Tom Moeller

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<img quot align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041110d.jpg" width="353">
Import prices rose jumped 1.5% last month versus the Consensus expectation for a 1.0% gain. All of the increase reflected higher oil prices while non-petroleum prices fell.
Non-petroleum import prices fell in October the first down month in a year. Capital goods prices fell 0.2% (-1.3% y/y) due to a 0.6% decline in computer prices (-6.5% y/y). Capital goods prices excluding computers rose 0.1% (+1.5% y/y). Non-auto consumer goods prices were again unchanged (+0.5% y/y), flat or down in each month since January.
Petroleum prices rose sharply as crude oil prices surged. The price of Brent crude oil in November has retraced its prior month&#39;s strength.
During the last ten years there has been a (negative) 55% correlation between the level of the dollar and the y/y change in nonpetroleum import prices.
Export prices jumped 0.7% as nonagricultural prices surged 1.0% (5.2% y/y). Prices of industrial supplies and materials jumped 2.4% (15.3% y/y).

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<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/USECON/@E8/@E807/@E807.HTM"> Import/Export Prices (NSA)</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>1.5%</td>
<td>0.5%</td>
<td>9.7%</td>
<td>2.9%</td>
<td>-2.5%</td>
<td>-3.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>11.7%</td>
<td>2.8%</td>
<td>67.6%</td>
<td>21.0%</td>
<td>3.0%</td>
<td>-17.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>-0.2%</td>
<td>0.0%</td>
<td>2.7%</td>
<td>1.1%</td>
<td>-2.4%</td>
<td>-1.5%</td>
</tr>
<tr>
<td class="firstcol">Export - All Commodities</td>
<td>0.7%</td>
<td>0.4%</td>
<td>4.5%</td>
<td>1.6%</td>
<td>-1.0%</td>
<td>-0.8%</td>
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</tbody>
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Import prices rose jumped 1.5% last month versus the Consensus expectation for a 1.0% gain. All of the increase reflected higher oil prices while non-petroleum prices fell. Non-petroleum import prices fell in October the first down [...]

Import Price Gain All Oil

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041110b.jpg" width="353">
The U.S. foreign trade deficit eased to $51.6B in September from the near record $53.5B in August which was revised shallower due to higher exports. Consensus expectations had been for a deficit of $54.0B.
Total exports grew 0.8% for the second month (+13.3% y/y). Goods exports jumped 1.4% (15.0% y/y) due to broad gains but higher exports of foods &amp; beverages stole the show with a 15.3% m/m gain (+4.0% y/y).
Non auto consumer goods exports also were strong for the second month with a 2.9% (+14.9% y/y) gain and capital goods export rose 1.0% (12.8% y/y).
Total imports fell for the second month in the last three, down 0.8% (17.1% y/y) as petroleum imports fell 4.3% (+42.8% y/y) despite a rise in crude oil prices to an average $37.62/bbl. Crude oil prices rose another $6.00/bbl in October but have since retraced all of that gain. The quantity of energy related petroleum products fell 9.7% in September -1.3% y/y).
Imports of non-petroleum goods rose 0.2% (15.3% y/y). In constant 2000$ nonpetroleum imports fell 0.1% (+15.5% y/y). Foods imports fell 2.6% (+3.7% y/y as did &quot;other&quot; imports by 5.9%. Capital goods imports rose 1.4% (17.6% y/y) but nonauto consumer goods imports fell 0.1% (+9.2% y/y, down for the fifth consecutive month.
The US trade deficit with China deepened to another record of $15.5.0B ($124.1B in 2003). Year over year, exports to China rose 36.6% and imports rose 24.6%. The US trade deficit with Japan eased to $6.1B ($66.0B in 2003) as did the deficit with the European Union which eased to $7.7B ($97.9B in 2003).
&quot;Reflections on China&#39;s Economy&quot; from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2004/el2004-31.pdf"> here</a>.
&quot;Exchange Rate Movements and the U.S. International Balance Sheet&quot; from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2004/el2004-25.pdf"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EE/@EE03/@EE03.HTM"> Foreign Trade</a></th>
<th scope="col">Sept</th>
<th scope="col">Aug</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
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<td class="firstcol">Trade Deficit</td>
<td>$51.6B</td>
<td>$53.5B</td>
<td>$41.3B(9/03)</td>
<td>$496.5B</td>
<td>$421.7B</td>
<td>$362.7B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports - Goods &amp; Services</td>
<td>0.8%</td>
<td>0.8%</td>
<td>13.3%</td>
<td>4.6%</td>
<td>-3.1%</td>
<td>-6.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports - Goods &amp; Services</td>
<td>-0.8%</td>
<td>2.6%</td>
<td>17.1%</td>
<td>8.5%</td>
<td>2.1%</td>
<td>-5.5%</td>
</tr>
</tbody>
</table>
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The U.S. foreign trade deficit eased to $51.6B in September from the near record $53.5B in August which was revised shallower due to higher exports. Consensus expectations had been for a deficit of $54.0B. Total exports grew 0.8% for [...]

