise.Wage &amp; salary income in service producing industries rose 0.6% (7.4% y/y) after a 0.5% increase in May while pay in the government sector rose 0.4% (5.0% y/y).
Interest income ticked up 0.1% (1.1% y/y) for the third consecutive month while dividend income rose 1.0% (14.2% y/y), about the same as during the prior six months.
Personal current taxes increased 0.7% (10.7% y/y). That left disposable personal income to grow 0.4% (5.5% y/y) after a 0.4% May gain. Real disposable personal income thus rose 0.3% (3.1% y/y) last month after a 0.1% decline during May. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070731b.jpg" width="353">
Personal consumption expenditures increased just 0.1% in June following a little revised 0.6% gain during May. Expectations were for 0.2% rise. Durable goods purchases reversed all of the prior month&#146;s increase with a 1.6% (+2.6% y/y) decline as spending on motor vehicles fell 2.1% (+2.0% y/y) and spending on furniture &amp; other household equipment fell 1.0% (+2.5 y/y. Lower gasoline prices dropped spending on gasoline by 0.4% (+4.4% y/y) and spending on apparel fell 0.8% (+3.5% y/y). One of the few increases in spending last month was on medical care by 0.5% (6.3% y/y).
The personal saving rate was back in positive territory as earlier upward revisions brought it to 0.6% in June.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
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</thead>
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<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.4%</td>
<td>0.4%</td>
<td>6.1%</td>
<td>6.6%</td>
<td>5.9%</td>
<td>6.2%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.1%</td>
<td>0.6%</td>
<td>5.2%</td>
<td>5.9%</td>
<td>6.2%</td>
<td>6.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Saving Rate</td>
<td>0.6%</td>
<td>0.4%</td>
<td>0.5% (June 06)</td>
<td>-1.1%</td>
<td>-0.4%</td>
<td>2.0%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.1%</td>
<td>0.5%</td>
<td>2.3%</td>
<td>2.8%</td>
<td>2.9%</td>
<td>2.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.1%</td>
<td>0.1%</td>
<td>1.9%</td>
<td>2.2%</td>
<td>2.2%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>


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Personal income rose 0.4% last month, the same as during May. The June increase about matched Consensus expectations for a 0.5% gain. The June increase at 6.1% y/y left income growing near the rate of increase during the last three [...]

U.S. Personal Income About On Forecast, Core Prices Again Up 0.1%

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070730a.jpg" width="353">
The Conference Board indicated that its index of help-wanted advertising reversed its earlier improvement and fell to 26 from 27 in June. 
The index had been elevated earlier this year off a 2006 low in November of 29.
During the last ten years there has been a 57% correlation between the level of help-wanted advertising and the three month change in non-farm payrolls.
The proportion of labor markets with rising want-ad volume moved in the opposite direction for the month, up to a still low 35.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070730b.jpg" width="353">
In the Mid-Atlantic states the index of advertising fell to a record low of 16 while in the South Atlantic states it also fell to a record low of 15. 
The Conference Board surveys help-wanted advertising volume in 51 major newspapers across the country every month.
The latest help wanted report from the Conference Board is available <a href="http://www.conference-board.org/economics/helpwanted.cfm">here</a>.
The FOMC in 1978 from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/mt/20070801/cover.pdf">here</a>. 

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/CBDB/@C3/@C3.HTM">Conference Board</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June 2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">National Help Wanted Index</td>
<td>26</td>
<td>27</td>
<td>32</td>
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The Conference Board indicated that its index of help-wanted advertising reversed its earlier improvement and fell to 26 from 27 in June. The index had been elevated earlier this year off a 2006 low in November of 29.

