Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081017a.jpg" align="left" border="0" height="265" width="353">
Housing starts fell 6.3% m/m last month to 817,000 units
(SAAR). That followed an 8.1% decline during August which was deeper
than reported initially. The latest level was the lowest since 921,000
starts during January 1991. Consensus expectations had been
for 874,000 starts.
During September, starts of single-family homes fell by 12.0%
to 544,000 units, their lowest level since late-1981. Since their peak
in early 2006, single-family starts are down by roughly two-thirds.
Permits to build these single family homes also fell 3.8% (-38.9% y/y)
to 532,000, their lowest since the recession during 1982.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081017b.jpg" align="right" border="0" height="265" width="353">
Starts during 2Q fell by 7.2% from 1Q and that
decline was accompanied by a 0.5 percentage point subtraction from real
GDP growth. In 3Q, single-family starts fell 10.9% from the 2Q average.
These new figures suggest that housing this quarter will even more of
drag on GDP. During the last ten years there has been an 84%
correlation between the q/q change in single-family starts and the
contribution to quarterly GDP growth.
Multi-family starts in September recouped just a bit of their
earlier declines with a 7.5% increase. Nonetheless, 3Q starts fell
20.7% from 2Q after that period's 7.5%.
By region, August starts of single-family units in the
Northeast fell 4.8% (-23.4% y/y) to a new low. In the Midwest starts
fell an even harder 24.1% (-43.3% y/y). In the South single family
starts fell 6.3% (-42.3% y/y) while in the West starts dropped 17.7%
(-45.5% y/y) and erased all of the prior months' gains.
Housing Busts and Household Mobility from
the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/staff_reports/sr350.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Housing
Starts (000s, SAAR)</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">July</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>817</td>
<td>872</td>
<td>949</td>
<td>-31.1%</td>
<td>1,341</td>
<td>1,812</td>
<td>2,073</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>544</td>
<td>618</td>
<td>644</td>
<td>-41.9</td>
<td>1,034</td>
<td>1,474</td>
<td>1,719</td>
</tr>
<tr>
<td class="firstcol">Multi-Family</td>
<td>273</td>
<td>254</td>
<td>305</td>
<td>9.6</td>
<td>307</td>
<td>338</td>
<td>354</td>
</tr>
<tr class="odd">
<td class="firstcol">Building Permits</td>
<td>786</td>
<td>857</td>
<td>937</td>
<td>-38.4</td>
<td>1,389</td>
<td>1,844</td>
<td>2,160</td>
</tr>
</tbody>
</table>
Mid-October Michigan Consumer
Sentiment Tanks With Stock Market 
by <a href="/comment/Moeller.html">Tom
Moeller</a> October 17, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081017c.jpg" align="left" border="0" height="265" width="353">
We got our first glimpse of consumer's reaction to the
unfolding crises in the credit markets. The University of Michigan's
mid-October reading of consumer sentiment collapsed by 18.2% from the
September level, to 57.5. The latest level was the lowest for the
series since June which in turn was the lowest since early 1980. The
drop was a record m/m decline for the index which dates back to the
late 1970s. Consensus had expected a lesser decline to 65.0.
During the last ten years there has been a 47% correlation
between the level of sentiment and the three-month change in real
consumer spending.
The current conditions index led the collapse with 21.5%
decline. The view of current personal finances gave back all of a
September improvement and fell 26.7% while index of buying conditions
for large household goods fell 17.8% m/m, down 38.0% y/y.
The expectations component of consumer sentiment aided the m/m
decline in the total with a 15.6% drop. Expectations for business
conditions during the next year collapsed by 26.2%. Expectations for
