Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071120f.jpg" align="left" border="0" height="265" width="353">
Italy&#8217;s order trends are not as
clear as the slowing in some other Euro area countries. True, the
3-month growth rates are lower and sharply lower especially for foreign
orders. But the chart on the left shows how erratic foreign orders have
been. Domestic orders that have slowed by less are negative and in a
clearer slowdown mode. On balance Italy&#8217;s pattern looks as though its
showdown is of domestic, not of foreign, origin. Domestic orders have
been weak and are now in negative territory. Sales, which have been
relatively firmer and even accelerated in the recent three months, fell
sharply in September after a strong rise in August. Orders give us a
clearer picture of slowing growth in Italy. The foreign sector is
unclear. But domestic orders are sending a pretty clear message of
slowdown in progress.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="7" scope="col">Italy Orders </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar exept m/m</td>
<td>Sep-07</td>
<td>Aug-07</td>
<td>Jul-07</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>0.3%</td>
<td>-0.8%</td>
<td>-0.6%</td>
<td>-4.1%</td>
<td>6.3%</td>
<td>5.9%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>5.7%</td>
<td>-4.0%</td>
<td>-3.5%</td>
<td>-8.1%</td>
<td>15.7%</td>
<td>17.8%</td>
</tr>
<tr>
<td class="firstcol">Domestic</td>
<td>-2.7%</td>
<td>1.1%</td>
<td>1.1%</td>
<td>-2.1%</td>
<td>1.3%</td>
<td>0.0%</td>
</tr>

<tr class="even">
<td class="firstcol">Memo:</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Sales</td>
<td>-3.6%</td>
<td>4.0%</td>
<td>1.3%</td>
<td>6.7%</td>
<td>3.8%</td>
<td>5.9%</td>
</tr>
</tbody>
</table>
</body></html>

Italy’s order trends are not as clear as the slowing in some other Euro area countries. True, the 3-month growth rates are lower and sharply lower especially for foreign orders. But the chart on the left shows how erratic foreign [...]

Italy's Orders Growth Slows as Foreign Orders Hold Erratically Higher

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071120e.jpg" align="left" border="0" height="265" width="353">
We continue to monitor order trends. Trends for France are
still higher over 12 months at +6.4%. Foreign orders are a half step
behind at +5.5%. But over six months the growth rate is lower and over
three months the growth rate is negative for both overall and foreign
orders. Total and foreign orders are lower in two of the most recent
three months.
The French economy has been losing momentum and now it is
beset with strikes. These are in sharp contrast with the post election
enthusiasm that kept sentiment strong well after the elections. The
prospect of change was invigorating; the reality of what it will really
mean appears to be disappointing. That swing from euphoria to worker
strikes could do damage to the economy. The
strong Euro has played a role in the slowing of the economy as well as
throughout the Euro area. Sarkozy has his work cut out for him. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="7" scope="col"> French Orders</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar exept m/m</td>
<td>Sep-07</td>
<td> Aug-07</td>
<td> Jul-07</td>
<td> 3-mo</td>
<td> 6-mo</td>
<td> 12-mo</td>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>-2.3%</td>
<td>-1.0%</td>
<td>0.5%</td>
<td>-10.7%</td>
<td>4.2%</td>
<td>6.4%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>-3.1%</td>
<td>0.5%</td>
<td>-1.2%</td>
<td>-14.5%</td>
<td>2.1%</td>
<td>5.5%</td>
</tr>
</tbody>
</table>
</body></html>

We continue to monitor order trends. Trends for France are still higher over 12 months at +6.4%. Foreign orders are a half step behind at +5.5%. But over six months the growth rate is lower and over three months the growth rate is [...]

French Orders Weaken

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071120d.jpg" align="left" border="0" height="265" width="353">
UK orders jumped to a net balance reading of +8 from -6 in
October. The series has been somewhat see-saw as the chart on the left
shows. Export orders, also
showing some see-saw movement, are nonetheless rather better behaved
and showing a clearer trend move lower. Output
volume has been moving to lower readings but that net balance response
continues to be at a firm, positive, +9. The price reading shows an
unwelcome +21, its strongest reading in a while.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col">UK
Industrial Volume Data CBI Survey </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Reported:</td>
<td>Nov 
07</td>
<td>Oct 
07</td>
<td>Sep 
07</td>
<td>Aug 
07</td>
<td>12MO Avg</td>
<td>Pctile</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>8</td>
<td>-6</td>
<td>6</td>
<td>9</td>
<td>2</td>
<td>98%</td>
<td>9</td>
<td>-40</td>
<td>49</td>
</tr>
<tr class="grey1">
<td class="firstcol">Export Orders</td>
<td>-4</td>
<td>-9</td>
<td>-2</td>
<td>-3</td>
<td>-4</td>
<td>87%</td>
<td>3</td>
<td>-50</td>
<td>53</td>
</tr>
<tr>
<td class="firstcol">Stocks:Finished Goods</td>
<td>14</td>
<td>14</td>
<td>7</td>
<td>9</td>
<td>10</td>
<td>57%</td>
<td>26</td>
<td>-2</td>
<td>28</td>
</tr>
<tr class="grey1">
<td class="firstcol">Output Volume: Next 3M</td>
<td>9</td>
<td>10</td>
<td>17</td>
<td>13</td>
<td>16</td>
<td>66%</td>
<td>28</td>
<td>-28</td>
<td>56</td>
</tr>
<tr>
<td class="firstcol">Avg Prices 4Nxt 3m</td>
<td>21</td>
<td>14</td>
<td>16</td>
<td>16</td>
<td>17</td>
<td>93%</td>
<td>25</td>
<td>-30</td>
<td>55</td>
</tr>
</tbody>
</table>
</body></html>

