Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080701k.jpg" width="353">
At 13.64 mil. (SAAR), U.S. sales of light vehicles in June fell 4.6% from May and they were down 13.1% from June of last year, according to the Autodata Corporation. The latest level was the lowest since early-1993 and it pulled sales down 15.8% so far this year. The level of vehicle sales also was lower than Consensus expectations for sales of 14.0M.
Overall, sales of domestically made light vehicles fell 6.0% last month and were off 19.7% YTD. They were at the lowest level since 1991.
Higher gasoline prices continued to hit sales of relatively fuel inefficient domestically made light trucks. Sales fell 2.5% after May&#39;s 9.8% decline. That brought the decline this year to 27.4%. Sales of U.S. made cars reversed all of their May gain with a 9.5% decline to the lowest level in the series&#39; history which dates back to 1990.
Sales of imported light vehicles again fell more moderately, by 1.0% to 3.93 million, after May&#39;s 0.7% decline.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080701l.jpg" width="353">
Sales of imported autos rose 1.8% following a 3.8% May gain. So far this year sales of imported cars are up 7.7%. Conversely, sales of imported light trucks also felt the effect from higher gasoline prices and fell 7.3%; off 25.5% since December.
Import&#39;s share of the U.S. light vehicle market rose again to another record level of 28.9%. (Imported vehicles are those produced outside the U.S. and does not include vehicles with the nameplate of a foreign manufacturer produced within the U.S.) Imports&#39; share of the U.S. car market rose to a record 37.3% but import&#39;s share of the light truck market slipped from the prior month&#39;s record to 18.4%.

<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/@ED09/@ED0901/@ED0901.HTM">Light Vehicle Sales (SAAR, Mil. Units)</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>13.64</td>
<td>14.30</td>
<td>-13.1%</td>
<td>16.17</td>
<td>16.54</td>
<td>16.96</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>7.53</td>
<td>7.98</td>
<td>-1.3%</td>
<td>7.58</td>
<td>7.77</td>
<td>7.65</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Domestic</td>
<td>4.72</td>
<td>5.22</td>
<td>-7.0%</td>
<td>5.07</td>
<td>5.31</td>
<td>5.40</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imported</td>
<td>2.81</td>
<td>2.76</td>
<td>10.0%</td>
<td>2.51</td>
<td>2.45</td>
<td>2.25</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Light Trucks</td>
<td>6.11</td>
<td>6.32</td>
<td>-24.3%</td>
<td>8.60</td>
<td>8.78</td>
<td>9.32</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Domestic</td>
<td>4.98</td>
<td>5.11</td>
<td>-24.6%</td>
<td>7.12</td>
<td>7.42</td>
<td>8.12</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imported</td>
<td>1.13</td>
<td>1.21</td>
<td>-22.8%</td>
<td>1.48</td>
<td>1.37</td>
<td>1.20</td>
</tr>
</tbody>
</table>
</body>
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At 13.64 mil. (SAAR), U.S. sales of light vehicles in June fell 4.6% from May and they were down 13.1% from June of last year, according to the Autodata Corporation. The latest level was the lowest since early-1993 and it pulled sales [...]

