Winnie Tapasanun

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The Empire State Manufacturing Index of General Business Conditions jumped to 24.6 in April from -11.8 in March and 3.1 in February, according to the Empire State Manufacturing Survey released by the Federal Reserve Bank of New York. A reading of 1.5 had been expected for April in the Action Economics Forecast Survey. The April reading was the highest since December, slightly down from 26.3 in April 2021. An increased 39.6% of respondents reported that conditions had improved in April compared to 23.6% in March, while a lessened 15.0% reported that conditions had worsened compared to 35.4%. The latest survey was conducted between April 4 and April 11.

Haver Analytics constructs an ISM-adjusted Empire State diffusion index using methodology similar to the ISM series. The index was at 60.2 in April, meaningfully up from 55.0 in March but slightly down from 60.5 in April 2021 and a 63.4 high in July 2021, indicating that activity remained robust in April. A reading above 50 signals growth. In contrast to the ISM index, the headline Empire Index reflects the answer to a single question, not calculated from its components.

The new orders index rebounded to 25.1 in April, a four-month high, from -11.2 in March. An increased 43.3% of respondents reported higher orders in April, while 18.2% reported lower orders. The shipments index recovered to 34.5, the highest reading since July 2021, from -7.4. An improved 45.4% of respondents reported higher shipments, while 10.9% reported lower shipments.

The unfilled orders index increased to 17.3 in April, the highest level since December, from 13.1 in March. The delivery times index fell to 21.8 from 32.7, with a lessened 31.8% of respondents reporting higher delivery times and 10.0% of respondents reporting lower delivery times. The inventories index fell to 13.6 in April from March's high of 21.5 (the highest level since September 2001).

The number of employees index dropped to 7.3 in April from 14.5 in March, registering the lowest level since October 2020. A lessened 15.2% of respondents reported increases in employment in April, while 7.9% reported lower employment. The average workweek rebounded to 10.0 from March's low of 3.5 (the lowest since August 2020).

Inflation pressures continued this month. The prices paid index advanced to a record 86.4 in April from 73.8 in March and the prices received index declined to a still-elevated 49.1 from March's record high of 56.1, indicating ongoing substantial rises in both input prices and selling prices. An increased 86.4% of respondents reported higher prices paid in April, while 0% reported lower prices paid. A lessened 49.1% of respondents reported higher prices received in April, while 0% reported lower prices received.

The indexes of expected conditions in six months fell markedly. The index for future business conditions dropped to 15.2 in April, the lowest level since April 2020, from 36.6 in March. Expectations for new orders, shipments, unfilled orders, delivery times, inventories, prices paid, prices received, and employment, all fell this month. Expectations for capital spending eased slightly, still remaining firm. Expectations for technology spending improved modestly.

The Empire State data, reported by the Federal Reserve Bank of New York, reflect business conditions in the manufacturing sector in New York, northern New Jersey and southern Connecticut. The headline measure is constructed from the answer to a single question on business conditions. The Empire State figures are diffusion indexes, which are calculated by subtracting the percent of respondents reporting declines from the percent reporting gains. The data are available in Haver's **SURVEYS** database. The ISM-adjusted headline index dates back to 2001. The Action Economics Forecasts can be found in Haver's **AS1REPNA** database.

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- Business activity improves noticeably in New York State, w/ the General Business Conditions Index up 36.4 points to 24.6.
- Inflation pressures continue w/ prices paid up 12.6 points to 86.4, a record high.
- Future optimism wanes w/ the Future Business Conditions Index down 21.4 points to 15.2.

U.S. Empire State Manufacturing Index Rebounds in April

Tom Moeller

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Industrial production increased 0.9% (5.5% y/y) during March following a 0.9% February gain, revised from 0.5%. January's 1.0% rise was revised from 1.4%. A 0.4% increase had been expected in the Action Economics Forecast Survey. Manufacturing output rose 0.9% (4.9% y/y) in March after increasing an unrevised 1.2% in February. January's 0.2% gain compared to 0.1% reported last month. Utilities output rose 0.4% (7.5% y/y) following February's 1.0% decline. Mining output strengthened 1.7% (7.0% y/y) after a 1.2% February increase.