A Shallower U.S. Trade Deficit in September

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041110b.jpg" width="353">
The U.S. foreign trade deficit eased to $51.6B in September from the near record $53.5B in August which was revised shallower due to higher exports. Consensus expectations had been for a deficit of $54.0B.
Total exports grew 0.8% for the second month (+13.3% y/y). Goods exports jumped 1.4% (15.0% y/y) due to broad gains but higher exports of foods &amp; beverages stole the show with a 15.3% m/m gain (+4.0% y/y).
Non auto consumer goods exports also were strong for the second month with a 2.9% (+14.9% y/y) gain and capital goods export rose 1.0% (12.8% y/y).
Total imports fell for the second month in the last three, down 0.8% (17.1% y/y) as petroleum imports fell 4.3% (+42.8% y/y) despite a rise in crude oil prices to an average $37.62/bbl. Crude oil prices rose another $6.00/bbl in October but have since retraced all of that gain. The quantity of energy related petroleum products fell 9.7% in September -1.3% y/y).
Imports of non-petroleum goods rose 0.2% (15.3% y/y). In constant 2000$ nonpetroleum imports fell 0.1% (+15.5% y/y). Foods imports fell 2.6% (+3.7% y/y as did &quot;other&quot; imports by 5.9%. Capital goods imports rose 1.4% (17.6% y/y) but nonauto consumer goods imports fell 0.1% (+9.2% y/y, down for the fifth consecutive month.
The US trade deficit with China deepened to another record of $15.5.0B ($124.1B in 2003). Year over year, exports to China rose 36.6% and imports rose 24.6%. The US trade deficit with Japan eased to $6.1B ($66.0B in 2003) as did the deficit with the European Union which eased to $7.7B ($97.9B in 2003).
&quot;Reflections on China&#39;s Economy&quot; from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2004/el2004-31.pdf"> here</a>.
&quot;Exchange Rate Movements and the U.S. International Balance Sheet&quot; from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2004/el2004-25.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EE/@EE03/@EE03.HTM"> Foreign Trade</a></th>
<th scope="col">Sept</th>
<th scope="col">Aug</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Trade Deficit</td>
<td>$51.6B</td>
<td>$53.5B</td>
<td>$41.3B(9/03)</td>
<td>$496.5B</td>
<td>$421.7B</td>
<td>$362.7B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports - Goods &amp; Services</td>
<td>0.8%</td>
<td>0.8%</td>
<td>13.3%</td>
<td>4.6%</td>
<td>-3.1%</td>
<td>-6.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports - Goods &amp; Services</td>
<td>-0.8%</td>
<td>2.6%</td>
<td>17.1%</td>
<td>8.5%</td>
<td>2.1%</td>
<td>-5.5%</td>
</tr>
</tbody>
</table>
Import Price Gain All Oil 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 10, 2004


<img quot align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041110d.jpg" width="353">
Import prices rose jumped 1.5% last month versus the Consensus expectation for a 1.0% gain. All of the increase reflected higher oil prices while non-petroleum prices fell.
Non-petroleum import prices fell in October the first down month in a year. Capital goods prices fell 0.2% (-1.3% y/y) due to a 0.6% decline in computer prices (-6.5% y/y). Capital goods prices excluding computers rose 0.1% (+1.5% y/y). Non-auto consumer goods prices were again unchanged (+0.5% y/y), flat or down in each month since January.
Petroleum prices rose sharply as crude oil prices surged. The price of Brent crude oil in November has retraced its prior month&#39;s strength.
During the last ten years there has been a (negative) 55% correlation between the level of the dollar and the y/y change in nonpetroleum import prices.
Export prices jumped 0.7% as nonagricultural prices surged 1.0% (5.2% y/y). Prices of industrial supplies and materials jumped 2.4% (15.3% y/y).

