Tom Moeller

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Personal consumption expenditures rose 0.4% (5.2% y/y) in
July, the same as during June which was unrevised. A 0.3% increase had been expected in the Action Economics
Forecast Survey. Personal income improved an expected 0.3% (4.7% y/y) following an unrevised 0.4% gain.

In constant dollars, personal spending increased 0.2% (2.8% y/y),
the weakest increase in four months. Real durable goods spending fell 0.5%
(+4.8% y/y), the first decline since February. A 1.3% shortfall (+0.1% y/y) in
constant dollar purchases of motor vehicles &amp; parts was the third consecutive decline. It added to a 0.3% fall
(+6.1% y/y) in real spending on furniture &amp; and appliances which came after
two months of firm increase. Recreational goods &amp; vehicles purchases rose
0.3% in real terms (8.9% y/y) following a 0.6% gain. Real outlays on nondurable goods
strengthened 0.6% last month (3.2% y/y) after a 0.2% decline. Constant dollar clothing &amp; footwear purchases jumped
1.5% (4.6% y/y) after a 0.5% decline, while the volume of gasoline &amp; oil buying gained 0.4% (-0.1% y/y)
following a 1.1% decline. Constant dollar spending on food &amp; beverages
rebounded 0.3% (3.8% y/y) following a 0.2% drop. Real services spending improved
0.2% (2.4% y/y) for the second month in the last three. Outlays at restaurants
&amp; hotels strengthened 0.9% in constant dollars (4.9% y/y), the third month
of strong gain. Real health care outlays improved 0.3% (2.5% y/y) for the second straight month and constant dollar
outlays on housing &amp; utilities gained 0.2% (1.5% y/y) for the second
straight month. Real financial services spending held steady (0.6% y/y) after
three months of firm increase. Spending on recreation services was off 0.4%
(+0.3% y/y) in real terms after a 0.6% rise.

The 0.3% increase in personal income reflected a 0.4% rise
(4.7% y/y) in wages &amp; salaries. It was the fourth such gain in the last five months. Rental income
strengthened 0.7% (4.6% y/y), the strongest gain in four months. Proprietors income,
however, eased slightly (+5.7% y/y) after a 0.6% rise. Dividend payments
strengthened 0.6% (3.9% y/y) after a 0.5% rise. Interest income edged 0.1% higher (8.3% y/y) following three consecutive 0.3%
gains. Transfer receipts increased 0.3% (4.1% y/y) after a 0.2% rise. Social security payments improved
0.3% (5.1% y/y) after rising 0.4%. Medicare payments rose 0.7% (5.3% y/y) following two 0.6% gains but Medicaid payments
fell 0.4% (+3.2% y/y) following stability in July. Unemployment insurance payments gained
0.8% (-13.4% y/y) after no change while veterans benefits surged 3.8% (10.6% y/y) after two months of decline.

Disposable personal income increased 0.3% (5.3% y/y) after
gaining 0.4% in three of the prior four months. Real disposable income
improved 0.2% (2.9% y/y) after a 0.3% rise.

The personal savings rate was fairly stable at 6.7%, but that
was down from 7.2% in March. Personal saving increased 5.5% y/y.

The chain type price index inched 0.1% higher for a second
straight month. The 2.3% y/y increase was the strongest, however, since March
2012. The index excluding food &amp; energy rose 0.2% (2.0% y/y) as it has for
most of this year. Energy prices declined 0.5% (+13.4% y/y) following a 0.2%
fall. Food prices inched 0.1% higher (0.5% y/y) after a 0.2% rise.

The personal income &amp; consumption figures are available
in Haver's USECON database with detail in the USNA database. The
Action Economics figure is in the AS1REPNA database.

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >Personal Income &amp; Outlays
 (%)</th>
 <th scope="col" >Jul</th>
 <th scope="col" >Jun</th>
 <th scope="col" >May</th>
 <th scope="col" >Jul Y/Y</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Personal Income</td>
 <td >0.3</td>
 <td >0.4</td>
 <td >0.3</td>
 <td >4.7</td>
 <td >4.4</td>
 <td >2.6</td>
 <td >4.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Wages &amp; Salaries</td>
 <td >0.4</td>
 <td >0.4</td>
 <td >0.3</td>
 <td >4.7</td>
 <td >4.6</td>
 <td >2.9</td>
 <td >5.1</td>
 </tr>
 <tr>
 <td class="firstcol" >Disposable Personal Income</td>
 <td >0.3</td>
 <td >0.4</td>
 <td >0.4</td>
 <td >5.3</td>
 <td >4.4</td>
 <td >2.8</td>
 <td >4.4</td>
 </tr>
 <tr>
 <td class="firstcol" >Personal Consumption Expenditures</td>
 <td >0.4</td>
 <td >0.4</td>
 <td >0.5</td>
 <td >5.2</td>
 <td >4.3</td>
 <td >3.8</td>
 <td >4.0</td>
 </tr>
 <tr>
 <td class="firstcol" >Personal Saving Rate</td>
 <td >6.7</td>
 <td >6.8</td>
 <td >6.8</td>
 <td >6.7 
 (Jul'17)</td>
 <td >6.7</td>
 <td >6.7</td>
 <td >7.6</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >PCE Chain Price Index</td>
 <td >0.1</td>
 <td >0.1</td>
 <td >0.2</td>
 <td >2.3</td>
 <td >1.8</td>
 <td >1.1</td>
 <td >0.3</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Less Food &amp; Energy</td>
 <td >0.2</td>
 <td >0.1</td>
 <td >0.2</td>
 <td >2.0</td>
 <td >1.6</td>
 <td >1.7</td>
 <td >1.3</td>
 </tr>
 <tr>
 <td class="firstcol" >Real Disposable Income</td>
 <td >0.2</td>
 <td >0.3</td>
 <td >0.2</td>
 <td >2.9</td>
 <td >2.6</td>
 <td >1.7</td>
 <td >4.1</td>
 </tr>
 <tr>
 <td class="firstcol" >Real Personal Consumption Expenditures</td>
 <td >0.2</td>
 <td >0.3</td>
 <td >0.3</td>
 <td >2.8</td>
 <td >2.5</td>
 <td >2.7</td>
 <td >3.7</td>
 </tr>
 </tbody>
 </table>
 
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Personal consumption expenditures rose 0.4% (5.2% y/y) in July, the same as during June which was unrevised. A 0.3% increase had been expected in the Action Economics Forecast Survey. Personal income improved an expected 0.3% (4.7% [...]

U.S. Personal Spending and Income Rise; Price Increase Strongest Y/Y Since 2012

Gerald D. Cohen

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Initial unemployment insurance claims increased to 213,000 during the week ended August 25 from an unrevised 210,000 during the prior week. The Action Economics Forecast Survey called for a 215,000 reading. The four-week moving average of initial claims declined to 212,250 the lowest level since December 1969. During the last ten years, there has been a 75% correlation between the level of claims and the month-on-month change in nonfarm payrolls.

In the week ending August 18, continuing claims for unemployment insurance decreased to 1.708 million from the slightly upwardly revised 1.728 million a week earlier. The four-week moving average of claimants declined to 1.731 million from 1.736 million in the prior week.

The insured rate of unemployment remained at its record low of 1.2%, where it's been since early May.

Insured rates of unemployment varied widely by state. During the week ended August 11, the lowest rates were in South Dakota (0.25%), Nebraska (0.43%), Indiana (0.44%), North Carolina (0.48%) and North Dakota (0.48%). The highest rates were in New Jersey (2.47%), Connecticut (2.24%), Pennsylvania (2.06%), and Rhode Island (1.92%). Among the largest states by population, the rate was 1.90% in California (this was also the fifth highest rate in the country), 1.04% in Texas, 1.47% in New York, and 0.56% in Florida. These state data are not seasonally adjusted.