U.S. Vehicle Sales in June Lowest Since 1993

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080701i.jpg" width="353">
The European Central Bank (ECB) meets on this Thursday, July 3rd. It is expected to raise the base rate of 4% by 25 basis points. Yesterday, Eurostat, the European Union&#39;s Statistical office announced that inflation data for the Euro Area as a whole was 4% in June, fully 2% above the ECB&#39;s target of 2%. June data for the individual countries of the Euro Area are not yet available, but the first chart showing steady rises in the rates of inflation in Germany, France, Italy and Spain from mid 2007 through May of this year is enough to suggest action by the central bank may be forthcoming.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080701j.jpg" width="353">
If the ECB were looking for additional data to shore up their decision to raise rates, they might consider the decline in Germany&#39;s unemployment rate, released today. Instead of rising as expected, the rate of registered unemployment fell to 7.8% in June from 7.9%. This is the lowest rate of unemployment in Germany since 2001, as can be seen in the second chart, showing the registered rate of unemployment together with the widely used International Labor Organization ILO rate. The registered rate of unemployment is typically higher than that of the (ILO) as the former includes those with a new job, but not yet at work and those working less than 15 hours a week, both of which are excluded in the ILO definition of unemployment.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">EUR0 AREA INFLATION &nbsp;(y/y % change in CPI)&nbsp;&nbsp;</th>
<th scope="col">Jun 08</th>
<th scope="col">May 08&nbsp;</th>
<th scope="col">Apr 08&nbsp;</th>
<th scope="col">Mar&nbsp;08&nbsp;</th>
<th scope="col">Feb 08&nbsp; &nbsp;</th>
<th scope="col">Jan 08</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Euro Area</td>
<td>4.0</td>
<td>3.7</td>
<td>3.3</td>
<td>3.6</td>
<td>3.3</td>
<td>3.2</td>
<td>2.1</td>
<td>2.2</td>
<td>2.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Germany</td>
<td>--</td>
<td>3.1</td>
<td>2.6</td>
<td>3.3</td>
<td>3.0</td>
<td>2.9</td>
<td>2.2</td>
<td>1.8</td>
<td>1.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; France</td>
<td>--</td>
<td>3.7</td>
<td>3.4</td>
<td>3.5</td>
<td>3.2</td>
<td>3.2</td>
<td>1.6</td>
<td>1.9</td>
<td>1.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Italy</td>
<td>--</td>
<td>3.7</td>
<td>3.6</td>
<td>3.6</td>
<td>3.1</td>
<td>3.1</td>
<td>2.0</td>
<td>2.2</td>
<td>2.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Spain</td>
<td>--</td>
<td>4.7</td>
<td>4.2</td>
<td>4.6</td>
<td>4.4</td>
<td>4.4</td>
<td>2.8</td>
<td>3.6</td>
<td>3.4</td>
</tr>
<tr>
<td class="firstcol">UNEMPLOYMENT RATES (%) GERMANY</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Registered&nbsp;</td>
<td>7.8</td>
<td>7.9</td>
<td>7.9</td>
<td>7.9</td>
<td>8.0</td>
<td>8.2</td>
<td>9.0</td>
<td>10.8</td>
<td>11.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;ILO</td>
<td>--</td>
<td>7.4</td>
<td>7.4</td>
<td>7.4</td>
<td>7.6</td>
<td>7.7</td>
<td>9.0</td>
<td>10.8</td>
<td>11.7</td>
</tr>
</tbody>
</table>
</body>
</html>

The European Central Bank (ECB) meets on this Thursday, July 3rd. It is expected to raise the base rate of 4% by 25 basis points. Yesterday, Eurostat, the European Union's Statistical office announced that inflation data for the Euro [...]

Inflation in the Euro Area, the Unemployment Rate in Germany and the ECB

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080701h.jpg" width="353">
The International Council of Shopping Centers reported that chain store sales increased all of 0.1% last week after the prior week&#39;s 0.6% decline.
During all of June sales look to have risen 0.5% after a 0.9% May decline.
During the last ten years there has been a 45% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
During the latest week, the leading indicator of chain store sales from ICSC-UBS fell again, by 0.4% (-2.8% y/y).
The chain store sales figures are available in Haver&#39;s SURVEYW database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">06/28/08</th>
<th scope="col">06/21/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>490.7</td>
<td>490.0</td>
<td>2.2%</td>
<td>2.8%</td>
<td>3.3%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>


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The International Council of Shopping Centers reported that chain store sales increased all of 0.1% last week after the prior week's 0.6% decline.