conditions during the next five years fell 13.3%.The expected change in
personal finances also fell 12.5%.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081017d.jpg" align="right" border="0" height="265" width="353">
The mean expected rate of inflation during the next year held
steady at 4.6% with lower oil prices. It was as high as 7.0% in May.
The expected inflation rate during the next five years fell to 2.9%,
the lowest level since 2003.
The opinion of government policy, which apparently influences
economic expectations, fell sharply from September (-41.5% y/y). Only
five percent of respondents thought that a good job was being done by
government, the least since 5%.
The University of Michigan survey is not seasonally
adjusted.The reading is based on telephone interviews with about 500
households at month-end; the mid-month results are based on about 300
interviews. The summary indexes are in Haver's USECON database,
with details in the proprietary UMSCA 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/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University
of Michigan</a></th>
<th scope="col">Mid-October</th>
<th scope="col">September</th>
<th scope="col">October 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">Consumer Sentiment</td>
<td>57.5</td>
<td>70.3</td>
<td>-28.9%</td>
<td>85.6</td>
<td>87.3</td>
<td>88.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>58.9</td>
<td>75.0</td>
<td>-39.7</td>
<td>101.2</td>
<td>105.1</td>
<td>105.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>56.7</td>
<td>67.2</td>
<td>-19.1</td>
<td>75.6</td>
<td>75.9</td>
<td>77.4</td>
</tr>
</tbody>
</table>
Japan's Service Sector Index Gets
Erratic 
by <a href="/comment/Brusca.html">Robert
Brusca</a> October 17, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081017e.jpg" align="left" border="0" height="265" width="353">
The tertiary index fell in August after two months of
stability. The Yr/Yr percentage change in the index is hovering in
negative territory and has just taken a weaker position with this
report.
The index is still in the top 10% of its range but then the
service index usually does rise. Setbacks to it are uncommon. The
weakness in the tertiary index is another red flag for the slowing in
the Japanese economy.
The declines in the tertiary index in this period already
rival the drops in the previous recession period from 2000-2003.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup><thead><tr>
<th colspan="10" scope="col"> Up to
date Japan Industry Survey</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"></td>
<td colspan="3">Recent Months</td>
<td colspan="3">Moving Averages</td>
<td colspan="3">Extremes; Range</td>
</tr>
<tr class="grey3">
<td class="firstcol"></td>
<td>Aug-2008</td>
<td>Jul-2008</td>
<td>Jun-2008</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Max</td>
<td>Min</td>
<td>%-Tile</td>
</tr>
<tr>
<td class="firstcol">Tertiary</td>
<td>109.1</td>
<td>110.6</td>
<td>109.3</td>
<td>109.7</td>
<td>109.8</td>
<td>109.9</td>
<td>110.9</td>
<td>92.0</td>
<td>90.5%</td>
</tr>
<tr class="grey1">
<td colspan="10" class="firstcol">Ranges,
Max, Min since 1993</td>
</tr>
</tbody>
</table>
Italy New Orders 
by <a href="/comment/Brusca.html">Robert
Brusca</a> October 17, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081017f.jpg" align="left" border="0" height="265" width="353">
Italian orders have fallen in August after several months of
gains. Foreign orders are much weaker than domestic orders in Italy.
Foreign orders have dropped in six of the past seven months. Domestic
orders are down in just two of those seven months.
Still, over that period, starting in February of 2008
overall orders are lower. The international sector is dragging Italy&#8217;s
industrial sector into decline. Over this period industrial sales have
fallen by 4%, not even annualized.