Data on weekly unemployment insurance are contained in
Haver's WEEKLY database, and they are summarized monthly in USECON.
Data for individual states are in REGIONW. The expectations figure is from the
Action Economics Forecast Survey, carried in the AS1REPNA database.

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" >Unemployment Insurance (SA, 000s)</th>
 <th>08/25/18</th>
 <th>08/18/18</th>
 <th>08/11/18</th>
 <th>Y/Y %</th>
 <th>2017</th>
 <th>2016</th>
 <th>2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Initial Claims</td>
 <td >213</td>
 <td >210</td>
 <td >212</td>
 <td >-10.5</td>
 <td >245</td>
 <td >263</td>
 <td >278</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Continuing Claims</td>
 <td >--</td>
 <td >1,708</td>
 <td >1,728</td>
 <td >-12.3</td>
 <td >1,961</td>
 <td >2,136</td>
 <td >2,267</td>
 </tr>
 <tr>
 <td class="firstcol" >Insured Unemployment Rate (%)</td>
 <td >--</td>
 <td >1.2</td>
 <td >1.2</td>
 <td >
 1.4 
 (Aug 2017)
 </td>
 <td >1.4</td>
 <td >1.6</td>
 <td >1.7</td>
 </tr>
 </tbody>
 </table>
 
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Initial unemployment insurance claims increased to 213,000 during the week ended August 25 from an unrevised 210,000 during the prior week. The Action Economics Forecast Survey called for a 215,000 reading. The four-week moving [...]

U.S. Initial Claims for Unemployment Insurance Edge Higher

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The Mortgage Bankers Association reported that its total
Mortgage Applications Index fell 1.7% last week (-15.5% y/y) following a 4.2%
increase. It was the sixth decline in the last seven weeks.

The effective interest rate on a 15-year fixed-rate mortgage
was little-changed w/w at 4.36%, but remained up sharply from last September's
low of 3.40%. The effective rate on a 30-year fixed-rate loan also was fairly
steady w/w at 4.92%. The rate on a Jumbo 30-year loan was unchanged at 4.76%.
For adjustable 5-year mortgages, the effective interest rate declined sharply to
4.07%, its lowest level since the first week in March.

Purchase loan applications eased 0.9% (+2.7% y/y), also the
sixth decline in the last seven weeks. Applications to refinance fell 3.0% w/w
(-33.4% y/y) after a 6.0% rise.

The average mortgage loan size declined to $283,700 (-0.7%
y/y). For purchases, the average loan size dropped to $300,700 (-1.3% y/y); for
refinancings, it fell to $257,000 (-3.5% y/y).

Applications for fixed-rate loans fell 15.0% y/y while
applications for adjustable-rate loans declined 22.0% y/y.

The survey covers over 75% of all U.S. retail residential
mortgage applications and has been conducted weekly since 1990. Respondents
include mortgage bankers, commercial banks and thrifts. The base period and
value for all indexes is March 16, 1990=100. The figures for weekly mortgage
applications and interest rates are available in Haver's SURVEYW database.

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >MBA Mortgage Applications (%,
 SA)</th>
 <th scope="col" >08/24/18</th>
 <th scope="col" >08/17/18</th>
 <th scope="col" >08/10/18</th>
 <th scope="col" >Y/Y</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" >Total Market Index</td>
 <td >-1.7</td>
 <td >4.2</td>
 <td >-2.0</td>
 <td >-15.5</td>
 <td >-17.8</td>
 <td >15.6</td>
 <td >17.9</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Purchase</td>
 <td >-0.9</td>
 <td >2.9</td>
 <td >-3.3</td>
 <td >2.7</td>
 <td >5.6</td>
 <td >13.3</td>
 <td >15.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Refinancing</td>
 <td >-3.0</td>
 <td >6.0</td>
 <td >-0.0</td>
 <td >-33.4</td>
 <td >-34.0</td>
 <td >17.3</td>
 <td >19.7</td>
 </tr>
 <tr>
 <td class="firstcol" >15-Year Mortgage Effective Interest Rate
 (%)</td>
 <td >4.36</td>
 <td >4.37</td>
 <td >4.40</td>
 <td >3.49 (Aug'17)</td>
 <td >3.59</td>
 <td >3.22</td>
 <td >3.47</td>
 </tr>
 </tbody>
 </table>
 
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The Mortgage Bankers Association reported that its total Mortgage Applications Index fell 1.7% last week (-15.5% y/y) following a 4.2% increase. It was the sixth decline in the last seven weeks. The effective interest rate on a [...]

U.S. Mortgage Loan Applications Decline

Robert Brusca

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The GfK economic index, that looks ahead to preview September for Germany, shows a slight downtick in its consumer gauge. The recent history shows that German confidence has been bumping along its rent ceiling sketching out a declining trend that has moved ever so slightly lower since late-2017 (see Chart).

While the GfK reading remains strong, its economic component has been weakening having hit its peak in January 2018. The economic index had reached even higher levels in 2011, but January is peak level in the phase of the expansion. It has fallen from a level of 54.4 in January to 22.2 in August. In fact, August represents a bounce since that gauge is up from its 15.7 low point of 2018 reached just one month ago.

The economic gauge has the lowest queue percentile standing of any of the GfK components. The economic expectations reading is meaningfully above its median at a queue standing in its 68.8 percentile. But it is not strong. The income expectations reading with an 86.4 percentile standing and the buying climate reading with an 81.9 percentile standing are on much stronger ground. However, income expectations have been eroding while the buying climate gauge has remained somewhat firmer with a much more gradual loss of value.

The overall climate index has a 92.5 percentile standing. It also stands at the 96th percentile of its high-low range. The percentile standing is lower than the percent of range standing only because the index has spent so much time clustered up near the top of its range in this cycle. Still, the component parts of this index show lesser standings in their respective ranges with the economic gauge not in support of such a higher overall reading for consumer confidence.

The German GfK index standing contrasts with a 92nd percentile standing in Italy, and a 62nd percentile standing in France and a 69th percentile standing for the United Kingdom. The surprise here is that Italian confidence stands up so well after even a decade of lost growth and with a good dose of political turmoil in train to boot. France had a strong recovery run last year that is now unwinding to some extent. The U.K. pattern is mostly the result of the Brexit vote and its timing.

We know that Europe has a number of issues festering some of them just below the surface. Europe has not been able/willing to sort out what relationship it will have with the U.K. post-Brexit. The Italian situation is potentially destabilizing to the EU and EMU. And beyond that, the treatment of migrants and the way EU rules treat countries who must deal with migrants has not rising to challenge of what is going on and this has left Greece and Italy to bear the brunt of the migrant problem, its distress dislocation, and financial burden.

Italy and France show much the same pattern for confidence trends as confidence gauges have been running out of gas but have been moving sideways more than moving lower. Italy displays a bit more of a topping pattern while France displays more of a decline on data back to 2017. The U.K. is on a different beat since its confidence tanked in the wake of the Brexit vote and has since caught on and has been achieving a slight upward gradient from 2016 onward.

As a background to all of this, there is also the trade conflict that lurks. The U.S. and Europe are for now quietly negotiating in the background. The U.S. that has been the trade policy aggressor has just cut a deal with Mexico and is negotiating with Canada. The U.S. and China are trading tariffs and threats. In a report released today, the OECD noted that OECD trade contracts had fallen in Q2. Nonetheless, central banks remain on the warpath to reduce their legacy policies of stimulus. There is a lot going on in the mixture of growth trends, policy and geopolitics. A lot of things are changing in the global economy. So far, consumer attitudes have responded in a mostly favorable way by not reacting to the bad news on trade or the heightened risks in Europe.


