Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070717g.jpg" width="353">
The July ZEW survey of German institutional investors and analysts revealed a sharp deterioration in the excess of those who see improvement in the economic outlook six months ahead and those who see worsening conditions. The excess in July was 10.4% compared with 20.3% in June. The historical average of optimists over pessimists is 32.8%.
The participants in the ZEW survey also expressed slightly less confidence in the current situation. The excess of optimists regarding current conditions fell to 88.2% in July from 88.7% in June, nevertheless, the confidence in the current situation is among the strongest reported over the entire history of the survey, as can be seen in the first chart.
Concerns over the rising price of oil, the strengthening of the euro and higher interest rates may have accounted for some of the weakening confidence among the financial community. Although there was some relief to the rising price of oil and strengthening of the Euro in the second quarter of this year, the price of oil has risen almost 58% from the low point of the year of January 18, to July 16 and the euro is up almost 7% over the same period. The daily prices of a barrel of Brent Crude and the dollar exchange rates of the euro for the current year are shown in the second chart. While the European Central Bank (ECB) did not raise rates at its last meeting, its base rate has risen steadily over the last 18 months from 2% in November, 2005 to 4% currently, as shown in the third chart. Moreover, the bank continues to stress that further tightening may be needed. 

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<td><img border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070717h.jpg" width="353"><img border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070717i.jpg" width="353"> </td>
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<th scope="col" class="firstcol">GERMANY&nbsp;&nbsp;</th>
<th scope="col">July 07</th>
<th scope="col">June 07&nbsp;</th>
<th scope="col">July&nbsp; 06&nbsp;</th>
<th scope="col">M/M Chg&nbsp;</th>
<th scope="col">Y/Y Chg&nbsp;</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">ZEW Indicator (%)</td>
<td>&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations 6 mo ahead</td>
<td>10.4</td>
<td>20.3</td>
<td>15.1</td>
<td>-9.9</td>
<td>-4.7</td>
<td>22.3</td>
<td>34.8</td>
<td>44.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Current conditions</td>
<td>88.2</td>
<td>88.7</td>
<td>23.3</td>
<td>-0.5</td>
<td>64.9</td>
<td>18.3</td>
<td>-61.8</td>
<td>-67.0</td>
</tr>
<tr>
<td class="firstcol"></td>
<td>7/16/07</td>
<td>1/18/07</td>
<td>% Chg</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Euro/Dollar Exchange rate</td>
<td>1.38</td>
<td>1.29</td>
<td>6.98</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Price of&nbsp; Oil per bbl. Brent Crude</td>
<td>79.73</td>
<td>50.83</td>
<td>57.91</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
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The July ZEW survey of German institutional investors and analysts revealed a sharp deterioration in the excess of those who see improvement in the economic outlook six months ahead and those who see worsening conditions. The excess [...]

Confidence Among the German Financial Community Weakens in July

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070717c.jpg" width="353">
The Composite Housing Market Index from the National Association of Home Builders&#39; (NAHB) fell last month to the lowest level since early 1991. At 28 for June, the index fell 6.7% from May and fell by one third from a year earlier. 
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/070717d.jpg" width="353"> 
The sub-index for current sales also fell 6.5% from May (-38.3% y/y) and the sub-index covering prospective sales in the next six months fell 4.9% m/m (-23.5% y/y). 
Traffic of prospective home buyers fell 4.5% (-27.6% y/y).
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>. 

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</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>
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</thead>
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<td class="firstcol">Composite Housing Market Index</td>
<td>28</td>
<td>30</td>
<td>42</td>
<td>42</td>
<td>67</td>
<td>68</td>
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The Composite Housing Market Index from the National Association of Home Builders' (NAHB) fell last month to the lowest level since early 1991. At 28 for June, the index fell 6.7% from May and fell by one third from a year earlier. [...]