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr> <th colspan="7" scope="col">Italy
Orders </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Saar exept m/m</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>Jun08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
</tr>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-0.3%</td>
<td>2.7%</td>
<td>0.7%</td>
<td>13.2%</td>
<td>-1.4%</td>
<td>1.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign</td>
<td>-3.4%</td>
<td>-0.7%</td>
<td>1.2%</td>
<td>-11.3%</td>
<td>-14.3%</td>
<td>-7.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic</td>
<td>1.2%</td>
<td>4.6%</td>
<td>0.5%</td>
<td>28.2%</td>
<td>5.9%</td>
<td>5.9%</td>
</tr>
<tr>
<td class="firstcol">Memo</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Sales</td>
<td>-3.0%</td>
<td>-2.7%</td>
<td>3.1%</td>
<td>-10.4%</td>
<td>-7.9%</td>
<td>-7.1%</td>
</tr>
</tbody>
</table>
</body></html>

Housing starts fell 6.3% m/m last month to 817,000 units (SAAR). That followed an 8.1% decline during August which was deeper than reported initially. The latest level was the lowest since 921,000 starts during January 1991. Consensus [...]

U.S. Housing Starts Fell Further in September

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081016g.jpg" align="left" border="0" height="265" width="353">
The German Chamber of Industry and Commerce survey (DIHK)
shows a steady if not rapid deterioration in the current assessment and
in the expectations for the period ahead. Economic
conditions slipped from a reading of +24 in Q2 to +17 in Q4 dropping
their standing to the 69th percentile from the 80th
percentile previously. Business
expectations dropped from +6 to -9 as the percentile standing fell to
the 41st percentile from the 76th
percentile, a sharp drop off and a move away from a nice position above
the range midpoint to substantially below it.
Investment intentions have also crossed into negative
territory, dropping from +6 to -2. But in terms of the percentile
standing, the drop off is not as severe as the percentile fall from the
78th to the 60th
percentile still leaves a firm reading in place not one that is below
average. A modest negative
number is still above the mid-point response for German firms&#8217; capital
spending intentions. Hiring intentions also fell to a negative reading
from +6 in Q2 2008 to -3 in Q4 2008. Similarly the percentile ranking
fell from the 86th to the 66th
percentile for hiring plans.
The survey was conducted in late September and early October
so some of the worst of the recent financial markets events were
probably not taken into consideration in the survey. However in mid and
late September the stock market was extremely choppy and volatile. It
is unclear how much of this affected respondent expectations and
assessments.
In the survey German firms also expressed more concerns about
foreign growth and with that diminished expectations for German exports.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">DIHK-Balance
of Economic Opinion </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Net Balance Readings</td>
<td colspan="3">Change</td>
<td>Range Q4'91</td>
<td>Percentile</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Q4-08</td>
<td>Q2-08</td>
<td>Q1-08</td>
<td>Yr Ago</td>
<td>2-Yr</td>
<td>3-Yr</td>
<td>Q4-08</td>
<td>Q2-08</td>
</tr>
<tr>
<td class="firstcol">Economic Conditions</td>
<td>17</td>
<td>24</td>
<td>30</td>
<td>-14</td>
<td>-7</td>
<td>17</td>
<td>69.4</td>
<td>80.6</td>
</tr>
<tr class="grey1">
<td class="firstcol">Business Expectations</td>
<td>-9</td>
<td>6</td>
<td>10</td>
<td>-24</td>
<td>-18</td>
<td>-12</td>
<td>41.1</td>
<td>67.9</td>
</tr>
<tr>
<td class="firstcol">Export Expectations</td>
<td>14</td>
<td>26</td>
<td>36</td>
<td>-25</td>
<td>-21</td>
<td>-18</td>
<td>54.8</td>
<td>74.2</td>
</tr>
<tr class="grey1">
<td class="firstcol">Investment Intentions</td>
<td>-2</td>
<td>6</td>
<td>9</td>
<td>-15</td>
<td>-9</td>
<td>4</td>
<td>60.9</td>
<td>78.3</td>
</tr>
<tr>
<td class="firstcol">Hiring Intentions</td>
<td>-3</td>
<td>6</td>
<td>7</td>
<td>-12</td>
<td>-3</td>
<td>11</td>
<td>66.7</td>
<td>86.7</td>
</tr>
</tbody>
</table>
</body></html>

The German Chamber of Industry and Commerce survey (DIHK) shows a steady if not rapid deterioration in the current assessment and in the expectations for the period ahead. Economic conditions slipped from a reading of +24 in Q2 to +17 [...]

German Firms Cut Back Their Assessment and Expectations

Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081016e.jpg" width="313">
Initial claims for unemployment insurance fell 16,000 in the week ended last Saturday to 461,000 from the prior week&#39;s 477,000.The four-week moving average barely changed from 482,500 to 483,250 (+50.2% y/y). The Labor Department estimates that 12,000 claims in the latest week were due to Hurricane Ike in Texas, less than the hurricane effects the two weeks before of 17,000 (10/4) and 45,000 (9/27).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081016f.jpg" width="313">
Continuing claims for unemployment insurance during the October 4 week rose 40,000 following an upwardly revised 68,000 increase during the prior period. The four-week average of claims rose to 3,632,000, the highest level since July 2003. Continuing claims provide some indication of workers&#39; ability to find employment and they lag the initial claims figures by one week.
Claims under the new &quot;EUC&quot; program, Emergency Unemployment Compensation, enacted during the summer, reached 1,345,375 in the September 27 week, up 278,298 from September 20. These people have exhausted all regular benefits and are granted an additional 13 weeks while they continue to job-hunt.
The insured rate of unemployment edged up to 2.8% in the October 4 week, a cycle high and the highest since exactly the same week in 2003. The high in that recessionary period was 3.0%, reached in late June 2003.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">10/11/08</th>
<th scope="col">10/04/08</th>
<th scope="col">09/27/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>461</td>
<td>&nbsp;477</td>
<td>499</td>
<td>36.4%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,711</td>
<td>3,671</td>
<td>45.6</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial claims for unemployment insurance fell 16,000 in the week ended last Saturday to 461,000 from the prior week's 477,000.The four-week moving average barely changed from 482,500 to 483,250 (+50.2% y/y). The Labor Department [...]