UK orders jumped to a net balance reading of +8 from -6 in October. The series has been somewhat see-saw as the chart on the left shows. Export orders, also showing some see-saw movement, are nonetheless rather better behaved and [...]

UK Orders Bounce Higher in Survey Unexpectedly

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071120c.jpg" align="left" border="0" height="265" width="353">
We are hearing more concerns about inflation not just
inflation risk from Euro area officials. Germany has its core PPI
heading lower and the headline as well but not in a clear cut way. Also
the declines are slow and energy prices are still threatening. Germany
has not had its year/year PPI core rate below 2% since April of 2006
when it rose by 1.8%. The Bundesbank has been issuing such warnings
especially Weber. Today Austrian CB president Liebscher says that the
harmonized CPI is &#8216;striking me with concern.&#8217; At the same time groups
like the German engineering Association warn of the impact of a too
strong euro on the economy. These very clear, well founded, and
completely opposite concerns put the ECB in a tough spot.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">Germany PPI
</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">%m/m</td>
<td colspan="4">%-SAAR</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Oct-07</td>
<td>Sep-07</td>
<td>Aug-07</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-moY-Ago</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>0.4%</td>
<td>0.1%</td>
<td>0.2%</td>
<td>2.7%</td>
<td>2.4%</td>
<td>1.7%</td>
<td>4.6%</td>
</tr>
<tr>
<td class="firstcol">Ex Energy</td>
<td>0.3%</td>
<td>0.0%</td>
<td>0.4%</td>
<td>2.5%</td>
<td>2.6%</td>
<td>2.4%</td>
<td>3.0%</td>
</tr>
<tr class="grey1">
<td colspan="8" class="firstcol">Core: ex
food beverages, tobacco
&amp; Petroleum</td>
</tr>
</tbody>
</table>
</body></html>

We are hearing more concerns about inflation not just inflation risk from Euro area officials. Germany has its core PPI heading lower and the headline as well but not in a clear cut way. Also the declines are slow and energy prices [...]

German PPI Drifts Lower but no Clear Deceleration is in Sight

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071120a.jpg" width="353">
Overall, good weather helped housing starts to post a surprising 3.0% m/m gain in October to 1.229M units. Consensus expectations had been for little change at 1.20M starts and the prior month&#39;s level was little revised.
The surprise was that starts of multi-family structures recovered virtually all the prior month&#39;s plunge with a 44.4% rebound. It was from the lowest level since 1994.
Single-family starts continued downward for the seventh consecutive month with a 7.3% m/m decline. At 884M units single family starts fell to their lowest since 1991, off by more than one-half from the peak early last year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071120b.jpg" width="353">
By region, single family starts in the South suffered the worst m/m drop in a year with a 19.5% fall, down 56% from the 2006 peak. In the West single family starts fell 8.1% m/m but starts are off nearly two-thirds from the 2005 peak level. In the Midwest starts rose 15.% to finish 48% below the 2006 peak and single family starts in the Northeast rose for the second consecutive month with a 29.5% rise, but they&#39;re still 42% below the recent peak.
Continuing with downward momentum, building permits fell 6.6% (-24.5% y/y) for the fifth straight m/m decline. Single-family permits fell 8.0% (-31.0% y/y) and multi-family permits fell as well.
Asset Price Bubbles from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/"> 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/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>1,229</td>
<td>1,193</td>
<td>-16.4%</td>
<td>1,812</td>
<td>2,073</td>
<td>1,950</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-Family</td>
<td>884</td>
<td>954</td>
<td>-25.1%</td>
<td>1,474</td>
<td>1,719</td>
<td>1,604</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-Family</td>
<td>345</td>
<td>239</td>
<td>9.4%</td>
<td>338</td>
<td>354</td>
<td>345</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>1,178</td>
<td>1,261</td>
<td>-24.5%</td>
<td>1,842</td>
<td>2,159</td>
<td>2,058</td>
</tr>
</tbody>
</table>
</body>
</html>

Overall, good weather helped housing starts to post a surprising 3.0% m/m gain in October to 1.229M units. Consensus expectations had been for little change at 1.20M starts and the prior month's level was little revised. The surprise [...]