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The GfK economic index, that looks ahead to preview September for Germany, shows a slight downtick in its consumer gauge. The recent history shows that German confidence has been bumping along its rent ceiling sketching out a [...]

German Confidence Will Continue to Bump Along the Ceiling

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The National Association of Realtors (NAR) reported that
pending sales of existing homes declined 0.7% during July following
a 1.0% June rise, revised from 0.9%. Sales fell to an index level of 106.2
(2001=100) and remained down 2.3% y/y. Sales were 6.0% below the peak in April of 2016.

Sales were mixed across the nation last month. Pending home sales
in the South were off 1.7% (-0.9% y/y), the third decline in the last four
months. Pending home sales in the West fell 0.9% last month (-5.8% y/y) and
reversed the June rise. Working the other way last month were pending home sales
in the Northeast which rose 1.0% (-2.3% y/y) to the highest level since
December. Also improving in July by 0.3% (-1.5% y/y) were pending home sales in
the Midwest, up 4.1% versus the low six months earlier.

The pending home sales index measures sales at the time the
contract for an existing home is signed, analogous to the Census Bureau's new
home sales data. In contrast, the National Association of Realtors' existing
home sales data are recorded when the sale is closed. In developing the pending
home sales index, the NAR found that the level of monthly sales contract
activity parallels the level of closed existing home sales in the following two
months. The series dates back to 2001, and the data are available in Haver's PREALTOR
database.

<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >Pending Home Sales (SA,
 2001=100)</th>
 <th scope="col" >Jul</th>
 <th scope="col" >Jun</th>
 <th scope="col" >May</th>
 <th scope="col" >Jul Y/Y %</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Total</td>
 <td >106.2</td>
 <td >107.0</td>
 <td >105.9</td>
 <td >-2.3</td>
 <td >109.0</td>
 <td >109.8</td>
 <td >108.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Northeast</td>
 <td >94.6</td>
 <td >93.7</td>
 <td >92.4</td>
 <td >-2.3</td>
 <td >97.2</td>
 <td >96.4</td>
 <td >90.8</td>
 </tr>
 <tr>
 <td class="firstcol" >Midwest</td>
 <td >102.2</td>
 <td >101.9</td>
 <td >101.4</td>
 <td >-1.5</td>
 <td >104.8</td>
 <td >107.4</td>
 <td >107.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >South</td>
 <td >122.1</td>
 <td >124.2</td>
 <td >122.9</td>
 <td >-0.9</td>
 <td >123.8</td>
 <td >122.9</td>
 <td >123.1</td>
 </tr>
 <tr>
 <td class="firstcol" >West</td>
 <td >94.7</td>
 <td >95.6</td>
 <td >94.7</td>
 <td >-5.8</td>
 <td >99.6</td>
 <td >102.4</td>
 <td >102.2</td>
</tr>
 </tbody>
 </table>
 
</body></html>

The National Association of Realtors (NAR) reported that pending sales of existing homes declined 0.7% during July following a 1.0% June rise, revised from 0.9%. Sales fell to an index level of 106.2 (2001=100) and remained down 2.3% [...]

U.S. Pending Home Sales Retreat

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Real gross domestic product grew 4.2% (AR) during Q2'18 (2.9%
y/y), revised higher from 4.1% reported initially. It remained the strongest
increase since Q3'14. A 4.0% gain had been expected in the Action Economics
Forecast Survey. The GDP price index increased an unrevised and expected 3.0%
(2.4% y/y). It was the strongest gain since Q3'08.

After tax corporate profits increased 3.7% (6.7% y/y)
following an 8.5% rise. The 12.4% six-month increase was the strongest since Q1
2012. Pretax profits increased 3.3% (7.7% y/y), the strongest rise in four
years. Earnings in the nonfinancial sector grew an improved 5.1% (6.6% y/y).
Financial sector profits increased 3.8% (19.2% y/y) but foreign sector earnings
fell 1.7% (+4.1% y/y).

Personal consumption expenditures strengthened 3.8% (2.6%
y/y), revised from 4.0%. They were led by an 8.6% surge (6.6% y/y) in spending
on durable goods. Motor vehicle expenditures gained a lessened 6.7% (4.2% y/y)
but purchases of recreational goods &amp; vehicles surged an upwardly revised
9.3% (7.7% y/y). Spending on furniture &amp; appliance spending improved 6.1%
(7.1% y/y). Nondurable goods buying advanced 3.7% (2.5% y/y). Clothing purchases
strengthened 8.9% (3.0% y/y) and food &amp; beverage spending rose 2.8% (3.5%
y/y). Gasoline &amp; fuel oil purchases increased 2.3% (-1.4% y/y). Outlays on
services gained 3.1% (2.0% y/y) led by an 8.4% rise (2.7% y/y) in restaurant
&amp; accommodations outlays. Medical care outlays increased 2.2% (2.8% y/y) and
recreation spending gained 3.3% (0.3% y/y). Spending on housing &amp; utilities
improved 2.5% (1.4% y/y).

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Nonresidential investment increased a strengthened 8.5% (7.0%
y/y) led by a 13.2% jump (5.3% y/y) in structures outlays. Equipment investment
rose 4.4% (8.1% y/y), paced by a 10.8% jump (10.5% y/y) in information
processing equipment. Intellectual property products investment improved an
upwardly revised 11.0% (6.7% y/y), following a 14.1% surge during Q1. Outlays on
industrial equipment fell 3.5% (+3.8% y/y).

Residential investment declined 1.6% (+1.3% y/y), down for
the fourth quarter in the last five.

Government sector outlays increased 2.4% (1.3% y/y) led by a
3.7% rise (2.3% y/y) in federal government purchases. National defense spending
strengthened 6.0% (2.2% y/y), the largest quarterly rise in nine years. State
&amp; local government spending increased 1.6% (0.7% y/y).

Improvement in the foreign trade deficit added an improved 1.2
percentage points to GDP growth last quarter. Exports surged 9.1% (5.7% y/y)
while imports edged 0.4% lower (+4.4% y/y). The change in inventories subtracted
1.0 percentage point from growth.

The chained GDP price index increased an unchanged 3.0% (2.4%
y/y). The residential investment price index surged 7.3% (6.0% y/y). The PCE
price index increased 1.9% (2.2% y/y) and the business fixed investment price
index rose 1.9% (1.2% y/y). The export price index strengthened 5.2% after a
0.2% improvement.

The GDP figures can be found in Haver's USECON and USNA
database. USNA contains virtually all of the Bureau of Economic Analysis' detail
in the national accounts. Both databases include tables of the newly published
not seasonally adjusted data. The Action Economics consensus estimates can be
found in AS1REPNA.

Information in the Yield Curve about Future Recessions
from the Federal Reserve Bank of San Francisco can be found
<a href="https://www.frbsf.org/economic-research/files/el2018-20.pdf">here</a>.

