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/081015b.jpg" width="353">
Retail sales fell 1.2% last month, the Commerce Department reported this morning. Both August and July sales were revised lower, August to a 0.9% decrease from 0.7% reported last month, and July to a 0.1% increase from 0.3% in last month&#39;s data. This puts the entire Q3 down at a 4% annual rate from Q2. The Action Economics survey shown in Haver&#39;s AS1REPNA database looked for a 1.0% decline in September. All the retail sales data are contained in Haver&#39;s USECON database.
Not only were total sales down in September, but every major store group saw lower sales, except for stores and gas stations. Drug stores, more formally known as &quot;health &amp; personal care stores&quot;, were up 0.4%, and gas stations, 0.1%. [This latter seems odd, in view of falling gasoline prices, but it seems to be a seasonal phenomenon; sales not seasonally adjusted were down 7.8%, while September&#39;s seasonal factor falls 8.1%.]<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081015c.jpg" width="353">
Among other major store groups, the biggest decline was at auto dealers, which saw a 3.8% plunge after their brief recovery in August, which itself was revised a bit lower. Furniture stores and electronics &amp; appliance stores continued their steep downtrends, losing 2.3% and 1.5%, respectively. Furniture sales were off 10.7% from a year ago, their 13th consecutive year-on-year decline.
Individual store reports made a week ago indicated that discounters had done better than full-price retailers. This was evident in today&#39;s data in the comparative performance of general merchandise stores as a whole, which were off 0.4%, and mainline department stores down 1.5%. The subcategory we might call &quot;discounters&quot;, that is, the whole general merchandise group less the department stores, rose 0.1% (see second graph). This isn&#39;t great, but it is in fact better than other segments.
Other noteworthy sectors include restaurants, down 0.5% in September, and nonstore retailers (mostly electronic shopping), down 0.8%. This latter group, as Tom Moeller has highlighted here before, has been weakening. A month ago, he reported it down 3.9% annualized from three months before; the comparable number this month is 10.7%! This category also includes fuel oil dealers, so falling oil prices could be pulling it down. This level of detail won&#39;t be published until next month&#39;s release.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</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"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM">Retail Sales &amp; Food Services</a> (%)</td>
<td>-1.2</td>
<td>-0.5</td>
<td>-0.6</td>
<td>-1.0</td>
<td>4.0</td>
<td>5.8</td>
<td>6.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>-0.6</td>
<td>-0.9</td>
<td>0.1</td>
<td>3.6</td>
<td>4.4</td>
<td>6.8</td>
<td>7.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Less Gasoline</td>
<td>-0.7</td>
<td>-0.6</td>
<td>0.1</td>
<td>1.6</td>
<td>4.1</td>
<td>6.2</td>
<td>6.4</td>
</tr>
</tbody>
</table>
</body>
</html>

Retail sales fell 1.2% last month, the Commerce Department reported this morning. Both August and July sales were revised lower, August to a 0.9% decrease from 0.7% reported last month, and July to a 0.1% increase from 0.3% in last [...]

U.S. Retail Sales Drop 1.2% in September

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081015a.jpg" align="left" border="0" height="265" width="353">
The PPI emitted mixed signals in September. The headline
finished goods PPI dropped a sharp 0.4% as energy prices fell. But the
core PPI for consumer goods rose by a sharp 0.5% an uncomfortable
harbinger for the CPI core that is due for release tomorrow. 
 

Wholesale food prices were tempered in September rising by
just 0.2%. Food in general has seen its inflation profile lowered as
its Yr/yr pace of 8.1% far exceed its three-month pace of 3.1%. 
 

Finished energy prices are off sharply, dropping by 2.9% in
the month. They are also off at a 16.7% annual rate in the quarter.
That is the constructive side of the inflation trend. But the Fed looks
harder at core inflation and there trends are still worsening. 
 

But for core consumer goods Yr/Yr inflation has gone from 4.4%
over 12 months to 5.1% over six months to 5.3% over three months. That
is an uncomfortable trend. 
 

However, the weakness in the economy and the ongoing financial
crisis will put this PPI on the back burner. The Fed is not giving up
on fighting inflation instead it knows that economic conditions such as
these will snuff out inflation without special action by the central
bank. Extreme economic weakness does that. 
 