NAHB Housing Market Index Fell Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070717a.jpg" width="353">
The producer price index for finished goods fell 0.2% last month following its 0.9% rise in May. The decline compared to Consensus forecasts for a 0.1% increase and it was the first decline since January.
Food prices fell 0.8% (+6.3% y/y) after May&#39;s 0.2% dip.
Energy prices, in addition, declined a sharp 1.1% (+4.3% y/y) as gasoline prices fell 3.9% (+3.8% y/y).Fuel oil dipped 0.5% (-0.6% y/y/y) but natural gas prices increased a hefty 2.6% (6.8% y/y), the firmest y/y increase since June 2006.
The core finished goods PPI increased 0.3%, bit more than the 0.2% May rise but the last two increases followed two months of unchanged readings during March and April. Consensus estimates were for a 0.2% increase in June.
Finished consumer goods prices less food &amp; energy rose 0.3% (1.7% y/y) as passenger car prices rose 0.9% (-1.8% y/y) after an unchanged reading during May.
Capital equipment prices increased 0.2% (1.8% y/y) after unchanged prices during the prior two months. Most of the June increase was due to a 1.0% (0.8% y/y) in prices of light motor trucks.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070717b.jpg" width="353">
Intermediate goods prices added 0.5% to the firm 1.1% increase during May.Intermediate food prices rose a large 1.6% (15.3% y/y), suggesting future strength in finished food prices. The index excluding food &amp; energy prices rose the same 0.4% (2.7% y/y) as it did during May. 
The crude materials PPI rose 0.3% (14.9% y/y), as energy prices rose 0.6% (8.5% y/y) and food prices rose 0.5% (27.1% y/y). The core crude materials PPI fell 0.2% (10.2% y/y) as copper scrap prices fell 6.6% NSA (+9.6% y/y) and aluminum scrap prices fell 2.3% NSA (-3.3% y/y). 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Finished Goods</td>
<td>-0.2</td>
<td>0.9%&nbsp;</td>
<td>&nbsp; 3.2%&nbsp;</td>
<td>2.9%</td>
<td>&nbsp;4.9%&nbsp;</td>
<td>3.6%&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.3</td>
<td>0.2%</td>
<td>&nbsp;1.8%</td>
<td>1.4%</td>
<td>2.4%</td>
<td>1.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>0.5%</td>
<td>1.1%</td>
<td>3.4%</td>
<td>6.4%</td>
<td>&nbsp;8.0%</td>
<td>6.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.4%</td>
<td>0.4%</td>
<td>2.7%</td>
<td>6.0%</td>
<td>&nbsp;5.5%</td>
<td>5.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>0.3%</td>
<td>&nbsp;2.0%&nbsp;</td>
<td>&nbsp;14.9%</td>
<td>1.4%</td>
<td>14.6%</td>
<td>&nbsp;17.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-0.2%</td>
<td>0.1%</td>
<td>&nbsp;10.1%</td>
<td>20.9%</td>
<td>4.9%</td>
<td>&nbsp;26.5%</td>
</tr>
</tbody>
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The producer price index for finished goods fell 0.2% last month following its 0.9% rise in May. The decline compared to Consensus forecasts for a 0.1% increase and it was the first decline since January. Food prices fell 0.8% (+6.3% [...]

Lower Energy Prices Ease U.S. PPI; Core Prices Firm

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070717a.jpg" width="353">
The producer price index for finished goods fell 0.2% last month following its 0.9% rise in May. The decline compared to Consensus forecasts for a 0.1% increase and it was the first decline since January.
Food prices fell 0.8% (+6.3% y/y) after May&#39;s 0.2% dip.
Energy prices, in addition, declined a sharp 1.1% (+4.3% y/y) as gasoline prices fell 3.9% (+3.8% y/y).Fuel oil dipped 0.5% (-0.6% y/y/y) but natural gas prices increased a hefty 2.6% (6.8% y/y), the firmest y/y increase since June 2006.
The core finished goods PPI increased 0.3%, bit more than the 0.2% May rise but the last two increases followed two months of unchanged readings during March and April. Consensus estimates were for a 0.2% increase in June.
Finished consumer goods prices less food &amp; energy rose 0.3% (1.7% y/y) as passenger car prices rose 0.9% (-1.8% y/y) after an unchanged reading during May.
Capital equipment prices increased 0.2% (1.8% y/y) after unchanged prices during the prior two months. Most of the June increase was due to a 1.0% (0.8% y/y) in prices of light motor trucks.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070717b.jpg" width="353">
Intermediate goods prices added 0.5% to the firm 1.1% increase during May.Intermediate food prices rose a large 1.6% (15.3% y/y), suggesting future strength in finished food prices. The index excluding food &amp; energy prices rose the same 0.4% (2.7% y/y) as it did during May. 
The crude materials PPI rose 0.3% (14.9% y/y), as energy prices rose 0.6% (8.5% y/y) and food prices rose 0.5% (27.1% y/y). The core crude materials PPI fell 0.2% (10.2% y/y) as copper scrap prices fell 6.6% NSA (+9.6% y/y) and aluminum scrap prices fell 2.3% NSA (-3.3% y/y). 