The March production increase was led by a 7.8% rise (3.9% y/y) in motor vehicle output which followed a 4.6% decline. Output of computers & electronic products improved 0.6% (7.5% y/y) following a 2.1% jump. Machinery production rose 0.8% (6.1% y/y) after increasing 0.5% and electrical equipment & appliance production rose 1.0% (5.5% y/y), half the February increase. In the nondurable goods sector, the lessened 0.4% rise reflected a 0.5% gain (-0.3% y/) in apparel production as it came after February's 2.1% surge. Chemical production rose a fairly steady 0.7% (9.8% y/y) while food & beverage output increased 0.3% (0.8% y/y), half the prior month's increase. Petroleum output rose 0.7% (2.4% y/y) after February's 2.4% surge.

In the special classifications, factory output of high technology industries rose 1.4% in March (8.9% y/y) after a 2.6% gain. Less the high technology sector, factory output rose 0.8% (4.8% y/y) following a 1.4% rise. Maufacturing production excluding both high tech and autos rose 0.4% (4.9% y/y) after surging 1.5% in February.

Capacity utilization rose to 78.3% last month from 77.7% in February. A 77.8% rate had been expected. Utilization in the factory sector rose to 78.7%, the highest rate since July 2007. Factory sector capacity rose 0.3% y/y.

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

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- Overall production growth is steady but factory sector slows.
- Slowdown is broad-based.
- Capacity utilization strengthens.

U.S. Industrial Production Remains Strong in March

Sandy Batten

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Initial claims for unemployment insurance file in the week ended April 9 rose to 185,000 (-67.6% y/y) versus 167,000 claims file in the previous week, revised up slightly from 166,000. The Action Economics Forecast Survey expected 173,000 claims for the latest week. Notwithstanding the weekly rise, claims continue to hover around 50-year lows. The 4-week moving average of initial claims increased to 172,250 from 170,250 in the prior week.

In the week ended April 2, continued weeks claimed for unemployment insurance edged down to 1.475 million, the lowest level since March 1970, from an unrevised 1.523 million in the prior week. The insured unemployment rate held steady at a record low of 1.1%.

In the week ended March 26, the number of continued weeks claimed in all unemployment insurance programs continued to fall, declining to 1.703 million from 1.723 million in the prior week. This total includes federal employees, newly discharged veterans, extended benefits and other specialized programs. Continued claims for the Pandemic Unemployment Assistance program and for Pandemic Emergency Unemployment Compensation are no longer reported as both programs have expired.

The state insured rates of unemployment in regular programs vary widely. The highest insured unemployment rates in the week ending March 19 were in California (2.40%), New Jersey (2.37%), Alaska (2.16%), Illinois (2.09%) and Rhode Island (2.07%), The lowest rates were in Virginia (0.18%), Alabama (0.20%), North Carolina (0.32%), Tennessee (0.38%), Florida (0.39%) and New Hampshire (0.39%). Other state insured rates of unemployment in regular programs include New York (1.93%), Pennsylvania (1.62%), Ohio (0.96%) and Texas (0.83%). These state rates are not seasonally adjusted.

Data on weekly unemployment claims going back to 1967 are contained in Haver's **WEEKLY** database, and they are summarized monthly in **USECON**. Data for individual states are in **REGIONW**. The expectations figure is from the Action Economics Forecast Survey and is in the **AS1REPNA** database.

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- Despite weekly increase, claims still around 50-year low.
- Continued weeks claimed edged down to lowest level since March 1970.
- Insured unemployment rate holds at record low.

U.S. Initial Unemployment Claims Rose in Most Recent Week

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Consumer spending growth remains moderate. Total retail sales including food service and drinking establishments increased 0.5% during March (6.9% y/y) after rising 0.8% in February, revised from 0.3%. A 0.6% sales increase had been expected in the Action Economics Forecast Survey. Sales excluding motor vehicles and parts strengthened 1.1% (9.1% y/y) following a 0.6% February increase, revised from 0.2%. Expectations had been for a 0.9% increase.

Reflecting higher prices, gasoline service station sales surged 8.9% (37.0% y/y) after rising 6.7% in February. Gasoline prices rose 18.3% last month (48.0% y/y) as indicated in this week's CPI report.

Sales in the retail control group, which excludes autos, gas stations, building materials and food services, eased 0.1% in March (+4.4% y/y) after falling 0.9% during February, revised from -1.2%.