For now the economy picture is mess. The economy is weakening
fast. The financial sector is in shambles and inflation is still
accelerating and moving out over the Fed's comfort zone. But we know
that is just a snap shot of an ever changing environment. In fact
inflation is about to be extinguished by the economic weakness that
appears to be getting worse. Meanwhile, the Fed and the Treasury have
made great strides in trying to contain the financial unraveling. Their
attempt at containment appears to be a success &#8211; so far. Aid for the
ailing economy has not yet moved up to the actionable stage but
Congress is making plans for a stimulus plan. This is one of those
times that you must look at the indicators with a broader perspective.
At another time this PPI report would be viewed as a bad PPI and as
trouble for the Fed. But in this environment the report will not gather
headlines &#8211; hardly even footnotes. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col">Key Trends
In Producer Prices </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Sep-08</td>
<td colspan="4">PPI Trends By Type Of Good</td>
<td>CHANGE</td>
</tr>
<tr class="grey5">
<td class="firstcol">PPI</td>
<td>1Mo:M/M</td>
<td>3-Mo:ar</td>
<td>6-Mo:ar</td>
<td>1-Yr</td>
<td>Yr-Ago</td>
<td>Y/Y</td>
</tr>
<tr class="grey4">
<td class="firstcol">Total PPI</td>
<td>-0.4%</td>
<td>-0.4%</td>
<td>6.8%</td>
<td>8.7%</td>
<td>4.4%</td>
<td>4.3%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Finished Consumer Goods</td>
<td>-0.6%</td>
<td>-2.3%</td>
<td>7.5%</td>
<td>10.2%</td>
<td>5.2%</td>
<td>5.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Consumer Foods</td>
<td>0.2%</td>
<td>3.1%</td>
<td>6.1%</td>
<td>8.1%</td>
<td>5.8%</td>
<td>2.3%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Finished Consumer Goods Excl
Foods</td>
<td>-0.9%</td>
<td>-4.2%</td>
<td>8.0%</td>
<td>11.1%</td>
<td>5.0%</td>
<td>6.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Nondurables less Food</td>
<td>-1.3%</td>
<td>-6.8%</td>
<td>9.7%</td>
<td>14.1%</td>
<td>7.0%</td>
<td>7.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Consumer Nondurable Goods excl
Food &amp; Energy</td>
<td>0.5%</td>
<td>6.8%</td>
<td>6.4%</td>
<td>5.8%</td>
<td>3.4%</td>
<td>2.4%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Durable Goods</td>
<td>0.4%</td>
<td>3.5%</td>
<td>3.5%</td>
<td>2.5%</td>
<td>0.8%</td>
<td>1.7%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Finished Core Consumer
Goods</td>
<td>0.5%</td>
<td>5.3%</td>
<td>5.1%</td>
<td>4.4%</td>
<td>2.2%</td>
<td>2.2%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Capital Goods</td>
<td>0.5%</td>
<td>5.6%</td>
<td>4.8%</td>
<td>3.7%</td>
<td>1.6%</td>
<td>2.1%</td>
</tr>
<tr class="grey2">
<td class="firstcol">MFG Industries</td>
<td>0.5%</td>
<td>6.3%</td>
<td>5.8%</td>
<td>4.3%</td>
<td>1.8%</td>
<td>2.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Non-MFG Industries</td>
<td>0.5%</td>
<td>5.4%</td>
<td>4.4%</td>
<td>3.5%</td>
<td>1.5%</td>
<td>2.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Core PPI</td>
<td>0.4%</td>
<td>5.4%</td>
<td>4.9%</td>
<td>4.1%</td>
<td>2.0%</td>
<td>2.1%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Memo: Finished Energy</td>
<td>-2.9%</td>
<td>-16.7%</td>
<td>12.4%</td>
<td>22.3%</td>
<td>10.3%</td>
<td>11.9%</td>
</tr>
</tbody>
</table>
</body></html>

The PPI emitted mixed signals in September. The headline finished goods PPI dropped a sharp 0.4% as energy prices fell. But the core PPI for consumer goods rose by a sharp 0.5% an uncomfortable harbinger for the CPI core that is due [...]

PPI Still Troublesome

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081015b.jpg" align="left" border="0" height="265" width="353">
Retail sales fell 1.2% last month, the Commerce Department
reported this morning. Both August and July sales were revised lower,
August to a 0.9% decrease from 0.7% reported last month, and July to a
0.1% increase from 0.3% in last month's data. This puts the entire Q3
down at a 4% annual rate from Q2. The Action Economics survey shown in
Haver's AS1REPNA database looked for a 1.0% decline
in September. All the retail sales data are contained in Haver's USECON
database.
Not only were total sales down in September, but every major
store group saw lower sales, except for stores and gas stations. Drug
stores, more formally known as "health &amp; personal care stores",
were up 0.4%, and gas stations, 0.1%. [This latter seems odd, in view
of falling gasoline prices, but it seems to be a seasonal phenomenon;
sales not seasonally adjusted were down 7.8%, while September's
seasonal factor falls 8.1%.]<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081015c.jpg" align="right" border="0" height="265" width="353">
Among other major store groups, the biggest decline was at
auto dealers, which saw a 3.8% plunge after their brief recovery in
August, which itself was revised a bit lower. Furniture stores and
electronics &amp; appliance stores continued their steep
downtrends, losing 2.3% and 1.5%, respectively. Furniture sales were
off 10.7% from a year ago, their 13th consecutive year-on-year decline.
Individual store reports made a week ago indicated that
discounters had done better than full-price retailers. This was evident
in today's data in the comparative performance of general merchandise
stores as a whole, which were off 0.4%, and mainline department stores
down 1.5%. The subcategory we might call "discounters", that is, the
whole general merchandise group less the department stores, rose 0.1%
(see second graph). This isn't great, but it is in fact better than
other segments.
Other noteworthy sectors include restaurants, down 0.5% in
September, and nonstore retailers (mostly electronic shopping), down
0.8%. This latter group, as Tom Moeller has highlighted here before,
has been weakening. A month ago, he reported it down 3.9% annualized
from three months before; the comparable number this month is 10.7%!
This category also includes fuel oil dealers, so falling oil prices
could be pulling it down. This level of detail won't be published until
next month's release.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</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"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM">Retail
Sales &amp; Food Services</a> (%)</td>
<td>-1.2</td>
<td>-0.5</td>
<td>-0.6</td>
<td>-1.0</td>
<td>4.0</td>
<td>5.8</td>
<td>6.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding
Autos</td>
<td>-0.6</td>
<td>-0.9</td>
<td>0.1</td>
<td>3.6</td>
<td>4.4</td>
<td>6.8</td>
<td>7.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Less Gasoline</td>
<td>-0.7</td>
<td>-0.6</td>
<td>0.1</td>
<td>1.6</td>
<td>4.1</td>
<td>6.2</td>
<td>6.4</td>
</tr>
</tbody>
</table>
U.S. Budget Deficit Widens to
Record&nbsp;in Fiscal 2008 
by <a href="/comment/Stone.html">Carol
Stone</a> October 15, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081015d.jpg" align="left" border="0" height="265" width="353">
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 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's marginal 1.2%. Receipts were 17.8%
of GDP, down from 18.8% and outlays rose to 21.0%.
The Government's financial data are available in Haver's USECON
database, with extensive detail available in the specialized GOVFIN.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081015e.jpg" align="right" border="0" height="265" width="353">
Net revenues last fiscal year fell 1.7%, reversing FY07's 6.7%
increase. Both individual income taxes and corporate taxes fell, the
former by 1.5% and the latter, 17.8%. The "stimulus" 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'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
"just" 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>
PPI Still Troublesome 
by <a href="/comment/Brusca.html">Robert
Brusca</a> October 15, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081015a.jpg" align="left" border="0" height="265" width="353">
The PPI emitted mixed signals in September. The headline
finished goods PPI dropped a sharp 0.4% as energy prices fell. But the
core PPI for consumer goods rose by a sharp 0.5% an uncomfortable
harbinger for the CPI core that is due for release tomorrow. 
 