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/USECON/@E8/@E807/@E807.HTM"> Import/Export Prices (NSA)</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>1.5%</td>
<td>0.5%</td>
<td>9.7%</td>
<td>2.9%</td>
<td>-2.5%</td>
<td>-3.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>11.7%</td>
<td>2.8%</td>
<td>67.6%</td>
<td>21.0%</td>
<td>3.0%</td>
<td>-17.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>-0.2%</td>
<td>0.0%</td>
<td>2.7%</td>
<td>1.1%</td>
<td>-2.4%</td>
<td>-1.5%</td>
</tr>
<tr>
<td class="firstcol">Export - All Commodities</td>
<td>0.7%</td>
<td>0.4%</td>
<td>4.5%</td>
<td>1.6%</td>
<td>-1.0%</td>
<td>-0.8%</td>
</tr>
</tbody>
</table>
Initial Claims for Unemployment Insurance Ticked Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 10, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041110c.jpg" width="353">
Last week, initial claims for unemployment insurance ticked up 2,000 to 333,000 following the sharp 19,000 decline the prior week. The Consensus expectation had been for 337,000 claims.
The four week moving average of initial claims fell to 336,000 (-11.2% y/y), the lowest level in four years.
During the last ten years there has been a (negative) 73% correlation between the level of initial claims and the m/m change in payroll employment.
Continuing claims for unemployment insurance rose 19,000 following a deepened 26,000 decline the prior week.
The insured rate of unemployment remained at 2.2% for the fifth week.

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<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM"> Unemployment Insurance (000s)</a></th>
<th scope="col"> 11/06/04</th>
<th scope="col"> 10/30/04</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>333</td>
<td>331</td>
<td>-10.5%</td>
<td>402</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,813</td>
<td>-18.8%</td>
<td>3,531</td>
<td>3,570</td>
<td>3,018</td>
</tr>
</tbody>
</table>
Mortgage Applications Falter 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 10, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041110a.jpg" width="353">
Mortgage applications fell 4.5% last week and reversed about half of the 8.2% gain the week earlier, according to the Mortgage Bankers Association (MBA).
Purchase applications fell 2.7% after the prior week&#39;s 12.6% surge. During the last ten years there has been a 60% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
Applications to refinance fell 6.7% to the lowest level since early last month.
The effective interest rate on a conventional 30-year mortgage rose to 5.96% from 5.90% the prior week and from averaged 5.92% in October. The effective rate on a 15-year mortgage rose to 5.41%.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM"> MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">11/05/04</th>
<th scope="col">10/29/04</th>
<th scope="col"> Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>727.3</td>
<td>761.7</td>
<td>16.2%</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>483.0</td>
<td>496.5</td>
<td>28.7%</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,148.7</td>
<td>2,303.9</td>
<td>3.1%</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
</table>
</body>
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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041109e.jpg" width="353">
Optimists among German institutional investors and analysts were hard to find in November. The ZEW index that shows the balance of those expecting improved conditions during the next six months over those expecting worse conditions fell to 13.9% from 31.3% in October. This was the lowest value since January, 2003. The rise in the euro and the price of oil were cited as the principal causes of worry about the outlook.
The quarterly survey of employment conducted by the Federal Statistical Office, reported the third quarter-to-quarter increase in seasonally adjusted employment in the third quarter. These increases in employment are the first since late 2001. In its press release, the FSO noted that the increased use of temporary workers and the subsidization of single person or family companies -- labor reforms, known as Hartz I and II that became effective in 2003--played a positive role in the rise in employment.
The harmonized index of consumer prices was 107.0 in October, up 0.38% from September and 2.00% above October 2003. The details are not yet available for October, but the high and rising price of oil during the month was likely a major cause of the rise in the overall index.
The year-to-year changes in employment and prices are shown in the attached chart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Nov 04</th>
<th scope="col">Oct&nbsp;04</th>
<th scope="col">Nov 03</th>
<th scope="col">M/M Dif</th>
<th scope="col">Y/Y Dif</th>
<th scope="col">&nbsp;2003&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2002&nbsp;</th>
<th scope="col">&nbsp; 2001&nbsp; &nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">ZEW (Percent balance)</td>
<td>13.9</td>
<td>31.3</td>
<td>67.2</td>
<td>-17.2</td>
<td>-53.3</td>
<td>36.4</td>
<td>45.3</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Oct 04</td>
<td>Sep 04</td>
<td>Oct 03</td>
<td>M/M %&nbsp;</td>
<td>Y/Y %&nbsp;</td>
<td>&nbsp;2003&nbsp;&nbsp;</td>
<td>&nbsp;2002&nbsp;</td>
<td>&nbsp; 2001&nbsp; &nbsp;</td>
</tr>
<tr>
<td class="firstcol">Harmonized CPI (2000=100)</td>
<td>107.0</td>
<td>106.6</td>
<td>104.9</td>
<td>0.38</td>
<td>2.00</td>
<td>104.5</td>
<td>103.4</td>
<td>103.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Q3 04</td>
<td>Q2 O4</td>
<td>Q3 04</td>
<td>Q/Q Dif</td>
<td>Y/Y Dif</td>
<td>&nbsp;2003&nbsp;&nbsp;</td>
<td>&nbsp;2002&nbsp;</td>
<td>&nbsp; 2001&nbsp; &nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Employment&nbsp; (Thousands)</td>
<td>38390</td>
<td>38371</td>
<td>38294</td>
<td>15</td>
<td>96</td>
<td>38316</td>
<td>38699</td>
<td>38923</td>
</tr>
</tbody>
</table>
</body>
</html>