U.S. Housing Starts Total Up Unexpectedly; Single Family & Permits Down

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071120a.jpg" align="left" border="0" height="265" width="353">
Overall, good weather helped housing starts to post a
surprising 3.0% m/m gain in October to 1.229M units. Consensus
expectations had been for little change at 1.20M starts and the prior
month's level was little revised.
The surprise was that starts of multi-family structures
recovered virtually all the prior month's plunge with a 44.4% rebound.
It was from the lowest level since 1994.
Single-family starts continued downward for the seventh
consecutive month with a 7.3% m/m decline. At 884M units single family
starts fell to their lowest since 1991, off by more than one-half from
the peak early last year.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071120b.jpg" align="right" border="0" height="265" width="353">
By region, single family starts in the South suffered the
worst m/m drop in a year with a 19.5% fall, down 56% from the 2006
peak. In the West single family starts fell 8.1% m/m but starts are off
nearly two-thirds from the 2005 peak level. In the Midwest starts rose
15.% to finish 48% below the 2006 peak and single family starts in the
Northeast rose for the second consecutive month with a 29.5% rise, but
they're still 42% below the recent peak.
Continuing with downward momentum, building permits fell 6.6%
(-24.5% y/y) for the fifth straight m/m decline. Single-family permits
fell 8.0% (-31.0% y/y) and multi-family permits fell as well.
Asset Price Bubbles from the Federal
Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/">
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/@E9/@E901/@E90101/@E90101.HTM">Housing
Starts (000s, AR)</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>1,229</td>
<td>1,193</td>
<td>-16.4%</td>
<td>1,812</td>
<td>2,073</td>
<td>1,950</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-Family</td>
<td>884</td>
<td>954</td>
<td>-25.1%</td>
<td>1,474</td>
<td>1,719</td>
<td>1,604</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-Family</td>
<td>345</td>
<td>239</td>
<td>9.4%</td>
<td>338</td>
<td>354</td>
<td>345</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>1,178</td>
<td>1,261</td>
<td>-24.5%</td>
<td>1,842</td>
<td>2,159</td>
<td>2,058</td>
</tr>
</tbody>
</table>
German PPI Drifts Lower but
noClear Deceleration is in Sight 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 20, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071120c.jpg" align="left" border="0" height="265" width="353">
We are hearing more concerns about inflation not just
inflation risk from Euro area officials. Germany has its core PPI
heading lower and the headline as well but not in a clear cut way. Also
the declines are slow and energy prices are still threatening. Germany
has not had its year/year PPI core rate below 2% since April of 2006
when it rose by 1.8%. The Bundesbank has been issuing such warnings
especially Weber. Today Austrian CB president Liebscher says that the
harmonized CPI is &#8216;striking me with concern.&#8217; At the same time groups
like the German engineering Association warn of the impact of a too
strong euro on the economy. These very clear, well founded, and
completely opposite concerns put the ECB in a tough spot.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">Germany PPI
</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">%m/m</td>
<td colspan="4">%-SAAR</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Oct-07</td>
<td>Sep-07</td>
<td>Aug-07</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-moY-Ago</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>0.4%</td>
<td>0.1%</td>
<td>0.2%</td>
<td>2.7%</td>
<td>2.4%</td>
<td>1.7%</td>
<td>4.6%</td>
</tr>
<tr>
<td class="firstcol">Ex Energy</td>
<td>0.3%</td>
<td>0.0%</td>
<td>0.4%</td>
<td>2.5%</td>
<td>2.6%</td>
<td>2.4%</td>
<td>3.0%</td>
</tr>
<tr class="grey1">
<td colspan="8" class="firstcol">Core: ex
food beverages, tobacco
&amp; Petroleum</td>
</tr>
</tbody>
</table>
UK Orders Bounce Higher in Survey
Unexpectedly 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 20, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071120d.jpg" align="left" border="0" height="265" width="353">
UK orders jumped to a net balance reading of +8 from -6 in
October. The series has been somewhat see-saw as the chart on the left
shows. Export orders, also
showing some see-saw movement, are nonetheless rather better behaved
and showing a clearer trend move lower. Output
volume has been moving to lower readings but that net balance response
continues to be at a firm, positive, +9. The price reading shows an