Wholesale food prices were tempered in September rising by
just 0.2%. Food in general has seen its inflation profile lowered as
its Yr/yr pace of 8.1% far exceed its three-month pace of 3.1%. 
 

Finished energy prices are off sharply, dropping by 2.9% in
the month. They are also off at a 16.7% annual rate in the quarter.
That is the constructive side of the inflation trend. But the Fed looks
harder at core inflation and there trends are still worsening. 
 

But for core consumer goods Yr/Yr inflation has gone from 4.4%
over 12 months to 5.1% over six months to 5.3% over three months. That
is an uncomfortable trend. 
 

However, the weakness in the economy and the ongoing financial
crisis will put this PPI on the back burner. The Fed is not giving up
on fighting inflation instead it knows that economic conditions such as
these will snuff out inflation without special action by the central
bank. Extreme economic weakness does that. 
 

For now the economy picture is mess. The economy is weakening
fast. The financial sector is in shambles and inflation is still
accelerating and moving out over the Fed's comfort zone. But we know
that is just a snap shot of an ever changing environment. In fact
inflation is about to be extinguished by the economic weakness that
appears to be getting worse. Meanwhile, the Fed and the Treasury have
made great strides in trying to contain the financial unraveling. Their
attempt at containment appears to be a success &#8211; so far. Aid for the
ailing economy has not yet moved up to the actionable stage but
Congress is making plans for a stimulus plan. This is one of those
times that you must look at the indicators with a broader perspective.
At another time this PPI report would be viewed as a bad PPI and as
trouble for the Fed. But in this environment the report will not gather
headlines &#8211; hardly even footnotes. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup><thead><tr>
<th colspan="7" scope="col">Key Trends
In Producer Prices </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Sep-08</td>
<td colspan="4">PPI Trends By Type Of Good</td>
<td>CHANGE</td>
</tr>
<tr class="grey5">
<td class="firstcol">PPI</td>
<td>1Mo:M/M</td>
<td>3-Mo:ar</td>
<td>6-Mo:ar</td>
<td>1-Yr</td>
<td>Yr-Ago</td>
<td>Y/Y</td>
</tr>
<tr class="grey4">
<td class="firstcol">Total PPI</td>
<td>-0.4%</td>
<td>-0.4%</td>
<td>6.8%</td>
<td>8.7%</td>
<td>4.4%</td>
<td>4.3%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Finished Consumer Goods</td>
<td>-0.6%</td>
<td>-2.3%</td>
<td>7.5%</td>
<td>10.2%</td>
<td>5.2%</td>
<td>5.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Consumer Foods</td>
<td>0.2%</td>
<td>3.1%</td>
<td>6.1%</td>
<td>8.1%</td>
<td>5.8%</td>
<td>2.3%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Finished Consumer Goods Excl
Foods</td>
<td>-0.9%</td>
<td>-4.2%</td>
<td>8.0%</td>
<td>11.1%</td>
<td>5.0%</td>
<td>6.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Nondurables less Food</td>
<td>-1.3%</td>
<td>-6.8%</td>
<td>9.7%</td>
<td>14.1%</td>
<td>7.0%</td>
<td>7.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Consumer Nondurable Goods excl
Food &amp; Energy</td>
<td>0.5%</td>
<td>6.8%</td>
<td>6.4%</td>
<td>5.8%</td>
<td>3.4%</td>
<td>2.4%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Durable Goods</td>
<td>0.4%</td>
<td>3.5%</td>
<td>3.5%</td>
<td>2.5%</td>
<td>0.8%</td>
<td>1.7%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Finished Core Consumer
Goods</td>
<td>0.5%</td>
<td>5.3%</td>
<td>5.1%</td>
<td>4.4%</td>
<td>2.2%</td>
<td>2.2%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Capital Goods</td>
<td>0.5%</td>
<td>5.6%</td>
<td>4.8%</td>
<td>3.7%</td>
<td>1.6%</td>
<td>2.1%</td>
</tr>
<tr class="grey2">
<td class="firstcol">MFG Industries</td>
<td>0.5%</td>
<td>6.3%</td>
<td>5.8%</td>
<td>4.3%</td>
<td>1.8%</td>
<td>2.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Non-MFG Industries</td>
<td>0.5%</td>
<td>5.4%</td>
<td>4.4%</td>
<td>3.5%</td>
<td>1.5%</td>
<td>2.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Core PPI</td>
<td>0.4%</td>
<td>5.4%</td>
<td>4.9%</td>
<td>4.1%</td>
<td>2.0%</td>
<td>2.1%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Memo: Finished Energy</td>
<td>-2.9%</td>
<td>-16.7%</td>
<td>12.4%</td>
<td>22.3%</td>
<td>10.3%</td>
<td>11.9%</td>
</tr>
</tbody>
</table>
Japanese IP Dives &#8211; Back on Trend
to Lower Results 
by <a href="/comment/Brusca.html">Robert
Brusca</a> October 15, 2008


