Robert Brusca

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070725f.jpg" width="353">
The INSEE Biz index for French industry is still in its impressive uptrend. Yet it is only in the 74th percentile of its range and it is about 10% above its mean value. The index is off peak and while the trend is technically still in place it is appropriate to wonder if the uptrend is abating. 
Orders and demand trends are still firm but so is the series &#145;likely price trend&#146;. The MFG portion of the survey shows a bit more of a loss in momentum. The Production trend reading fell off in July to 17 from 24 but still ranking in the mid-70s in terms of the percentile of its range of values - a firm result. The recent trend for production assessment ticked up in July; the likely trend assessment also rose to 15 from 14. MFG prices expected are only at a reading of 6 and reside in their 62nd percentile of their range, a more modest showing than for French industry overall. 
On balance, the readings from France are still solid and encouraging. Some of the inflation responses are, however, on the high side, and for overall industry, with a bit of momentum. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
 INSEE Industry Survey
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="4">&nbsp;</td>
<td colspan="2">Since Jan 1990</td>
<td colspan="4">Since Jan 1990</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td> Jul-07</td>
<td> Jun-07</td>
<td> May-07</td>
<td> Apr-07</td>
<td> Percentile</td>
<td> Rank</td>
<td> Max</td>
<td> Min</td>
<td> Range</td>
<td> Mean</td>
</tr>
<tr class="grey2">
<td class="firstcol"> Climate</td>
<td>110</td>
<td>110</td>
<td>108</td>
<td>112</td>
<td> 74.0</td>
<td> 41</td>
<td> 123</td>
<td> 73</td>
<td> 50</td>
<td> 101</td>
</tr>
<tr class="grey1">
<td colspan="11"> Production</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Recent Trend</td>
<td>16</td>
<td>24</td>
<td>14</td>
<td>10</td>
<td>72.5</td>
<td>44</td>
<td>44</td>
<td>-58</td>
<td>102</td>
<td>-6</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Likely trend</td>
<td>31</td>
<td>27</td>
<td>22</td>
<td>21</td>
<td>66.7</td>
<td>20</td>
<td>63</td>
<td>-33</td>
<td>96</td>
<td>7</td>
</tr>
<tr class="grey1">
<td colspan="11"> Orders/Demand</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Orders&amp;Demand</td>
<td>2</td>
<td>4</td>
<td>3</td>
<td>5</td>
<td>73.6</td>
<td>33</td>
<td>25</td>
<td>-62</td>
<td>87</td>
<td>-15</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Foreign Orders &amp; Demand</td>
<td>5</td>
<td>4</td>
<td>6</td>
<td>10</td>
<td>70.8</td>
<td>46</td>
<td>31</td>
<td>-58</td>
<td>89</td>
<td>-11</td>
</tr>
<tr class="grey1">
<td colspan="11"> Prices</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Likely Sales Prices Trend</td>
<td>10</td>
<td>10</td>
<td>9</td>
<td>4</td>
<td>70.2</td>
<td>26</td>
<td>24</td>
<td>-23</td>
<td>47</td>
<td>0</td>
</tr>
</tbody>
</table>
</body>
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The INSEE Biz index for French industry is still in its impressive uptrend. Yet it is only in the 74th percentile of its range and it is about 10% above its mean value. The index is off peak and while the trend is technically still in [...]

INSEE Biz Index Holds its Ground: Uptrend Intact

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070725d.jpg" width="353">
Sales of existing homes fell again in June. The 3.8% to 5.750M units to the lowest level since November 2002. Sales were down 20.2% from the peak during September of 2005.
Sales of single family homes fell a sharper 3.5% last month after a 1.0% decline in May. Sales were 20.5% lower than during the peak month of September 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070725e.jpg" width="353">
By region, single family home sales fell 5.3% (-10.0% y/y) in the Northeast. Out West sales dropped 6.5% (-19.4% y/y) in June. Sales in the Midwest dropped 3.2% (-8.3% y/y) and down South sales fell 1.4% (-11.1% y/y).
The inventory of single family &quot;homes on the market&quot; dropped 2.7%. The decline was the only the first this year and inventories were up 12.7% from last year.
The median price of an existing single family home rose 3.8% but versus last year, the price of $230,300 was up just 0.1%.
The broad aggregate data on existing home sales are included in Haver&#39;s USECON database; details about prices by region and inventories are available in the REALTOR database. 
Comparing the prime and subprime mortgage markets from the Federal Reserve Bank of Chicago is available <a href="http://www.chicagofed.org/publications/fedletter/cflaugust2007_241.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">Existing Home Sales (SAAR, 000s)</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Sales</td>
<td>5,750</td>
<td>5,980</td>
<td>-11.4%</td>
<td>6,510</td>
<td>7,065</td>
<td>6,727</td>
</tr>
<tr>
<td class="firstcol">Single-Family Sales</td>
<td>5,010</td>
<td>5,190</td>
<td>-12.1%</td>
<td>5,708</td>
<td>6,182</td>
<td>5,914</td>
</tr>
<tr class="odd">
<td class="firstcol">Median Single-Family Home Price (NSA,000s)</td>
<td>$230.3</td>
<td>$221.9</td>
<td>0.1%</td>
<td>$221.9</td>
<td>$217.5</td>
<td>$192.8</td>
</tr>
</tbody>
</table>