<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/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Finished Goods</td>
<td>-0.2</td>
<td>0.9%&nbsp;</td>
<td>&nbsp; 3.2%&nbsp;</td>
<td>2.9%</td>
<td>&nbsp;4.9%&nbsp;</td>
<td>3.6%&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.3</td>
<td>0.2%</td>
<td>&nbsp;1.8%</td>
<td>1.4%</td>
<td>2.4%</td>
<td>1.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>0.5%</td>
<td>1.1%</td>
<td>3.4%</td>
<td>6.4%</td>
<td>&nbsp;8.0%</td>
<td>6.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.4%</td>
<td>0.4%</td>
<td>2.7%</td>
<td>6.0%</td>
<td>&nbsp;5.5%</td>
<td>5.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>0.3%</td>
<td>&nbsp;2.0%&nbsp;</td>
<td>&nbsp;14.9%</td>
<td>1.4%</td>
<td>14.6%</td>
<td>&nbsp;17.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-0.2%</td>
<td>0.1%</td>
<td>&nbsp;10.1%</td>
<td>20.9%</td>
<td>4.9%</td>
<td>&nbsp;26.5%</td>
</tr>
</tbody>
</table>
Tom Moeller 
by <a href="/comment/Moeller.html">Tom Moeller</a> Industrial Production Rebounded In June July 17, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070717e.jpg" width="353">
For June, industrial production rebounded 0.5% after a revised 0.1% decline during the prior month. The magnitude of the rebound matched Consensus expectations.
Little of the figures were distorted by movement in the utility or in the mining categories. As a result, factory output rose 0.5% after a revised no change in May. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070717f.jpg" width="353">
Consumer goods output surged 0.7% (1.6% y/y) led by a 2.5% (-1.7% y/y) pop in motor vehicle output. Production of computers &amp; electronics also rose a strong 1.1% (9.3% y/y) while output of furniture rose a tentative 1.2% (-4.1% y/y). To the downside was production of apparel by 2.4% (-3.4% y/y.
Production of business equipment was unchanged for the second consecutive month (3.4% y/y), held back by a 0.6% decline in output of industrial &amp; other equipment. Information processing &amp; related equipment rose 0.4% (5.7% y/y.
Capacity utilization rose to 81.7%from 81.4% in May as capacity rose 0.1% (2.1% y/y for the fifth strait month.
How Accurate Are Real-Time Estimates of Output Trends and Gaps? from the Federal Reserve Bank of Richmond can be found <a href="http://www.richmondfed.org/publications/economic_research/economic_quarterly/pdfs/spring2007/watson.pdf">here</a>.

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<colgroup><col><col><col><col><col><col></colgroup>
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<th scope="col" class="firstcol">INDUSTRIAL PRODUCTION (SA)</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</td>
<td>0.5%</td>
<td>-0.1%</td>
<td>1.3%</td>
<td>4.0%</td>
<td>3.2%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">Manufacturing</td>
<td>0.5%</td>
<td>0.0%</td>
<td>1.6%</td>
<td>4.7%</td>
<td>3.9%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Mining</td>
<td>0.6%</td>
<td>0.3%</td>
<td>-0.9%</td>
<td>2.7%</td>
<td>-1.6%</td>
<td>-0.6%</td>
</tr>
<tr>
<td class="firstcol">Utilities</td>
<td>0.3%</td>
<td>-1.6%</td>
<td>0.7%</td>
<td>0.2%</td>
<td>2.0%</td>
<td>1.4%</td>
</tr>
</tbody>
</table>
NAHB Housing Market Index Fell Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 17, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070717c.jpg" width="353">
The Composite Housing Market Index from the National Association of Home Builders&#39; (NAHB) fell last month to the lowest level since early 1991. At 28 for June, the index fell 6.7% from May and fell by one third from a year earlier. 
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/070717d.jpg" width="353"> 
The sub-index for current sales also fell 6.5% from May (-38.3% y/y) and the sub-index covering prospective sales in the next six months fell 4.9% m/m (-23.5% y/y). 
Traffic of prospective home buyers fell 4.5% (-27.6% y/y).
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>. 