<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>

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081014a.jpg" width="353">
According to the International Council of Shopping Centers chain store sales rose last week, but they still have been quite anemic. The 0.7% increase was the first of any magnitude since late July. Since then weekly sales have been either down, unchanged or up just 0.1%. The level of sales in early October was 0.6% below the September average which fell 1.9% from August.
The level of sales during the latest week was near the lowest since December of last year.
During the last ten years there has been a 45% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
The chain store sales figures are available in Haver&#39;s SURVEYW database.
Credit Card Debt and Payment Use from the Federal Reserve Bank of Boston is available <a href="http://www.bos.frb.org/economic/wp/wp2008/wp0802.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">10/11/08</th>
<th scope="col">10/04/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>484.7</td>
<td>481.5</td>
<td>1.0%</td>
<td>2.8%</td>
<td>3.3%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>


</html>

According to the International Council of Shopping Centers chain store sales rose last week, but they still have been quite anemic. The 0.7% increase was the first of any magnitude since late July. Since then weekly sales have been [...]

U.S. Chain Store Sales Rose

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081014b.jpg" width="353">
According to the National Federation of Independent Business (NFIB), small business optimism rose another 2.0% during September to the highest level since February. The rise to an index level of 91.1 added to a gain of 3.3% during August.
During the last ten years there has been a 70% correlation between the level of the NFIB index and the two quarter change in real GDP.
The percent expecting the economy to improve rose again, last month to the highest level since late 2005.
The percentage planning to raise employment dipped slightly to 7%, still near the highest level since February. The percentage of respondents with one or more job openings improved to 18% which was the highest level since June. During the last ten years there has been a 71% correlation between the NFIB employment percentage and the y/y change in nonfarm payrolls.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081014c.jpg" width="353">
The percentage of firms actually raising prices fell to 20%, the lowest level since April. During the last ten years there has been a 64% correlation between the y/y change in the producer price index and the level of the NFIB price index. The percentage of firms planning to raise prices also fell further to 24% which was the least since February.
The largest, single most important problems seen by business were poor sales (20%), inflation (16%), insurance cost and availability (10%) and taxes (17%). The latter, however, still was reduced from 27% in early 2007.
About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.
The NFIB figures can be found in Haver&#39;s SURVEYS database.
The Federal Reserve and other central banks announce further measures to provide broad access to liquidity and funding to financial institutions. Visit the U.S. Federal Reserve site <a href="http://www.federalreserve.gov/newsevents/press/monetary/20081013a.htm"> here</a> for more info.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S7/@S7.HTM">Nat&#39;l Federation of Independent Business</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Small Business Optimism Index (1986=100)</td>
<td>92.9</td>
<td>91.1</td>
<td>-4.5%</td>
<td>96.7</td>
<td>98.9</td>
<td>101.6</td>
</tr>
</tbody>
</table>
</body>
</html>

According to the National Federation of Independent Business (NFIB), small business optimism rose another 2.0% during September to the highest level since February. The rise to an index level of 91.1 added to a gain of 3.3% during [...]

U.S. Small Business Optimism Rose Further

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081014b.jpg" width="353">
According to the National Federation of Independent Business (NFIB), small business optimism rose another 2.0% during September to the highest level since February. The rise to an index level of 91.1 added to a gain of 3.3% during August.
During the last ten years there has been a 70% correlation between the level of the NFIB index and the two quarter change in real GDP.
The percent expecting the economy to improve rose again, last month to the highest level since late 2005.
The percentage planning to raise employment dipped slightly to 7%, still near the highest level since February. The percentage of respondents with one or more job openings improved to 18% which was the highest level since June. During the last ten years there has been a 71% correlation between the NFIB employment percentage and the y/y change in nonfarm payrolls.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081014c.jpg" width="353">
The percentage of firms actually raising prices fell to 20%, the lowest level since April. During the last ten years there has been a 64% correlation between the y/y change in the producer price index and the level of the NFIB price index. The percentage of firms planning to raise prices also fell further to 24% which was the least since February.
The largest, single most important problems seen by business were poor sales (20%), inflation (16%), insurance cost and availability (10%) and taxes (17%). The latter, however, still was reduced from 27% in early 2007.
About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.
The NFIB figures can be found in Haver&#39;s SURVEYS database.
The Federal Reserve and other central banks announce further measures to provide broad access to liquidity and funding to financial institutions. Visit the U.S. Federal Reserve site <a href="http://www.federalreserve.gov/newsevents/press/monetary/20081013a.htm"> here</a> for more info.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S7/@S7.HTM">Nat&#39;l Federation of Independent Business</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Small Business Optimism Index (1986=100)</td>
<td>92.9</td>
<td>91.1</td>
<td>-4.5%</td>
<td>96.7</td>
<td>98.9</td>
<td>101.6</td>
</tr>
</tbody>
</table>
U.S. Chain Store Sales Rose 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 14, 2008


