Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080716a.jpg" align="left" border="0" height="265" width="353">
The June consumer price index (CPI-U), as
reported by the Bureau of Labor Statistics, jumped 1.1% after May's
0.6% rise. The increase, fueled by higher energy prices, was the
strongest since October 2005 and it lifted the y/y increase to 4.9%,
its strongest since 1991. Consensus expectations had been for a 0.7%
increase for last month.
Energy prices jumped 6.6% in June after
the 4.4% surge during May. Gasoline prices spiked a seasonally adjusted
10.1% and were up 32.8% y/y. (Not seasonally adjusted gasoline prices
rose 7.9% m/m last month and they are up another 1.5% so far in July.)
Fuel oil prices also were quite strong and surged 8.5% (61.2% y/y).
Natural gas &amp; electricity prices rose 1.5% (10.1% y/y).
Food &amp; beverage prices were strong
again and jumped 0.7%. That lifted the y/y gain of 5.2% to its fastest
since 1990. The three-month rate of increase jumped to an even firmer
8.1%. Prices for cereals &amp; bakery products rose at a 15.2% rate
during the last three months while dairy and related products increased
at an 11.1% rate. Prices for meats poultry &amp; fish showed upward
pressure lately and rose at a 7.8% rate while dairy product prices
surged at an 11.1% rate.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080716b.jpg" align="right" border="0" height="265" width="353">
Less food &amp; energy consumer prices
again matched expectations and rose 0.2%, the same as during May.
During the last three months core prices rose at a 2.5% annual rate,
the quickest since January.
Core goods prices offset May's slip and
nudged up 0.1%. On a the three-month basis prices nudged lower at a
0.1% rate. Prices for new &amp; used motor vehicles rose 0.1% in
June but are down at a 0.7% annual rate during the last three months.
Apparel prices also ticked up 0.1% and, together with a firm 0.5% gain
in April, was enough to lift the three month increase to 1.0%, its
firmest since January. Prices for household furnishings &amp;
operations were unchanged. They posted a 0.5% uptick during the last
three months versus a 0.1% decline during all of last year.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080716c.jpg" align="left" border="0" height="265" width="353">
Core services prices posted 0.4% increase,
which was the largest rise since January, and it lifted the three month
growth rate to 3.6%. The strength again was led by a 3.4% (13.4% y/y)
surge in public transportation prices and they are up at a 23.6% rate
during the last three months. Medical care services prices rose a
reduced 0.3% (4.6% y/y) and shelter prices increased 0.3% (2.6% y/y).
Owners equivalent rent of primary residence, a measure not equivalent
to other house price measures, rose 0.3% (2.6% y/y) and rents rose 0.4%
(3.7% y/y). Education costs rose another 0.5% and here prices rose at
an accelerated 5.1% rate during the last three months following a 2.4%
rise during 2007.
The chained CPI, which adjusts for shifts in consumption
patterns, rose a faster 0.8%. Less food and beverages chained prices
rose 0.1%.
PCE and CPI Inflation Differentials: Converting
Inflation Forecasts from the Federal Reserve Bank of Kansas
City can be fund <a href="http://www.kansascityfed.org/Publicat/Econrev/PDF/1q08Hakkio.pdf">
here</a>.
Has the Behavior of Inflation and
Long-term Inflation Expectations Changed? also from the
Federal Reserve Bank of Kansas City is available <a href="http://www.kansascityfed.org/Publicat/ECONREV/PDF/1q08Clark.pdf">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer
Price Index</a> (%)</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June Y/Y&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Total&nbsp;</td>
<td>1.1</td>
<td>0.6</td>
<td>4.9</td>
<td>2.9</td>
<td>3.2</td>
<td>3.4</td>
</tr>
<tr class="even">
<td class="firstcol">Total less Food &amp; Energy</td>
<td>0.3</td>
<td>0.2</td>
<td>2.4</td>
<td>2.3</td>
<td>2.5</td>
<td>2.2</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Goods less Food
&amp; Energy</td>
<td>0.1</td>
<td>-0.1</td>
<td>0.2</td>
<td>-0.4</td>
<td>0.2</td>
<td>0.5</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Services less Energy</td>
<td>0.4</td>
<td>0.3</td>
<td>3.3</td>
<td>3.4</td>
<td>3.4</td>
<td>2.8</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Energy</td>
<td>6.6</td>
<td>4.4</td>
<td>24.4</td>
<td>5.6</td>
<td>11.0</td>