unwelcome +21, its strongest reading in a while.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col">UK
Industrial Volume Data CBI Survey </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Reported:</td>
<td>Nov 
07</td>
<td>Oct 
07</td>
<td>Sep 
07</td>
<td>Aug 
07</td>
<td>12MO Avg</td>
<td>Pctile</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>8</td>
<td>-6</td>
<td>6</td>
<td>9</td>
<td>2</td>
<td>98%</td>
<td>9</td>
<td>-40</td>
<td>49</td>
</tr>
<tr class="grey1">
<td class="firstcol">Export Orders</td>
<td>-4</td>
<td>-9</td>
<td>-2</td>
<td>-3</td>
<td>-4</td>
<td>87%</td>
<td>3</td>
<td>-50</td>
<td>53</td>
</tr>
<tr>
<td class="firstcol">Stocks:Finished Goods</td>
<td>14</td>
<td>14</td>
<td>7</td>
<td>9</td>
<td>10</td>
<td>57%</td>
<td>26</td>
<td>-2</td>
<td>28</td>
</tr>
<tr class="grey1">
<td class="firstcol">Output Volume: Next 3M</td>
<td>9</td>
<td>10</td>
<td>17</td>
<td>13</td>
<td>16</td>
<td>66%</td>
<td>28</td>
<td>-28</td>
<td>56</td>
</tr>
<tr>
<td class="firstcol">Avg Prices 4Nxt 3m</td>
<td>21</td>
<td>14</td>
<td>16</td>
<td>16</td>
<td>17</td>
<td>93%</td>
<td>25</td>
<td>-30</td>
<td>55</td>
</tr>
</tbody>
</table>
French Orders Weaken 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 20, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071120e.jpg" align="left" border="0" height="265" width="353">
We continue to monitor order trends. Trends for France are
still higher over 12 months at +6.4%. Foreign orders are a half step
behind at +5.5%. But over six months the growth rate is lower and over
three months the growth rate is negative for both overall and foreign
orders. Total and foreign orders are lower in two of the most recent
three months.
The French economy has been losing momentum and now it is
beset with strikes. These are in sharp contrast with the post election
enthusiasm that kept sentiment strong well after the elections. The
prospect of change was invigorating; the reality of what it will really
mean appears to be disappointing. That swing from euphoria to worker
strikes could do damage to the economy. The
strong Euro has played a role in the slowing of the economy as well as
throughout the Euro area. Sarkozy has his work cut out for him. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col"> French
Orders</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar exept m/m</td>
<td>Sep-07</td>
<td> Aug-07</td>
<td> Jul-07</td>
<td> 3-mo</td>
<td> 6-mo</td>
<td> 12-mo</td>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>-2.3%</td>
<td>-1.0%</td>
<td>0.5%</td>
<td>-10.7%</td>
<td>4.2%</td>
<td>6.4%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>-3.1%</td>
<td>0.5%</td>
<td>-1.2%</td>
<td>-14.5%</td>
<td>2.1%</td>
<td>5.5%</td>
</tr>
</tbody>
</table>
Italy's Orders Growth Slows as
Foreign Orders Hold Erratically Higher 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 20, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071120f.jpg" align="left" border="0" height="265" width="353">
Italy&#8217;s order trends are not as
clear as the slowing in some other Euro area countries. True, the
3-month growth rates are lower and sharply lower especially for foreign
orders. But the chart on the left shows how erratic foreign orders have
been. Domestic orders that have slowed by less are negative and in a
clearer slowdown mode. On balance Italy&#8217;s pattern looks as though its
showdown is of domestic, not of foreign, origin. Domestic orders have
been weak and are now in negative territory. Sales, which have been
relatively firmer and even accelerated in the recent three months, fell
sharply in September after a strong rise in August. Orders give us a
clearer picture of slowing growth in Italy. The foreign sector is
unclear. But domestic orders are sending a pretty clear message of
slowdown in progress.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col">Italy
Orders </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar exept m/m</td>
<td>Sep-07</td>
<td>Aug-07</td>
<td>Jul-07</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>0.3%</td>
<td>-0.8%</td>
<td>-0.6%</td>
<td>-4.1%</td>
<td>6.3%</td>
<td>5.9%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>5.7%</td>
<td>-4.0%</td>
<td>-3.5%</td>
<td>-8.1%</td>
<td>15.7%</td>
<td>17.8%</td>
</tr>
<tr>
<td class="firstcol">Domestic</td>
<td>-2.7%</td>
<td>1.1%</td>
<td>1.1%</td>
<td>-2.1%</td>
<td>1.3%</td>
<td>0.0%</td>
</tr>
<tr class="even">
<td class="firstcol">Memo:</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Sales</td>
<td>-3.6%</td>
<td>4.0%</td>
<td>1.3%</td>
<td>6.7%</td>
<td>3.8%</td>
<td>5.9%</td>
</tr>
</tbody>
</table>
</body></html>