Elsewhere, there was improvement in sales. General merchandise store sales jumped 5.4% last month (5.2% y/y) after a 0.2% dip in February. Within that category, department store sales eased 0.3% (+7.4% y/y) after strong gains in the prior two months. Electronics & appliance store sales surged 3.3% (-9.7% y/y) following a 0.3% gain. Sporting goods, hobby and book store sales also jumped 3.3% (-5.1% y/y) last month, about the same as in February. Apparel store sales surged 2.6% (7.3% y/y) after rising 0.6%. Furniture & home furnishing store sales rose 0.7% (3.6% y/y) after increasing 2.7% in February. Building materials & garden equipment sales rose 0.5% last month (0.6% y/y) after a 0.9% February rise.

Weakness in retail sales last month reflected a 6.4% decline (+1.8% y/y) in purchases via the internet. Sales fell sharply in three of the last four months. Also falling were motor vehicle sales by 1.9% (-1.2% y/y) after rising 1.5% in February. Unit motor vehicle sales fell 4.6% last month (-23.7% y/y) after declining 6.6% in February.

In the nondiscretionary sales categories, food & beverage store sales surged 1.0% (8.4% y/y) during March after falling 0.3% in February. Health & personal care store sales declined 0.3% (+1.4% y/y) after falling 0.6% in February.

Sales at restaurants & drinking establishments strengthened 1.0% in March (19.4% y/y) after rising 3.0% in February.

The retail sales data can be found in Haver's **USECON** database. The Action Economics forecast is in the **AS1REPNA** database.

**2021: The Year of High Inflation** from the Federal Reserve Bank of St. Louis is available [here](https://www.stlouisfed.org/on-the-economy/2022/apr/2021-year-high-inflation).

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- Individual categories are mostly firm.
- Online sales fall sharply.
- Vehicle sales decline.

U.S. Retail Sales Rise With Higher Gasoline Prices in March

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Total business inventories rose 1.5% during February (12.4% y/y) following a 1.3% January rise, revised from 1.1%. A 1.3% gain had been expected in the Informa Global Markets Survey. Business sales rose 1.0% (18.8% y/y) in February following a 4.1% January gain. The inventory-to-sales ratio edged higher to 1.26 after falling to 1.25 in January. These figures remained up slightly versus the record low of 1.24 reached last October

The 2.5% increase (19.9% y/y) in wholesale inventories, reported last month, led the rise in inventories overall. Retail inventories gained 1.2% (7.3% y/y) following a 2.0% January increase. The rise reflected a 0.9% increase (-10.3% y/y) in auto inventories which came after three straight months of strong gains. Furniture, electronics and appliance store inventories gained 4.6% (22.3% y/y) after two months of strong growth. General merchandise store inventories surged 2.0% (22.2% y/y) after rising 5.0% in January. Clothing store inventories rose 1.2% (13.7% y/y), the sixth consecutive month of strong increases. Factory inventories increased 0.6% (9.7% y/y) after rising 0.8% in January.

The rise in business sales was led by a 1.7% increase in wholesale sales as reported last Friday. Retail sales increased 0.5% in February (16.4% y/y) after a 5.8% January increase while nonauto retail sales increased 0.2% (16.0% y/y) after surging 5.5% in January. Manufacturing sales posted a 0.6% gain (13.7% y/y) in February following a 1.4% jump in the prior month.

The overall inventory-to-sales ratio edged higher due to modest increases in the retail and wholesale sectors to 1.13 and 1.21, respectively. The I/S ratio in the factory sector held steady at 1.45

The manufacturing and trade data are in Haver's **USECON** database.

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- Retail inventories continue to build.
- Wholesale inventory gain firms.
- Inventory-to-sales ratio edges higher from near-record low.

U.S. Business Inventories & Sales Advance in February

Carol Stone, CBE

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Import prices rose 2.6% m/m (12.5% y/y) in March, following a 1.6% rise in February, revised from 1.4% reported last month, and a 2.0% advance in January, according to the Bureau of Labor Statistics. The March advance was the largest since March 2011. Export prices surged 4.5% (18.8% y/y) in March after 3.0% in February and 2.8% in January; totals in both February and January were unrevised. The m/m rise in export prices was by far the largest ever in these data, which run back to December 1988 on a monthly basis. All these data are not seasonally adjusted. The Action Economics Forecast survey had expected March increases of 2.3% for import prices and 2.2% for export prices.