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	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 
 <tr>
 <th class="firstcol" scope="col" ><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM" ;>Chained
 2012 $ (%, AR</a>)</th>
 <th scope="col" >Q2'18 (Second Estimate)</th>
 <th scope="col" >Q2'18 (Advance Estimate)</th>
 <th scope="col" >Q1'18</th>
 <th scope="col" >Q4'17</th>
 <th scope="col" >Q2'18 Y/Y</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 </tr>
 <tbody>
 <tr>
 <td class="firstcol" >Gross Domestic Product</td>
 <td >4.2</td>
 <td >4.1</td>
 <td >2.2</td>
 <td >2.3</td>
 <td >2.9</td>
 <td >2.2</td>
 <td >1.6</td>
 <td >2.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Inventory Effect</td>
 <td >-1.0</td>
 <td >-1.0</td>
 <td >0.3</td>
 <td >-0.9</td>
 <td >-0.2</td>
 <td >-0.1</td>
 <td >-0.5</td>
 <td >0.3</td>
 </tr>
 <tr>
 <td class="firstcol" >Final Sales</td>
 <td >5.3</td>
 <td >5.1</td>
 <td >1.9</td>
 <td >3.2</td>
 <td >3.0</td>
 <td >2.2</td>
 <td >2.1</td>
 <td >2.6</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Foreign Trade Effect</td>
 <td >1.2</td>
 <td >1.1</td>
 <td >0.0</td>
 <td >-0.9</td>
 <td >0.1</td>
 <td >-0.3</td>
 <td >-0.2</td>
 <td >-0.7</td>
 </tr>
 <tr>
 <td class="firstcol" >Domestic Final Sales</td>
 <td >3.9</td>
 <td >3.9</td>
 <td >1.9</td>
 <td >4.0</td>
 <td >2.9</td>
 <td >2.5</td>
 <td >2.3</td>
 <td >3.3</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colSpan="9" >Demand Components</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Personal Consumption Expenditure</td>
 <td >3.8</td>
 <td >4.0</td>
 <td >0.5</td>
 <td >3.9</td>
 <td >2.6</td>
 <td >2.5</td>
 <td >2.7</td>
 <td >3.7</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Nonresidential Business Fixed Investment</td>
 <td >8.5</td>
 <td >7.4</td>
 <td >11.5</td>
 <td >4.9</td>
 <td >7.0</td>
 <td >5.3</td>
 <td >0.5</td>
 <td >1.8</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Residential Investment</td>
 <td >-1.6</td>
 <td >-1.1</td>
 <td >-3.4</td>
 <td >11.2</td>
 <td >1.3</td>
 <td >3.3</td>
 <td >6.5</td>
 <td >10.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Government Spending</td>
 <td >2.4</td>
 <td >2.1</td>
 <td >1.5</td>
 <td >2.4</td>
 <td >1.3</td>
 <td >-0.1</td>
 <td >1.4</td>
 <td >1.9</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colSpan="9" >Chain-Type Price Index</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp; GDP</td>
 <td >3.0</td>
 <td >3.0</td>
 <td >2.0</td>
 <td >2.5</td>
 <td >2.4</td>
 <td >1.9</td>
 <td >1.1</td>
 <td >1.0</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;&nbsp; Personal Consumption
 Expenditures</td>
 <td >1.9</td>
 <td >1.8</td>
 <td >2.5</td>
 <td >2.7</td>
 <td >2.2</td>
 <td >1.8</td>
 <td >1.1</td>
 <td >0.3</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;&nbsp; Nonresidential
 Investment</td>
 <td >1.9</td>
 <td >2.0</td>
 <td >0.7</td>
 <td >0.7</td>
 <td >1.2</td>
 <td >0.7</td>
 <td >-0.8</td>
 <td >0.5</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;&nbsp; Residential Investment</td>
 <td >7.3</td>
 <td >7.5</td>
 <td >8.8</td>
 <td >3.1</td>
 <td >6.0</td>
 <td >4.5</td>
 <td >3.6</td>
 <td >2.7</td>
 </tr>
 </tbody>
 
 
</html>

Real gross domestic product grew 4.2% (AR) during Q2'18 (2.9% y/y), revised higher from 4.1% reported initially. It remained the strongest increase since Q3'14. A 4.0% gain had been expected in the Action Economics Forecast Survey. [...]

U.S. GDP Growth Revised Up; Profits Strengthen

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The pump price for a gallon of gasoline has been
fairly steady near $2.83 per gallon since the end of June. Nevertheless, prices remained
up 17.8% y/y. Haver Analytics constructs factors to adjust for the marked
seasonal variation in prices. The seasonally-adjusted gasoline price also has
been roughly steady at
$2.76 per gallon, but remained up versus $2.60 late last year.
West Texas Intermediate crude oil prices improved to
$67.63 per barrel last week (41.8% y/y) from $66.13 in the previous week. WTI
prices remained lower than the $73.71 peak early in July. Yesterday, the price
rose to $68.87. Brent crude oil prices strengthened to $73.77 per barrel last week
(41.6% y/y) from $71.85 during the prior week. The price was $76.16 yesterday.
Natural gas prices were steady last week at
$2.98/mmbtu (0.7% y/y), the highest level since early-February. They were $2.95
yesterday.
In the four-weeks ending August 17, gasoline demand
fell 1.6% y/y; total petroleum product demand declined 1.1% y/y. Gasoline
inventories increased 1.9% y/y, but inventories of all petroleum products
fell 5.0% y/y. Crude oil input to refineries rose 1.3% y/y in the last four
weeks.
These data are reported by the U.S. Department of Energy. The
price data can be found in Haver's WEEKLY and DAILY databases.
Greater detail on prices, as well as the demand, production and inventory data,
along with regional breakdowns, are in OILWKLY.
<table width="1871" class="centered" border="0" cellSpacing="0">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="1028">Weekly Energy Prices</th>
 <th scope="col" width="119">08/27/18</th>
 <th scope="col" width="120">08/20/18</th>
 <th scope="col" width="120">08/13/18</th>
 <th scope="col" width="120">Y/Y %</th>
 <th scope="col" width="120">2017</th>
 <th scope="col" width="120">2016</th>
 <th scope="col" width="120">2015</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" width="1028">Retail Gasoline ($ per Gallon Regular,
 Monday Price)</td>
 <td align="center" width="119">2.83</td>
 <td align="center" width="120">2.82</td>
 <td align="center" width="120">2.84</td>
 <td align="center" width="120">17.8</td>
 <td align="center" width="120">2.47</td>
 <td align="center" width="120">2.31</td>
 <td align="center" width="120">2.03</td>
 </tr>
 <tr>
 <td class="firstcol" width="1028">Light Sweet Crude Oil, WTI ($ per bbl,
 Previous Week's Average)</td>
 <td align="center" width="119">67.63</td>
 <td align="center" width="120">66.13</td>
 <td align="center" width="120">67.91</td>
 <td align="center" width="120">41.8</td>
 <td align="center" width="120">50.87</td>
 <td align="center" width="120">43.22</td>
 <td align="center" width="120">48.90</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="1028">Natural Gas ($/mmbtu, LA, Previous
 Week's Average)</td>
 <td align="center" width="119">2.98</td>
 <td align="center" width="120">2.97</td>
 <td align="center" width="120">2.93</td>
 <td align="center" width="120">0.7</td>
 <td align="center" width="120">2.96</td>
 <td align="center" width="120">2.49</td>
 <td align="center" width="120">2.62</td>
 </tr>
 </tbody>
</table>