Louise Curley

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071119d.jpg" align="left" border="0" height="265" width="353">
Singapore's current account continues to climb. In the third
quarter, it was S$20,773 mil. on a seasonally unadjusted basis compared
with S$18,263 million in the second quarter and S$14,289 million in the
third quarter of 2006. The current account balance was 34% of Gross
Domestic Product in the third quarter. The first chart shows the rise
in the current account and in its percentage of GDP.
The combined capital and financial account continues to be
much smaller than the current account with the result that Singapore'
foreign reserves continue to pile up. In the third quarter after
allowing for -S$2,634 million of errors and omissions, reserves were
increased by S$6,031 million. At the end of the quarter foreign
reserves amounted to S$226 billion. Since mid 2003, reserves have been
close in amount to the annual rate of Singapore's Gross Domestic
Product in nominal terms, as shown in the second chart.
Singapore in contrast to some of the other Pacific Rim
countries who are accumulating reserves, has been more relaxed about
letting its currency appreciate relative to the dollar. The dollar
exchange rates of China, Japan and Singapore are shown in the third
chart. The data are plotted on a log scale where the slope of data
represents equal percentage changes. Thus the steep decline in the
number of Singapore dollars to the U. S. dollar shows a greater
appreciation to the dollar than the Japanese yen or the Chinese yuan.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071119e.jpg" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071119f.jpg" height="265" width="312">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">SINGAPORE
BALANCE OF PAYMENTS (NSA, Mil of S$)</th>
<th scope="col">Q3 07</th>
<th scope="col">Q2 07&nbsp;</th>
<th scope="col">Q1 07&nbsp;</th>
<th scope="col">Q4 06</th>
<th scope="col">Q3 06&nbsp;&nbsp;</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Current Account&nbsp;</td>
<td>20773</td>
<td>18263</td>
<td>16603</td>
<td>15317</td>
<td>14289</td>
<td>57661</td>
<td>47616</td>
<td>36414</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Capital and Financial
Account&nbsp;</td>
<td>-12108</td>
<td>-7744</td>
<td>-13496</td>
<td>-8518</td>
<td>-9078</td>
<td>-33262</td>
<td>-31923</td>
<td>-12868</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Net Errors and
Omissions</td>
<td>-2634</td>
<td>-1383</td>
<td>-1592</td>
<td>2688</td>
<td>-1205</td>
<td>2597</td>
<td>4703</td>
<td>-3077</td>
</tr>
<tr>
<td class="firstcol"> &nbsp;Change in Reserves*</td>
<td>-6031</td>
<td>-9136</td>
<td>-1515</td>
<td>-9487</td>
<td>-4006</td>
<td>-26996</td>
<td>-20397</td>
<td>-20468.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Reserves</td>
<td>226290</td>
<td>220503</td>
<td>208876</td>
<td>208992</td>
<td>205096</td>
<td>208992</td>
<td>182813</td>
<td>183467</td>
</tr>
</tbody>
</table>
</body></html>

Singapore's current account continues to climb. In the third quarter, it was S$20,773 mil. on a seasonally unadjusted basis compared with S$18,263 million in the second quarter and S$14,289 million in the third quarter of 2006. The [...]

Singapore's Balance of Payments Continues Strong

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071119g.jpg" width="353">
The Composite Housing Market Index from the National Association of Home Builders&#39; (NAHB) at 19 in November remained stable, near record lows, m/m versus the downwardly revised level of the prior month.
The index rose very slightly m/m in most areas of the country but fell sharply (-52.5% y/y) in the South. 
During the last twenty years there has been a 76% correlation between the y/y change in the Composite Index and the change in single family housing starts. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071119h.jpg" width="353">
The sub-index from the NAHB for current sales (-45.5% y/y) and prospective sales in the next six months (-44.4% y/y) were both roughly stable m/m.
Similarly, traffic of prospective home buyers was up very slightly m/m bu remained down 41% from this past February&#39;s high.
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions good than poor. 
Visit the <a href="http://www.nahb.org">National Association of Home Builders</a>.
The Decline in the U.S. Personal Saving Rate: Is It Real and Is It a Puzzle? from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/review/07/11/Guidolin.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/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a>&nbsp;</th>
<th scope="col">November</th>
<th scope="col">October &nbsp;</th>
<th scope="col">Nov. &#39;06&nbsp;</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Housing Market Index</td>
<td>19</td>
<td>19</td>
<td>33</td>
<td>42</td>
<td>67</td>
<td>68</td>
</tr>
</tbody>
</table>
</body>
</html>

The Composite Housing Market Index from the National Association of Home Builders' (NAHB) at 19 in November remained stable, near record lows, m/m versus the downwardly revised level of the prior month. The index rose very slightly [...]

U.S. NAHB Housing Market Index Stable At Record Low

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

Only modest evidence of AI-related surge in US productivity growth

Previous Trump tariffs fading. A boost from new tariffs ahead?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

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Andrew Cates

**China-US shipping activity** 
The economic fallout from escalating US-China trade tensions is becoming increasingly visible in the data. A clear example is the chart below, which highlights a sharp drop in vessel arrivals at the ports of Los Angeles and Long Beach, along with a notable decline in ships waiting offshore. These trends point to a tangible weakening in bilateral trade flows, as the effects of tit-for-tat tariffs imposed by both countries begin to bite. Given the outsized role the US and China play in global commerce, this slowdown is likely to reverberate through global supply chains, weighing on trade volumes, dampening demand, and curbing economic growth worldwide.