<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> </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">Composite Housing Market Index</td>
<td>28</td>
<td>30</td>
<td>42</td>
<td>42</td>
<td>67</td>
<td>68</td>
</tr>
</tbody>
</table>
Confidence Among the German Financial Community Weakens in July  
by <a href="/comment/Curley.html">Louise Curley</a> July 17, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070717g.jpg" width="353">
The July ZEW survey of German institutional investors and analysts revealed a sharp deterioration in the excess of those who see improvement in the economic outlook six months ahead and those who see worsening conditions. The excess in July was 10.4% compared with 20.3% in June. The historical average of optimists over pessimists is 32.8%.
The participants in the ZEW survey also expressed slightly less confidence in the current situation. The excess of optimists regarding current conditions fell to 88.2% in July from 88.7% in June, nevertheless, the confidence in the current situation is among the strongest reported over the entire history of the survey, as can be seen in the first chart.
Concerns over the rising price of oil, the strengthening of the euro and higher interest rates may have accounted for some of the weakening confidence among the financial community. Although there was some relief to the rising price of oil and strengthening of the Euro in the second quarter of this year, the price of oil has risen almost 58% from the low point of the year of January 18, to July 16 and the euro is up almost 7% over the same period. The daily prices of a barrel of Brent Crude and the dollar exchange rates of the euro for the current year are shown in the second chart. While the European Central Bank (ECB) did not raise rates at its last meeting, its base rate has risen steadily over the last 18 months from 2% in November, 2005 to 4% currently, as shown in the third chart. Moreover, the bank continues to stress that further tightening may be needed. 

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<td><img border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070717h.jpg" width="353"><img border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070717i.jpg" width="353"> </td>
</tr>
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">GERMANY&nbsp;&nbsp;</th>
<th scope="col">July 07</th>
<th scope="col">June 07&nbsp;</th>
<th scope="col">July&nbsp; 06&nbsp;</th>
<th scope="col">M/M Chg&nbsp;</th>
<th scope="col">Y/Y Chg&nbsp;</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">ZEW Indicator (%)</td>
<td>&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations 6 mo ahead</td>
<td>10.4</td>
<td>20.3</td>
<td>15.1</td>
<td>-9.9</td>
<td>-4.7</td>
<td>22.3</td>
<td>34.8</td>
<td>44.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Current conditions</td>
<td>88.2</td>
<td>88.7</td>
<td>23.3</td>
<td>-0.5</td>
<td>64.9</td>
<td>18.3</td>
<td>-61.8</td>
<td>-67.0</td>
</tr>
<tr>
<td class="firstcol"></td>
<td>7/16/07</td>
<td>1/18/07</td>
<td>% Chg</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Euro/Dollar Exchange rate</td>
<td>1.38</td>
<td>1.29</td>
<td>6.98</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Price of&nbsp; Oil per bbl. Brent Crude</td>
<td>79.73</td>
<td>50.83</td>
<td>57.91</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
METI Sector Surveys Show Some Weakness in May 
by <a href="/comment/Brusca.html">Robert Brusca</a> July 17, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070717j.jpg" width="353">
The Industry index from METI is in a sharp decline and is lower over six months for a period of three months running. Services (the tertiary index) tend to be more stable. Their index has slowed in the past few months and even fell in May but it is growing at pace just below 2%.
The tertiary and industry index are still relatively strong in their five year context. Fixing them in the range of values they have experienced over the past five years we find that the tertiary index is in its 95Th percentile (top 5-percent). The Industrial gauge is a bit lower but resides in the 84th percentile about the top 15 percentile of its range. The percentile standing of the MFG sector is higher than we get from other surveys of Japan (NTC has the MFG sector in the bottom 30 percent of its five year range). Japan remains unconcerned about this weakness and the BoJ continues to talk of when it will go back to hiking rates. Onew BOJ board member thinks they should already have hiked them again.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
 Key Japanese Sector Surveys
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Raw readings of each survey</td>
<td colspan="2">Percent of 5Yr range*</td>
</tr>
<tr>
<td class="firstcol">Biz Activity (METI:Indexes)</td>
<td>May-07</td>
<td>Apr-07</td>
<td>Mar-07</td>
<td>May-07</td>
<td>Apr-07</td>
</tr>
<tr class="odd">
<td class="firstcol"> Industry</td>
<td>107.1</td>
<td>107.4</td>
<td>107.6</td>
<td>84.9%</td>
<td>86.7%</td>
</tr>
<tr class="odd">
<td class="firstcol"> Tertiary (Services)</td>
<td>110.2</td>
<td>110.3</td>
<td>108.6</td>
<td>95.1%</td>
<td>96.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">*100 is high; Zero is low</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body>
</html>