Fuel was again the main driver of import prices. That category jumped 14.6% m/m in March (66.7% y/y) after 10.0% in February and 7.3% in January. Natural gas, however, fell 4.2% in March, although the y/y change was 79.7% y/y. Nonfuel import prices rose less than fuel costs, but with a 1.2% increase in March, they were hardly weak. Textile, chemicals and selected building materials all had sizable advances in March.

Export prices rose markedly, as indicated. All major categories had sizable increases in March, with food, feed and beverages up 4.9% just in the month of March alone, which made the y/y increase 20.0%. This followed 2.8% m/m in February and 3.2% in January. Industrial supplies and materials prices advanced 8.6% m/m in March (38.2% y/y), after 5.9% in February and 4.8% in January. The other major export groups rose less strongly, but they still had large increases. Capital goods prices were up 0.5% in March (4.5% y/y) after 0.4% in February and 0.8% in January. Automobiles, parts and engines were up 0.8% in March after 0.8% in February and 0.6% in January; the March amount was “just” 3.2% y/y, although that was the strongest y/y performance since May 1990. Export prices of consumer goods excluding autos and parts rose 0.8% m/m in March (4.9% y/y), following 0.7% in February and 1.1% in January.

The import and export price series are in Haver's **USECON** database. Detailed figures are available in the **USINT** database. The expectations figure from the Action Economics Forecast Survey is in the **AS1REPNA** database.

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- Fuel prices, up 14.6% in March, again drive import prices.
- Import prices ex fuels increase 1.2%.
- Export prices surge 4.5%, a second monthly record; food and industrial goods both very strong.

U.S. Import Prices Rise Again as Export Prices Have Another Record Monthly Surge

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The Mortgage Bankers Association's Loan Applications Index fell 1.3% w/w (-41.1% y/y) in the week ended April 8, their fifth consecutive weekly decline and the eighth in the past nine weeks, to their lowest level since the week ended March 15, 2019. Over the past five weeks, applications have fallen 21.7%. The persistent decline continued to be led by applications for refinancing, which fell 4.9% w/w (-62.0% y/y) in the most recent week after a 9.9% weekly decline in the previous week. Applications for purchase rebounded slightly, rising 1.4% w/w (-6.3% y/y) following a 3.4% w/w decline in the prior week.

The share of applications for refinancing declined for the tenth consecutive week to 37.1% in the week ended April 8, the lowest since August 2018, from 38.8% in the previous week. The adjustable-rate mortgage (ARM) share of activity rose for the fifth consecutive week to 7.4%, the highest since June 2019, from 6.8% in the previous week.

Mortgage interest rates rose markedly in the week of April 8. The effective rate on 30-year fixed-rate loans jumped up 25bps to 5.31%, the highest since November 2018. This rate has risen 236bps from its recent low of 2.95% in December 2021. The effective rate on 15-year fixed-rate loans also rose 25bps in the latest week to 4.50%, its highest since December 2018. The rate on a Jumbo 30-year loan increased 18bps to 4.79% and the rate on the 5-year ARM jumped 32bps to 4.31%.

Applications for fixed-rate loans declined 1.9% w/w (-43.4% y/y) in the week ended April 8, their ninth weekly decline in the past 10 weeks. Applications for adjustable-rate mortgages increased 8.3% w/w (+21.7% y/y) following a 4.1% weekly decline in the previous week.

The average size of a mortgage loan rose 0.7% w/w (+21.5% y/y) to a record-high $392,000 in the week ended April 8. The average size of a loan for purchase edged up 0.1% w/w (+13.5% y/y) to $453,000. The average size of a refinanced loan declined 0.3% w/w (+6.9% y/y) to $288,300.

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

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- Lowest level for total applications since March 2019.
- Sharp decline in refinancing applications continued; purchase applications rose.
- Rise in mortgage interest rates accelerated.

U.S. Mortgage Applications Declined for Fifth Consecutive Week

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The Producer Price Index for Final Demand increased a record 1.4% during March following a 0.9% February gain, revised from 0.8%. The 11.2% increase during the last twelve months also was a record for the series which dates back to November 2009. A 1.1% increase had been expected in the Action Economics Forecast Survey. The PPI excluding food and energy matched its record and rose 1.0% (9.2% y/y) after rising 0.4% in February. Expectations had been for a 0.5% gain. The PPI less food, energy and trade services rose 0.9% (7.0% y/y) after increasing 0.2% in February.