Optimists among German institutional investors and analysts were hard to find in November. The ZEW index that shows the balance of those expecting improved conditions during the next six months over those expecting worse conditions [...]

A Mixed Bag of Data from Germany: The ZEW Index of Expectation Down Sharply, Employment and Prices Higher

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041109c.jpg" width="353">
Last week, chain store sales jumped by 1.3% as consumer spending emerged from a three week skid which had pulled the October average 0.1% below September, according to the International Council of Shopping Centers (ICSC)-UBS.
The weekly increase was the largest since a 1.5% pop in late April and started the month 0.7% ahead of October.
During the last ten years there has been a 60% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline.
Last week&#39;s sales increase was preceded by a 1.1% w/w increase in the leading indicator of chain store sales from ICSC.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart. 

<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">11/06/04</th>
<th scope="col">10/30/04</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>438.0</td>
<td>432.4</td>
<td>3.0%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
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Last week, chain store sales jumped by 1.3% as consumer spending emerged from a three week skid which had pulled the October average 0.1% below September, according to the International Council of Shopping Centers (ICSC)-UBS. The [...]

US Consumers Went Shopping At Chain Stores

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041109a.jpg" width="353">
The October Small Business Optimism Index published by the National Federation of Independent Business (NFIB) fell 0.6%, reversed some of the prior month&#39;s 1.6% rise and continued the sideways trend of 2004.
During the last ten years there has been a 74% correlation between the level of the NFIB index and the two quarter change in real GDP.
The percentage of firms expecting the economy to improve fell sharply to 30%, the lowest since June, and the percentage of firms reporting that now is a good time to expand fell to 20%, a figure well off the highs of 24-25. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041109b.jpg" width="353">
Despite the lost enthusiasm, the percent of firms planning to raise employment firmed slightly and the percentage of firms with one or more jobs open rose to the highest since July (23%). During the last ten years there has been a 63% correlation between these hiring plans and the three month growth in nonfarm payrolls.
The percentage of firms raising average selling prices rose slightly to 20%.
About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.

<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">Oct</th>
<th scope="col">Sept</th>
<th scope="col"> Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Small Business Optimism Index (1986=100)</td>
<td>103.9</td>
<td>104.5</td>
<td>-0.1%</td>
<td>101.3</td>
<td>101.2</td>
<td>98.4</td>
</tr>
</tbody>
</table>
</body>
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The October Small Business Optimism Index published by the National Federation of Independent Business (NFIB) fell 0.6%, reversed some of the prior month's 1.6% rise and continued the sideways trend of 2004. During the last ten years [...]