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Sales of existing homes fell again in June. The 3.8% to 5.750M units to the lowest level since November 2002. Sales were down 20.2% from the peak during September of 2005. Sales of single family homes fell a sharper 3.5% last month [...]

Existing Home Sales Fell Again in June, Lowest Since 2002

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070725c.jpg" width="353">
The National Activity Index (CFNAI) from the Federal Reserve Bank of Chicago improved in June to 0.11 from negative values which had been sustained during four of the prior five months.
The categories of production, income, sales and orders made positive contributions while the employment, consumption and housing categories were negative.
The three-month moving average of the CFNAI also improved but only slightly to a still negative value of -0.15, up from its worst level of -0.47 last November.
A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth and during the last twenty years there has been a 68% correlation between the level of the CFNAI and q/q growth in real GDP.
All of the CFNAI components contributed to the January decline includingproduction, employment, consumption and housing.
The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production and income, the labor market, personal consumption and housing, manufacturing and trade sales, and inventories &amp; orders.
The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_February2007.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/@S5/@S503/@S503.HTM">Chicago Fed</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June &#39;06</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>0.11</td>
<td>-0.32</td>
<td>0.32</td>
<td>0.04</td>
<td>0.25</td>
<td>0.31</td>
</tr>
</tbody>
</table>
</body>
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The National Activity Index (CFNAI) from the Federal Reserve Bank of Chicago improved in June to 0.11 from negative values which had been sustained during four of the prior five months. The categories of production, income, sales and [...]

Chicago Fed Nat'l Activity Index Improved

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070725a.jpg" width="353">
The total number of mortgage applications fell 3.6% last week to the lowest level since last February, according to the Mortgage Bankers Association. The decline was to a level 11.8% below the recent peak in March. 
Purchase applications fell a hard 5.0%, the fourth decline in the last five weeks. The decline was to the lowest level since late April. 
During the last ten years there has been a 58% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070725b.jpg" width="353">
Applications to refinance also fell but by a moderate 1.4% after the prior week&#146;s 4.9% advance.
The effective interest rate on a conventional 30-year mortgage fell slightly to 6.90% from 6.93% the prior week. Rates averaged 6.84% last month, up from 6.28% in December. The peak for 30 year financing was 7.08% late in June. Rates for 15-year financing similarly fell to 6.60% last week. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage.
The Mortgage Bankers Association surveys between 20 and 35 top lenders in the U.S. housing industry. Then it derives its refinance, purchase and market indexes. The weekly survey covers roughly 50% of all U.S. residential mortgage applications processed each week by mortgage banks, commercial banks and thrifts. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.
The Narrowing of the Male-Female Wage Gap from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2007/el2007-17.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/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100) </a> </th>
<th scope="col">7/20/07 </th>
<th scope="col">7/13/07 </th>
<th scope="col">Y/Y</th>
<th scope="col">2006 </th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>609.0</td>
<td>631.6</td>
<td>14.1%</td>
<td>584.2</td>
<td>708.6</td>
<td>735.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>424.2</td>
<td>446.5</td>
<td>9.0%</td>
<td>406.9 </td>
<td>470.9</td>
<td>454.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,692.9</td>
<td>1,717.4</td>
<td>22.2%</td>
<td>1,633.0</td>
<td>2,092.3</td>
<td>2,366.8</td>
</tr>
</tbody>
</table>


</html>

The total number of mortgage applications fell 3.6% last week to the lowest level since last February, according to the Mortgage Bankers Association. The decline was to a level 11.8% below the recent peak in March. Purchase [...]