A 5.7% surge (36.7% y/y) in energy prices led last month's increase in the PPI following a 7.5% February rise. Gasoline prices rose 4.9% (59.9% y/y) and added to February's 14.6% surge. Home heating oil prices jumped 20.2% and more than doubled y/y after a 13.6% February rise. Natural gas prices eased 0.4% last month (+22.8% y/y) but the cost of electric power jumped 1.9% (8.4% y/y).

Food prices increased 2.4% in March (16.2% y/y) after rising 2.1% in February. Vegetable prices rose 81.5% y/y while egg prices increased 1.9% y/y. Beef & veal prices fell 7.3% (+16.0% y/y) but the cost of dairy products increased 2.7% (19.3% y/y).

Final demand for goods prices less foods & energy increased 1.1% (10.0% y/y). Finished consumer goods prices less good & energy rose 0.7% in March (7.7% y/y) following a 1.0% increase. Durable consumer goods prices surged 1.0% last month (8.9% y/y) after two straight 0.9% increases. Core nondurable consumer goods prices rose 0.5% (7.0% y/y) following a 1.0% February increase. Prices for private capital equipment jumped 0.9% (8.7% y/y) following two straight 1.0% gains.

Services prices increased 0.9% in March (8.7% y/y) for the third month in the last four. Trade services prices surged 1.2% (17.1% y/y) following four straight months of strong increase. Services prices less trade, transportation & warehousing rose 0.3% in March (3.8% y/y) and reversed the prior month's decline.

Construction product prices rose 0.6% (16.7% y/y) after rising 0.5% in February. Construction costs for private capital investment rose 0.6% (18.2% y/y) for the second consecutive month.

Intermediate goods prices jumped 2.1% (21.7% y/y) due to a 6.4% gain (35.5% y/y) in processed fuel costs.

The PPI data are published by the Bureau of Labor Statistics and can be found in Haver's **USECON** database. Further detail is contained in **PPI** and **PPIR**. The expectations figures are available in the **AS1REPNA** database.

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- Energy & food prices again jump.
- Core goods prices accelerate.
- Services prices pick up momentum as well.

U.S. Producer Prices Post Record Increase in March

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

US tariff revenues nearly doubled in April

Even with expected tariff-induced increases in inflation, BCFF forecasters look for a more aggressive round of monetary easing

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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

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Nonfarm payrolls increased 73,000 during July after rising 14,000 in June, revised from 147,000, and 19,000 in May, revised from 144,000. Expectations had been for a 102,000 rise in the Action Economics Forecast Survey. The three-month average change in payrolls of 35,000 compared to 64,000 in June. The Bureau of Labor Statistics indicates that monthly revisions result from additional reports received from businesses and government agencies since the last published estimates.

Average hourly earnings rose an expected 0.3% during July after unrevised gains of 0.2% and 0.4% in June & May. Earnings growth of 3.9% y/y is little changed over twelve months, but has been trending lower from its 5.9% high in March 2022.

The unemployment rate, measured in the household survey, edged up m/m to an expected 4.2% from 4.1% and compared to 4.2% in the previous three months. It reached a low of 3.4% in April 2023. The unemployment rate, including employees working part-time for economic reasons plus all marginally-attached workers, rose to 7.9% last month from 7.7% In June. It was 6.6% in April 2023.

In the **establishment survey**, private-sector employment in July rose 83,000, factory sector jobs declined 11,000, off for the third straight month. Construction sector employment increased 2,000, after rising 3,000 in June. The number of mining & logging industry jobs declined 4,000 after falling in both of the prior two months. 

Private service sector employment increased 96,000 July after improving 16,000 in June. Increases varied greatly amongst service sector categories. Private education & health sector employment rose 79,000 last month, following a 52,000 increase in June. The number of trade, transportation & utilities jobs gained 11,000, following a 22,000 decline and financial activities employment improved 15,000 after a 2,000 drop, while leisure & hospitality employment rose just 5,000 after a 4,000 gain. The number of professional & business services jobs fell 14,000, down for the third straight month.  Information sector employment fell 2,000, after holding steady in June.