U.S. Chain Store Sales Nudged Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080701f.jpg" width="353">
The value of construction put in place fell 0.4% during May which was about as-expected.The decline followed a revised 0.1% April dip but data back to 2005 were revised; 4Q and 1Q sharply lower. The y/y decline of 6.0% was the weakest since 1991 though this year the level of activity has leveled out.
Lower residential building activity repeated its April performance and fell 1.6%. Since its peak it has fallen by more than one-third. Single-family construction paced that decline with a 3.4% May drop and the level is off by more than one-half from the early-2006 peak level. Building activity on multi-family units edged up 0.1% (-9.5% y/y) but since the late-2006 peak activity is down 20%.
During the last twenty years there has been an 84% correlation between the q/q change in the value of residential building and its contribution to growth in real GDP.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080701g.jpg" width="353">
The value of nonresidential building activity nudged up 0.2% after two months of 1.6% gain. Lodging spending surged again, in May by 3.2% (42.0% y/y). Spending on educational buildings rose 0.4% (18.3% y/y) and health care activity dipped for the second month, by 0.3% in May but it was still up 8.5% y/y. Office construction activity nudged up 0.3%(16.7% Y/Y) but multi-retail building eased 0.8% (+1.9% y/y).
Public construction recouped the prior month&#39;s dip and rose 0.4%. Spending on office structures has been quite firm and rose another 1.6% (29.8% y/y) while growth in public health care facilities rose 0.8%. The strong y/y gain here of 8.0% follows 25.4% growth last year. The value of construction spending on highways &amp; streets retraced the prior month&#39;s increase and fell 0.7% (5.2% y/y). (The value of construction on highways &amp; streets is roughly one third of the value of total public construction spending.) Building activity of educational facilities rose 1.8% (6.6% y/y).
The more detailed categories of construction represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.
Are Inflation Targets Good Inflation Forecasts? from the Federal Reserve Bank of Chicago is available <a href="http://www.chicagofed.org/publications/economicperspectives/ep_2qtr2008_part3_diron_mojon.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E907/@E907.HTM">Construction</a> (%)</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-0.4</td>
<td>-0.1</td>
<td>-6.0</td>
<td>-2.7</td>
<td>6.3</td>
<td>11.2</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>-0.7</td>
<td>-0.0</td>
<td>-9.7</td>
<td>-6.9</td>
<td>5.5</td>
<td>12.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>-1.6</td>
<td>-1.7</td>
<td>-27.3</td>
<td>-19.8</td>
<td>1.0</td>
<td>14.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonresidential</td>
<td>0.2</td>
<td>1.6</td>
<td>16.6</td>
<td>19.6</td>
<td>16.2</td>
<td>7.8</td>
</tr>
<tr>
<td class="firstcol">Public</td>
<td>0.4</td>
<td>-0.3</td>
<td>5.2</td>
<td>12.3</td>
<td>9.3</td>
<td>6.2</td>
</tr>
</tbody>
</table>
</body>
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The value of construction put in place fell 0.4% during May which was about as-expected.The decline followed a revised 0.1% April dip but data back to 2005 were revised; 4Q and 1Q sharply lower. The y/y decline of 6.0% was the weakest [...]

U.S. Construction Spending Down in May, 2008 Leveled

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080701d.jpg" width="353">
The retail price for a gallon of regular gasoline crept two cents higher last week to $4.10 per gallon, according to the U.S. Department of Energy survey. For all grades of gasoline the average price also moved two cents higher an average $4.15 per gallon.
Yesterday, the spot market price for a gallon of regular gasoline remained at $3.34 per gallon, about where it has been since early June.
Weekly gasoline prices can be found in Haver&#39;s WEEKLY database, daily prices are in the DAILY database.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080701e.jpg" width="353">
According to the U.S. Department of Energy the demand for gasoline during the latest four weeks fell 2.7% from a year earlier due to the increase in gasoline prices, along with the slowdown in economic growth. That was the weakest reading for gasoline demand in three years.
The DOE figures are available in Haver&#39;s OILWKLY database.
Yesterday the price for a barrel of West Texas Intermediate crude oil reached $140.00 per barrel versus an averge of $137.25 during all of last week.
Price for natural gas also have been quite strong and last week rose to $12.894 per mmbtu, near the record high reached in late-2005.
Consumer Sentiment and Consumer Spending from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2008/el2008-19.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">06/30/08</th>
<th scope="col">06/23/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per Gallon)</td>
<td>4.10</td>
<td>4.08</td>
<td>38.4%</td>
<td>2.80</td>
<td>2.57</td>
<td>2.27</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; ($ per bbl.)</td>
<td>137.25</td>
<td>134.37</td>
<td>98.4%</td>
<td>72.25</td>
<td>66.12</td>
<td>56.60</td>
</tr>
</tbody>
</table>
</body>
</html>