&nbsp;
U.S. Consumer Confidence Strengthens 
by <a href="http://haver.com/comment/Moeller.html">Tom Moeller</a>&nbsp;&nbsp;August
28, 2018
Consumer confidence improved this month to its firmest level
since October 2000. The Conference Board Consumer Confidence Index during August
jumped 4.3% (10.8% y/y) to 133.4 from 127.9 in July, initially reported as
127.4. The August level exceeded expectations for 127.0 in the Action Economics Forecast
Survey. The level of confidence had been moving sideways since November until
this latest rise. The
indexes in this report are based on 1985=100. During the past 10 years, there
has been a 68% correlation between the level of consumer confidence and the y/y
change in real PCE.
The present conditions component increased 3.7% (16.0% y/y)
to 172.2, its highest level since December 2000. The expectations component
gained 5.1% (5.8% y/) to 101.7, the lowest level since December.
Expectations for business conditions improved m/m as 23.1% of
respondents thought that conditions would improve, still down from a 26.9% high
in March 2017. Income was expected to increase in six months by a still sharply
lessened 20.8%, versus the February high of 23.5%. Expectations that there would
be more jobs in six months surged m/m to 22.5%, the highest level since early
last year.
Jobs were viewed as &quot;plentiful&quot; by an increased
43.1% of respondents in July. Jobs were viewed as &quot;hard to get&quot; by a
steady and low 15.0%, the fewest in seventeen years. The net jobs assessment
reading increased to +28.1 in July. It remained near the highest level since
2001. Over the past 15 years, this differential has been 96% inversely related
to the unemployment rate. The percentage of respondents indicating the business
conditions are &quot;good&quot; rose to a 17-year high of 38.0%. The percentage
saying business conditions are &quot;bad&quot; declined to a cycle low 10.1%.
Expectations for the inflation rate in twelve months rose m/m
to 5.1%, up from last November's 4.5% low. It was the highest reading since
October 2015. The percentage expecting higher interest rates over the next
twelve months held fairly steady at 71.1%, but was up sharply from 67.6% in May
of last year. Those looking to buy a home in the next six months fell sharply
m/m to 5.1%, the lowest level in two years.
Confidence amongst respondents under age 35 years improved
sharply to the highest level since May of last year. For those aged 35-54 years,
confidence declined m/m to nearly a one year low. And for those over 55 years of
age, confidence has been fairly steady this year near the eighteen-year high.
The Consumer Confidence data is available in Haver's CBDB
database. The total indexes appear in USECON, and the market expectations
are in AS1REPNA.
<table width="1871" class="centered" border="0" cellSpacing="0">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="866">Conference Board (SA,
 1985=100)</th>
 <th scope="col" width="143">Aug</th>
 <th scope="col" width="143">Jul</th>
 <th scope="col" width="143">Jun</th>
 <th scope="col" width="143">Y/Y %</th>
 <th scope="col" width="143">2017</th>
 <th scope="col" width="143">2016</th>
 <th scope="col" width="143">2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="866">Consumer Confidence Index</td>
 <td align="center" width="143">133.4</td>
 <td align="center" width="143">127.9</td>
 <td align="center" width="143">127.1</td>
 <td align="center" width="143">10.8</td>
 <td align="center" width="143">120.5</td>
 <td align="center" width="143">99.8</td>
 <td align="center" width="143">98.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="866">&nbsp; Present Situation</td>
 <td align="center" width="143">172.2</td>
 <td align="center" width="143">166.1</td>
 <td align="center" width="143">161.7</td>
 <td align="center" width="143">16.0</td>
 <td align="center" width="143">144.8</td>
 <td align="center" width="143">120.3</td>
 <td align="center" width="143">111.7</td>
 </tr>
 <tr>
 <td class="firstcol" width="866">&nbsp; Expectations</td>
 <td align="center" width="143">107.6</td>
 <td align="center" width="143">102.4</td>
 <td align="center" width="143">104.0</td>
 <td align="center" width="143">5.8</td>
 <td align="center" width="143">104.3</td>
 <td align="center" width="143">86.1</td>
 <td align="center" width="143">88.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="866">Consumer Confidence By Age Group</td>
 <td align="center" width="143"></td>
 <td align="center" width="143"></td>
 <td align="center" width="143"></td>
 <td align="center" width="143"></td>
 <td align="center" width="143"></td>
 <td align="center" width="143"></td>
 <td align="center" width="143"></td>
 </tr>
 <tr>
 <td class="firstcol" width="866">&nbsp; Under 35 Years</td>
 <td align="center" width="143">134.1</td>
 <td align="center" width="143">138.3</td>
 <td align="center" width="143">127.0</td>
 <td align="center" width="143">5.9</td>
 <td align="center" width="143">130.2</td>
 <td align="center" width="143">122.4</td>
 <td align="center" width="143">116.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="866">&nbsp; Aged 35-54 Years</td>
 <td align="center" width="143">135.5</td>
 <td align="center" width="143">125.6</td>
 <td align="center" width="143">132.0</td>
 <td align="center" width="143">11.1</td>
 <td align="center" width="143">123.5</td>
 <td align="center" width="143">106.2</td>
 <td align="center" width="143">103.9</td>
 </tr>
 <tr>
 <td class="firstcol" width="866">&nbsp; Over 55 Years</td>
 <td align="center" width="143">131.9</td>
 <td align="center" width="143">123.7</td>
 <td align="center" width="143">122.8</td>
 <td align="center" width="143">15.2</td>
 <td align="center" width="143">112.9</td>
 <td align="center" width="143">84.6</td>
 <td align="center" width="143">84.1</td>
 </tr>
 </tbody>
</table>


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The pump price for a gallon of gasoline has been fairly steady near $2.83 per gallon since the end of June. Nevertheless, prices remained up 17.8% y/y. Haver Analytics constructs factors to adjust for the marked seasonal variation in [...]

U.S. Energy Prices Are Little Changed

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<a href="/comment/180828e.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/180828e.png" align="left"></a>
As central bankers have been acting, planning and pondering their next move, all of them are on the road or on the tilt to reduced monetary stimulus. The Fed in the U.S. is the farthest along that trail with some 7-notches on its belt. The BOE also is hiking rates. The Fed, in addition for concerted rate-hiking, is reducing the size of its balance sheet. Japan has announced a plan to allow more variability in its 10-year note peg, a shift that most see as a way for the BOJ to leg its way out of its zero rate peg for that maturity. The ECB is still in the planning stages for its exit.

If it’s stimulus, what isn’t it stimulating? 
The degree of monetary stimulus taken in the form of central bank asset purchases and in terms of the low nominal and real rates, both of which that have been endured worldwide, are stunning for their lack of impact on real growth and on inflation. Growth during this period has been nurtured back into existence. But no one would call it ‘strong.’ Because of the advanced stage of the business cycle that would be asking too much now, but in this cycle with gobs of stimulus, growth has never been ‘strong’ anywhere. And Inflation is still MIA (Missing In-spite-of Accommodation). Economists of the 1970s and 1980s would be stunned by this result. Had you been a graduate student in economics anywhere back then and had you tried to write a paper about how this would happen, you would today be operating a cash register at Wal-Mart – or at least not having any career as an economist.

Flummoxed by the facts 
Indeed, modern day economists, too, remain flummoxed by the lack of impact from monetary policy and just to prove it they remain disbelievers and are at this very moment worried as can be that the forces of inflation are regrouping and planning an attack that will drive the inflation rate up and force central banks to pull out the stops and act more aggressively with a likely deleterious impact on growth. However, despite what can be characterized as excessive ‘monetary stimulus’ during the period since the financial crisis, money supply growth itself in the key monetary center countries has largely remained well-behaved and right now money growth rates are still moving lower.


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Year-on-year nominal money growth rates largely erode 

Fixed fears! 
So it is no wonder that inflation expectations on the part of monetary officials are rising? (huh?) Inflation expectations by market participants, however, are not rising. In the U.S., the yield curve is flattening, a well-known and highly reliable signal of recession that makes inflation a less likely event should the yield curve actually invert. And yet the Fed is crazy-glued™ to its tightening path.

Germany: the outlier 
In Europe, the Germans are all but apoplectic of the degree of stimulus in play and the length of time that it has been there. Of course, Germany is carrying more inflation than most EMU members largely because Germany has had a post reunification low in its unemployment rate for many months now. And to Germans, even low inflation rates can seem high. Even though we think of central banks as targeting 2% inflation, the ECB targets a rate just below 2%- just to put that added measure of intolerance in there.