Government sector payrolls declined 10,000 last month and revered June’s 11,000 rise. Federal government employment weakened 12,000 and has fallen for six straight months. Local government employment eased 3,000 after rising 10,000 in June while state government payrolls rose 5,000 after increasing 10,000.

Private-sector average hourly earnings rose 0.3% (3.9% y/y) in July. Earnings in the goods-producing sector edged up 0.1% (3.6% y/y). In construction, earnings rose 0.2% (3.7% y/y) following a 0.4% rise, but factory sector earnings eased 0.1% (+3.6% y/y). In the service sector, earnings rose 0.4% (4.0% y/y) in July after increasing 0.2% in June.

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The length of the average workweek rose to 34.3 hours in July from 34.2 hours in June. The workweek in the goods-producing sector lengthened to 39.9 hours from 39.7 hours. The construction sector average workweek rose to 39.1 hours from 38.9 while the factory sector workweek held steady at 40.1 hours. The average workweek in the private service sector edged up to 33.2 hours from 33.1 hours.

In the **household survey**, the unemployment rate increased to 4.2% in July after falling to 4.1% as employment fell 260,000 after rising 93,000 in June and the size of the labor force declined 38,000, off for the third straight month. The labor force participation rate eased to 62.2% last month from 62.3% and remained below the high of 63.3% early in 2020. The rate for teenagers declined to 35.0%, after plunging to 35.1%. For workers aged 20-24, the rate declined to 70.9%. For workers aged 25-54, the participation rate eased to 83.4%. For individuals 55 and over, the rate improved slightly to 38.1% but remained near a 20-year low of 38.0% in June.

The employment/population ratio for all workers slipped to 59.6% last month. It remained below the peak reading of 61.1% in February, 2020 just prior to the pandemic. For men, the rate fell to 64.7% in July from 64.9% and for women, the rate eased to 54.7% from 54.8% in June.

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's **USECON** database. Detailed figures are in the **EMPL** and **LABOR** databases. The expectations figures are in the **AS1REPNA** database.

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- Recent job growth reduced by fewer factory & government jobs.
- Earnings gain remains steady y/y.
- Jobless rate reverses June decline.

U.S. Employment Report Shows Weakness in July, While Revisions Reduce Earlier Gains; Jobless Rate Picks Up

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U.S. light vehicle sales increased 7.6% (6.0% y/y) to 16.87 million units (SAAR) in July after falling 0.3% to 15.68 million units in June. The gain followed three straight months of decline. The improvement in July vehicle sales accompanied a 1.7% y/y rise in real disposable income through June, which compared to 2.1% growth last year.

Increases in sales were broad-based last month. Light truck sales rose 7.7% (10.0% y/y) in July to 14.02 million units, after easing 0.2% to 13.02 million in June and weakening 8.7% in May to 13.04 million. Purchases of domestically-made light trucks improved 7.1% (12.0% y/y) to 10.79 million units, after falling 1.0% in June to 10.07 million. Sales of imported light trucks rose 9.8% (3.8% y/y) to 3.24 million units, following a 3.9% rise in June.

Trucks’ record 83.1% share of the light vehicle market last month compared to 83.0% in June and 80.1% in July of last year. The share averaged 80.3% during all of 2024 versus 53.3% ten years earlier.

Auto sales rose 6.4% last month, down 9.8% y/y, to 2.84 million units (SAAR) following a 0.4% June decline. Purchases of domestically-produced cars rebounded 10.1% (-6.4% y/y) last month to 2.18 million units, after declining 2.5% in June. Sales of imported autos fell 2.9% (-20.5% y/y) to 0.66 million units, after a 4.6% June gain.

Imports' 23.1% share of the U.S. light vehicle market edged down from 23.2% in June. These compare to a May 2023 low of 22.9% and a high of 26.3% in November of 2023. Imports' share of the passenger car market fell to 23.2% last month and compared to 26.4% in July of last year. It reached a high of 38.7% in September 2021. Imports' share of the light truck market rose to 23.1% last month after rising to 22.7% in June.

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

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- Both light truck and auto sales recover.
- Domestic and imports each increase.
- Imports' market share steadies.