The retail price for a gallon of regular gasoline crept two cents higher last week to $4.10 per gallon, according to the U.S. Department of Energy survey. For all grades of gasoline the average price also moved two cents higher an [...]

U.S. Gasoline Price Reached $4.10 per Gallon

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080701b.jpg" width="353">
The Composite Index of Manufacturing Sector Activity, from the Institute for Supply Management, rose very slightly last month to 50.2 from an unrevised May reading of 49.6. The latest level beat Consensus expectations for 48.6.
The index&#39;s average level of 49.3 during the first half of 2008 was its lowest since early-2003.
During the last twenty years there has been a 64% correlation between the level of the Composite Index and the three-month growth in factory sector industrial production.
It is appropriate to correlate the ISM index level with factory sector growth because the ISM index is a diffusion index. It measures growth by using all of the positive changes in activity added to one half of the zero change in activity measures.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080701c.jpg" width="353">
Improvement in the inventory and in the supplier deliveries indexes accounted for about all of last month&#39;s improvement in the overall index. The production index did rise slightly to its highest level since January, but employment fell to the lowest level since 2003 and production fell slightly.
During the last twenty years there has been a 67% correlation between the level of the ISM employment index and the three-month growth in factory sector employment.
The new orders index was roughly unchanged m/m at 49.6, though this year&#39;s figures are improved from last December&#39;s low.
The new export orders sub-series fell modestly m/m to 58.5 but so far this year has averaged 57.8, the best six months since mid-2004. During the last ten years there has been a 53% correlation between the index and the q/q change in real exports of goods in the GDP accounts.
Prices paid rose further as the index rose to 91.5, its highest level since 1979 (no typo). During the last twenty years there has been a 79% correlation between the price index and the three-month change in the PPI for intermediate goods.

<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/@S2/@S201/@S201.HTM">ISM Mfg</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Index</td>
<td>50.2</td>
<td>49.6</td>
<td>53.4</td>
<td>51.1</td>
<td>53.1</td>
<td>54.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>49.6</td>
<td>49.7</td>
<td>58.5</td>
<td>54.3</td>
<td>55.4</td>
<td>57.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Employment Index</td>
<td>43.7</td>
<td>45.5</td>
<td>50.8</td>
<td>50.5</td>
<td>51.7</td>
<td>53.6</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>91.5</td>
<td>87.0</td>
<td>68.0</td>
<td>64.6</td>
<td>65.0</td>
<td>66.4</td>
</tr>
</tbody>
</table>
</body>
</html>

The Composite Index of Manufacturing Sector Activity, from the Institute for Supply Management, rose very slightly last month to 50.2 from an unrevised May reading of 49.6. The latest level beat Consensus expectations for 48.6. The [...]

ISM Factory Sector Index Improved Slightly, Again

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080701a.jpg" align="left" border="0" height="265" width="353">
The EMU HICP is now over 4% Yr/Yr. this is not a good result
for a central bank that has set a ceiling of 2% for headline inflation.
It is also running at a pace of just over 4% over three-months and
six-months. No detail of prices is yet available and only Germany and
Italy have released public figures for June. The good news is that
neither Italy nor Germany show accelerating trends in headline
inflation. Their sequential growth rates are either mixed or pointing
lower. But at 4% Yr/Yr Italian inflation is high and a 3.6% Yr/Yr
German inflation, usually one of the lowest in the zone, is also high. 
 