What good is it? What bad is it? 
For all of the stimulus in the EMU, money growth remains moderate and credit and loan growth which stopped falling in 2015 still are not really advancing when expressed in real terms. So if ‘excessive monetary stimulus cannot get money or credit growth in gear, what good is it – and what ‘bad’ is it (what sort of bad effects can it generate?)?


<img border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/180828.png" width="660" height="300">


The bad and ugly without ‘the good’ 
There is rising concern that monetary stimulus (in this case than means low interest rates) contributes to financial sector risk even though it is not stimulating much real sector activity. And for the moment, that view seems to be a dominant one and it is one of the driving forces to put monetary policy back ‘where it belongs.’ But no one knows where that is.

A place for everything and everything in its place...your place or mine? 
If excessive monetary policy stimulus is not a stimulant, can we conclude that monetary policy does not matter and that we can raise rates and go back to old standards without any adverse impact? Or is the anemic reaction to excessive stimulus an indication of a still-needy economy and will taking rates back to old benchmarks prove to be an excessive tightening for policy in this new environment?

Never let the facts get in the way of a good opinion 
There is hardly anyway to know. But policymakers have opinions and some of them have very strong opinions on this.

Think but also LOOK 
Interest rate levels still have the potential to move exchange rates in the real world and we are seeing that interest rates also have an impact on the housing market. And they have impact in the financial sector itself in various ways. So rising interest rates are going to have an economic impact; it’s just not clear that they will have the impact that is expected or desired. I simply hope that whatever choice monetary officials make they do not move too fast and they do keep their eyes AND THEIR MINDS open to what actually happens. It is not a time to let dogma trump reality. Reality has been too unpredictable for us to think we really understand it or can predict it. Against that background, policy calls for economists who are grounded in reality not immersed in dogma.

Oh captain, my captain 
While many think the time is due or overdue to have a German at the head of the ECB, I wonder if it isn’t too soon to install someone who has the inflexible position on monetary policy that is taught in Germany. For one thing, the EMU is not Germany. Things that can be done in Germany cannot as easily be pulled off in the EMU. I have always believed that the economic and monetary structure of country (or region) was in some way tailored to the societal values. Things that policy can do in Germany, Finland, Sweden and Norway (yes the last two are not EMU members) cannot be done in Spain, Portugal, Italy and Greece. And it is not as simple as just imposing a new will or discipline. Italy and Greece are two different cases but clear examples of what excessive austerity can do. The Greek economy is still in shambles and Europe has not arranged any debt forgiveness just a debt payment moratorium that hangs over Greece like the sword of Damocles. Italy, under austerity, has been unable to return its GDP level to its pre-crisis standing after a decade of struggle. Some would call Italy a success because of its low inflation rate but how can that kind of growth (none!) be construed as a success?

There are lessons but has there been learning? 
Europe still faces many challenges. The struggles with austerity should have been an eye opener. They weren’t. The severity of the crisis in Greece should have changed some views, but it didn’t. The ongoing struggle with migrants and Europe’s willingness to stuff the problem in the economies of its border countries is only becoming an eye opener because Italy’s new government has vowed not to take it anymore. The U.K. decided to leave the EU because of its intrusive and inflexible policies and the EU arrogantly viewed the British as ‘the problem.’ If the British were the problem, why do so many problems –many stemming from migrant issues- still linger and fester like the protest explosion in Germany just yesterday in Chemnitz? Europe is a place in denial. And denial does not solve problems. The issues surrounding monetary policy are only some of the things that Europeans must address. They have one monetary policy; yet, they are all are different and they have not yet figured out how to deal with it. Germans think the answer is to turn the Greeks, Italians and everyone else into Germans. Well that is not going to happen. Putting a German at the helm of the ECB at this time might just make things worse.
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As central bankers have been acting, planning and pondering their next move, all of them are on the road or on the tilt to reduced monetary stimulus. The Fed in the U.S. is the farthest along that trail with some 7-notches on its [...]

EMU Monetary Stimulus Is Just Not Taking

Next year's inflation forecasts are on the rise and above target

Disrupted global supply chains placing upward pressure on US goods prices

Construction of data centers has overtaken transportation construction in US

Elevated energy prices putting intense upward pressure on input prices around the globe

US is big leader in global surge in private AI investment

Larger-than-usual income tax refunds this year are supporting consumer spending

Sharply rising share of AI-related jobs

Inflationary impact of surge in oil prices larger in Europe than in the US

Futures market thinks the price of oil will recede significantly over the next six months

Recent pickup in US defense orders could help support overall growth ahead

Cost of transporting crude oil has soared to series high

Market-based inflation expectations have not yet reflected recent surge in oil prices

Global equity markets are fearing a major economic disruption from soaring oil prices

Is recent drop in sentiment signaling softer growth ahead?

With the Iran conflict, geopolitical risk has soared to alarming levels

Soaring AI-related investment in US underpinning strong contribution of business spending to overall growth

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

Global freight costs are on the rise while supply chain pressures are contained

Accelerating positive economic surprises in the G10 are boosting the global economy

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**PMIs in June mark some progress**
The PMI report from S&P shows modest firming in conditions in June, even with the Middle East situation unresolved.

**Monthly:** The median reading for the 8 reporting countries or regions rose to 50.8 in June from 50.1 in May. Manufacturing improved to 52.7 from 52.4, while the services reading rose to 50.3 from 49.6, leaving a month of mild contraction behind.

**Most show June improvement:** Most countries or regions improved in June; the exceptions were Germany, the United Kingdom, and India, which were weaker. India was dragged down by a weaker service sector reading in June; the U.K. and Germany showed weakening conditions across the board for the composite index, the manufacturing sector, and services. On the other side of the coin, France, Japan, Australia, and the U.S. all showed improvement in each of three sectors: the composite, manufacturing, and services, in June compared to May.

**Sequentially still mixed:** The broader sequential readings show ongoing weakness, but these are derived from hard data and lag the monthly observations in the table that include preliminary flash estimates. All the composite readings weakened based on three-month averages except for India. However, seven of eight reporting areas showed improvement in manufacturing over three months compared to six months; the exception was Australia. Over six months, conditions are mixed, with four composite readings weaker compared to 12 months and with four stronger. However, over six months, all eight manufacturing sectors improved compared to 12 months. The 12-month readings are consistently stronger than their readings of 12 months ago. The only composite that's weaker is the U.S., while the services sectors in the monetary union, Germany, France, and the U.S. are weaker than they were 12 months ago.

**Standings are weak:** The queue percentile standings evaluate the current diffusion index in June compared to where it has been since January 2022, a period of about 4½ years. The queue standings show weakness up and down the line, with the exception of the manufacturing sector; that has the standing above its historic median in the monetary union, Germany, France, the U.K., the U.S., and Japan. Only Australia and India show manufacturing sectors whose current monthly standings are below their medians of the last 4½ years. In addition, Japan has a strong composite reading at its 81st percentile. Overall, the services sectors are weak and below their 50% standing every place, and below that mark by a large margin, except for Japan, where the services sector has a 47th percentile standing, only a few ticks below its median.

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**Summing up: A glimmer of hope but still a lot of weakness**
Manufacturing is stronger sequentially over three months, six months, and 12 months for every reporter except for Australia over three months. The rest of the report is not very impressive. There is some rebound in June, but here we're talking about volatile monthly data. The services sectors still show sequential weakness over 12 months, six months, and three months in the European Monetary Union, Germany, France, and the U.S. The U.K. and Japan showed three-month and six-month weakness as well. That’s too much weakness in the key job creation sector to think that this report is a positive signal.