U.S. Help-Wanted Advertising Reverses Improvement

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/070727e.jpg" width="353">
It was looking promising in Japan: deflation was ending, finally, after almost 8 years. The most watched measure there, the core CPI excluding fresh food, had fallen from the middle of 1998 through April of 2006, according to the path of the year-over-year percent change. The overall amount of deflation wasn&#39;t all that bad: the index, seasonally adjusted, fell from a high of 103.4 in mid-1997 to a low of 99.9 in several months of 2005. But it was promising to see the index bottom out and begin to rise. The latter months of last year didn&#39;t see any big increase, but it really seemed that retailers were regaining some pricing power, necessary for the economy to sustain a self-reinforcing expansion.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070727f.jpg" width="353">
But prices have not been able to sustain this new uptrend. This specific measure, the General CPI excluding fresh food has been down year-on-year since February, and today, the Ministry of Internal Affairs and Communications reported that June was a fifth consecutive month of decline, 0.1% from June 2006. This core index level is the blue line in the first graph.
The green line in that graph is a Western-style core index, the total less all food and energy. It highlights that the &quot;recovery&quot; we thought we saw in the other index was really concentrated in energy and that other prices continued down. The rate of decline eased in this index, but the year-on-year rate has never turned positive.
The June data show continuing weakness in housing, especially imputed rents, household furnishings, communications and reading &amp; recreation. Clothing and vehicle prices and public transportation charges have been edging marginally higher. Medical care and the &quot;miscellaneous&quot; category are up somewhat, the latter due mainly to an administered increase in tobacco prices.
With consumer prices unable to increase, it doesn&#39;t really seem surprising that retail sales have not risen either. The Ministry of Economy, Trade and Industry (METI) today reported a monthly decline of 0.8% for June, and a year-on-year reduction of 0.4%. Stores did have rising sales from 2003 through the middle of last year, a period when prices were falling. So price behavior isn&#39;t the only determinant. Individual store categories are showing mixed performances, with general merchandise outlets having persistent gains. But clothing stores saw notable drops in June, and motor vehicle dealers more than reversed a good April increase in May and June. Household appliance stores, facing a downtrend in home furnishings prices, have also been experiencing declining sales.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070727g.jpg" width="353">
At the beginning of this month, the fabled TANKAN survey indicated that businesses were more optimistic in Q2. While this is generally true, the assessments of retailers have diminished. For &quot;all enterprises&quot; in retailing, the &quot;actual conditions&quot; measure turned weaker in Q2 2006 and has continued to deteriorate since, along with both prices and sales. Sigh.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol">JAPAN</th>
<th scope="col">June 2007*</th>
<th scope="col">May 2007*</th>
<th scope="col">Apr 2007*</th>
<th scope="col">Year/ Year</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">CPI, General</td>
<td>-0.1</td>
<td>0.2</td>
<td>0.2</td>
<td>-0.2</td>
<td>0.2</td>
<td>-0.3</td>
<td>0.0</td>
</tr>
<tr>
<td class="firstcol">CPI ex Fresh Food</td>
<td>0.0</td>
<td>0.1</td>
<td>0.1</td>
<td>-0.1</td>
<td>0.1</td>
<td>-0.1</td>
<td>-0.1</td>
</tr>
<tr class="odd">
<td class="firstcol">CPI ex Food &amp; Energy</td>
<td>-0.1</td>
<td>-0.1</td>
<td>0.1</td>
<td>-0.4</td>
<td>-0.4</td>
<td>-0.4</td>
<td>-0.6</td>
</tr>
<tr>
<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 class="odd">
<td class="firstcol">Retail Sales</td>
<td>-0.8</td>
<td>0.6</td>
<td>0.3</td>
<td>-0.4</td>
<td>0.1</td>
<td>1.0</td>
<td>1.0</td>
</tr>
</tbody>
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It was looking promising in Japan: deflation was ending, finally, after almost 8 years. The most watched measure there, the core CPI excluding fresh food, had fallen from the middle of 1998 through April of 2006, according to the path [...]

Japan: CPI and Retail Sales Weaken--Discouragingly

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070727c.jpg" width="353">
The University of Michigan&#39;s reading of consumer sentiment this month rose 6.0% to 90.4, the highest level since February. The increase was less than the 8.3% gain reported in the preliminary report and it fell short of Consensus expectations for a reading of 91.5.
Consumer expectations contributed to the rise with a 9.1% jump m/m.
An improved expectation for business conditions during the next year contributed with an 11.7% m/m rise and an improved outlook for the next five years contributed with a 9.1% jump. Both these increases were much reduced from the preliminary report. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070727d.jpg" width="353">
An improved view of the current economic conditions contributed as it rose 2.6%. The view of current personal finances rose 4.5% (4.5% y/y) but the perspective of current buying conditions rose just 1.3% (-1.3% y/y).
The assessment of government policy improved 4.9% (4.9% y/y) after falling sharply during the prior two months.
The University of Michigan survey is not seasonally adjusted.The reading is based on telephone interviews with about 500 households at month-end.