Small Business Optimism Backpedaled

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041109a.jpg" width="353">
The October Small Business Optimism Index published by the National Federation of Independent Business (NFIB) fell 0.6%, reversed some of the prior month&#39;s 1.6% rise and continued the sideways trend of 2004.
During the last ten years there has been a 74% correlation between the level of the NFIB index and the two quarter change in real GDP.
The percentage of firms expecting the economy to improve fell sharply to 30%, the lowest since June, and the percentage of firms reporting that now is a good time to expand fell to 20%, a figure well off the highs of 24-25. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041109b.jpg" width="353">
Despite the lost enthusiasm, the percent of firms planning to raise employment firmed slightly and the percentage of firms with one or more jobs open rose to the highest since July (23%). During the last ten years there has been a 63% correlation between these hiring plans and the three month growth in nonfarm payrolls.
The percentage of firms raising average selling prices rose slightly to 20%.
About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.

<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">Oct</th>
<th scope="col">Sept</th>
<th scope="col"> Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Small Business Optimism Index (1986=100)</td>
<td>103.9</td>
<td>104.5</td>
<td>-0.1%</td>
<td>101.3</td>
<td>101.2</td>
<td>98.4</td>
</tr>
</tbody>
</table>
US Consumers Went Shopping At Chain Stores 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 9, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041109c.jpg" width="353">
Last week, chain store sales jumped by 1.3% as consumer spending emerged from a three week skid which had pulled the October average 0.1% below September, according to the International Council of Shopping Centers (ICSC)-UBS.
The weekly increase was the largest since a 1.5% pop in late April and started the month 0.7% ahead of October.
During the last ten years there has been a 60% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline.
Last week&#39;s sales increase was preceded by a 1.1% w/w increase in the leading indicator of chain store sales from ICSC.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart. 

<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">11/06/04</th>
<th scope="col">10/30/04</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>438.0</td>
<td>432.4</td>
<td>3.0%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
</body>
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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041109d.jpg" width="353">
Japan and Taiwan have reported October data on reserves of foreign currencies. Although they were about 35% and 20%, respectively, above the year ago figure, the increases in foreign exchange reserves over year ago figures have been declining sharply. Part of the reason for the deceleration is the decline in the dollar. The attached chart shows the year over year increases in Japan&#39;s foreign exchange holdings along with the index of the trade weighted dollar.
The effect of the decline in the dollar on foreign reserve holdings is beginning to be a cause of concern not only for the foreign governments but also for the United States. The capital loss entailed in the decline in the value of their dollar holdings has tended to dampen the rate at which foreigners are adding to their holdings of US dollars. The decline in dollar purchases by foreign central banks, in turn, results in a reduced capital inflow into the U. S. a flow that has been an important offset to the growing current account deficit.
The problem is one essentially for Asia where the greatest accumulation of foreign currency reserves has occurred. At the end of last year, the foreign exchange reserves of Japan, China, Hong Kong, Taiwan, Korea, Indonesia, India, Malaysia, the Philippines, Singapore and Thailand amounted to $1.2 trillion compared with $223 billion held by the Euro Zone.
A recent article, <a href="http://www.newyorkfed.org/research/current_issues/ci10-10.pdf">Reserve Accumulation: Implications for Global Capital Flows and Financial Markets</a> by Matthew Higgins and Thomas Klitgaard of the NY Fed deals with this subject in some detail. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Foreign Currency Reserves&nbsp; (Billions of US dollars)</th>
<th scope="col">Oct&nbsp; 04</th>
<th scope="col">Sep&nbsp; 04</th>
<th scope="col">Aug&nbsp; 04</th>
<th scope="col">Oct &nbsp;03</th>
<th scope="col">Sep&nbsp; 03</th>
<th scope="col">Aug 03&nbsp;&nbsp;</th>
<th scope="col">Y/Y %</th>
<th scope="col">Y/Y %</th>
<th scope="col">Y/Y %</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Japan</td>
<td>817.7</td>
<td>811.2</td>
<td>808.4</td>
<td>605.7</td>
<td>584.1</td>
<td>535.5</td>
<td>35.0</td>
<td>28.87</td>
<td>51.95</td>
</tr>
<tr>
<td class="firstcol">Taiwan</td>
<td>235.0</td>
<td>233.0</td>
<td>231.6</td>
<td>196.6</td>
<td>190.6</td>
<td>185.7</td>
<td>19.54</td>
<td>22.27</td>
<td>24.74</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"></td>
<td>Sep &nbsp;04</td>
<td>Aug&nbsp; 04</td>
<td>Jul&nbsp; 04</td>
<td>Sep&nbsp; 03</td>
<td>Aug 03&nbsp;&nbsp;</td>
<td>Jul &nbsp;03</td>
<td>Y/Y&nbsp; %</td>
<td>Y/Y&nbsp; %</td>
<td>Y/Y &nbsp;%</td>
</tr>
<tr class="odd">
<td class="firstcol">Korea&nbsp;</td>
<td>173.6</td>
<td>169.7</td>
<td>167.1</td>
<td>140.7</td>
<td>135.41</td>
<td>132.1</td>
<td>23.34</td>
<td>25.27</td>
<td>26.5</td>
</tr>
<tr>
<td class="firstcol">India</td>
<td>114.1</td>
<td>112.7</td>
<td>113.0</td>
<td>87.2</td>
<td>82.6</td>
<td>80.9</td>
<td>30.81</td>
<td>36.42</td>
<td>39.55</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Euro area</td>
<td>207.2</td>
<td>205.4</td>
<td>209.0</td>
<td>234.0</td>
<td>230.1</td>
<td>231.5</td>
<td>-11.54</td>
<td>-10.74</td>
<td>-9.73</td>
</tr>
</tbody>
</table>
</body>
</html>