<td>17.0</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Food &amp;
Beverages</td>
<td>0.8</td>
<td>0.3</td>
<td>5.3</td>
<td>4.0</td>
<td>2.3</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td></td>
<td></td>
<td>&nbsp;&nbsp;</td>
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained
CPI: Total (NSA)</a>&nbsp;</td>
<td>0.8</td>
<td>0.6</td>
<td>4.2 </td>
<td>2.5</td>
<td>2.9 </td>
<td>2.9</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;Total less Food
&amp; Energy&nbsp;</td>
<td>0.1</td>
<td>0.0</td>
<td>2.1</td>
<td>2.0</td>
<td>2.2</td>
<td>1.9</td>
</tr>
</tbody>
</table>
U.S. Industrial Production Up in
June 
by <a href="/comment/Moeller.html">Tom
Moeller</a> July 16, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080716d.jpg" align="left" border="0" height="265" width="353">
Industrial production recovered unexpectedly by 0.5% last
month, but the gain was due mostly to warmer temperatures. The rise
followed an unrevised 0.2% decline during May. Consensus expectations
had been for no change in output last month.
Warmer temperatures lifted utility output by 2.1% during June
and that offset the decline during May.
Factory output also was better than expected and rose 0.2%
following an unrevised flat reading during May. The three-month rate
change, however, remained negative at -3.1% (AR).
Production in the high tech sector again was firm and rose
1.8% (23.6% y/y). Production of computers &amp; office equipment
rose 0.8% (14.7% y/y) but the three-month growth rate slowed further to
3.7% (AR). Output of communications equipment jumped 1.6% and
three-month growth totaled 18.4%.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080716e.jpg" align="right" border="0" height="265" width="353">
The trend in output outside the high-tech sector has been
decidedly weak. Less high-tech, factory output rose all of 0.2% last
month and three-month output growth remained a negative 4.1% (AR).
Output of motor vehicles &amp; parts did rise 5.4% in June but
three-month growth was still low at -4.0%. June output of furniture
fell 0.4% and at an 8.1% rate during the last three months. Electrical
equipment rose at a 4.2% rate during the last three months. Machinery
output continued to decline sharply at a 14.7% annual rate during the
last three months.
In the nondurables area, output of apparel recovered 1.3% in
June but it was still down at a 3.1% rate during the last three months.
Capacity utilization increased to 79.9% from an upwardly
revised 79.6% during May. Utilization in the factory sector, however,
was unchanged at 77.6%, near its lowest also since late-2004.
Speculative Bubbles and Overreaction to
Technological Innovation from the Federal Reserve Bank
of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2008/el2008-18.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">INDUSTRIAL
PRODUCTION (SA)</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.5</td>
<td>-0.2</td>
<td>0.3</td>
<td>1.7</td>
<td>2.2</td>
<td>3.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Manufacturing</td>
<td>0.2</td>
<td>0.0</td>
<td>-0.6</td>
<td>1.7</td>
<td>2.4</td>
<td>4.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Consumer Goods</td>
<td>0.8</td>
<td>-0.2</td>
<td>-0.8</td>
<td>1.7</td>
<td>0.3</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Business Equipment</td>
<td>0.2</td>
<td>0.2</td>
<td>1.6</td>
<td>3.3</td>
<td>10.4</td>
<td>7.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;
Construction Supplies</td>
<td>-0.8</td>
<td>0.4</td>
<td>-6.2</td>
<td>-2.5</td>
<td>2.2</td>
<td>4.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Utilities</td>
<td>2.1</td>
<td>-2.1</td>
<td>4.0</td>
<td>3.3</td>
<td>-0.6</td>
<td>2.1</td>
</tr>
</tbody>
</table>
Euro Area HICP Sees Core Decelerate 
by <a href="/comment/Brusca.html">Robert
Brusca</a> July 16, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080716f.jpg" align="left" border="0" height="265" width="353">Although the ECB policy remains steadfastly fixed on the
behavior of the HICP headline, it is the HICP core that is showing
signs of behaving. The six month pace of the core at 2.3% is as low as
it has been since Oct 2007 (eight months ago). The three-month pace at
1.3% is as low as that metric has been since March of 2006 (twenty
seven months ago). The trends may be too good to be true or even
lasting but for now they are a note of optimism in an otherwise rotten
policy environment. Moreover I think their message is the right one.