U.S. Light Vehicle Sales Rebound in July

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The ISM U.S. manufacturing PMI fell to 48.0 in July from 49.0 in June and 48.5 in May, according to the Institute for Supply Management. The July manufacturing PMI, below the 50 expansion-contraction dividing line, indicated that the U.S. manufacturing sector contracted for the fifth consecutive month and to the lowest level since October 2024. The July reading, while slightly higher than a low of 46.9 in October and 47.0 in July of last year, was below its recent high of 50.9 in January and a peak of 63.8 in March 2021. A reading of 49.5 for July had been expected in the Action Economics Forecast Survey.

The production index rose to 51.4 in July after rising to 50.3 in June, suggesting production expanded for the second successive month and to the highest level since January; it was up from its most recent low of 44.0 in April but slightly below a high of 53.7 in March 2024. Twenty percent (NSA) of respondents reported higher production in July while 19.2% reported lower.

The new orders index increased to 47.1 in July after falling to 46.4 in June, indicating new orders contracted for the sixth straight month but at a slightly less severe pace. The Index, while below its recent high of 55.1 in January, was up from a low of 42.7 in January 2023. Nearly nineteen percent (NSA) of respondents reported higher new orders in July while 25.9% reported declines. The inventories index, however, fell to 48.9 in July after rising to 49.2 in June, showing inventories contracted for the third consecutive month. The index was down from its recent high of 53.4 in March and a high of 56.5 in July 2022. Meanwhile, the supplier deliveries index fell to 49.3 in July from 54.2 in June, indicating faster delivery performance following seven straight months in slower territory. An 8.7% (NSA) of respondents reported slower delivery speeds in July while an increased 10.2% reported faster speeds.

On the labor front, the employment index fell to 43.4 in July after falling to 45.0 in June, indicating employment contracted for the sixth straight month and to the lowest level since June 2020. The index was down from its recent high of 50.3 in January and a high of 56.5 in March 2022. A 12.6% (NSA) of respondents reported higher employment in July while an increased 25.0% reported less hiring.

On the pricing front, the prices paid index declined to 64.8 (NSA) in July after rising to 69.7 in June, indicating raw materials prices rose for the 10th straight month but at the slowest rising rate since February. The July index remained well above a low of 39.4 in December 2022 but meaningfully below a high of 87.1 in March 2022 and a peak of 92.1 in June 2021. A decreased 35.4% (NSA) of respondents reported higher prices in July while 5.8% reported price declines.

In other ISM series not included in the composite index, the new export orders index slipped to 46.1 in July after increasing to 46.3 in June, indicating new export orders contracted for the fifth straight month. It was down from its recent high of 52.4 in January and a high of 57.1 in February 2022. The imports index edged up to 47.6 in July after rising to 47.4 in June, remaining at a contraction level for the fourth consecutive month; it was down from its recent high of 52.6 in February and a high of 55.4 in February 2022. The order backlog index increased to 46.8 (NSA) in July after declining to 44.3 in June, indicating falling backlog levels since October 2022. It was up from a low of 37.5 in May 2023 but down from a peak of 70.6 in May 2021.

The ISM figures are based on responses from over 400 purchasing and supply executives from 18 industries, which are weighted according to each industry’s contribution to GDP. These data are diffusion indexes where a reading above 50 indicates expansion; below 50 indicates contraction. The ISM Manufacturing PMI is a composite index based on the diffusion indexes of five of the indexes (seasonally adjusted) with equal weights: New Orders, Production, Employment, Supplier Deliveries, and Inventories. The figures from the Institute for Supply Management can be found in Haver’s **USECON** database; further detail is found in the **SURVEYS** database. The expectations number is available in Haver’s **AS1REPNA** database.

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- 48.0 in July vs. 49.0 in June; the fifth consecutive month of contraction.
- Production (51.4) expands to a six-month high.
- New orders (47.1) contract for the sixth successive month.
- Employment (43.4) contracts to the lowest level since June ’20.
- Prices Index (64.8) indicates prices rise for the 10th straight month; exports & imports contracting.

U.S. ISM Manufacturing PMI Contracts in July to a Nine-Month Low

Michael J. Moran

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Total construction activity fell 0.4 percent in June, continuing a soft trend that began in the middle of last year. After peaking in May 2024, total outlays have declined 3.6%. The retreat was modest at first, but the softness began to intensify last fall. Activity has now declined in nine of the past ten months, with the drop over this span totaling 3.1%. The private sector accounts for nearly all of the softness, with both residential and nonresidential contributing; public construction has continued to advance, although gains in recent months have been modest.