Robert Brusca

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070716g.jpg" width="353">
The chart on select core HICP readings violates the rule on how many lines to plot on a graph (sorry). But the clear message is that few of these are trending lower and most are trending up. Among those that have any trend lower, there is usually abysmally high inflation rate anyway (Greece and Spain, for example).
The table below presents the discernable detail on core inflation trends on data that were not available last week. The table shows that inflation is accelerating in too many countries for comfort. In the same table we slice the data into a number of 12-month periods ended in June since that is the most recent observation.
As of June 2007 inflation was accelerating in half of the select 12 EMU members. Over the past year inflation also was higher on a year/year basis in seven countries than it had been in June of 2004. Any way you look at the inflation comparisons there is a hint of inflation. And these data look at core prices excluding the direct effects of food and energy inflation. These four presentations, the chars and the table below, make it clear why the ECB remains wary about inflation forces.
Inflation is simply trending higher into many categories to be ignored and across too many EMU countries to assume that it will go down all by itself. 

<table border="0" cellspacing="0" width="100%">
<tr>
<td><img border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070716h.jpg" width="353"><img border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070716i.jpg" width="353"> </td>
</tr>
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Euro area Select Members: Core Inflation Yr/Yr
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"></td>
<td>Jun-07</td>
<td>Jun-06</td>
<td>Jun-05</td>
<td>Jun-04</td>
</tr>
<tr>
<td class="firstcol">Austria</td>
<td>1.9%</td>
<td>1.3%</td>
<td>1.6%</td>
<td>1.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Belgium</td>
<td>1.7%</td>
<td>1.7%</td>
<td>1.4%</td>
<td>1.3%</td>
</tr>
<tr>
<td class="firstcol">Finland</td>
<td>1.4%</td>
<td>0.8%</td>
<td>0.6%</td>
<td>-0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>1.4%</td>
<td>1.4%</td>
<td>1.2%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>2.1%</td>
<td>0.8%</td>
<td>0.8%</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Greece</td>
<td>2.9%</td>
<td>3.0%</td>
<td>2.9%</td>
<td>3.6%</td>
</tr>
<tr>
<td class="firstcol">Ireland</td>
<td>2.4%</td>
<td>2.1%</td>
<td>1.7%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>1.8%</td>
<td>1.8%</td>
<td>1.9%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">Luxembourg</td>
<td>2.3%</td>
<td>2.3%</td>
<td>2.5%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">The Netherlands</td>
<td>1.5%</td>
<td>0.8%</td>
<td>0.6%</td>
<td>1.3%</td>
</tr>
<tr>
<td class="firstcol">Portugal</td>
<td>2.4%</td>
<td>2.5%</td>
<td>0.2%</td>
<td>3.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>2.4%</td>
<td>3.1%</td>
<td>2.5%</td>
<td>2.9%</td>
</tr>
<tr>
<td class="firstcol">EMU Core HICP</td>
<td>1.9%</td>
<td>2.5%</td>
<td>1.9%</td>
<td>2.4%</td>
</tr>
</tbody>
</table>
</body>
</html>

The chart on select core HICP readings violates the rule on how many lines to plot on a graph (sorry). But the clear message is that few of these are trending lower and most are trending up. Among those that have any trend lower, [...]