250501Z1.jpg

**GDP growth in Q1**
Data this week showed that the US economy contracted, albeit modestly, in Q1 even as the euro area recorded a modest expansion—an unusual divergence. The contraction in US GDP can be largely attributed to a sharp increase in imports, as firms rushed to front-load purchases ahead of anticipated tariff hikes. In addition, domestic demand was subdued, with weaker contributions from both consumer spending and government consumption. This decoupling between the US and euro area economies is particularly striking given the current global focus on the US dollar. While the euro area has shown unexpected signs of resilience, the US downturn raises important questions about its underlying momentum, especially as trade dynamics and policy uncertainty continue to cloud the outlook.

250501Z2.jpg

**The US dollar versus yield differentials**
Chart 3 below illustrates a sharp breakdown in the correlation between the US-Germany 10-year yield differential and the EUR/USD exchange rate. Historically, the dollar has moved closely with interest rate spreads, as yield-seeking capital flowed into US assets. But since early 2025—and more acutely following the April tariff actions—the dollar has weakened markedly even as the yield spread has narrowed only modestly. This decoupling underscores a critical shift: capital markets are reacting not just to monetary policy, but to rising trade and geopolitical uncertainty. In other words, the exchange rate is now being driven as much by risk sentiment as by interest rate arbitrage.

250501Z3.jpg

**The US economy’s structural outperformance and the dollar**
A second dynamic, captured in the next chart, reveals a tight correlation between the US real effective exchange rate and the potential GDP growth differential between the US and euro area over the past 50-60 years. This raises the question: has dollar strength (until recently) merely been a reflection of US growth leadership—or are capital inflows themselves helping to sustain this growth outperformance? In effect, the tail may be wagging the dog. Global investors have long allocated capital to the US, attracted by its macroeconomic resilience, technological leadership, and deep, liquid financial markets. The danger now is that the US trade war may disrupt this equilibrium. A sharp or sustained reduction in capital inflows could undermine growth, weaken the dollar, and trigger broader financial instability. Moreover, reversing this dynamic is not straightforward—barring a credible structural resurgence in European (or Asian) growth, the global investment landscape remains tilted toward the US.

250501Z4.jpg

**US competitiveness versus Europe, China and Japan** 
The next chart below examines relative unit labour costs across major economies since 2011. The US and China have seen a broadly similar trajectory, with steady increases in relative cost structures, while the euro area has remained flat and Japan has seen dramatic improvement. This suggests that, from a cost competitiveness standpoint, the US is not uniquely disadvantaged vis-à-vis China. However, as we discuss further below, this parallel erosion of cost competitiveness is occurring at much higher nominal wage levels in the US, which blunts its ability to regain export share through tariff-related shifts alone. The trade war strategy—absent a corresponding improvement in productivity or structural reforms—risks imposing costs without delivering material competitiveness gains.

250501Z5.jpg

**Average wages in selected developed and developing economies**
This point is reinforced by the final chart, which shows estimates for average monthly wages across countries in 2024. US labour remains much more expensive than in peer or emerging economies. So even if China’s costs rise in tandem with the US, the global supply chain has ample alternatives. 'China plus one' strategies are accelerating, and the US remains structurally misaligned with low-cost production hubs. Tariffs aimed at reshoring supply chains are unlikely to deliver sustained gains unless accompanied by deep supply-side reforms, and risk further disincentivizing foreign direct investment if global firms perceive US trade policy as erratic or punitive.

250501Z6.jpg

Financial markets found a measure of calm this week, buoyed by some subtle shifts in tone from US policymakers. A softening in the administration’s rhetoric around trade tariffs coupled with a less confrontational stance toward Federal Reserve Chair Jerome Powell, helped ease tensions that had roiled markets earlier in the month. Equities rebounded modestly, and volatility indicators edged lower, reflecting cautious optimism that the worst of the policy shocks may be behind us. But beneath the surface, significant downside risks persist. New shipping data point to a pronounced slowdown in US-China trade flows (chart 1), suggesting the damage from recent tariff escalations is already rippling through global supply chains. Meanwhile, incoming data for the US revealed an unexpected contraction in the economy in Q1 and further signs of weakness in the labour market (chart 2). The US dollar, in the meantime, while long supported by superior growth and yield differentials, has begun to decouple from traditional drivers (charts 3 and 4) suggesting growing pressure on capital flows. At the same time, structural imbalances are drawing renewed scrutiny: unit labour cost comparisons show the US steadily losing competitiveness (chart 5), while nominal wage disparities remain stark versus China and other Asian economies, further complicating any effort to restore trade balance without broader reforms (chart 6). In short, while markets may be drawing temporary comfort from a pause in tariff brinkmanship, the deeper economic and financial vulnerabilities exposed this month remain unresolved—and increasingly central to the global macro narrative.

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Charts of the Week: Tariff Truce, Tenuous Trust

250501F20.jpg

250501G20.jpg

U.S. light vehicle sales dropped 2.9% (+6.5% y/y) to 17.31 million units (SAAR) in April after surging 10.8% to 17.82 million units in March. The retreat in April vehicle sales accompanied a 1.7% y/y rise in real disposable income through March, which compared to 2.0% growth last year.