Japan and Taiwan have reported October data on reserves of foreign currencies. Although they were about 35% and 20%, respectively, above the year ago figure, the increases in foreign exchange reserves over year ago figures have been [...]

US Dollar Decline Beginning to Affect Foreign Exchange Reserves

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

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

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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

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Total factory orders declined 4.8% (+5.6% y/y) in June after surging 8.3% in May, revised from 8.2%, as reported by the U.S. Census Bureau. A 4.9% decline had been expected in the Action Economics Forecast Survey. A halving in orders for nondefense aircraft accounted for much of the June decline. Factory orders excluding transportation altogether rose 0.4% after increasing 0.3% in May, revised from 0.2%.

Durable goods orders fell 9.4% (+10.9% y/y) in June after 16.5% rise in May. The advance report indicated a 9.3% decline. Transportation orders fell 22.4% (+30.5% y/y). Automobile orders declined 3.1% (-2.7% y/y). Computer & electronic product orders increased 0.6% (5.2% y/y) while electrical equipment, appliances & components rose 0.1% (4.5% y/y). Machinery orders improved 0.3% (3.0% y/y). Furniture & related products increased 0.1% (1.1% y/y). Primary metals orders increased 0.6% (-0.5% y/y) while fabricated metals orders edged 0.1% (3.1% y/y) higher.

Nondurable goods orders, which equal nondurable goods shipments, rose 0.5% (0.6% y/y) in June after edging 0.1% higher in May. Shipments of petroleum & coal products rose 1.4% (-4.5% y/y) and beverage & tobacco products rose 1.5% (4.2% y/y). Food product shipments improved 0.4% (0.9% y/y) and textile product shipments rose a minimal 0.1% (1.9% y/y). To the downside, apparel shipments declined 0.9% (-4.7% y/y) and chemical product shipments eased 0.1% (+3.6% y/y). Paper products declined 0.3% (+0.7% y/y).

Total shipments increased 0.5% (1.8% y/y) in June following a 0.2% May increase. Excluding transportation, shipments rose 0.4% (1.3% y/y) in June after a 0.1% uptick in May. Shipments of durable goods industries rose 0.5% (3.0% y/y) in April, the seventh consecutive m/m rise.  Transportation equipment shipments rose 0.8% (4.3% y/y) as nondefense aircraft shipments fell 6.2% (+13.8% y/y). Machinery shipments rose 1.0% (1.5% y/y), and electrical equipment, appliances & components shipments increased 0.6 (4.6% y/y). Primary metals shipments rose 0.6% (2.4% y/y), fabricated metals shipment rose 0.2% (1.9% y/y), but furniture & related products eased 0.2% (+1.4% y/y).