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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">July </th>
<th scope="col">July (Prelim.)</th>
<th scope="col">July y/y</th>
<th scope="col">June </th>
<th scope="col">2006</th>
<th scope="col">2005</th>
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</thead>
<tbody>
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<td class="firstcol">Consumer Sentiment</td>
<td>90.4</td>
<td>92.4</td>
<td>6.7% </td>
<td>85.3</td>
<td>87.3</td>
<td>88.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>104.5</td>
<td>105.7</td>
<td>1.0%</td>
<td>101.9</td>
<td>105.1</td>
<td>105.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Expectations</td>
<td>81.5</td>
<td>83.9</td>
<td>12.4%</td>
<td>74.7</td>
<td>75.9</td>
<td>77.4</td>
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</body>
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The University of Michigan's reading of consumer sentiment this month rose 6.0% to 90.4, the highest level since February. The increase was less than the 8.3% gain reported in the preliminary report and it fell short of Consensus [...]

Michigan Consumer Sentiment Up During July

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070727a.jpg" width="353">
U.S. real GDP grew 3.4% (AR) last quarter. It was both the fastest growth since 1Q06 and exceeded Consensus expectations for a 3.2% rise. 
The estimates released today reflect the annual revision to the national income &amp; product accounts (NIPAs), beginning with the estimates for the first quarter of 2004. The release includes the revised quarterly estimates of GDP, corporate profits, and personal income. In general, real GDP growth was revised down as price inflation was revised up. 
Growth in final sales to domestic purchasers held about steady with 1Q at 1.7%. Growth in residential investment, however, collapsed for the fifth straight quarter. Perhaps showing some sign of reaching a bottom, the 9.2% annual rate of decline in housing during 2Q was roughly half the shortfalls during the prior year. Growth in personal consumption expenditures also moderated to a 1.3% (2.9% y/y) rate of growth versus an average 3.4% during each of the prior five quarters. Picking up the slack was a 2.3% (0.1% y/y) advance in business fixed investment in equipment &amp; software, the firmest in three quarters, and a 22.2% (11.5% y/y) jump in business investment in structures. Also rising quickly were government purchases with a 4.3% (2.0% y/y) rise after a 0.5% 1Q decline. 
An improved net export deficit added 1.6 percentage points to GDP growth. It occurred as exports boomed 6.4% (6.8% y/y) while imports fell 2.6% (+2.0% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070727b.jpg" width="353">
Somewhat faster inventory accumulation added 0.2 percentage points to 2Q GDP after subtracting from GDP during the prior two quarters.
The GDP chain price index rose 2.7% versus expectations for a 3.4% rate of gain. Growth in the PCE chain price index rose to 4.3% (2.3% y/y) due to a 10.0% jump in nondurables boosted by higher fuel costs. Less food &amp; energy the PCE chain price index grew 1.4% (2.0% y/y), its slowest rate of increase since 2003.

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<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained 2000$, % AR</a> </th>
<th scope="col">2Q 2007 </th>
<th scope="col">1Q 2007 </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>
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<td class="firstcol">GDP</td>
<td>3.4%</td>
<td>0.6%</td>
<td>1.8%</td>
<td>2.9%</td>
<td>3.1%</td>
<td>3.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>0.2%</td>
<td>-0.7%</td>
<td>-0.7%</td>
<td>0.1%</td>
<td>-0.2%</td>
<td>0.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>2.2%</td>
<td>1.9%</td>
<td>3.5%</td>
<td>2.8%</td>
<td>3.3%</td>
<td>3.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Foreign Trade Effect</td>
<td>1.6%</td>
<td>-0.2%</td>
<td>0.8%</td>
<td>0.1%</td>
<td>0.0%</td>
<td>-0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>1.7%</td>
<td>1.6%</td>
<td>1.7%</td>
<td>2.7%</td>
<td>3.3%</td>
<td>3.8%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>2.7%</td>
<td>4.2%</td>
<td>2.7%</td>
<td>3.2%</td>
<td>3.2%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>


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U.S. real GDP grew 3.4% (AR) last quarter. It was both the fastest growth since 1Q06 and exceeded Consensus expectations for a 3.2% rise. The estimates released today reflect the annual revision to the national income & product [...]