Headline inflation, the ostensible ECB target rate, is not
supposed to rise more that 2% Y/Y. I fact the headline pace has not
been below 2% since August of 2007. The current pace is 4.0% double the
targeted top pace.

However the sharp drop in the Zew index this week has everyone
in Europe thinking about coming weakness. This may be one reason that
oil prices finally became vulnerable on Mr Bernanke&#8217;s remarks
yesterday, as oil fell an outsized $6/bbl.

There has been a certain denial of the transmission of the US
business cycle to Europe and to the rest of the world. But with so many
benefiting from US demand it is hard to understand where that view
originated. Europeans seemed to foster a view of newfound invincibility
but the jump in inflation has undermined that. And the view itself
helped the euro to climb to new heights, but now there is evidence of
growth fading more severely and that will test the ECB and likely bring
the euro down a notch or two.

While the ECB does not make the core HICP the centerpiece of
policy the fact that core inflation has decelerated to 1.3% over three
months from 2.3% over six months and 2.5% over 12-months seems to say
that there is some progress on the inflation front apart for the
headline where oil especially is wreaking such havoc. The ECB does have
some authentic scope to be a bit pragmatic on the inflation front due
to the kind trend in core inflation. A weakening economy will give it
more lee way still.
<table border="0" cellspacing="0" width="100%"> <colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Trends
in HICP</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% mo/mo</td>
<td colspan="4">% saar</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Jun-08</td>
<td>May-08</td>
<td>Apr-08</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">EMU-13</td>
<td>0.5%</td>
<td>0.6%</td>
<td>0.0%</td>
<td>4.1%</td>
<td>4.1%</td>
<td>4.0%</td>
<td>1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Core</td>
<td>0.2%</td>
<td>0.2%</td>
<td>-0.1%</td>
<td>1.3%</td>
<td>2.3%</td>
<td>2.5%</td>
<td>1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Goods</td>
<td>0.4%</td>
<td>0.8%</td>
<td>0.6%</td>
<td>7.6%</td>
<td>6.0%</td>
<td>4.9%</td>
<td>1.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>0.3%</td>
<td>0.4%</td>
<td>-0.1%</td>
<td>2.2%</td>
<td>2.5%</td>
<td>2.5%</td>
<td>2.6%</td>
</tr>
<tr>
<td class="firstcol" colspan="8">HICP</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>0.5%</td>
<td>0.6%</td>
<td>-0.4%</td>
<td>2.7%</td>
<td>3.2%</td>
<td>3.4%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>0.5%</td>
<td>0.5%</td>
<td>0.1%</td>
<td>4.5%</td>
<td>4.0%</td>
<td>4.0%</td>
<td>1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>0.6%</td>
<td>0.4%</td>
<td>0.0%</td>
<td>4.2%</td>
<td>4.6%</td>
<td>4.0%</td>
<td>1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>0.6%</td>
<td>0.7%</td>
<td>-0.1%</td>
<td>4.9%</td>
<td>4.5%</td>
<td>5.0%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol" colspan="8">Core
excl Food Energy
&amp; Alcohol</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>0.1%</td>
<td>0.3%</td>
<td>-0.5%</td>
<td>-0.4%</td>
<td>0.8%</td>
<td>1.8%</td>
<td>2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>#N/A</td>
<td>0.1%</td>
<td>0.1%</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>0.4%</td>
<td>0.2%</td>
<td>-0.1%</td>
<td>1.9%</td>
<td>3.1%</td>
<td>3.0%</td>
<td>1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>0.3%</td>
<td>0.3%</td>
<td>-0.1%</td>
<td>2.2%</td>
<td>2.6%</td>
<td>3.4%</td>
<td>2.5%</td>
</tr>
</tbody>
</table>
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The June consumer price index (CPI-U), as reported by the Bureau of Labor Statistics, jumped 1.1% after May's 0.6% rise. The increase, fueled by higher energy prices, was the strongest since October 2005 and it lifted the y/y increase [...]