Mortgage Applications Lowest Since February

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070725a.jpg" width="353">
The total number of mortgage applications fell 3.6% last week to the lowest level since last February, according to the Mortgage Bankers Association. The decline was to a level 11.8% below the recent peak in March. 
Purchase applications fell a hard 5.0%, the fourth decline in the last five weeks. The decline was to the lowest level since late April. 
During the last ten years there has been a 58% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070725b.jpg" width="353">
Applications to refinance also fell but by a moderate 1.4% after the prior week&#146;s 4.9% advance.
The effective interest rate on a conventional 30-year mortgage fell slightly to 6.90% from 6.93% the prior week. Rates averaged 6.84% last month, up from 6.28% in December. The peak for 30 year financing was 7.08% late in June. Rates for 15-year financing similarly fell to 6.60% last week. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage.
The Mortgage Bankers Association surveys between 20 and 35 top lenders in the U.S. housing industry. Then it derives its refinance, purchase and market indexes. The weekly survey covers roughly 50% of all U.S. residential mortgage applications processed each week by mortgage banks, commercial banks and thrifts. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.
The Narrowing of the Male-Female Wage Gap from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2007/el2007-17.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/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100) </a> </th>
<th scope="col">7/20/07 </th>
<th scope="col">7/13/07 </th>
<th scope="col">Y/Y</th>
<th scope="col">2006 </th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>609.0</td>
<td>631.6</td>
<td>14.1%</td>
<td>584.2</td>
<td>708.6</td>
<td>735.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>424.2</td>
<td>446.5</td>
<td>9.0%</td>
<td>406.9 </td>
<td>470.9</td>
<td>454.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,692.9</td>
<td>1,717.4</td>
<td>22.2%</td>
<td>1,633.0</td>
<td>2,092.3</td>
<td>2,366.8</td>
</tr>
</tbody>
</table>
Chicago Fed National Activity Index Improved 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 25, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070725c.jpg" width="353">
The National Activity Index (CFNAI) from the Federal Reserve Bank of Chicago improved in June to 0.11 from negative values which had been sustained during four of the prior five months.
The categories of production, income, sales and orders made positive contributions while the employment, consumption and housing categories were negative.
The three-month moving average of the CFNAI also improved but only slightly to a still negative value of -0.15, up from its worst level of -0.47 last November.
A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth and during the last twenty years there has been a 68% correlation between the level of the CFNAI and q/q growth in real GDP.
All of the CFNAI components contributed to the January decline includingproduction, employment, consumption and housing.
The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production and income, the labor market, personal consumption and housing, manufacturing and trade sales, and inventories &amp; orders.
The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_February2007.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/@S5/@S503/@S503.HTM">Chicago Fed</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June &#39;06</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>0.11</td>
<td>-0.32</td>
<td>0.32</td>
<td>0.04</td>
<td>0.25</td>
<td>0.31</td>
</tr>
</tbody>
</table>
Existing Home Sales Fell Again in June, Lowest Since 2002 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 25, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070725d.jpg" width="353">
Sales of existing homes fell again in June. The 3.8% to 5.750M units to the lowest level since November 2002. Sales were down 20.2% from the peak during September of 2005.
Sales of single family homes fell a sharper 3.5% last month after a 1.0% decline in May. Sales were 20.5% lower than during the peak month of September 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070725e.jpg" width="353">