U.S. Weekly Initial Jobless Insurance Claims Fell But Still Near Cycle High

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081016d.jpg" align="left" border="0" height="265" width="353">
US industrial output, an index of real output, is off by 2.8%
in September but the drop is exaggerated by the impact of two
hurricanes and a job action at aircraft manufacturer Boeing. The
Federal Reserve Board reported that the disruptions from the hurricanes
contributed about 2.25 percentage points to the decline while the
Boeing strike contributed 0.5 percentage point. 
 

The drop is beginning to look like the drops IP made in the
last recession. Declines in output are widespread in September. 
 

For the quarter which is now complete based on preliminary
data the drop in output is at a rate of -6%, a substantial pace of
decline for a quarter (saar). Consumer goods output is down at a -6%
pace with consumer goods ex-auto output down at a pace of -8.2% and
consumer energy off at a -12.6% pace. In this framework auto output
rose in September but fell in the quarter at a pace of -5%. The
consumer vehicle sector is not what is leading us lower. 
 

The business sector is leading us lower. The business sector
saw a sharper decline with business equipment output off by -8.4% saar
led by a whopping decline of -41% (saar) for transportation. Materials
output was off at a pace of -6%. 
 

The weakness in the industrial sector clearly is widespread.
The slowing in US exports will hit the sector hard. Manufacturing has
been shedding jobs but at a slower pace than it has in most recessions.
It looks like the pace of job losses in MFG is about to pick up. That
in turn that will send waves of repercussions throughout the economy as
a vicious circle of job cuts is likely to ensue since workers that lose
jobs also are consumers that lose income. As that happens spending
drops and that leads to more job cuts. It is vicious circle time: Not
Miller time. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">Industrial
Production </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Monthly Pct. Changes</td>
<td colspan="3">At Annual Rates of Change</td>
<td>SAAR</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Month-to-month Pct. Change</td>
<td>3-Month</td>
<td>6-Month</td>
<td>Year/Year</td>
<td>08-Q3</td>
</tr>
<tr class="odd">
<td class="firstcol">Industrial Output</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>%Change</td>
<td>%Change</td>
<td>%Change</td>
<td>Pct Change</td>
</tr>
<tr>
<td class="firstcol">All
Prod&amp;Materials</td>
<td>-2.8%</td>
<td>-0.9%</td>
<td>-0.1%</td>
<td>-15.1%</td>
<td>-8.4%</td>
<td>-4.5%</td>
<td>-6.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">All
Products</td>
<td>-2.3%</td>
<td>-1.1%</td>
<td>-0.2%</td>
<td>-14.1%</td>
<td>-7.9%</td>
<td>-4.9%</td>
<td>-5.9%</td>
</tr>
<tr>
<td class="firstcol">Final Products</td>
<td>-2.5%</td>
<td>-1.2%</td>
<td>-0.2%</td>
<td>-15.6%</td>
<td>-8.5%</td>
<td>-4.9%</td>
<td>-5.8%</td>
</tr>
<tr class="grey1">
<td colspan="8" class="firstcol">Manufacturing only</td>
</tr>
<tr>
<td class="firstcol">MFG - NAICS</td>
<td>-2.7%</td>