Private residential construction fell 0.7% in June, marking the 12th decline in the past 13 months and leaving activity 7.3% below the peak in May 2024. Hints of softness in private residential construction first appeared in mid-2023, when multi-family construction first stalled and then moved notably downward throughout 2024. Following the swoon in 2024, multi-family activity has stabilized in recent months.

However, single family building has taken the lead in pulling activity lower, declining for four consecutive months with pronounced retreats in the past three (average of -1.8%). Prospects for single-family construction do not seem bright, as the ups and downs in single-family housing starts have left little net growth in the past year; the past four months have been especially soft.

Improvements to existing structures contributed to weakness with sharp declines early in the year, but this area has posted small gains in the past three months. Home improvements (i.e. additions and renovations) should not be ignored in assessing residential construction, as they typically represent 35 to 40 percent of private activity.

Private nonresidential construction fell 0.3 percent in June, reinforcing the downward drift that has been in place since the start of 2024. This sector has posted 11 declines in the past 18 months. While activity grew in several months over this span, most of the increases were minuscule. The net effect of the ups and downs was a drop of 6.6% (annual rate of 4.4%). Total nonresidential activity has several components, and some have advanced in the past year or so, but none has posted an impressive performance. Two areas, lodging (hotel, motels, resorts) and commercial (retail and wholesale), have been notably soft.

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The public sector has started to sputter after two years of strong activity. Building was vigorous in 2023, growing 21.8% (December to December), and activity advanced an additional 2.4% in 2024. Growth so far this year has been modest on balance. Most months have registered gains, but they offset declines in the closing months of last year by only a small margin. Activity in June was 0.1% above the reading in October (the high point in 2024). Both state and Local governments and the federal sector have posted similar performances: robust in 2023, moderate in 2024, and hesitating this year.

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

- Private building, both residential and nonresidential, drifting lower.
- Public construction hesitating after two strong years.

U.S. Construction: Sluggish in June

Robert Brusca

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Manufacturing PMIs in the S&P framework were mixed in July. However, the median reading edged slightly higher rising to 48.6 in July from 48.5 in June. But both of these are significantly weaker than the 49.1 reading in May. Manufacturing continues to post PMI readings that are below 50 indicating sector contraction on a fairly broad basis in July among the 17 reporting countries in the table plus the euro area. Only India and Vietnam reported PMI readings above 50 indicating sector expansion in July. In June, three of these jurisdictions showed readings above 50; in May, only three had readings above 50 as well. It remains a difficult time for manufacturing globally.

The readings for the manufacturing PMIs also show slippage in the medians from 12-months to six-months to three-months. The 12-month median is 49.2, the six-month median at 48.8, and the three-month median at 48.7. The bottom line is that most manufacturing sectors show contraction, and the contractions are generally getting slightly worse.

However, on an individual basis over three months about two-thirds of the reporters showed an improvement. Over six months just under 40% showed improvement and over a year about 44% of them showed improvement compared to the year before. Only the three-month versus six-month comparison shows a majority of reporters indicating better performance in July.

The ranked or queue standings metrics that place these individual readings for July in their queue of data over the last 4 ½ years, show standings above 50% which put the individual readings above their medians for this period. And only six of these eighteen reporting jurisdictions sported readings above 50%. Those were for the euro area, Germany, France, and India. India has a rating well above 50% at its 96th percentile; Malaysia has a reading above 50% and Vietnam has a reading well above 50% at its 74th percentile.

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The global economy has been put through the ringer with shocks from a war in Ukraine, stepped up military action in the Middle East, threats in the Straits of Hormuz, and an aggressive tariff policy from the United States, affecting global trade- a significant factor for manufacturing. These events have wrong-footed manufacturing globally. During this period, the inflation threat has dissipated; however, in most countries, inflation still slightly overshoots its target where central banks have such targets.

The U.S. has a particularly large number of policy changes afoot. Its manufacturing sector is still struggling. And recent employment data there indicate what appears to be a broader slowdown in the economy. Job growth in the U.S. has slowed and U.S. trends now show consumer spending slowing along with weaker and downwardly revised job growth. Put together, these are signals to watch closely.

Manufacturing PMIs Rank Low and Show Ongoing Weakness

Economy in Brief: 2022

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