By region, single family home sales fell 5.3% (-10.0% y/y) in the Northeast. Out West sales dropped 6.5% (-19.4% y/y) in June. Sales in the Midwest dropped 3.2% (-8.3% y/y) and down South sales fell 1.4% (-11.1% y/y).
The inventory of single family &quot;homes on the market&quot; dropped 2.7%. The decline was the only the first this year and inventories were up 12.7% from last year.
The median price of an existing single family home rose 3.8% but versus last year, the price of $230,300 was up just 0.1%.
The broad aggregate data on existing home sales are included in Haver&#39;s USECON database; details about prices by region and inventories are available in the REALTOR database. 
Comparing the prime and subprime mortgage markets from the Federal Reserve Bank of Chicago is available <a href="http://www.chicagofed.org/publications/fedletter/cflaugust2007_241.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">Existing Home Sales (SAAR, 000s)</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Sales</td>
<td>5,750</td>
<td>5,980</td>
<td>-11.4%</td>
<td>6,510</td>
<td>7,065</td>
<td>6,727</td>
</tr>
<tr>
<td class="firstcol">Single-Family Sales</td>
<td>5,010</td>
<td>5,190</td>
<td>-12.1%</td>
<td>5,708</td>
<td>6,182</td>
<td>5,914</td>
</tr>
<tr class="odd">
<td class="firstcol">Median Single-Family Home Price (NSA,000s)</td>
<td>$230.3</td>
<td>$221.9</td>
<td>0.1%</td>
<td>$221.9</td>
<td>$217.5</td>
<td>$192.8</td>
</tr>
</tbody>
</table>
INSEE Biz Index Holds its Ground: Uptrend Intact  
by <a href="/comment/Brusca.html">Robert Brusca</a> July 25, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070725f.jpg" width="353">
The INSEE Biz index for French industry is still in its impressive uptrend. Yet it is only in the 74th percentile of its range and it is about 10% above its mean value. The index is off peak and while the trend is technically still in place it is appropriate to wonder if the uptrend is abating. 
Orders and demand trends are still firm but so is the series &#145;likely price trend&#146;. The MFG portion of the survey shows a bit more of a loss in momentum. The Production trend reading fell off in July to 17 from 24 but still ranking in the mid-70s in terms of the percentile of its range of values - a firm result. The recent trend for production assessment ticked up in July; the likely trend assessment also rose to 15 from 14. MFG prices expected are only at a reading of 6 and reside in their 62nd percentile of their range, a more modest showing than for French industry overall. 
On balance, the readings from France are still solid and encouraging. Some of the inflation responses are, however, on the high side, and for overall industry, with a bit of momentum. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
 INSEE Industry Survey
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="4">&nbsp;</td>
<td colspan="2">Since Jan 1990</td>
<td colspan="4">Since Jan 1990</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td> Jul-07</td>
<td> Jun-07</td>
<td> May-07</td>
<td> Apr-07</td>
<td> Percentile</td>
<td> Rank</td>
<td> Max</td>
<td> Min</td>
<td> Range</td>
<td> Mean</td>
</tr>
<tr class="grey2">
<td class="firstcol"> Climate</td>
<td>110</td>
<td>110</td>
<td>108</td>
<td>112</td>
<td> 74.0</td>
<td> 41</td>
<td> 123</td>
<td> 73</td>
<td> 50</td>
<td> 101</td>
</tr>
<tr class="grey1">
<td colspan="11"> Production</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Recent Trend</td>
<td>16</td>
<td>24</td>
<td>14</td>
<td>10</td>
<td>72.5</td>
<td>44</td>
<td>44</td>
<td>-58</td>
<td>102</td>
<td>-6</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Likely trend</td>
<td>31</td>
<td>27</td>
<td>22</td>
<td>21</td>
<td>66.7</td>
<td>20</td>
<td>63</td>
<td>-33</td>
<td>96</td>
<td>7</td>
</tr>
<tr class="grey1">
<td colspan="11"> Orders/Demand</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Orders&amp;Demand</td>
<td>2</td>
<td>4</td>
<td>3</td>
<td>5</td>
<td>73.6</td>
<td>33</td>
<td>25</td>
<td>-62</td>
<td>87</td>
<td>-15</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Foreign Orders &amp; Demand</td>
<td>5</td>
<td>4</td>
<td>6</td>
<td>10</td>
<td>70.8</td>
<td>46</td>
<td>31</td>
<td>-58</td>
<td>89</td>
<td>-11</td>
</tr>
<tr class="grey1">
<td colspan="11"> Prices</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Likely Sales Prices Trend</td>
<td>10</td>