The ECB has an emerging credibility problem that will probably
force its hand on a rate hike. But one as to wonder the usefulness of a
target that is breached so baldy it has been doubled. While critics can
pick at the Fed&#8217;s choice of the core rate to &#8216;monitor&#8217; it has set out
parameters for that rate&#8217;s range that US inflation still lies within.
The core is contained even as headline inflation in the US surges over
4%. The Fed can claim victory but many don&#8217;t want to acknowledge it. 
 

Europe has a policy credibility issue inflation has been above
the ECB&#8217;s ceiling for far too along. In the US inflation is within the
Fed&#8217;s boundaries but it is the Fed choice of boundaries that is a
matter of debate concerning policy integrity. Central banks are having
all sorts of issues maintaining their standing despite the success in
holding core inflation low. 
 

Still the fact is&#8230; 
When oil prices flare so sharply, it is impossible to cushion the
impact on inflation in the short run. The ECB thus has a credibility
problem since its sole pledge is on headline inflation. It has not
offered any cogent statement on inflation or an alternative to headline
and has not suggested anything other than that inflation as it is
remains unacceptable. Energy inflation is something special, since if
the central bank can hold its impact on core inflation at bay it will
also produce deflationary effects. No central banks gets good marks for
their public relations stance in dealing with this issue in this cycle
despite having had prior experience with energy inflation. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Trends
in EMU HICP; Flash Index</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% mo/mo</td>
<td colspan="4">% SAAR</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td>Jun-08</td>
<td>May-08</td>
<td>Apr-08</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
</tr>
<tr class="grey2">
<td class="firstcol">EMU-13</td>
<td>0.5%</td>
<td>0.6%</td>
<td>0.0%</td>
<td>4.3%</td>
<td>4.2%</td>
<td>4.0%</td>
<td>1.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Core</td>
<td>#N/A</td>
<td>0.2%</td>
<td>-0.1%</td>
<td>2.3%</td>
<td>2.5%</td>
<td>2.4%</td>
<td>1.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Goods</td>
<td>#N/A</td>
<td>0.8%</td>
<td>0.6%</td>
<td>11.8%</td>
<td>5.3%</td>
<td>4.5%</td>
<td>1.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Services</td>
<td>#N/A</td>
<td>0.4%</td>
<td>-0.1%</td>
<td>2.6%</td>
<td>3.7%</td>
<td>2.5%</td>
<td>2.6%</td>
</tr>
<tr class="even">
<td class="firstcol" colspan="8">HICP</td>
</tr>
<tr class="grey3">
<td class="firstcol">Germany</td>
<td>0.5%</td>
<td>0.6%</td>
<td>-0.4%</td>
<td>2.7%</td>
<td>3.2%</td>
<td>3.4%</td>
<td>2.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">France</td>
<td>#N/A</td>
<td>0.5%</td>
<td>0.1%</td>
<td>4.6%</td>
<td>3.8%</td>
<td>3.7%</td>
<td>1.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Italy</td>
<td>0.6%</td>
<td>0.4%</td>
<td>0.0%</td>
<td>4.2%</td>
<td>4.6%</td>
<td>4.0%</td>
<td>1.9%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Spain</td>
<td>#N/A</td>
<td>0.7%</td>
<td>-0.1%</td>
<td>4.1%</td>
<td>4.3%</td>
<td>4.7%</td>
<td>2.4%</td>
</tr>
<tr class="even">
<td class="firstcol" colspan="8">Core
excl Food Energy
&amp; Alcohol</td>
</tr>
<tr class="grey2">
<td class="firstcol">Germany</td>
<td>#N/A</td>
<td>0.3%</td>
<td>-0.5%</td>
<td>0.8%</td>
<td>1.2%</td>
<td>1.8%</td>
<td>2.1%</td>
</tr>
<tr class="grey2">
<td class="firstcol">France</td>
<td>#N/A</td>
<td>0.1%</td>
<td>0.1%</td>
<td>2.4%</td>
<td>2.6%</td>
<td>2.4%</td>
<td>1.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Italy</td>
<td>#N/A</td>
<td>0.2%</td>
<td>-0.1%</td>
<td>3.1%</td>
<td>2.9%</td>
<td>2.7%</td>
<td>1.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Spain</td>
<td>#N/A</td>
<td>0.3%</td>
<td>-0.1%</td>
<td>2.2%</td>
<td>2.7%</td>
<td>3.3%</td>
<td>2.5%</td>
</tr>
<tr class="grey1">
<td colspan="8" class="firstcol">Blue shaded
area data trail by one
month</td>
</tr>
</tbody>
</table>
</body></html>