Sales declines were broad-based last month. Light truck sales fell 1.3% (+9.9% y/y) during April to 14.34 million units (SAAR), after rising 12.4% in March. Purchases of domestically-made light trucks declined 1.2% (+11.9% y/y) to 11.02 million units, after jumping 12.5% in March. Sales of imported light trucks fell 1.8% (+4.4% y/y) to 3.32 million units, following an 11.6% March surge.

Trucks’ record 82.8% share of the light vehicle market last month compared to 81.5% in March and 80.3% in April of last year. The share averaged 80.3% during all of 2024 versus 53.3% ten years earlier.

Auto sales also declined last month, down 9.5% (-7.5%) to 2.97 million units (SAAR) following a 3.5% March rise. The decline reversed all of the increase over the prior two months. Purchases of domestically-produced cars fell 9.8% (-4.3% y/y) last month to 2.22 million units, after rising 3.8% in March. Sales of imported autos declined 9.6% (-15.7% y/y) to 0.75 million units, following a 2.5% March increase.

Imports' 23.5% share of the U.S. light vehicle market was little changed from 23.6% in March and compared to a May 2023 low of 22.9% and a high of 26.3% in November of 2023. Imports' share of the passenger car market held steady at 25.3% last month and compared to 27.7% in April of last year. It reached a high of 38.7% in September 2021. Imports' share of the light truck market eased to 23.2% last month after falling to 23.3% in March.

U.S. vehicle sales figures can be found in Haver's **USECON** database. Additional detail by manufacturer is in the I**NDUSTRY** database.

250501H20.jpg

250501I20.jpg

- Light truck sales pull back, while auto sales tumble.
- Both domestic and imported sales decline.
- Imports' market share slips further.

U.S. Light Vehicle Sales Fall in April

250501J5.jpg

250501K5.jpg

The ISM Purchasing Managers Index of activity in the manufacturing sector slipped to 48.7 in April from 49.0 during March and 50.3 in February. It remained up from a low of 46.9 in October of last year. A level of 50 is the break-even point between a rising and falling level of activity. The Action Economics Forecast Survey expected a reading of 47.8 for April. The series reached a monthly high of 63.8 in March 2021.

Two of the five component indexes weakened last month. The April production index fell to 44.0 after declining to 48.3 in March. It was the lowest level since May 2020. A lessened 19.8% (NSA) of respondents reported higher production while an increased 24.2% reported lower output. The inventories index declined to 50.8 last month from 53.4 in March. The index remained up from a low of 43.2 in October of last year.

Moving higher, the new orders index rose to 47.2 last month from 45.2 in March. The index remained below a January high of 55.1. Twenty-eight percent (NSA) of respondents reported higher new orders while 26.7% reported a decline. The employment index rose to 46.5 from 44.7 in March. It was below a high of 50.3 in January. A greater 13.1% (NSA) of respondents reported more hiring while a fewer 16.2% indicated less. The supplier delivery index rose to 55.2 from 53.5 in March. A higher 16.6% (NSA) of respondents reported slower delivery speeds while a fairly steady 6.2% reported a quickening.

The prices index, which is not part of the composite series, edged up to 69.8 (NSA) in April after increasing to 69.4 in March. It was the highest level since June 2022, up from a December 2022 low of 39.4. An increased 49.2% of respondents reported higher prices last month, up from 12.2% in November, while a higher 9.7% reported lower prices.

In other series, the export orders index plummeted to 43.1 in April from 49.6 during March. It was down from the high of 52.4 in January. The imports index fell sharply to 47.1 from 50.1 in March. It was the lowest reading since December 2023. The order backlog index dropped to 43.7 (NSA) last month from 44.5 in March. It was the lowest level in five months.

The ISM figures are based on responses from over 400 purchasing executives from 18 industries, which are weighted according to each industry’s contribution to GDP. These indexes are diffusion indexes where a reading above 50 indicates expansion and a reading below 50 points to contraction. The figures from the Institute for Supply Management can be found in Haver’s **USECON** database; further detail is found in the **SURVEYS** database. The expectations number is available in Haver’s **AS1REPNA** database.

250501L5.jpg

250501M5.jpg

- Declines in last three months follow earlier improvement.
- Production & inventories account for m/m shortfall.
- Prices index edges up to another three-year high.

U.S. ISM Manufacturing Index Indicates Contraction in April

Winnie Tapasanun

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The value of construction put in place unexpectedly fell 0.5% m/m in March after rises of 0.6% in February (+0.7% initially) and 0.1% in January (-0.5% previously), data from the U.S. Census Bureau showed. The March reading was the first m/m fall following five straight m/m gains. A 0.3% m/m March rise had been expected in the Action Economics Forecast Survey. The year-on-year rate of increase decelerated to 2.8% in March, the lowest since May 2019, after registering at 3.4% in February and January. The latest y/y figure was lower than 8.7% in March 2024; thus, having remained below its recent high of 9.8% in January 2024 and a peak of 18.6% in April 2022.