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081014a.jpg" width="353">
According to the International Council of Shopping Centers chain store sales rose last week, but they still have been quite anemic. The 0.7% increase was the first of any magnitude since late July. Since then weekly sales have been either down, unchanged or up just 0.1%. The level of sales in early October was 0.6% below the September average which fell 1.9% from August.
The level of sales during the latest week was near the lowest since December of last year.
During the last ten years there has been a 45% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
The chain store sales figures are available in Haver&#39;s SURVEYW database.
Credit Card Debt and Payment Use from the Federal Reserve Bank of Boston is available <a href="http://www.bos.frb.org/economic/wp/wp2008/wp0802.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">10/11/08</th>
<th scope="col">10/04/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>484.7</td>
<td>481.5</td>
<td>1.0%</td>
<td>2.8%</td>
<td>3.3%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
Sentiment in France and Germany in the Developing Financial Crisis 
by <a href="/comment/Curley.html">Louise Curley</a> October 14. 2008


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081014d.jpg" width="353">
The September reading of the Bank of France&#39;s monthly business survey in industry and the October reading of the ZEW indicator in Germany give some indication of the mood of the French and the Germans as financial conditions worsened world wide.
The indicator of sentiment among French businessmen fell 6.82 points in September to 86.97, 13% below its long term average of 100, but still some 12 points above the low of 74.97 reached in July, 1993. (See the first chart.) The French survey was taken during the first five working days of September when worse news was yet to come.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081014e.jpg" width="353">
The ZEW survey was conducted in late September through October 13. According to institutional investors and analysts in Germany, macroeconomic expectations, which had become less negative in August and September, fell sharply in October. The excess of pessimists over optimists increased 21.9 points to 63.0%, just below the all time high of 63.9% in July of this year. The ZEW measure of current conditions dropped 34.6 points in October, even more sharply than the measure of expectations. The measure of current conditions had been positive through July of this year. The ZEW measures of current conditions and of expectations are shown in the second chart.
The ZEW press release noted: &quot;A separate analysis was made for 39 answers that came in on October 13th, the day on which the German Government decided in favour of a rescue package for the German banking sector. It shows that the decline of the economic expectations for Germany was less pronounced after the decision on the rescue package was made.&quot;.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">MEASURES OF SENTIMENT&nbsp;&nbsp;</th>
<th scope="col">Oct 08</th>
<th scope="col">Sep 08&nbsp;</th>
<th scope="col">Aug 08&nbsp;</th>
<th scope="col">Jul 08&nbsp;</th>
<th scope="col">Jun 08&nbsp;</th>
<th scope="col">May 08&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Bank of France Business Survey</td>
<td></td>
<td>86.97</td>
<td>93.79</td>
<td>91.58</td>
<td>94.95</td>
<td>95.88</td>
</tr>
<tr>
<td class="firstcol">ZEW</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Macro Expectations (% balance)</td>
<td>-63.0</td>
<td>-10.1</td>
<td>-55.5</td>
<td>-63.9</td>
<td>-52.4</td>
<td>-41.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Current Conditions (% balance)</td>
<td>-35.9</td>
<td>-1.0</td>
<td>-9.2</td>
<td>17.0</td>
<td>37.6</td>
<td>38.6</td>
</tr>
</tbody>
</table>