<td>-1.0%</td>
<td>0.0%</td>
<td>-14.4%</td>
<td>-8.6%</td>
<td>-4.8%</td>
<td>-5.8%</td>
</tr>
<tr>
<td class="firstcol">MFG-Durables</td>
<td>-2.4%</td>
<td>-1.5%</td>
<td>0.3%</td>
<td>-14.2%</td>
<td>-9.2%</td>
<td>-4.6%</td>
<td>-4.8%</td>
</tr>
<tr class="grey1">
<td class="firstcol">MFG-Nondurables</td>
<td>-2.9%</td>
<td>-0.4%</td>
<td>-0.4%</td>
<td>-14.4%</td>
<td>-7.9%</td>
<td>-4.9%</td>
<td>-7.0%</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods</td>
<td>-1.3%</td>
<td>-1.7%</td>
<td>-0.3%</td>
<td>-13.1%</td>
<td>-6.9%</td>
<td>-5.0%</td>
<td>-6.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Durables</td>
<td>-0.7%</td>
<td>-6.2%</td>
<td>1.1%</td>
<td>-23.1%</td>
<td>-13.1%</td>
<td>-11.7%</td>
<td>-6.7%</td>
</tr>
<tr>
<td class="firstcol">Automotive Prod.</td>
<td>1.7%</td>
<td>-10.9%</td>
<td>1.9%</td>
<td>-30.6%</td>
<td>-17.3%</td>
<td>-15.2%</td>
<td>-5.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Ex. Automotive Prod.</td>
<td>-2.7%</td>
<td>-1.7%</td>
<td>0.4%</td>
<td>-15.9%</td>
<td>-9.0%</td>
<td>-8.1%</td>
<td>-8.2%</td>
</tr>
<tr>
<td class="firstcol">Nondurables</td>
<td>-1.6%</td>
<td>-0.6%</td>
<td>-0.5%</td>
<td>-10.6%</td>
<td>-5.5%</td>
<td>-3.1%</td>
<td>-5.7%</td>
</tr>
<tr class="grey1">
<td class="firstcol">NonEnergy</td>
<td>-0.4%</td>
<td>0.0%</td>
<td>-0.5%</td>
<td>-3.7%</td>
<td>-2.4%</td>
<td>-1.7%</td>
<td>-2.5%</td>
</tr>
<tr>
<td class="firstcol">Cons Energy</td>
<td>-4.4%</td>
<td>-1.6%</td>
<td>-0.5%</td>
<td>-25.8%</td>
<td>-12.2%</td>
<td>-5.9%</td>
<td>-12.6%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Business Equip.</td>
<td>-7.0%</td>
<td>-0.2%</td>
<td>0.0%</td>
<td>-28.7%</td>
<td>-16.5%</td>
<td>-7.0%</td>
<td>-8.4%</td>
</tr>
<tr>
<td class="firstcol">Transportation</td>
<td>-33.6%</td>
<td>-4.5%</td>
<td>0.2%</td>
<td>-145.6%</td>
<td>-72.9%</td>
<td>-38.2%</td>
<td>-41.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Computer &amp; Office Eqpt</td>
<td>0.9%</td>
<td>0.6%</td>
<td>0.1%</td>
<td>6.4%</td>
<td>6.7%</td>
<td>15.6%</td>
<td>4.2%</td>
</tr>
<tr>
<td class="firstcol">Ex. Tech.&amp; T-port</td>
<td>-9.2%</td>
<td>0.4%</td>
<td>-0.3%</td>
<td>-36.6%</td>
<td>-21.7%</td>
<td>-10.4%</td>
<td>-11.5%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Materials</td>
<td>-3.4%</td>
<td>-0.8%</td>
<td>0.2%</td>
<td>-16.0%</td>
<td>-9.0%</td>
<td>-3.8%</td>
<td>-6.0%</td>
</tr>
<tr>
<td class="firstcol">Durables</td>
<td>-1.0%</td>
<td>-1.0%</td>
<td>0.2%</td>
<td>-7.6%</td>
<td>-5.2%</td>
<td>-1.8%</td>
<td>-3.3%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Nondurables excl
Energy</td>
<td>-3.3%</td>
<td>-0.3%</td>
<td>-0.6%</td>
<td>-16.6%</td>
<td>-9.4%</td>
<td>-6.6%</td>
<td>-7.8%</td>
</tr>
<tr>
<td class="firstcol">Energy</td>
<td>-6.2%</td>
<td>-0.9%</td>
<td>0.8%</td>
<td>-25.0%</td>
<td>-13.2%</td>
<td>-4.1%</td>
<td>-7.8%</td>
</tr>
</tbody>
</table>
</body></html>

US industrial output, an index of real output, is off by 2.8% in September but the drop is exaggerated by the impact of two hurricanes and a job action at aircraft manufacturer Boeing. The Federal Reserve Board reported that the [...]