U.S. Consumer Price Index Jumped 1.1%, Y/Y Gain The Most Since 1991

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080715j.jpg" width="353">
The Federal Reserve Bank of New York reported that its July index of manufacturing activity in the Empire State remained negative at -4.92 after the unrevised -8.68 during June. It was the fifth negative reading this year. A more negative reading of -8.0 for July had been the Consensus expectation.
The figure is a diffusion index. Since the series&#39; inception in 2001 there has been a 55% correlation between the index level and the three-month change in U.S. factory sector industrial production.
Negative readings for inventories and unfilled orders weighed heavily on the July index. The new orders and shipments indexes, however, improved to their first positive readings since April.
The employment index turned to its most negative reading since 2003. In the (perhaps too) short seven year history of the NY employment index, there has been an 86% correlation between it and the three-month growth in overall factory sector employment.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080715k.jpg" width="353">
Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question; it is not a weighted combination of the components.
Pricing pressure rose to the highest level in the series&#39; history. The latest index level was 77.89. Since the series&#39; inception in 2001 there has been an 81% correlation between the index of prices paid and the three-month change in the core intermediate materials PPI.
The Empire State index of expected business conditions in six months fell to its lowest level since the recession year of 1981.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead.
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html">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/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">July &#39;07&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions (diffusion index, %)&nbsp;&nbsp;</td>
<td>-4.92</td>
<td>-8.68</td>
<td>25.73</td>
<td>17.23</td>
<td>20.24</td>
<td>15.53</td>
</tr>
<tr>
<td class="firstcol">Prices Paid</td>
<td>77.89</td>
<td>66.28</td>
<td>34.57</td>
<td>35.64</td>
<td>41.88</td>
<td>44.74</td>
</tr>
</tbody>
</table>


</html>

The Federal Reserve Bank of New York reported that its July index of manufacturing activity in the Empire State remained negative at -4.92 after the unrevised -8.68 during June. It was the fifth negative reading this year. A more [...]

U.S. Empire State Index Remained Negative

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080715h.jpg" width="353">
The retail price for a gallon of regular gasoline held at $4.11 per gallon last week, according to the U.S. Department of Energy survey. For all grades of gasoline the average price also held steady w/w at an average $4.16 per gallon.
Yesterday, the spot market price for a gallon of regular gasoline was $3.31 per gallon, about where it has been since early June.
Weekly gasoline prices can be found in Haver&#39;s WEEKLY database, daily prices are in the DAILY database.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080715i.jpg" width="353">
According to the U.S. Department of Energy the demand for gasoline during the latest four weeks fell 2.9% from a year earlier due to the increase in gasoline prices, along with the slowdown in economic growth. That was the weakest reading for gasoline demand in three years.
The DOE figures are available in Haver&#39;s OILWKLY database.
Last week the price for a barrel of West Texas Intermediate crude oil slipped to $140.16 per barrel, down slightly from $142.46 during all of last week.
Price for natural gas also have been quite strong but last week slipped to $12.240 per mmbtu (92..1% y/y), near the record high reached in late-2005.
Consumer Sentiment and Consumer Spending from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2008/el2008-19.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">07/14/08</th>
<th scope="col">07/07/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per Gallon)</td>
<td>4.11</td>
<td>4.11</td>
<td>34.9%</td>
<td>2.80</td>
<td>2.57</td>
<td>2.27</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; ($ per bbl.)</td>
<td>140.16</td>
<td>142.46</td>
<td>98.4%</td>
<td>72.25</td>
<td>66.12</td>
<td>56.60</td>
</tr>
</tbody>
</table>
</body>
</html>