Unfilled orders rose 1.0% (7.1% y/y) in June after a 3.4% jump in May. Excluding transportation, unfilled orders held steady (+0.8 y/y) after a 0.1% rise in May. Backlogs of durable goods increased 1.0% (7.1% y/y), reflecting a 2.1% rise (14.7% y/y) in nondefense aircraft and a 0.1% decline (-1.8% y/y) in machinery. Electrical equipment, appliances & components backlogs also rose 0.1% (1.0% y/y) while computer & electronic equipment backlogs eased 0.1% both m/m and y/y.
 
Inventories increased 0.2% (1.1% y/y) in June after edging 0.1% higher in May. Excluding transportation, inventories rose 0.2% (1.0% y/y) in June after a 0.1% uptick in May. Durable goods inventories rose 0.2% (1.5% y/y) in June, the same as in May, and rose 0.1% in both of the prior two months. Nondurable goods inventories increased 0.2% 0.5% y/y) after declines in both of the prior two months.

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

250804L1.jpg

250804M1.jpg

- Total orders less transportation rise moderately.
- Shipments pick up.  
- Unfilled orders surge as inventories rise modestly.

U.S. Factory Orders Retreat in June, Largely Centered in Aircraft

Tian Yong Woon

This week, we examine the latest wave of trade developments across Asia as the US unveiled a full list of its modified reciprocal tariff rates, set to take effect on August 7. As anticipated, many of the updated rates are now lower than the original tariffs, with Cambodia and Vietnam seeing the sharpest reductions (chart 1). However, from peak tariff levels, China stands out—continuing to benefit from a 10% pause rate, down from triple-digit highs.

South Korea secured a deal just before the deadline, lowering its tariff from 25% to 15%. The new rate also applies to auto exports, offering relief to Korean automakers (chart 2). Thailand and Cambodia followed with US trade agreements after agreeing to an unconditional ceasefire following earlier military clashes. Their US-imposed tariffs dropped from 36% to 19%, highlighting how US trade policy can intersect with geopolitical interests and, in this case, may help reduce trade uncertainty (chart 3).

Malaysia, a key mediator in the ceasefire, also finalized a trade deal, reducing its tariff rate to 19% and gaining exemptions on key exports such as semiconductors (chart 4). Turning to Japan, while its US trade deal helped avert immediate tensions, the vague terms and a headline $550 billion investment—mostly in the form of loans—leave room for future friction (chart 5). China, however, remains a wildcard. Talks to extend its tariff pause are ongoing, but failure could see a return to extreme tariff levels (chart 6). Meanwhile, tech tensions linger, despite eased restrictions on Nvidia AI chip exports.

**Latest US tariff developments**
We gained further clarity on the new reciprocal tariff rates announced by the US administration last week, as the White House released a full list of the modified rates on Thursday. It also announced that the new rates will take effect on August 7, giving partner countries a bit more time to negotiate new terms. Overall, as earlier indications suggested, Trump’s post-pause tariff rates—regardless of whether trade deals were secured—have often ended up lower than the original rates, as shown in chart 1. The largest reductions from original tariff levels have so far come from Cambodia and Vietnam. However, when looking at the steepest reductions from peak tariff rates, China stands out. It continues to benefit from a 10% tariff pause—down sharply from the triple-digit rates imposed at the height of US-China trade tensions earlier this year. On the flipside, a handful of economies—including New Zealand, the Philippines, and Brunei—are now facing modified tariff rates that are actually higher than their original Liberation Day levels. Notably, the Philippines ended up in this group despite having secured a trade deal with the US.

250804T1.jpg

**South Korea**
As for South Korea, the US reduced its tariff rate to 15% just ahead of the August 1 deadline, a significant drop from the original Liberation Day rate of 25%. In return, South Korea committed to, among other terms, $350 billion in investments into the US. Of that total, $150 billion will go specifically toward shipbuilding cooperation—supporting the entry of Korean firms into the US shipbuilding industry—while the remaining $200 billion will be directed toward semiconductors and other sectors. Similar to Japan’s arrangement, the new 15% tariff rate will also apply to South Korean auto exports, likely providing relief to the country’s automakers. As shown in chart 2, South Korea’s vehicle exports—and, by extension, its export-driven growth—have come under pressure, with more recent headwinds stemming from the broad 25% auto tariffs imposed by the US. Notably, South Korea’s dealmaking pace with the US has been considered exceptionally swift, especially given that the country had only recently undergone an administrative transition following its presidential elections, leaving limited time to initiate formal trade negotiations.