US IP Plunges in September and Plummets in the Quarter

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081016a.jpg" width="353">
The consumer price index (CPI-U) fell just slightly last month, according to the Bureau of Labor Statistics, after an unrevised 0.1% dip during August. Consensus expectations had been for a 0.1% uptick. The latest figure lowered the three-month rate of change to 2.6% from 7.2%.
Energy prices again moved lower, during September by 1.9%. Fuel oil prices fell hard by 5.8% (+38.2% y/y) after a 6.5% skid in August. Prices for natural gas &amp; electricity also were quite weak and they fell 3.2% (+10.9% y/y). Gasoline prices dipped just 0.6% (+31.7% y/y) but they have since moved lower this month to $3.15 from an average $3.70 last month. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081016b.jpg" width="353">
Food &amp; beverage prices rose the same, strong 0.6% as they did during August. The y/y gain of 6.0% was the fastest since early 1990. For the third straight month prices for meats poultry &amp; fish rose 1.0% and they are up at a 12.9% annual rate during that period. Prices for cereals &amp; bakery products jumped 1.1% (12.3% y/y) but prices for dairy product prices fell 0.6% (+4.9% y/y).
The CPI less food &amp; energy rose just 0.1% and the gain fell slightly short of expectations for a 0.2% increase. The three-month rate of increase fell back to 2.7% from its recent high of 3.5%.
Core goods prices reversed the August increase and fell 0.2%. The decline was led by lower prices for new &amp; used motor vehicles which were down another 0.9% (-1.6% y/y). Apparel prices fell 0.1% but the y/y increase remained positive at 1.4%. Apparel prices fell 0.4% last year. Prices for household furnishings &amp; operations rose 0.5% (1.2% y/y) and that was enough to pull the y/y gain to 1.9%, the strongest y/y increase since 2000. Tobacco prices were unchanged (6.8% y/y).<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081016c.jpg" width="353">
Core services prices were firm again and they rose 0.3%. That left the three-month growth rate at 3.2%. Medical care services prices continued firm and they rose 0.4% (3.8% y/y). Education costs also have been strong and last month rose 0.4% (6.1% y/y). Shelter prices increased 0.3% (2.4% y/y) but that was the weakest y/y gain since early-2006. Owners equivalent rent of primary residence, a measure not equivalent to other house price measures, increased 0.2% (2.4% y/y). Rents rose for the third straight month by 0.3% (3.8% y/y). Public transportation prices gave back a piece of prior months&#39; strength with a 1.0% decline (13.3% y/y). Though recreation prices rose just 0.2%, the 2.4% y/y rise compares to a 0.5% increase during all of last year.
The chained CPI, which adjusts for shifts in consumption patterns, fell 0.1%. Less food and energy, chained prices rose 0.2% for the third straight month.
Yesterday&#39;s speech by Fed Chairman Ben S. Bernanke can be found <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20081015a.htm"> here</a>.
 Fed Vice Chairman Donald L. Kohn also spoke yesterday on the Economic Outlook and his comments can be found <a href="http://www.federalreserve.gov/newsevents/speech/kohn20081015a.htm"> 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/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a> (%)</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Total&nbsp;</td>
<td>-0.0</td>
<td>-0.1</td>
<td>4.9</td>
<td>2.9</td>
<td>3.2</td>
<td>3.4</td>
</tr>
<tr class="even">
<td class="firstcol">Total less Food &amp; Energy</td>
<td>0.1</td>
<td>0.2</td>
<td>2.5</td>
<td>2.3</td>
<td>2.5</td>
<td>2.2</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>-0.2</td>
<td>0.1</td>
<td>0.5</td>
<td>-0.4</td>
<td>0.2</td>
<td>0.5</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Services less Energy</td>
<td>0.3</td>
<td>0.2</td>
<td>3.2</td>
<td>3.4</td>
<td>3.4</td>
<td>2.8</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Energy</td>
<td>-1.9</td>
<td>-3.1</td>
<td>23.3</td>
<td>5.6</td>
<td>11.0</td>
<td>17.0</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Food &amp; Beverages</td>
<td>0.6</td>
<td>0.6</td>
<td>6.0</td>
<td>3.9</td>
<td>2.3</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a>&nbsp;</td>
<td>-0.1</td>
<td>-0.2</td>
<td>4.3 </td>
<td>2.5</td>
<td>2.9 </td>
<td>2.9</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;Total less Food &amp; Energy&nbsp;</td>
<td>0.2</td>
<td>0.2</td>
<td>2.2</td>
<td>2.0</td>
<td>2.2</td>
<td>1.9</td>
</tr>
</tbody>
</table>
</body>
</html>

The consumer price index (CPI-U) fell just slightly last month, according to the Bureau of Labor Statistics, after an unrevised 0.1% dip during August. Consensus expectations had been for a 0.1% uptick. The latest figure lowered the [...]

U.S. CPI Fell Again With Lower Gasoline Prices

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081015f.jpg" align="left" border="0" height="265" width="353">
What a shock to those that thought that decoupling was a
reality. The US slowdown clearly has spread to Japan and to Europe. The
August drop in output is just one of the visible signs. July&#8217;s 1.3%
rise in IP is sandwiched between drops of 3.5% in August and 2.2% in
June. The global slowdown is everywhere. The financial crisis, of
course, is going to deepen it. The developing world &#8216;demand
juggernauts&#8217; India and China will not escape the slowing either. 
 