S&P PMIs in June Firm

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Danish consumer confidence rose to -14 in June from -19.8 in May, a small pickup for a still-negative net reading. In June, the reading has a standing at its 7.9 percentile on data back to 1995. So, this confidence headline still has a lower 8% reading overall.

On the month, all seven component readings improved compared to May, although the environmental assessments were little changed across four components. As for the environment, the most changed reading is the improved favorability of the time to save, a metric that is not always a positive category.

As for the seven categories, the readings on the financial situation, general economy and the unemployment rate all improved month-to-month, while the inflation metrics both backed down sharply.

These changes show the financial situation and general economy gauges all at rankings in the lower 20th percentiles, with the outlook for the next 12 months having a standing in their lower 10th percentiles and lower for both the financial situation and the general economy.

Consumer prices, despite a strong monthly step-back, have a 90.2 percentile standing for prices over the past 12 months and a 94.3 percentile standing for the CPI over the next 12 months. Despite some let-up in concerns about unemployment, the unemployment gauge has an 85.1 percentile standing, still substantially elevated.

The environmental readings are less negative, starting with the ‘favorability of the time to purchase,’ a bit weaker month-to-month but improved on balance over two months. The June reading is slightly better than its 12-month average but still has a ranking only in its 21st percentile. The favorability of the time to purchase over the next 12 months is a tick weaker month-to-month and about a point worse than its 12-month average. Its June ranking is in its lower 10th percentile of its historic queue. The favorability of the time to save has a stronger ranking, but this is a more equivocal category. It is improved month-to-month and only slightly stronger over two months The June reading is stronger than its 12-month average, with a ranking in its 47.6 percentile—improved compared to previous categories but still worse than its historic median since 1995 (the median occurs at a ranking of 50%). The ‘general financial situation of households now’ ticked lower in June from May but is stronger on balance over two months. The June reading is above its 12-month average and has a 59.2 percentile standing—above its median.

On balance, Denmark shows improving confidence, progressing slowly but on the right path. There is a sharp downward adjustment in inflation, especially over the next 12 months, despite global conditions. Still, the ranking of the confidence metrics are uniformly weak.

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Denmark

Danish Confidence Improves As Inflation Expectations Pull Back Sharply

Andrew Cates

**US Outperformance Holds; Europe and China Continue to Disappoint**
One of the most persistent features of the global macro landscape in 2026 has been the widening divergence between growth outcomes in the United States and those in Europe and China. Citigroup’s global growth surprise indices—which measure the gap between actual economic releases and consensus expectations—capture this divergence with unusual clarity. US data have continued to surprise on the upside, supported by resilient consumer spending, a stronger-than-expected labour market and the ongoing AI-driven capital spending boom. The picture elsewhere is less encouraging. Growth surprises have turned negative across the euro area, reflecting the cumulative toll of elevated energy costs, weak industrial activity and subdued business confidence. And China's growth surprise index has also fallen sharply in recent weeks, with weaker-than-expected retail sales and fixed asset investment data for May this week reinforcing concerns that domestic demand remains fragile and that policy support is yet to gain meaningful traction.

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**The Oil Risk Premium in the UK Has Been Fading**
One of the more notable features of UK markets this year has been the close relationship between oil prices and two-year gilt yields. The link is not mechanical, but in an economy heavily exposed to imported energy, swings in oil prices can materially alter the inflation outlook and, by extension, expectations for Bank of England policy. That relationship was on display again this week. A softer-than-expected UK CPI reading for May—helped in part by easing energy price pressures—led investors to scale back expectations that inflation would remain persistently above target, pushing two-year gilt yields to their lowest level in six weeks. The question now is whether this marks the start of a more sustained easing in inflation pressures or merely a temporary reprieve. Much will depend on whether the recent decline in oil prices following the US-Iran ceasefire agreement proves durable.

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**The AI Investment Boom Is Rewriting the Rule Book for the Chip Industry**
If the divergence in global growth surprises noted above tells a story of a world economy under strain, the semiconductor sales data tell a very different one — of a technology-driven investment cycle that is accelerating almost regardless of the broader macro environment. Global semiconductor sales have surged to record levels over the past twelve months, driven primarily by insatiable demand for the chips that underpin AI infrastructure: graphics processing units, high-bandwidth memory, and advanced logic chips. Data centre capital expenditure from the hyperscalers continues to exceed even the most optimistic forecasts from a year ago, and the investment pipeline shows no sign of moderating. The gains are concentrated in AI-adjacent products; legacy chips for consumer electronics and industrial applications remain relatively soft.

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**Copper Holds Firm As Oil Retreats**
The commodity markets are telling two quite different stories this week, and the contrast is instructive. Oil has moved sharply lower on the US-Iran MoU news as investors trim the conflict risk premium that has been embedded in energy markets since March — a welcome development for inflation and central bank optionality alike. But the three commodities shown in this chart tell a different story. Copper, one of the most reliable proxies for global electricity infrastructure investment, remains near multi-year highs, reflecting the extraordinary volume of data centre construction, grid expansion and electrification spending flowing through the global economy. Aluminium — energy-intensive to produce and increasingly in demand for the structural components of both data centres and electric vehicles — has, until quite recently, held its ground. Lithium hydroxide, the battery-grade refining product that sits at the heart of the energy storage supply chain, has seen some cyclical softness but remains structurally underpinned by the scale of demand being projected for grid-scale storage and electric mobility over the next decade.

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**Is Energy Availability a Binding Constraint on Growth?**
This next chart is a scatter plot that maps electricity generation per capita against GDP growth per capita across a broad sample of countries over the past five years. The positive relationship is striking. Economies with higher electricity generation per capita, including the United States, have generally delivered stronger GDP growth, while those with more constrained electricity systems have tended to lag. The obvious objection is reverse causality: richer economies generate more electricity because they have more to power. That is partly true. But the broader evidence is difficult to dismiss. The US shale revolution delivered an abundance of cheap energy that supported a sustained period of industrial outperformance relative to many advanced economies. Mainstream commentary often attributed this advantage to factors such as labour market flexibility or technological innovation, but energy costs were arguably at least as important.

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**Corporate America Is Investing from a Position of Unusual Financial Strength**
The surge in US corporate investment—particularly in AI infrastructure, data centres and semiconductors—has inevitably drawn comparisons with the late-1990s dot-com boom. Yet the financial balance data suggest an important difference. During the dot-com era, US non-financial corporates moved into a financial deficit approaching 4% of GDP, relying heavily on external financing to fund investment. Today, despite another ambitious investment cycle, the sector remains in surplus, currently around 1.8% of GDP. Corporate America is investing aggressively, but it is still generating more cash than it is spending. The boom is being financed largely through profits rather than debt. Risks remain—not least the growing fiscal burden on the federal government—but the balance-sheet fragilities that turned previous investment booms into systemic crises appear far less pronounced. If a major constraint emerges in the years ahead, it may be energy and resources rather than leverage.