</html>

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081013a.jpg" align="left" border="0" height="265" width="353">
China chalked up another monthly record surplus on its trade
in goods in September, rising $3.8 billion to $28.8 billion. Exports
increased by $1.8 billion and imports declined by $2.0 billion, as
shown in the first chart. So far this year, the surplus on trade is
almost 4% below the comparable period of last year.
Not only has the surplus shown some moderate signs of
diminishing this year, but there continue to be changes in the pattern
of trade. Trade by country is not yet available for September, but the
January through August data for this year show that exports to North
America, largely the U. S., have increased over the comparable period
of last year by the lowest percentage among the broad areas of the
world. Exports to North America were up 10.5%; those to Asia, Oceania
and Europe were up 20 to 30% and those to Africa and Latin America were
up over 40% as can be seen in the table below.
Not only are the increases in China's exports to North America
lower than those in other areas of the world, China's imports from
North America show the smallest increase, 22.3%, compared with 25.6%
from Asia and the Middle East and 29.4% from Europe. Imports from
Africa, Latin America and Oceania were up 83.5%, 50.9% and 48.1%
respectively.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">CHINA
TRADE (Jan-Aug, bil. US$)</th>
<th colspan="3" scope="col">Exports
</th>
<th colspan="3" scope="col">Imports
</th>
<th colspan="3" scope="col">Balance
</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"></td>
<td>2008&nbsp;</td>
<td>2007&nbsp;</td>
<td>% Chg</td>
<td>2008</td>
<td>2007&nbsp;&nbsp;</td>
<td>% Chg</td>
<td>2008&nbsp;</td>
<td>2007&nbsp;</td>
<td>Chg %</td>
</tr>
<tr>
<td class="firstcol">Asia and Middle East</td>
<td>788.3</td>
<td>357.8</td>
<td>22.4</td>
<td>488.8</td>
<td>389.3</td>
<td>25.6</td>
<td>-50.7</td>
<td>-31.5</td>
<td>-19.2</td>
</tr>
<tr>
<td class="firstcol">Africa</td>
<td>32.8</td>
<td>23.4</td>
<td>40.2</td>
<td>41.1</td>
<td>22.4</td>
<td>83.5</td>
<td>-8.3</td>
<td>1.0</td>
<td>-9.3</td>
</tr>
<tr>
<td class="firstcol">Europe</td>
<td>225.2</td>
<td>178.9</td>
<td>25.9</td>
<td>115.4</td>
<td>89.2</td>
<td>29.4</td>
<td>109.8</td>
<td>89.7</td>
<td>20.1</td>
</tr>
<tr>
<td class="firstcol">Latin America</td>
<td>46.7</td>
<td>31.6</td>
<td>47.8</td>
<td>48.9</td>
<td>32.4</td>
<td>50.9</td>
<td>-2.2</td>
<td>-0.8</td>
<td>-1.4</td>
</tr>
<tr>
<td class="firstcol">North America</td>
<td>178.3</td>
<td>161.3</td>
<td>10.5</td>
<td>64.2</td>
<td>52.5</td>
<td>22.3</td>
<td>114.1</td>
<td>108.8</td>
<td>5.3</td>
</tr>
<tr>
<td class="firstcol">Oceania</td>
<td>16.5</td>
<td>12.7</td>
<td>29.9</td>
<td>27.1</td>
<td>18.3</td>
<td>48.1</td>
<td>-10.6</td>
<td>-5.6</td>
<td>-5.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Total&nbsp;</td>
<td>937.6</td>
<td>765.7</td>
<td>22.5</td>
<td>785.5</td>
<td>604.1</td>
<td>30.0</td>
<td>152.1</td>
<td>161.6</td>
<td>-9.5</td>
</tr>
</tbody>
</table>
 UK Inflation by <a href="/comment/Brusca.html">Robert
Brusca</a> October 13. 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081013b.jpg" align="left" border="0" height="265" width="353">
UK headline inflation turned lower for the second month
running. Over three months
headline PPI inflation is lower at a 1.7% annual rate. It is still up
by 8.6% Yr./Yr. The lagged
core rate was up at a 2.9% rate over three-months in August. That
compared to +6.3% Yr/Yr. So the short horizon movement in inflation is
more agreeable. Yet the history of inflation is entrenched with a rate
that is too high permit any complacency over the trajectory of current
rates. Still the three month result is encouraging and so are the last
few months of the headline rate.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> UK PPI</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">%m/m</td>
<td colspan="4">%-SAAR</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-moY-Ago</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>-0.2%</td>
<td>-0.5%</td>
<td>0.3%</td>
<td>-1.7%</td>
<td>7.2%</td>
<td>8.6%</td>
<td>2.6%</td>
</tr>
<tr>
<td class="firstcol">Core</td>
<td>#N/A</td>
<td>-0.1%</td>
<td>0.4%</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>2.3%</td>
</tr>
<tr>
<td class="firstcol">Lagged Core</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>2.9%</td>
<td>7.2%</td>
<td>6.3%</td>
<td>2.2%</td>
</tr>
<tr class="grey1">
<td colspan="7" class="firstcol">Core: ex
food beverages, tobacco
&amp; Petroleum</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body></html>

China chalked up another monthly record surplus on its trade in goods in September, rising $3.8 billion to $28.8 billion. Exports increased by $1.8 billion and imports declined by $2.0 billion, as shown in the first chart. So far this [...]

China's Trade Balance and theChanging Pattern of Trade

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081010g.jpg" align="left" border="0" height="265" width="353">
The OECD Leading Economic Indicators (trend adjusted cyclical
indicators) are continuing to show distress. They point to continuing
declines in the economies of the key OECD countries and regions. This
report is updated through August and so the side it predicts pre-dates
the financial chaos that has since gripped the markets. The OECD likes
to look at six month changes in the indices to get the &#8216;best signal&#8217;.
On that basis most main indicators are not only falling but the rate of
their fall is accelerating. Europe has now moved to the fore in terms
of the pace of the unraveling among major countries and regions. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="5" scope="col"> OECD
Trend-restored leading Indicators</th>
</tr>
<tr><th colspan="5">Growth progression-SAAR</th>
</tr>
</thead>
<tbody>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>3-Mos</td>
<td>6-Mos</td>
<td>12-Mos</td>
<td>Yr-Ago</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD</td>
<td>-5.1%</td>
<td>-4.3%</td>
<td>-3.1%</td>
<td>1.2%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD7</td>
<td>-7.1%</td>
<td>-4.8%</td>
<td>-4.1%</td>
<td>0.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD Europe</td>
<td>-10.1%</td>
<td>-7.7%</td>
<td>-4.9%</td>
<td>0.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD Japan</td>
<td>-5.0%</td>
<td>-2.2%</td>
<td>-0.5%</td>
<td>-3.1%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD US</td>
<td>-4.0%</td>
<td>-3.0%</td>
<td>-4.0%</td>
<td>1.8%</td>
</tr>
<tr class="grey1">
<td colspan="5" class="firstcol">Six
month readings at 6-Mo
Intervals:</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Recent six</td>
<td>6-Mo Ago</td>
<td>12-Mo Ago</td>
<td>18-Mo Ago</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD</td>
<td>-4.3%</td>
<td>-1.8%</td>
<td>0.0%</td>
<td>2.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD7</td>
<td>-4.8%</td>
<td>-3.3%</td>
<td>-0.2%</td>
<td>1.1%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD Europe</td>
<td>-7.7%</td>
<td>-2.0%</td>
<td>-0.5%</td>
<td>1.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD Japan</td>
<td>-2.2%</td>
<td>1.3%</td>
<td>-7.2%</td>
<td>1.1%</td>
</tr>
<tr class="grey2">
<td class="firstcol">OECD US</td>
<td>-3.0%</td>
<td>-5.0%</td>
<td>2.2%</td>
<td>1.5%</td>
</tr>
<tr class="grey2">
<td colspan="5" class="firstcol">Slowdowns
indicated by BOLD RED</td>
</tr>
</tbody>
</table>
</body></html>

The OECD Leading Economic Indicators (trend adjusted cyclical indicators) are continuing to show distress. They point to continuing declines in the economies of the key OECD countries and regions. This report is updated through August [...]