US 2Q07 GDP Above Expectations

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

US productivity growth has been significantly faster than in other major economies

Consumers' short-term US inflation expectations still elevated while longer-term expectations of financial markets are steady

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

Job openings less than the number unemployed in July for first time since 2021

Reaccelerating goods price inflation along with sticky services inflation clouds the outlook

Falling oil prices aren't pulling down inflation expectations, pointing to a boost from increased tariffs

Equity market exuberance outpacing macroeconomic data

Apart from Japan, Blue Chip forecasters expect further sizable monetary easing

US production rebounded in Q2, but demand continued to slow

US leader, Germany trailer for real GDP growth over past 3 years

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

With escalation of Israel/Iran conflict, geopolitical risk has recently surged while US trade policy uncertainty has ebbed

Renewed supply chain pressures point to a rebound in global inflation ahead

Apart from Japan, Blue Chip forecasters look for further significant monetary policy easing

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

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Tian Yong Woon

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

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

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

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

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**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.

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**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.

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**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.

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**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).

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Asia

Economic Letter from Asia: As the Dust Settles

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Consumer credit outstanding increased $13.1 billion (2.3% y/y) in September after rising $3.1 billion in August, revised from $0.4 billion, and $17.7 billion in July, revised from $18.1 billion. A $10.0 billion rise had been expected in the Action Economics Forecast Survey.

Nonrevolving credit outstanding rose $11.4 billion (2.1% y/y) in September after increasing $9.2 billion in August, revised from $6.3 billion, and increasing $6.7 billion in July, revised from $6.9 billion. Nonrevolving credit held by depository institutions declined 6.8% y/y in September after falling 7.4% y/y in August. Finance company debt holdings fell 1.5% y/y after declining 1.3%, while credit union holdings rose an increased 12.8% y/y in September, the quickest growth since in two years. Nonrevolving debt of the federal government rose 3.6% y/y in September, the same as in August.

In September, revolving credit outstanding, which includes credit cards, rose $1.7 billion (2.6% y/y) after falling $6.1 billion in August, revised from a $6.0 billion decline, and rising $11.0 billion in July, revised from $11.2 billion. Revolving credit outstanding held by depository institutions fell 3.0% y/y. Revolving credit held by finance companies fell a steady 14.7% y/y in September, while credit union debt rose 4.5% y/y in September, up from 3.7% y/y in August.

The consumer credit figures from the Federal Reserve Board are break-adjusted and calculated by Haver Analytics. The breaks in the series in 2005, 2010 and 2015 are the result of the incorporation of data from the Census and the Survey of Finance Companies, as well as changes in the seasonal adjustment methodology. The consumer credit data are available in Haver’s **USECON** database. The Action Economics forecast figures are contained in the **AS1REPNA** database.

**AI and the Economy** is the title of today’s speech by Federal Reserve Vice Chair Philip N. Jefferson and it can be found [here](https://www.federalreserve.gov/newsevents/speech/jefferson20251107a.htm).

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- Notable gain in credit usage follows prior month’s slowdown.
- Nonrevolving credit usage strengthens and revolving turns positive.

U.S. Consumer Credit Strengthens in September

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The Industrial Materials Price Index from the Foundation for International Business and Economic Research (FIBER) eased 0.1% during the four weeks ended November 7, 2025 after improving 0.3% in the prior four-week period. The index increased 0.5% y/y following a 0.8% y/y gain at the end of October.

Prices in the **Textile** group increased 2.5% during the last four weeks and rose 3.3% y/y. The cost of burlap increased 23.8% in the last four weeks while surging 48.1% over the last year. Showing modest improvement, cotton prices rose 0.9% in four weeks but declined 5.6% y/y.

**Metals** group prices increased 1.5% (5.9% y/y) in the last four weeks as the cost of aluminum rose 4.9	% (10.3% y/y). Zinc prices moved up 3.6% (5.4% y/y) and the cost of steel scrap rose 1.4% (-5.9% y/y). Lead prices increased 1.1% (-0.2% y/y) in four weeks and the cost of copper scrap rose 0.6% (13.9% y/y). Working lower, tin prices declined 2.2% (+13.8% y/y) in four weeks.

**Miscellaneous** group prices weakened 2.9% in the last four weeks and were off 1.0% y/y, as framing lumber prices fell 11.3% (-4.3% y/y). The cost of tallow, used for frying & baking, declined 9.0% (+10.5% y/y) in four weeks. Offsetting this weakness, natural rubber prices rose 2.0% in four weeks, but were off 6.6% y/y.