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The signing of a Memorandum of Understanding (MoU) between the United States and Iran earlier this week has offered financial markets their most significant moment of geopolitical relief since the Middle East conflict escalated in early March. Oil prices fell sharply on the news, short-dated bond yields moved lower across several major economies, and risk assets recovered ground. But relief, as investors have learnt repeatedly over the past three months, is arguably not the same as resolution. The MoU sets a framework for negotiations rather than a final settlement, and the history of US-Iran diplomacy is not one that encourages complacency. Meanwhile, the Federal Reserve — concluding its June meeting yesterday under new chair Kevin Warsh — held rates steady but delivered a distinctly hawkish dot plot that shifted the median year-end projection from a cut to a hike, a reminder that the easing cycle the market had been pricing is no longer the base case. Against this backdrop, this week's charts take stock of where the global economy presently stands — and what the underlying data, beneath the geopolitical noise, are telling us. The picture that emerges is one of divergence. The United States continues to outperform consensus growth expectations while Europe and China disappoint (chart 1). UK short-dated yields have tracked oil prices with unusual consistency this year, and today's softer-than-expected CPI print for May — arriving just as the MoU has knocked crude lower — potentially changes the policy calculus for the Bank of England (chart 2). Global semiconductor sales, meanwhile, are storming ahead regardless of the geopolitical noise, powered by AI infrastructure spending that shows no sign of fatigue (chart 3). A cross-section of commodity prices tells two stories simultaneously: the geopolitical risk premium is draining out of oil, but the metals and materials the AI economy actually needs — copper, uranium, critical minerals — are holding firm (chart 4). Meanwhile a cross-country scatter of electricity generation and GDP growth over the past five years raises a question that deserves more attention than it typically gets: is energy availability a constraint on growth, or merely a consequence of it? The evidence, we would argue, points firmly in one direction (chart 5). And finally, for all the comparisons being drawn between the current investment boom and the late 1990s, the financial balance of the US corporate sector tells a rather different story — one that matters for how any correction might unfold (chart 6).

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Charts of the Week: Between Relief and Reality

Winnie Tapasanun

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The current general activity diffusion index rebounded to a slightly stronger-than-expected 10.3 in June following a 27.1-point drop to -0.4 in May, the latest Manufacturing Business Outlook Survey (MBOS) from the Federal Reserve Bank of Philadelphia showed, indicating a return to expansion in manufacturing activity in the Third Federal Reserve District this month. A reading of 10.0 for June had been expected by the Action Economics Forecast Survey. June marked the fifth m/m increase in six months, showing a sharp improvement from -1.4 in June 2025. In June, 32.1% of firms reported increases in current general activity (up from 22.5% in May), while 21.9% reported decreases (down from 22.9%); 45.4% reported no change (down from 54.6%). Survey responses were collected from June 8 to June 15.

Haver Analytics calculates an ISM-adjusted current activity diffusion index from five key components using the methodology along the lines of the national ISM index. The index rose to 53.1 in June after a 4.8-point decline to a contraction-level 49.7 in May, indicating manufacturing activity expanded for the third time in four months; it was slightly above 51.0 in June 2025.

In the latest survey, the new orders index surged to 27.3 in June following a 34.7-point plunge to -1.7 in May, signaling new orders expanded for the sixth time in seven months. The shipments index rebounded to 14.9 this month from 4.9 in May, registering the seventh consecutive expansion. The unfilled orders index advanced to 10.5 from -2.5, indicating expansion for the first time since July 2025 and the highest level since January 2025. In contrast, the inventories index dropped to -8.5 in June from 6.6 in May, showing inventories contracted for the second time in three months and at the lowest level since July 2024. Meanwhile, the delivery times index increased to -2.6 this month from -10.4 in May (the lowest reading since March 2024).

On the labor front, the number of employees index climbed to 7.9 in June from -2.8 in May, indicating employment expanded for the first time in three months and at the highest level since January. In June, a higher 17.0% of respondents reported increases in employment, while 9.2% reported declines; 73.8% reported no change in employment levels. The average employee workweek index fell to -6.5 this month, the first negative reading and lowest since February, from 1.2 in May.

Inflation indicators were mixed in June. The prices paid index rose to 53.2 this month following an 11.4-point drop to 47.9 in May. A higher 53.5% of respondents reported increases in input prices in June, while only 0.4% reported decreases. The prices received index fell to 20.3, a four-month low, after a 7.2-point May decline to 26.3. In June, 20.3% of respondents reported increases in prices received, while 0.0% reported decreases.

The future indexes remained in positive territory, signaling continued overall growth over the next six months, with most future indicators rising. The future general activity diffusion index edged down to 50.2 in June from 53.2 in May, staying positive since February 2024. Future indexes for new orders (60.8 vs. 53.5) and shipments (60.3 vs. 45.7) increased in June (vs. May) and remained positive. Notably, the future capital expenditures index rose to 41.2 this month, the highest level since June 2021, from 30.9 in May. The following future indexes slipped in June (vs. May) but stayed in positive territory: employment (30.8 vs. 31.7), unfilled orders (17.3 vs. 19.2), and inventories (10.0 vs. 11.8). Prices continued to increase, with the future prices paid index easing to a still-elevated 63.2 in June from 70.0 in May and the future prices received index rising to 67.2, the highest level since August 2021, from 60.5.

The Manufacturing Business Outlook Survey (MBOS), conducted by the Federal Reserve Bank of Philadelphia, is a monthly survey of manufacturers in the Third Federal Reserve District. Participants indicate the direction of change in overall business activity and in the various measures of activity at their plants. The diffusion indexes in the MBOS represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. The indexes range from -100 to +100 with positive values indicating an increase in activity. The series from the survey dating back to May 1968 can be found in Haver’s **SURVEYS** database. The expectations forecast figures are from the Action Economics Forecast Survey in **AS1REPNA**.

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- Current General Activity Index up 10.7 pts. to 10.3 in June; fifth rise in six months.
- New Orders (27.3), sixth expansion in seven mths.; Shipments (14.9), seventh straight expansion; Unfilled Orders (10.5), first expansion since July ’25.
- Employment (7.9), a five-month high after two mths. of contraction.
- Inflation indicators: Prices Paid up (53.2); Prices Received down (20.3, a four-month low).
- Future General Activity Index down to a still-expansion-level 50.2; most subindexes up and positive; future price indexes remaining above long-run avgs.

U.S. Philadelphia Fed Index Returns to Positive Territory in June

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Unemployment in the European Monetary Union stayed at 6.3% in April, just a tick above its all-time low. In the more inclusive EU, the unemployment rate hovered at 6%, just two tenths of a percentage point above its all-time low. Unemployment conditions in the monetary union remain low without many signs of acceleration.

The unemployment rate in April fell in Italy, Ireland, Greece, Portugal, and the Netherlands. The unemployment rate increased month-to-month in Finland.

In March, the unemployment rate declined in Austria, Belgium, Germany, Finland, Italy, and the Netherlands. It rose month-to-month in Greece and Luxembourg.

Over three months, the unemployment rate in these 12-early reporting monetary union members fell in five countries: Belgium, Germany, Italy, Ireland, and the Netherlands. In contrast, unemployment rose in five countries: Portugal, Greece, France, Finland, and Austria.

Over six months, unemployment rates fell in six countries: the Netherlands, Portugal, Italy, Germany, Belgium, and Austria. This was against increases in six countries: Greece, Finland, France, Luxembourg, Spain, and Ireland.

Year over year, the degree of inflation progress is much thinner, with the unemployment rates falling in only three countries Italy, Spain, and Portugal with increases in unemployment for all the other countries in the table.

Unemployment rates continue to rank low in the monetary union, with only three monetary union countries having their unemployment rates ranked above 50%, putting them above their respective medians on data back to the year 2000. Those three countries are Luxembourg, Finland, and Austria. For the remaining countries, the rankings of their unemployment rates over this period are not even as high as their 30th percentiles. Italy, at present, is experiencing its lowest unemployment rate of the period.

Unemployment conditions in the monetary union remain solid. The past two weeks were significant for monetary policy and global economics, with the ECB raising rates, Japan raising rates, and the United States keeping rates unchanged but moving away from an easing bias in policy that had been in effect for quite a number of months. Today the Bank of England, after experiencing some significant inflation progress, decided to keep its policy on hold for another session. An agreement between the U.S. and Iran securing an opening of the Strait of Hormuz was signed, paving the way for potentially improved oil flows, lower inflation, and less uncertainty in the period ahead.