The decline is hitting Japan especially hard in transportation
as high gas prices have adversely impacted consumer budgets in the US.
A key issue for Japan is that car sales have plummeted. Even makers of
fuel efficient cars have seen demand fall off. The most highly sought
after models have been in short supply. Thus, even fuel efficient auto
makers are having trouble &#8211; no one escapes the downturn. 
 

The outlook is for weakness to continue and probably to
deepen. The hit to industrial output in Japan, while relatively severe,
is not over. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr class="even">
<th colspan="9" scope="col">Japan
Industrial Production Trends </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">m/m %</td>
<td colspan="3">Saar %</td>
<td>Yr/Yr</td>
<td>Qtr-2-Date</td>
</tr>
<tr class="odd">
<td class="firstcol">seas adjusted</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>Jun-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Yr-Ago</td>
<td>% AR</td>
</tr>
<tr>
<td class="firstcol">Mining &amp; mfg</td>
<td>-3.5%</td>
<td>1.3%</td>
<td>-2.2%</td>
<td>-16.4%</td>
<td>-10.1%</td>
<td>-4.7%</td>
<td>4.4%</td>
<td>-6.0%</td>
</tr>
<tr>
<td class="firstcol">Total Industry</td>
<td>-3.6%</td>
<td>1.5%</td>
<td>-2.2%</td>
<td>-16.1%</td>
<td>-10.2%</td>
<td>-4.7%</td>
<td>4.4%</td>
<td>-5.4%</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>-3.5%</td>
<td>1.2%</td>
<td>-2.1%</td>
<td>-16.4%</td>
<td>-10.1%</td>
<td>-4.7%</td>
<td>4.4%</td>
<td>-6.2%</td>
</tr>
<tr>
<td class="firstcol">Textiles</td>
<td>-0.2%</td>
<td>-2.9%</td>
<td>-1.6%</td>
<td>-17.5%</td>
<td>-13.5%</td>
<td>-10.0%</td>
<td>-6.2%</td>
<td>-20.9%</td>
</tr>
<tr>
<td class="firstcol">T-port</td>
<td>-9.8%</td>
<td>4.0%</td>
<td>-5.0%</td>
<td>-36.9%</td>
<td>-19.3%</td>
<td>-7.8%</td>
<td>9.7%</td>
<td>-9.3%</td>
</tr>
<tr class="odd">
<td colspan="9" class="firstcol">Product
Group</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods</td>
<td>-3.3%</td>
<td>3.6%</td>
<td>-3.1%</td>
<td>-11.3%</td>
<td>-8.0%</td>
<td>-3.2%</td>
<td>6.3%</td>
<td>7.9%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>-2.3%</td>
<td>-0.2%</td>
<td>-0.6%</td>
<td>-11.7%</td>
<td>-7.1%</td>
<td>-2.6%</td>
<td>4.0%</td>
<td>-7.0%</td>
</tr>
<tr>
<td class="firstcol">Investment Goods</td>
<td>-5.2%</td>
<td>-0.5%</td>
<td>-2.9%</td>
<td>-29.8%</td>
<td>-18.5%</td>
<td>-10.9%</td>
<td>2.8%</td>
<td>-22.1%</td>
</tr>
<tr>
<td class="firstcol">Mining</td>
<td>1.6%</td>
<td>4.2%</td>
<td>1.9%</td>
<td>35.1%</td>
<td>15.3%</td>
<td>4.3%</td>
<td>-1.1%</td>
<td>28.2%</td>
</tr>
<tr>
<td class="firstcol">Electricity &amp; Gas</td>
<td>-7.6%</td>
<td>6.3%</td>
<td>-3.4%</td>
<td>-19.2%</td>
<td>-21.9%</td>
<td>-5.1%</td>
<td>2.9%</td>
<td>1.4%</td>
</tr>
</tbody>
</table>
</body></html>

What a shock to those that thought that decoupling was a reality. The US slowdown clearly has spread to Japan and to Europe. The August drop in output is just one of the visible signs. July’s 1.3% rise in IP is sandwiched between [...]