Prices in the **crude oil & benzene** group declined 1.6% (-10.8% y/y) in the last four weeks. The cost of West Texas Intermediate crude oil fell 2.2% in four weeks to $60.31 per barrel and declined 15.6% y/y. The price was increased from a low of $58.47 in the third week of last month. The price of the petro-chemical benzene fell 3.8% (-23.2% y/y) in four weeks.

**Excluding crude oil**, the industrial commodity price index was unchanged (+1.5% y/y) over the last four weeks after rising 0.5% during the prior four weeks.

The Foundation for International Business and Economic Research (FIBER) develops economic measurement techniques as applied to business cycles and inflation in the U.S. and other market economies. The commodity price data can be found in Haver's **DAILY**, **WEEKLY**, **USECON** and **CMDTY** databases.

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

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

Robert Brusca

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The chart provides a good overview for German trade trend. The table breaks trade trends down by categories and provides growth rates on shorter horizons of 3 months, 6 months and 12 months. But the chart depicts the overarching trends well. It shows the German surplus being diminished on a gradual path and not altogether in a clear monotonic fashion. Export and import lines on the chart move mostly sideways (horizontal). The export line is below the import line since late last year. These two series plots on the right-hand scale and they depict growth rates (year-over-year). So sideways movements mean roughly steady growth. Exports have been growth steadily year-over-year at a weak pace that on occasion has been a decline in terms of their year-on-year value. Generally, the green line is in positive territory. The red import line has been stronger, indicating somewhat better, steadier import growth over the period.

While exports had a good September, export growth sequenced from 12-months to 6-months, to 3-months has been weakening. Imports also put in a strong September but are showing some erosion from 12-month to 6-months to 3-months in terms of annualized rates of growth. Still, import growth rates remain quite strong and consistent; the sense of erosion is clear but also moderate – it’s a moderate erosion in progress for imports.

Capital goods exports from Germany are improving- this observation is based on lagged data with a one-month lag built in. But consumer goods and vehicle exports are slowing and rather sharply- likely as a result of U.S. tariffs.

Import side trends, with the same lag, are not as clear cut. Capital goods imports are growing, and motor vehicle imports are improving and accelerating. Consumer goods imports have erratically slowed.

Real exports and imports on sequential lagged data show exports contracting on most horizons while imports generate consistent positive growth in real terms. There is a big difference in these two trends expressed in real terms.

On balance, German trade trends are shifting. The trade balance is gradually eroding. Change is in play.

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Germany

German Trade Surplus Shrinks Despite Strong Exports

Andrew Cates

**The global growth cycle**
The new orders-to-inventory spread in the global manufacturing PMI is often been viewed as one of the most reliable forward-looking indicators of the global economic cycle. When new orders are rising relative to inventories, it typically signals that demand is firming, production pipelines are beginning to refill, and industrial momentum is building. Conversely, when inventories accumulate faster than orders, it often foreshadows a slowdown. As the chart shows, this spread has been holding up relatively well in recent months, suggesting that despite ongoing headwinds—US tariff policies, uneven global demand, and geopolitical uncertainty—the underlying pulse of global manufacturing remains resilient.

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**US credit standards**
The latest Senior Loan Officer Opinion Survey (SLOOS) from the Federal Reserve suggests that credit conditions remain tight but are no longer worsening, marking a tentative stabilization after several quarters of tightening. Banks reported modest easing in standards for some categories of corporate and commercial real estate loans, though mortgage lending remains constrained. Demand for business credit continues to soften, reflecting both higher borrowing costs and a cautious corporate outlook. Historically, periods of widespread tightening—like those seen in 2008 and 2020—have coincided with sharp rises in the private sector savings balance (a proxy for deleveraging), as firms and households retrench simultaneously. The current configuration, shown in the chart, indicates lingering deleveraging pressures, but not a collapse in credit availability.