Private construction slid 0.6% (+2.3% y/y) in March, down for the first time since September, following increases of 0.7% in February (+0.9% initially) and 0.1% in January (-0.7% previously). Residential private construction fell 0.4% (+2.8% y/y) in March, the first m/m fall in six months, after an unrevised 1.3% gain in February. Home improvement building dropped 1.2% (+13.4% y/y), the first m/m decline since December, following a 2.3% February gain; it was 41.1% of the residential private construction. Single-family building edged up 0.1% (-0.8% y/y), the smallest of seven consecutive m/m increases, after a 0.8% February rise; it was 46.6% of the residential private construction. Meanwhile, multi-family building was essentially unchanged m/m (-12.1% y/y) in March following 15 straight m/m decreases; it was 12.3% of the residential private construction.

Nonresidential private construction fell 0.8% (+1.6% y/y) in March after a 0.1% increase in February (+0.4% initially) and a 0.1% easing in January (-0.2% previously). The March fall reflected m/m drops in the following nonresidential private constructions. These included religious (-2.9%; +16.4% y/y), health care (-2.2%; -5.2% y/y), office (-1.8%; +2.7% y/y), educational (-1.7%; -4.2% y/y), lodging (-1.6%; -1.0% y/y), commercial (-1.0%; -5.8% y/y), manufacturing (-0.4%; +3.6% y/y), communication (-0.3%; +2.2% y/y), and utilities (-0.1%; +7.0% y/y). In contrast, private constructions for amusement & recreation (1.5%; 7.0% y/y) and transportation (0.7%; 10.2% y/y) rose m/m in March.

The value of public construction declined 0.2% (+4.7% y/y) in March after holding steady in February (+0.2% initially), reflecting a 0.2% increase (-1.9% y/y) in residential public construction and a 0.2% easing (+4.8% y/y) in nonresidential public construction. The March decline reflected m/m drops in the following nonresidential public constructions. These included utilities (-4.8%; -12.8% y/y), commercial (-1.6%; +40.3% y/y), amusement & recreation (-1.0%; +19.1% y/y), educational (-0.6%; +7.6% y/y), sewage & waste disposal (-0.6%; +10.6% y/y), and health care (-0.4%; +13.0% y/y). Notably, spending on highways & streets, which made up 28.7% of public construction spending, fell 0.5% (-2.4% y/y) in March, the first m/m fall since October, following a 0.9% increase in February. To the upside, the following public constructions rose m/m in March: office (1.6%; 6.0% y/y), transportation (1.4%; 7.3% y/y), public safety (0.7%; 4.1% y/y), conservation & development (0.6%; 4.7% y/y), and water supply (0.6%; 12.2% y/y).

The construction figures can be found in Haver's **USECON** database. The expectations figure is from the Action Economics Forecast Survey in **AS1REPNA**.

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- March construction spending -0.5% m/m; +2.8% y/y, the lowest y/y rate since May ’19.
- Residential private construction -0.4% m/m, led by a 1.2% drop in home improvement building.
- Nonresidential private construction -0.8% m/m, down for the second month in three.
- Public sector construction -0.2% m/m, reflecting a 0.2% decline in nonresidential public building.

U.S. Construction Spending Unexpectedly Drops in March, the First M/M Fall Since September

Carol Stone, CBE

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Initial claims for unemployment insurance rose 18,000 in the week ended April 26 to 241,000, seasonally adjusted.  This is higher by 16,000 than the Action Economics Forecast Survey amount of 225,000 and is the largest amount since the week of February 22. The previous week’s actual count was revised up by 1,000 to 223,000, from 222,000 reported initially.

The total number of unemployment insurance beneficiaries – also known as “continuing claims” – in the week ended April 19 was 1.916 million, up 83,000 from the prior week’s 1.833 million; that earlier amount was revised down by 8,000.

The insured unemployment rate, that is, the number of beneficiaries as a percentage of covered employment, was 1.3% in the April 19 week, following 1.2% continuously since the week of January 6, 2024.

Economic conditions vary widely across states and territories.  In the week ended April 12, the highest unemployment rates were in New Jersey (2.39%), California (2.24%), Washington (2.19%), Rhode Island (2.17%) and Massachusetts (1.93%).  The lowest rates were in Florida (0.35%), South Dakota (0.40%), Alabama (0.41%), Virginia (0.45%) and Tennessee (0.48%).  Rates in other notable states include the Illinois (1.85%), New York (1.71%), Pennsylvania (1.54%) and Texas (1.09%). 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 U**SECON**. Data for individual states are in **REGIONW** back to December 1986. The expectations figure is from the Action Economics Forecast Survey in the **AS1REPNA** database.

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- Actual initial claims amount is 16,000 more than forecast.
- Total beneficiaries rose by 83,000.
- Insured unemployment rate ticked up to 1.3% after 15 months at 1.2%.

Economy in Brief: November 2007

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