<td>10</td>
<td>9</td>
<td>4</td>
<td>70.2</td>
<td>26</td>
<td>24</td>
<td>-23</td>
<td>47</td>
<td>0</td>
</tr>
</tbody>
</table>
Korea GDP Up 1.7% in Q2; Maintaining 4-5% Annual Pace, Country Sees Its Credit Rating Raised 
by <a href="/comment/Stone.html">Carol Stone</a> July 25, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070725g.jpg" width="353">
South Korea&#39;s GDP grew 1.7% in Q2, following 0.9% in the previous two quarters. This was the strongest quarterly increase since Q4 2003, 4-1/2 years ago. The year-to-year growth was 4.9%, up from 4.0% in Q1 and also in Q4.
The quarterly growth was led by the manufacturing sector, which rebounded sharply to a 3.6% quarterly increase from a 0.9% fall in Q1. This pushed the year-on-year rate to 5.9% from 3.9%. Data on industrial production suggest that Q2 started off stronger for electrical machinery, electronic components and motor vehicles. Service industries collectively slowed a bit in Q2, gaining 1.1% after 1.2% in Q1 and Q4. Construction activity declined outright, falling 1.8% after a 1.4% increase in Q1 and 0.6% in Q4. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070725h.jpg" width="353">
The expenditure accounts show that the greater part of the pickup in GDP came from foreign demand. Exports surged 4.6% in Q2, their strongest quarterly advance in a year. Imports rose 4.7%, but this was less than Q1&#39;s 5.4%, and net exports widened to a surplus of KRW20.23 trillion from KRW19.48 trillion in Q1. Domestic demand, in contrast, slowed to 1.4% growth in Q2 from 1.8% in Q1. So net foreign demand added 0.3% to total GDP growth after cutting it by 0.9% in Q1. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070725i.jpg" width="353">
These figures hardly mean, however, that domestic demand was &quot;weak&quot;. Private consumption was up 0.8% in the quarter and 4.1% from a year ago. Fixed investment also grew 0.8%, putting it a substantial 6.8% higher than the year-ago period. Within this latter category, what the Koreans call &quot;facilities investment&quot; led the way in Q2, with a gain of 3.5% following 4.4% the quarter before; encompassing machinery and transport equipment, this item was up 12.1% from a year ago, the strongest since radically higher growth during the tech boom of 1999/2000.
As these data might suggest, the Korean economy is showing steady, moderate growth, which it has sustained now since about 2002. In the 2000/2001 fall-out from the tech bust, it managed to avoid recession and has had just one negative quarter since then, in early 2003. According to Bloomberg news, Moody&#39;s rating service has been sufficiently impressed announce today a hike in the country&#39;s credit rating to A2 from A3, where it has been since early 2002. &quot;A2&quot; is Moody&#39;s sixth highest rating and in the middle of the &quot;investment grade&quot; spectrum. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Korea GDP, 2000 Won</th>
<th scope="col">2Q 2007*</th>
<th scope="col">1Q 2007*</th>
<th scope="col">4Q 2006*</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">Total</td>
<td>1.7</td>
<td>0.9</td>
<td>0.9</td>
<td>4.9</td>
<td>5.0</td>
<td>4.2</td>
<td>4.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Private Consumption</td>
<td>0.8</td>
<td>1.5</td>
<td>1.0</td>
<td>4.1</td>
<td>4.2</td>
<td>3.6</td>
<td>-0.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Gross Fixed Capital Formation</td>
<td>0.8</td>
<td>2.0</td>
<td>1.2</td>
<td>6.8</td>
<td>3.2</td>
<td>2.4</td>
<td>2.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Net Exports (Tril.2000.Won)</td>
<td>20.2</td>
<td>19.5</td>
<td>21.0</td>
<td>19.4</td>
<td>19.6</td>
<td>16.7</td>
<td>14.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports</td>
<td>4.6</td>
<td>3.1</td>
<td>0.5</td>
<td>10.7</td>
<td>12.4</td>
<td>8.5</td>
<td>19.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports</td>
<td>4.7</td>
<td>5.4</td>
<td>-0.6</td>
<td>12.2</td>
<td>11.3</td>
<td>7.3</td>
<td>13.9</td>
</tr>
<tr>
<td colspan="8">Industry Value Added</td>
</tr>
<tr class="odd">
<td class="firstcol">Manufacturing</td>
<td>3.6</td>
<td>-0.9</td>
<td>1.0</td>
<td>5.9</td>
<td>8.4</td>
<td>7.1</td>
<td>11.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>1.1</td>
<td>1.2</td>
<td>1.2</td>
<td>4.5</td>
<td>4.2</td>
<td>3.4</td>
<td>1.9</td>
</tr>
</tbody>
</table>