250804T2.jpg

**Thailand and Cambodia**
Moving to other parts of Asia, one of the more notable developments last week was the signing of two additional US trade deals—specifically with Thailand and Cambodia. The two countries had recently been engaged in escalating border clashes but agreed to an unconditional ceasefire after mediation by Malaysia and the US. In reality, tensions between Thailand and Cambodia had been simmering for some time, likely driving in part the heightened uncertainty shown in chart 3, though other factors may have played a role. Notably, US President Trump stated that he had made it clear to both governments that no trade deal would be considered while they remained in conflict—an ultimatum that may have incentivized both sides to pursue de-escalation. Ultimately, US trade deals with both countries were announced, reducing their tariff rates from the original Liberation Day level of 36% to 19%. This illustrates how the US approach to dealmaking goes beyond trade, sometimes factoring in broader geopolitical considerations as well.

250804T3.jpg

**Malaysia**
Touching further on Malaysia, which played a key role in mediating the Thailand-Cambodia conflict mentioned earlier, a last-minute US-Malaysia trade deal also materialized shortly after the agreements with Thailand and Cambodia were hinted at. Under the new terms, Malaysia’s tariff rate was reduced to 19%, down from the original 24%. Malaysian Trade Minister Zafrul described the deal as a “win-win,” noting that Malaysia has either reduced or eliminated tariffs on nearly all American products. Notably—and perhaps offering some interim relief—Malaysia also secured tariff exemptions for its exports of semiconductors and pharmaceuticals. This is especially significant, as semiconductor exports account for a substantial share of Malaysia’s shipments to the US, as shown in chart 4.

250804T4.jpg

**Japan**
Turning to Japan, the recent US-Japan trade deal appears to have averted the worst for now. However, many key details remain unclear, particularly regarding Japan’s reported $550 billion investment into the US. While the headline figure is striking, Japan’s chief trade negotiator, Akazawa, later clarified that only 1–2% of the amount would constitute actual investment, with the remainder largely consisting of loans. More critically, the deal—like several other recent US-Asia trade agreements—was not accompanied by formal documentation, leaving its terms vague and, perhaps more concerning, open to future revision. These loose ends present ongoing risks to US-Japan economic relations and could potentially unwind recent market gains driven by trade optimism, as uncertainty remains and may yet resurface (see chart 5). This lingering uncertainty likely contributed to the Bank of Japan’s decision to hold its policy rate steady last week. The central bank adopted a wait-and-see approach before considering further rate hikes, while notably revising its inflation forecasts upward and presenting a slightly improved growth outlook for the fiscal year.

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**China**
Amid the recent flurry of US trade deals, one critical issue that may have slipped from the spotlight—but remains central to the global outlook —is China. Ongoing discussions between the two countries aim to extend China’s current tariff pause. If talks break down, US Treasury Secretary Scott Bessent has warned that the existing 10% tariff on Chinese exports could “boomerang” back to its previously exorbitant levels. This could potentially drive the US effective import tariff rate on China well above its already-elevated levels, as shown in chart 6. Meanwhile, the recent reversal of export restrictions by the US on Nvidia’s H20 AI chips may have brought temporary relief to China’s AI sector. However, Chinese authorities have raised national security concerns over the chips’ built-in tracking features and potential remote shutdown capabilities—adding yet another layer of complexity to the already tense US-China trade relationship and broader economic rivalry.

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Asia

Economic Letter from Asia: New Duty Roster

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

U.S. Light Vehicle Sales Rebound in July

Winnie Tapasanun

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

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

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

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

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

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

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

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

Economy in Brief: November 2004

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Import Price Gain All Oil

A Shallower U.S. Trade Deficit in September

A Shallower U.S. Trade Deficit in September

A Mixed Bag of Data from Germany: The ZEW Index of Expectation Down Sharply, Employment and Prices Higher

US Consumers Went Shopping At Chain Stores

Small Business Optimism Backpedaled

Small Business Optimism Backpedaled

US Dollar Decline Beginning to Affect Foreign Exchange Reserves