HICP Trends Show Pressure

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070716e.jpg" width="353">
The Central Bank of the Philippines announced today that the &quot;overall balance of payments&quot; for June amounted to $834 million, $169 million above May and $602 million above June of last year. The overall balance of payments is defined by the Bank as equal to the change in reserve assets less the change in reserve liabilities.
Because of the identity underlying the balance of payments concept, the change in reserves is shown with its sign reversed in the balance of payments table. Thus in the Balance of Payments Table in the PHILIPPINE@EMERGEPR data base, the Change in Reserves has the opposite sign of the Overall Balance of Payments, as shown in the first chart. The Overall Balance is equal to the sum of the Current Account, the Capital and Financial Account and the Net Unclassified Items (Errors and Omissions). <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070716f.jpg" width="353">
The Philippines balance on current account has shown a surplus, more often than not, since mid 2001. The improvement in the current account has been due mostly to remittances from citizens working abroad. The balance on trade in goods and services continues to be negative. The second chart shows the quarterly balance on current account together with the balance on trade in goods and services and the balance on transfers (largely workers&#39; remittances). These data are available only through the first quarter of 2007. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">PHILIPPINE BALANCE OF PAYMENTS&nbsp; (Millions U. S. $)</th>
<th scope="col">Q1 07</th>
<th scope="col">Q4 07&nbsp;</th>
<th scope="col">Q1 06&nbsp;</th>
<th scope="col">Q/Q Chg&nbsp;</th>
<th scope="col">Y/Y Chg&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</td>
<td>1823</td>
<td>1676</td>
<td>1153</td>
<td>147</td>
<td>670</td>
<td>5022</td>
<td>1955</td>
<td>1628</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital and Financial Account</td>
<td>154</td>
<td>-825</td>
<td>1427</td>
<td>974</td>
<td>-1185</td>
<td>-1722</td>
<td>1661</td>
<td>-1630</td>
</tr>
<tr class="odd">
<td class="firstcol">Net Unclassified Items</td>
<td>-559</td>
<td>297</td>
<td>-459</td>
<td>-856</td>
<td>-100</td>
<td>469</td>
<td>-1206</td>
<td>-278</td>
</tr>
<tr class="odd">
<td class="firstcol"> Overall Balance of Payments=Sum of above </td>
<td>1418</td>
<td>1150</td>
<td>2121</td>
<td>268</td>
<td>-703</td>
<td>3769</td>
<td>2410</td>
<td>-280</td>
</tr>
<tr class="odd">
<td class="firstcol">Change in Reserves</td>
<td>-1418</td>
<td>-1150</td>
<td>-2121</td>
<td>-268</td>
<td>703</td>
<td>-3769</td>
<td>-2410</td>
<td>280</td>
</tr>
<tr class="odd">
<td class="firstcol">Current Account</td>
<td>1823</td>
<td>1676</td>
<td>1153</td>
<td>147</td>
<td>670</td>
<td>5022</td>
<td>1955</td>
<td>1628</td>
</tr>
<tr class="odd">
<td class="firstcol">Goods and Services Balance</td>
<td>-1229</td>
<td>-2147</td>
<td>-1532</td>
<td>848</td>
<td>237</td>
<td>-7624</td>
<td>-9192</td>
<td>-7461</td>
</tr>
<tr class="odd">
<td class="firstcol">Net Transfer Balance</td>
<td>3445</td>
<td>3747</td>
<td>2911</td>
<td>-302</td>
<td>534</td>
<td>13189</td>
<td>11391</td>
<td>9160</td>
</tr>
<tr>
<td class="firstcol"></td>
<td>Jun 07</td>
<td>May&nbsp; 07&nbsp;</td>
<td>Jun&nbsp; 06&nbsp;</td>
<td>M/M Chg&nbsp;</td>
<td>Y/Y Chg&nbsp;</td>
<td>2006</td>
<td>2005</td>
<td>2004</td>
</tr>
<tr class="odd">
<td class="firstcol">Overall Balance of Payments</td>
<td>834</td>
<td>665</td>
<td>232</td>
<td>169</td>
<td>602</td>
<td>3769</td>
<td>2410</td>
<td>-280</td>
</tr>
<tr class="odd">
<td class="firstcol">Change in Reserves</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>
</body>
</html>

The Central Bank of the Philippines announced today that the "overall balance of payments" for June amounted to $834 million, $169 million above May and $602 million above June of last year. The overall balance of payments is defined [...]