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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070724b.jpg" width="353">
The International Council of Shopping Centers (ICSC)-UBS survey indicated that chain store sales ticked 0.2% lower last week and reversed most of the 0.3% rise during the prior week.
The weak showing of sales recently left the average level so far in July up 0.1% versus the June average which fell 0.5% versus May.
During the last ten years there has been a 45% correlation between the y/y change in chain store sales and the change in non-auto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070724c.jpg" width="353">
The leading indicator of chain store sales from ICSC-UBS fell 0.5% (+0.5% y/y) after a 0.3% rise during the prior week. Nevertheless, the July average thus far is up 0.8% from June which fell 0.8% from May.
The meager rise in chain store sales this month came as gasoline prices for regular, on average, fell 3.0% to $2.958 per gallon (-1.5% y/y) last week. That followed a 2.3% advance during the prior week.
As a result, the average gas price so far in July is 2.3% lower than in June when prices fell 2.9% from May.
The market price for regular gasoline in N.Y. harbor fell yesterday to $2.0316 (-11.25% y/y), suggesting further declines in the retail price for gas. 
Macroeconomic Implications of Changes in the Term Premium from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/review/07/07/Rudebusch.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">07/21 /07</th>
<th scope="col">07/14/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>481.3</td>
<td>482.1</td>
<td>3.0%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>