OECD LEIs Signal Further Weakness

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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

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.

In the **establishment survey**, private-sector employment rose 167,000 (1.2% y/y) after a 170,000 March increase. Factory sector jobs edged 1,000 lower (-0.7% y/y) following a 3,000 gain. Construction sector employment increased 11,000 (1.7% y/y), after rising 7,000 in March.

Private service-producing sector employment increased 156,000 (1.4% y/y) in April after improving 161,000 in March. Increases varied greatly amongst service sector categories. Private education & health sector employment rose 70,000 (3.4% y/y) last month following a 74,000 March increase. Leisure & hospitality employment rose 24,000 (1.3% y/y) after a 38,000 gain. Trade, transportation & utilities rose 32,000 (0.9% y/y) in April following a 25,000 March increase. Professional & business services employment rose 17,000 (-0.1% y/y) following a 3,000 rise while temporary help employment rose 3,600 (-3.9% y/y) following a 2,700 decline. Financial activities employment improved 14,000 (1.2% y/y) after a 6,000 gain. The number of information sector jobs held steady (-0.4% y/y) last month after falling 2,000 in March.

Government sector payrolls rose 10,000 (1.3% y/y) last month after increasing 15,000 in March. The number of local government jobs increased 13,000 (1.4% y/y) following a 17,000 gain. State government employment rose 6,000 (1.8% y/y) following a 2,000 March increase but federal government payrolls fell 9,000 (-0.3% y/y), the third consecutive monthly decline.

Private-sector average hourly earnings rose 0.2% (3.8% y/y) in April after increasing 0.3% in March. Earnings in the goods-producing sector eased 0.1% (+4.0% y/y) following a 0.6% gain. Earnings in construction rose 0.3% (3.6% y/y), after a 0.2% rise but factory sector earnings declined 0.3% (+4.3% y/y) after surging 0.8% in March. In the private services-sector, earnings rose 0.2% (3.7% y/y) in April for the third straight month. Information sector pay increased 1.0% (5.2% y/y) last month after easing 0.1%, and financial activities earnings rose 0.5% (4.3% y/y) for the second straight month. Trade, transportation & utilities sector pay increased 0.4% (3.4% y/y) after 0.6%. Professional & business sector earnings increased 0.1% (4.4% y/y) after 0.2% in March. Leisure & hospitality earnings held steady (+3.8% y/y) following a 0.6% March increase.

250502C5.jpg

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The length of the average workweek held steady at 34.3 hours in April. The workweek in the goods-producing sector eased to 39.8 hours from 40.0 hours. The construction sector average workweek eased to 39.0 hours from 39.3 hours while the factory sector workweek moved lower to 40.0 hours from 40.2. The average workweek in the private service sector held at 33.2 hours. Professional & business service hours fell to 36.3 hours from 36.4 while trade, transportation & utilities hours improved to 34.3 from 34.0 hours. Private education hours rose slightly to 32.8, but leisure & hospitality held steady at 25.5 hours.

In the **household survey**, the unemployment rate held at 4.2% in April as employment rose 436,000 and the size of the labor force increased 518,000. The labor force participation rate edged up to 62.6% last month from 62.5% in March. It remained below the high of 63.3% early in 2020. The rate for teenagers declined to 36.9%. For workers aged 20-24, the rate held steady at 72.1%, up from 71.8% six months earlier. For workers aged 25-54 the rate rose to 83.6%, a five-month high. For individuals 55 and over, the rate improved to 38.4% in April.

The employment/population ratio for all workers in April rose to 60.0%. It remained below the peak reading of 61.1% in February, 2020 just prior to the pandemic.

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.

250502X5.jpg

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- 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

Winnie Tapasanun

250502F32.jpg

250502G32.jpg

Total factory orders rose a slightly less-than-expected 4.3% m/m in March after rises of 0.5% in February and 1.8% in January, data from the U.S. Census Bureau showed. A 4.5% m/m March increase had been expected in the Action Economics Forecast Survey. The March reading was the third successive monthly rise and the largest since July 2024. The year-on-year rate accelerated to 6.0% in March, the highest since November 2022, from 2.3% in February. Notably, orders for nondefense aircraft & parts soared 139.0% in March following a 7.4% drop in February and a 92.9% surge in January. Factory orders excluding defense rose 4.8% (5.9% y/y), the largest of three straight m/m/ rises, after a 0.4% February increase. Factory orders excluding the transportation sector fell 0.2% (+1.1% y/y), the first m/m fall since August, after rising 0.3% in February, January and December.

Durable goods orders jumped 9.2% (11.9% y/y) in March, the third consecutive m/m gain and the biggest since July 2024, on top of a 0.8% increase in February (matching +9.2% m/m in the advance report on April 24). The March jump reflected m/m orders increases of 27.1% (the largest m/m surge since July 2024; 31.2% y/y) in transportation equipment, 1.1% (4.9% y/y) in primary metals, 0.5% (-0.4% y/y) in furniture & related products, 0.1% (2.5% y/y) in fabricated metal products, and 0.1% (0.9% y/y) in machinery. To the downside, durable goods orders for computers & electronic products (-1.3%; +2.7% y/y) and electrical equipment, appliances & components (-1.0%; +4.2% y/y) declined m/m in March.