251106Z2.jpg

**China**
Moving to China, the latest official and Caixin PMI releases for October painted a mixed picture of activity. Both manufacturing indices softened, suggesting that the industrial rebound which underpinned much of China’s recent growth may be losing some traction. The official non-manufacturing PMI, by contrast, edged higher, hinting at continued resilience in construction and public-sector-linked services, while the Caixin services measure—which tends to reflect smaller, private-sector firms—slipped modestly. The divergence underscores China’s two-speed recovery: industrial production and exports have carried the economy, while household spending and smaller enterprises remain subdued. If manufacturing momentum fades in the coming months, the economy could face a renewed loss of balance, with fewer reliable growth engines. Still, overall performance this year has surpassed expectations, and the government’s 5% growth target remains within reach, provided activity holds steady through year-end. Looking ahead, marginal policy support and improved external sentiment—helped by selective tariff relief from the US—could offer limited, though welcome, cushioning.

251106Z3.jpg

**Australia** 
In Australia, the RBA left the cash rate unchanged at its November meeting, maintaining a cautious stance amid a still-complex inflation and growth backdrop. The case for further easing has become less compelling as core inflation (trimmed mean CPI) remains above target and labour market conditions—while gradually softening—continue to show resilience. The unemployment rate has edged higher but remains low by historical standards, consistent with lingering wage and services price pressures. Recent data also hint at a tentative pickup in activity, supported by strong population growth and stabilising commodity exports. Against that backdrop, the RBA has stressed that the path for policy remains finely balanced, with a strong focus on incoming inflation data and global financial conditions. While downside risks persist—particularly from China’s slowdown and weak global trade—the persistence of domestic price pressures means the bar for renewed rate cuts remains relatively high.

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**Argentina**
Turning to Argentina, markets continue to digest the implications of President Milei’s midterm election victory amid deepening economic and financial imbalances. The peso’s broad nominal effective exchange rate has remained under heavy pressure, extending its long-running slide as investors weigh the challenges of implementing fiscal consolidation and monetary reform in a fragile political and social environment. In stark contrast, the Buenos Aires stock index has surged to record highs, reflecting optimism that Milei’s reformist agenda—anchored in deregulation, privatisation, and fiscal restraint—may eventually stabilise the economy and attract renewed capital inflows. The divergence between a falling currency and soaring equity prices highlights the tension between near-term macro risks and longer-term reform hopes. Going forward, investor confidence will hinge on the government’s ability to deliver credible policy execution while managing the inflationary fallout from ongoing peso weakness.

251106Z5.jpg

**Global CO2 emissions**
Shifting focus to more structural issues, the chart underscores how decarbonisation challenges remain deeply concentrated in a few heavy-emitting sectors. Energy production alone accounts for nearly 40% of global CO₂ emissions, with manufacturing, households, and transport together contributing another 50%. This composition highlights the complex trade-offs of the energy transition: the very sectors that underpin modern living standards—power generation, industrial output, mobility, and housing—are also those most difficult to decarbonise. Climate change is therefore not just an environmental issue but a structural economic one, shaping investment, infrastructure, and pricing systems for decades to come. The tension between sustaining growth and cutting emissions will remain a defining challenge for policymakers, particularly as clean technologies face constraints in scaling fast enough to offset rising global demand for energy-intensive goods and services.

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Recent financial market developments have been shaped by a renewed bout of volatility, with heightened concerns about stretched AI valuations triggering a big correction across parts of the tech sector. This comes against a backdrop of lingering uncertainty in Washington, where the US government shutdown has continued to delay the release of several key economic reports, clouding visibility on near-term momentum. Still, the broader macro signals offer a mixed but nuanced picture. Global manufacturing PMIs have continued to hold up, hinting that underlying industrial momentum remains resilient (chart 1). The latest US Senior Loan Officer Survey points to a stabilisation in credit conditions—banks remain cautious, but the most intense phase of tightening may have now passed (chart 2). In China, the October PMIs reflected renewed softness in manufacturing alongside a still-steady services sector, tentatively suggesting that growth may be rebalancing, albeit at a weaker aggregate pace of growth (chart 3). Australia’s inflation and labour market data, meanwhile, have complicated the case for near-term policy easing, with the RBA opting to stay on hold this week as core inflation remain sticky. In Argentina, currency weakness persists even as equity markets rally, highlighting the policy and market tension surrounding President Milei’s reform agenda (chart 5). And finally, at a more structural level, latest global emissions data serve as a reminder that energy, manufacturing, transport, and households remain the principal sources of CO₂—illustrating how the climate and energy transition will continue to shape the macro landscape well beyond the current economic cycle (chart 6).

Economy in Brief: 2007

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