</html>

The International Council of Shopping Centers (ICSC)-UBS survey indicated that chain store sales ticked 0.2% lower last week and reversed most of the 0.3% rise during the prior week. The weak showing of sales recently left the average [...]

Weekly Chain Store Sales Tick Down as Gas Prices Fell

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070724a.jpg" width="353">
Despite the rising Euro EMU orders continue strong, at least through May. The Euro has not risen by that much this year on a trade weighted basis but it is still extremely strong on a weighted basis in terms of its level compared to historic standards. So far adversity has been avoided and the manufacturing sector seem to continue to flourish. 
EMU orders and trend remain strong. Sales growth seems to be a little less robust, however. Main country trends are still quite robust. EU member UK is seeing some weakening as its CBI report also echoed in a release today. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Euro Area and UK Industrial Orders &amp; Sales Trends
</tr>
</thead>
<tbody>
<tr class="grey5">
<td class="firstcol">SAAR except m/m</td>
<td colspan="3">% m/m</td>
<td>May-07 3-Mo</td>
<td>May-07 6-mo</td>
<td>May-07 12-mo</td>
<td>May-06 12-mo</td>
<td>May-05 12-mo</td>
</tr>
<tr class="grey4">
<td class="firstcol">Euro Area Detail</td>
<td>May-07</td>
<td>Apr-07</td>
<td>Mar-07</td>
</tr>
<tr class="grey3">
<td class="firstcol">MFG Orders</td>
<td>1.7%</td>
<td>-0.6%</td>
<td>2.9%</td>
<td>16.7%</td>
<td>10.4%</td>
<td>8.4%</td>
<td>12.5%</td>
<td>0.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">MFG Sales</td>
<td>0.4%</td>
<td>0.2%</td>
<td>0.4%</td>
<td>4.1%</td>
<td>5.9%</td>
<td>5.9%</td>
<td>7.9%</td>
<td>2.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Consumer</td>
<td>0.2%</td>
<td>0.1%</td>
<td>0.1%</td>
<td>1.6%</td>
<td>2.5%</td>
<td>3.7%</td>
<td>7.9%</td>
<td>2.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Capital</td>
<td>0.3%</td>
<td>0.3%</td>
<td>0.5%</td>
<td>4.9%</td>
<td>6.8%</td>
<td>7.5%</td>
<td>4.1%</td>
<td>1.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Intermediate</td>
<td>0.5%</td>
<td>0.1%</td>
<td>0.1%</td>
<td>10.9%</td>
<td>11.0%</td>
<td>4.2%</td>
<td>7.1%</td>
<td>2.4%</td>
</tr>
<tr class="grey1">
<td colspan="9">MFG Orders</td>
</tr>
<tr class="grey3">
<td class="firstcol">Total Orders</td>
<td>1.7%</td>
<td>-0.6%</td>
<td>2.9%</td>
<td>16.7%</td>
<td>10.4%</td>
<td>8.4%</td>
<td>12.5%</td>
<td>0.8%</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; E-13 Domestic MFG orders</td>
<td>0.9%</td>
<td>-0.6%</td>
<td>2.4%</td>
<td>10.9%</td>
<td>11.0%</td>
<td>4.2%</td>
<td>11.4%</td>
<td>-5.7%</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; E-13 Foreign MFG orders</td>
<td>3.9%</td>
<td>-1.7%</td>
<td>4.4%</td>
<td>28.8%</td>
<td>12.6%</td>
<td>13.8%</td>
<td>13.7%</td>
<td>4.2%</td>
</tr>
<tr class="grey5">
<td class="firstcol">Countries:</td>
<td>May-07</td>
<td>Apr-07</td>
<td>Mar-07</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-mo</td>
<td>12-mo</td>
</tr>
<tr class="grey3">
<td class="firstcol">Germany</td>
<td>3.5%</td>
<td>-1.5%</td>
<td>1.0%</td>
<td>12.2%</td>
<td>16.8%</td>
<td>12.5%</td>
<td>13.5%</td>
<td>1.9%</td>
</tr>
<tr class="grey3">
<td class="firstcol">France</td>
<td>1.1%</td>
<td>2.4%</td>
<td>5.3%</td>
<td>41.2%</td>
<td>19.6%</td>
<td>13.3%</td>
<td>2.7%</td>
<td>-9.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Italy</td>
<td>2.5%</td>
<td>-0.8%</td>
<td>4.9%</td>
<td>29.9%</td>
<td>9.7%</td>
<td>7.0%</td>
<td>13.6%</td>
<td>3.6%</td>
</tr>
<tr class="grey3">
<td class="firstcol">UK</td>
<td>-3.5%</td>
<td>-6.4%</td>
<td>5.1%</td>
<td>-18.7%</td>
<td>1.6%</td>
<td>-1.2%</td>
<td>2.0%</td>
<td>0.8%</td>
</tr>
</tbody>
</table>
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Despite the rising Euro EMU orders continue strong, at least through May. The Euro has not risen by that much this year on a trade weighted basis but it is still extremely strong on a weighted basis in terms of its level compared to [...]