Nondurable goods orders, which equal nondurable goods shipments, fell 0.3% (+0.4% y/y) in March, the first m/m fall since September, after a 0.1% uptick in February. The March fall reflected m/m drops of 2.4% (-9.3% y/y) in petroleum & coal products and 0.9% (-1.2% y/y) in apparel. To the upside, the following nondurable goods shipments rose m/m in March: leather & allied products (1.5%; 8.6% y/y), beverage & tobacco products (0.7%; 5.8% y/y), paper products (0.6%; 2.3% y/y), printing (0.3%; 3.8% y/y), textile mills (0.3%; 0.8% y/y), chemical products (0.2%; 5.4% y/y), plastics & rubber products (0.2%; 0.4% y/y), food products (0.1%; 1.8% y/y), and textile products (0.1%; 2.1% y/y).

Total shipments slipped 0.1% (+2.0% y/y) in March, the first m/m easing since October, after a 0.7% increase in February. Excluding transportation, shipments were virtually unchanged m/m (+1.1% y/y) in March following six straight m/m gains. Shipments of durable goods industries inched up 0.1% (3.8% y/y) in March, the smallest of four consecutive m/m increases, after a 1.3% advance in February. This reflected m/m durable goods shipments rises of 1.2% (5.6% y/y) in primary metals, 0.9% (0.1% y/y) in furniture & related products, 0.8% (-0.2% y/y) in nonmetallic mineral products, 0.4% (0.0% y/y) in machinery, 0.3% (1.8% y/y) in fabricated metal products, 0.2% (4.5% y/y) in computers & electronic products, 0.2% (-2.1% y/y) in wood products, and 0.1% (3.0% y/y) in electrical equipment, appliances & components. In contrast, durable goods shipments for transportation equipment (-0.5%; +7.3% y/y) and miscellaneous durable goods (-0.1%; +2.9% y/y) fell m/m in March following three successive m/m increases.

Unfilled orders rose 2.0% (2.3% y/y) in March, up for the eighth month in nine, after a 0.1% uptick in February. Excluding transportation, unfilled orders dipped 0.1% (+0.7% y/y) in March, the first m/m easing since May 2024, after holding steady in February. Backlogs of durable goods rose 2.0% (2.3% y/y) in March, reflecting m/m rises of 3.1% (3.1% y/y) in transportation equipment and 0.2% (2.4% y/y) in electrical equipment, appliances & components.

Inventories edged up 0.1% (0.9% y/y) in March, the fifth straight m/m increase, after rising at the same pace in the prior two months. Excluding transportation, inventories were up 0.1% (0.5% y/y) in March, the fifth consecutive m/m rise. Durable goods inventories ticked up 0.1% (1.0% y/y) in March after holding steady in February and January; nondurable goods inventories edged up 0.1% (0.8% y/y), the fifth successive m/m increase.

The factory sector data are available in Haver’s **USECON** database. The Action Economics Forecast Survey is in the **AS1REPNA** database.

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- March manufacturers’ new orders +4.3% m/m; +6.0% y/y, highest since Nov. ’22.
- Durable goods orders (+9.2%) jump m/m, while nondurable goods orders (-0.3%) and shipments (-0.1%) decline m/m.
- Transportation equipt. orders +27.1% m/m, w/ a 139.0% m/m surge in nondefense aircraft & parts orders.
- Unfilled orders +2.0%, the eighth m/m rise in nine months.
- Inventories +0.1%, the fifth consecutive m/m increase.

U.S. Factory Orders Increase for the Third Straight Month in March

250502E.jpg

The global manufacturing data showed broad weakening in April as conditions weakened across more than half of the contributing early reporters in the S&P survey of manufacturing. Of the 18 early reporting countries, more than half of them showed deceleration over six months and 12 months. Over three months, only 8 of 18 showed deterioration and that's about as good as it got in this report. In the current month, month-to-month changes showed more than half of the survey contributors showing weaker results than the month before. In the S&P framework, manufacturing improved month-to-month for the U.S.; however, looking at sequential averages for the U.S., U.K., European monetary union, Canada, and Japan, we see a steady weakening and results over 12 months, over six months versus 12 months, and for three months versus 6 months. The highly developed countries are not doing particularly well.

Asian economies are also showing slight deterioration but doing a little better than the developed countries in general.

Only five of the 18 reporting countries have queue percentile standings in their data back to January 2021 that are above their medians. Readings at or above the 50% mark are at or above the median standing. Canada is showing the weakest manufacturing result on record over this span, in terms of its queue percentile standing which is at 0 in the current month.

I showed the graphic for the Baltic dry goods index in this report rather than statistics on the manufacturing PMI data because the Baltic data, which reflect shipping volume for dry goods - that is excluding things like oil - is weak but it's only in the neighborhood where it's been for some time. There has been a great deal of talk about how tariffs may have impacted trade flows, expected trade flows, shipping, shipping rates, and the like. However, according to the Baltic dry goods index, there isn't much evidence that this is occurring right now and affecting the current data. That may still lie ahead but for now it's not baked in the cake.

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Globally Manufacturing Weakens

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.

250501Z1.jpg

**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.

250501Z2.jpg

**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.

250501Z3.jpg

**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.

Economy in Brief: October 2008

Jump to:

U.S. Retail Sales Drop 1.2% in September

PPI Still Troublesome

U.S. Retail Sales Drop 1.2% in September

U.S. Chain Store Sales Rose

U.S. Small Business Optimism Rose Further

U.S. Small Business Optimism Rose Further

China's Trade Balance and theChanging Pattern of Trade

OECD LEIs Signal Further Weakness