Japanese IP Dives – Back on Trend to Lower Results

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081015d.jpg" width="353">
The U.S. government&#39;s budget deficit for fiscal year 2008 widened sharply to $454.8B versus a deficit during FY 2007 of $161.5B. Reversing recent trends of strengthening revenues, the deficit spread resulted from an outright decline in revenues, while outlays picked up smartly.
As a percentage of GDP the budget deficit last year totaled roughly 3.2%, a contrast to FY07&#39;s marginal 1.2%. Receipts were 17.8% of GDP, down from 18.8% and outlays rose to 21.0%.
The Government&#39;s financial data are available in Haver&#39;s USECON database, with extensive detail available in the specialized GOVFIN. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081015e.jpg" width="353">
Net revenues last fiscal year fell 1.7%, reversing FY07&#39;s 6.7% increase. Both individual income taxes and corporate taxes fell, the former by 1.5% and the latter, 17.8%. The &quot;stimulus&quot; rebates were the main factor in the lower individual taxes, as well as weaker capital gains and less growth in wages and salaries. Corporate taxes were lowered by weakening profits. Also, during the September hurricanes, impacted companies were able to postpone their September tax installments. In contrast, various unemployment and social insurance grew 3.6%, somewhat soft, but well within recent growth ranges.
U.S. government outlays grew just 9.1% during last fiscal year, a significant pickup from 2007&#39;s 2.8% rise. Defense spending (19% of total outlays) surged by 13.2%, with both war-related and standard uses contributing. Medicare expenditures (12% of outlays) slowed to &quot;just&quot; a 4.1% increase after the prior 13.8% increase. Social security spending (21% of outlays) also slowed, rising 5.3% from 6.9% in FY07. Net interest payments increased 4.6% in FY08, similar to the previous 5.0%.

<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/@E1/@E106/@E10602/@E106021.HTM">US Government Finance</a> &nbsp;</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">FY 2008</th>
<th scope="col">FY 2007</th>
<th scope="col">FY 2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>+$45.7B</td>
<td>$-111.9B</td>
<td>+$112.9B (9/07)</td>
<td>-$454.8B</td>
<td>-$162.8B</td>
<td>-$248.2B</td>
</tr>
<tr>
<td class="firstcol">Net Revenues</td>
<td>$272.4B</td>
<td>$157.0B</td>
<td>-4.5%</td>
<td>-1.7%</td>
<td>6.7%</td>
<td>11.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Net Outlays</td>
<td>$226.7B</td>
<td>$268.9B</td>
<td>31.4%</td>
<td>9.1%</td>
<td>2.8%</td>
<td>7.4%</td>
</tr>
</tbody>
</table>
</body>
</html>

The U.S. government's budget deficit for fiscal year 2008 widened sharply to $454.8B versus a deficit during FY 2007 of $161.5B. Reversing recent trends of strengthening revenues, the deficit spread resulted from an outright decline [...]

U.S. Budget Deficit Widens to Record in Fiscal 2008

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Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

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

Policy uncertainty has surged since the US national elections.

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

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

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

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

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

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

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Nonfarm payrolls increased 177,000 (1.2% y/y) during April after rising 185,000 in March, revised from 228,000, and 102,000 in February, revised from 117,000. Expectations had been for a 130,000 rise in the Action Economics Forecast Survey. The latest figure left the three-month average change at 155,000 in April, down from 232,000 in January.

Average hourly earnings rose 0.2% during April after unrevised increases of 0.3% in March and 0.2% in February. Earnings growth of 3.8% y/y was below the 5.9% high in March 2022.

The unemployment rate, measured in the household survey, held m/m at an expected 4.2% in April, and compared to 4.1% in February and 4.0% in January. 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, eased to 7.8% in April from 7.9% in March.

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.

- Job growth spreads across most sectors.
- Earnings growth trend decelerates.
- Jobless rate holds steady.

U.S. Job Growth Is Firm in April but March Gain Is Lessened

Andrew Cates

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

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

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

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

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

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

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

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Charts of the Week: Tariff Truce, Tenuous Trust

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

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

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

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

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

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

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

U.S. Light Vehicle Sales Fall in April

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

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

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

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

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

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

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

U.S. ISM Manufacturing Index Indicates Contraction in April

Winnie Tapasanun

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

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

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

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

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

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

Economy in Brief: October 2008

Jump to:

U.S. Housing Starts Fell Further in September

German Firms Cut Back Their Assessment and Expectations

U.S. Weekly Initial Jobless Insurance Claims Fell But Still Near Cycle High

US IP Plunges in September and Plummets in the Quarter

U.S. CPI Fell Again With Lower Gasoline Prices

U.S. CPI Fell Again With Lower Gasoline Prices

Japanese IP Dives – Back on Trend to Lower Results

U.S. Budget Deficit Widens to Record in Fiscal 2008