EMU Orders Continue Strong

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070724b.jpg" width="353">
The International Council of Shopping Centers (ICSC)-UBS survey indicated that chain store sales ticked 0.2% lower last week and reversed most of the 0.3% rise during the prior week.
The weak showing of sales recently left the average level so far in July up 0.1% versus the June average which fell 0.5% versus May.
During the last ten years there has been a 45% correlation between the y/y change in chain store sales and the change in non-auto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070724c.jpg" width="353">
The leading indicator of chain store sales from ICSC-UBS fell 0.5% (+0.5% y/y) after a 0.3% rise during the prior week. Nevertheless, the July average thus far is up 0.8% from June which fell 0.8% from May.
The meager rise in chain store sales this month came as gasoline prices for regular, on average, fell 3.0% to $2.958 per gallon (-1.5% y/y) last week. That followed a 2.3% advance during the prior week.
As a result, the average gas price so far in July is 2.3% lower than in June when prices fell 2.9% from May.
The market price for regular gasoline in N.Y. harbor fell yesterday to $2.0316 (-11.25% y/y), suggesting further declines in the retail price for gas. 
Macroeconomic Implications of Changes in the Term Premium from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/review/07/07/Rudebusch.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">07/21 /07</th>
<th scope="col">07/14/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>481.3</td>
<td>482.1</td>
<td>3.0%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>
EMU Orders Continue Strong 
by <a href="/comment/Brusca.html">Robert Brusca</a> July 24, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070724a.jpg" width="353">
Despite the rising Euro EMU orders continue strong, at least through May. The Euro has not risen by that much this year on a trade weighted basis but it is still extremely strong on a weighted basis in terms of its level compared to historic standards. So far adversity has been avoided and the manufacturing sector seem to continue to flourish. 
EMU orders and trend remain strong. Sales growth seems to be a little less robust, however. Main country trends are still quite robust. EU member UK is seeing some weakening as its CBI report also echoed in a release today. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Euro Area and UK Industrial Orders &amp; Sales Trends
</tr>
</thead>
<tbody>
<tr class="grey5">
<td class="firstcol">SAAR except m/m</td>
<td colspan="3">% m/m</td>
<td>May-07 3-Mo</td>
<td>May-07 6-mo</td>
<td>May-07 12-mo</td>
<td>May-06 12-mo</td>
<td>May-05 12-mo</td>
</tr>
<tr class="grey4">
<td class="firstcol">Euro Area Detail</td>
<td>May-07</td>
<td>Apr-07</td>
<td>Mar-07</td>
</tr>
<tr class="grey3">
<td class="firstcol">MFG Orders</td>
<td>1.7%</td>
<td>-0.6%</td>
<td>2.9%</td>
<td>16.7%</td>
<td>10.4%</td>
<td>8.4%</td>
<td>12.5%</td>
<td>0.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">MFG Sales</td>
<td>0.4%</td>
<td>0.2%</td>
<td>0.4%</td>
<td>4.1%</td>
<td>5.9%</td>
<td>5.9%</td>
<td>7.9%</td>
<td>2.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Consumer</td>
<td>0.2%</td>
<td>0.1%</td>
<td>0.1%</td>
<td>1.6%</td>
<td>2.5%</td>
<td>3.7%</td>
<td>7.9%</td>
<td>2.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Capital</td>
<td>0.3%</td>
<td>0.3%</td>
<td>0.5%</td>
<td>4.9%</td>
<td>6.8%</td>
<td>7.5%</td>
<td>4.1%</td>
<td>1.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Intermediate</td>
<td>0.5%</td>
<td>0.1%</td>
<td>0.1%</td>
<td>10.9%</td>
<td>11.0%</td>
<td>4.2%</td>
<td>7.1%</td>
<td>2.4%</td>
</tr>
<tr class="grey1">
<td colspan="9">MFG Orders</td>
</tr>
<tr class="grey3">
<td class="firstcol">Total Orders</td>
<td>1.7%</td>
<td>-0.6%</td>
<td>2.9%</td>
<td>16.7%</td>
<td>10.4%</td>
<td>8.4%</td>
<td>12.5%</td>
<td>0.8%</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; E-13 Domestic MFG orders</td>
<td>0.9%</td>
<td>-0.6%</td>
<td>2.4%</td>
<td>10.9%</td>
<td>11.0%</td>
<td>4.2%</td>
<td>11.4%</td>
<td>-5.7%</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; E-13 Foreign MFG orders</td>
<td>3.9%</td>
<td>-1.7%</td>
<td>4.4%</td>
<td>28.8%</td>
<td>12.6%</td>
<td>13.8%</td>
<td>13.7%</td>
<td>4.2%</td>
</tr>
<tr class="grey5">
<td class="firstcol">Countries:</td>
<td>May-07</td>
<td>Apr-07</td>
<td>Mar-07</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-mo</td>
<td>12-mo</td>
</tr>
<tr class="grey3">
<td class="firstcol">Germany</td>
<td>3.5%</td>
<td>-1.5%</td>
<td>1.0%</td>
<td>12.2%</td>
<td>16.8%</td>
<td>12.5%</td>
<td>13.5%</td>
<td>1.9%</td>
</tr>
<tr class="grey3">
<td class="firstcol">France</td>
<td>1.1%</td>
<td>2.4%</td>
<td>5.3%</td>
<td>41.2%</td>
<td>19.6%</td>
<td>13.3%</td>
<td>2.7%</td>
<td>-9.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Italy</td>
<td>2.5%</td>
<td>-0.8%</td>
<td>4.9%</td>
<td>29.9%</td>
<td>9.7%</td>
<td>7.0%</td>
<td>13.6%</td>
<td>3.6%</td>
</tr>
<tr class="grey3">
<td class="firstcol">UK</td>
<td>-3.5%</td>
<td>-6.4%</td>
<td>5.1%</td>
<td>-18.7%</td>
<td>1.6%</td>
<td>-1.2%</td>
<td>2.0%</td>
<td>0.8%</td>
</tr>
</tbody>
</table>


</html>

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

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Tian Yong Woon

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

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

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

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

251110T1.jpg

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

251110T2.jpg

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

251110T3.jpg

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

251110T4.jpg

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

251110T5.jpg

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

251110T6.jpg

Asia

Economic Letter from Asia: As the Dust Settles

251107F5.jpg

251107G5.jpg

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

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

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

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

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

251107H5.jpg

251107I5.jpg

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

U.S. Consumer Credit Strengthens in September

251107A2.jpg

251107D2.jpg

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

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

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

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

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

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

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

251107C2.jpg

251107B2.jpg

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

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

251107E.jpg

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

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

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

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

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

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

251107.jpg

Germany

German Trade Surplus Shrinks Despite Strong Exports

Andrew Cates

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

251106Z1.jpg

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

251106Z2.jpg

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

251106Z3.jpg

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

251106Z4.jpg

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

251106Z5.jpg

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

251106Z6.jpg

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

Economy in Brief: 2007

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Chicago Fed Nat'l Activity Index Improved

Mortgage Applications Lowest Since February

Mortgage Applications Lowest Since February

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