Favorable Trends in the Philippine Balance of Payments

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070716d.jpg" width="353">
After deceleration through April, total business inventories in May rose 0.5% following a 0.4% increase the month prior. The increases were sufficient to raise the three month growth rates. Consensus expectations had been for a 0.3% one month rise.
Three month average growth in business inventories rose to 0.8%, its highest since last October.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070716c.jpg" width="353">
Business sales jumped 1.3% (4.0% y/y). Wholesale sales led the gain with a 1.3% (8.7%y/y) jump and retail sales surged 1.6% (4.9% y/y) for May. Factory shipments rose 1.0% for the second month. 
Due to the strong sales gain in May, the inventory to sales ratio fell to its lowest level since last August. 
Retail inventories rose 0.6%, double the rise in April. General merchandise inventories halved their April rise with a 0.4% (6.6% y/y) but clothing store inventories surged 0.7% (8.1% y/y) after a 0.2% April decline. Furniture inventories fell 0.7% (-0.2% y/y) after no change during April. Auto inventories fell for the fourth straight month. 

<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/@ED/@ED06/@ED0601/@ED0601.HTM">Business Inventories</a></th>
<th scope="col">May</th>
<th scope="col">April</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>0.5%</td>
<td>0.4%</td>
<td>4.0%</td>
<td>5.9%</td>
<td>6.2%</td>
<td>7.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.6%</td>
<td>0.3%</td>
<td>1.6%</td>
<td>3.2%</td>
<td>2.8%</td>
<td>6.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Autos</td>
<td>0.7%</td>
<td>0.4%</td>
<td>4.3%</td>
<td>4.5%</td>
<td>4.5%</td>
<td>7.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>0.5%</td>
<td>0.3%</td>
<td>6.7%</td>
<td>8.6%</td>
<td>7.4%</td>
<td>9.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.3%</td>
<td>0.4%</td>
<td>4.3%</td>
<td>6.4%</td>
<td>7.9%</td>
<td>7.7%</td>
</tr>
</tbody>
</table>


</html>

After deceleration through April, total business inventories in May rose 0.5% following a 0.4% increase the month prior. The increases were sufficient to raise the three month growth rates. Consensus expectations had been for a 0.3% [...]

U.S. Inventory Accumulation Showed Some Life

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070716a.jpg" width="353">
 The July index of manufacturing activity in New York State added slightly to the improvement in June. The Index of General Business Conditions rose 0.71 points on top of its 17.72 jump during June. Consensus expectations for the Empire State index had been for a decline to a reading of 18.0. The figures are reported by the Federal Reserve Bank of New York.
Since the series&#39; inception in 2001 there has been a 75% correlation between the index level and the three month change in U.S. factory sector industrial production.
The index for new orders improved slightly and the index for employment jumped. Conversely, the shipments index fell considerably as did inventories and the index &amp; delivery times, each into negative territory.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070716b.jpg" width="353">
Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question; it is not a weighted combination of the components.
Pricing pressure also fell considerably with the prices paid index and the prices received index falling into negative territory. Since 2001 there has been an 88% correlation between the index of prices paid and the three month change in the core intermediate materials PPI.
The Empire State index of expected business conditions in six months improved. The index of expected new orders led the gain to the highest level in over a year.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001.
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html">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/@S511/@S511.HTM">Empire State Manufacturing Survey</a> </th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">July. &#39;06 </th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions (diffusion index)</td>
<td>26.46</td>
<td>25.75</td>
<td>20.33</td>
<td>20.33</td>
<td>15.62</td>
<td>28.70</td>
</tr>
</tbody>
</table>


</html>

The July index of manufacturing activity in New York State added slightly to the improvement in June. The Index of General Business Conditions rose 0.71 points on top of its 17.72 jump during June. Consensus expectations for the [...]

Empire State Index Adds To June Surge

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

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US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

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Tian Yong Woon

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

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

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

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

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

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

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

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

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

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Asia

Economic Letter from Asia: As the Dust Settles

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

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

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

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

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

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

U.S. Consumer Credit Strengthens in September

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Germany

German Trade Surplus Shrinks Despite Strong Exports

Andrew Cates

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

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

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**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.

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

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

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

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

Economy in Brief: 2007

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Confidence Among the German Financial Community Weakens in July

NAHB Housing Market Index Fell Again

Lower Energy Prices Ease U.S. PPI; Core Prices Firm

Lower Energy Prices Ease U.S. PPI; Core Prices Firm

HICP Trends Show Pressure

Favorable Trends in the Philippine Balance of Payments

U.S. Inventory Accumulation Showed Some Life

Empire State Index Adds To June Surge