The EMU HICP is now over 4% Yr/Yr. this is not a good result for a central bank that has set a ceiling of 2% for headline inflation. It is also running at a pace of just over 4% over three-months and six-months. No detail of prices is [...]

EMU Inflation Goes Ballistic - Over 4%; Ceiling Still is 2%

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

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251107F5.jpg

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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).

251107H5.jpg

251107I5.jpg

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

U.S. Consumer Credit Strengthens in September

251107A2.jpg

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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.

251107C2.jpg

251107B2.jpg

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

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

251107E.jpg

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

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

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

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

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

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

251107.jpg

Germany

German Trade Surplus Shrinks Despite Strong Exports

Andrew Cates

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

251106Z1.jpg

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

251106Z2.jpg

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

251106Z3.jpg

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

251106Z4.jpg

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

251106Z5.jpg

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

251106Z6.jpg

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

Charts of the Week: Uneven But Unbroken

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Initial claims for unemployment insurance fell 12,643 during the week ended October 25 to 219,520 (+0.6% y/y) and mostly reversed the prior week’s increase to 232,163. The four-week moving average of initial claims eased to 226,766 from 227,953. They have trended higher this year, after weakening late in 2024. The four-week average hit a low of 200,323 in January 2024.

Federal government employees initially filed 9,435 jobless insurance claims last week after 10,062 in the prior week. These figures are increased from 588 at the end of September.

Continuing claims for unemployment insurance rose to 1.957 million (5.5% y/y) in the week ended October 18 from 1.947 million in the prior week. The four-week moving average rose to 1.940 million from 1.931 million. It was the highest level since the last week of August.	

Federal government employees continuing benefits rose to 23,188 in the week ended October 18 from 14,472 in the prior week. These figures are increased from 8,680 at the end of September.

The insured unemployment rate varied greatly across individual states and territories. In the week ended October 18, the highest unemployment rates were in New Jersey (2.14%), Washington (2.03%), California (1.93%), Massachusetts (1.84%), the District of Columbia (1.86%) and Connecticut (1.70%). The lowest were in South Dakota (0.25%), Florida (0.36%), North Carolina & Louisiana (0.41%), Nebraska (0.44%) and Virginia (0.49%). Rates in other notable states include New York (1.51%), Illinois (1.50%), Pennsylvania (1.39%), and Texas (1.11%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986.

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- Decline in initial claims reverses earlier gain.
- Continuing claims move higher.
- State unemployment rates vary.

Economy in Brief: 2008

Jump to:

U.S. Vehicle Sales in June Lowest Since 1993

Inflation in the Euro Area, the Unemployment Rate in Germany and the ECB

U.S. Chain Store Sales Nudged Up

U.S. Construction Spending Down in May, 2008 Leveled

U.S. Gasoline Price Reached $4.10 per Gallon

ISM Factory Sector Index Improved Slightly, Again

U.S. Construction Spending Down in May, 2008 Leveled

EMU Inflation Goes Ballistic - Over 4%; Ceiling Still is 2%