The retail price for a gallon of regular gasoline held at $4.11 per gallon last week, according to the U.S. Department of Energy survey. For all grades of gasoline the average price also held steady w/w at an average $4.16 per gallon. [...]

U.S. Gasoline Price Held at $4.11 per Gallon

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080715g.jpg" width="353">
Total business inventories rose 0.3% during May after a 0.5% April gain. The latest increase fell short of expectations and it reduced three-month growth in inventories to 4.1% (AR) which was its slowest since November.
Retail inventories fell 0.4% and reversed all of the March increase. The three-month growth rate fell further to a negative 2.2% which reflects the draw-down of automobile inventories. Inventories of motor vehicle &amp; parts fell at a 7.6% annual rate during the last three months due to further production cutbacks. Outside of autos, retail inventories rose at a slight 0.4 rate over the last three months versus a 2.7% rise last year and a 4.9% increase during 2006.
The industry detail in the retail sector indicated that furniture inventories fell at a 1.4% rate during the last three months. Clothing &amp; accessory store inventories continued to fall sharply at a 4.1% rate while general merchandise stores&#39; inventories dropped at a 2.0% rate.
Wholesale inventories rose at a 9.7% rate during the last three months, boosted by the rise in oil prices but less petroleum inventories also rose at a firm 9.8% rate which was twice the rate of increase during all of last year.
Factory inventories rose 0.5% after the sight decline during April. Three-month growth fell to 5.9% (AR) which was half the growth earlier this year. Despite the rise in oil prices, petroleum inventories still rose at a modest 2.1% rate over the last three months. Elsewhere, factory inventory accumulation has been fairly steady in 2008 at a 6.2% rate.
Total business sales surged again, in May by 0.8%. Three-month growth jumped to a 15.1% annual rate.
The inventory-to-sales ratio for all business fell to 1.24 in May which was the low for this cycle.
Fed Chairman ChairmanBen S. Bernanke&#39;s Semiannual Monetary Policy Report to the Congress can be found <a href="http://www.federalreserve.gov/newsevents/testimony/bernanke20080715a.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED06/@ED0601/@ED0601.HTM">Business Inventories</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.3%</td>
<td>0.5%</td>
<td>5.3%</td>
<td>3.8%</td>
<td>5.9%</td>
<td>6.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>-0.4%</td>
<td>0.4%</td>
<td>1.7%</td>
<td>2.6%</td>
<td>3.5%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Auto</td>
<td>-0.2%</td>
<td>0.7%</td>
<td>1.6%</td>
<td>2.7%</td>
<td>4.9%</td>
<td>3.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>0.8%</td>
<td>1.4%</td>
<td>8.7%</td>
<td>5.5%</td>
<td>8.3%</td>
<td>7.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.5%</td>
<td>-0.0%</td>
<td>6.1%</td>
<td>3.7%</td>
<td>6.4%</td>
<td>8.9%</td>
</tr>
</tbody>
</table>
</body>
</html>

Total business inventories rose 0.3% during May after a 0.5% April gain. The latest increase fell short of expectations and it reduced three-month growth in inventories to 4.1% (AR) which was its slowest since November. Retail [...]

U.S. Business Inventories' Trend Growth Slower

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080715f.jpg" align="left" border="0" height="265" width="353">
The Zew index took a real turn for the worse. Expectations are
on an all time low. German denial is coming rapidly to a close. Belief
in the de-linked business cycle is going the way of belief in the tooth
fairy. It&#8217;s something you just have to grow out of even if you once
believed in it. The current conditions index is still relative high
valued standing in the 61st percentile of its range. But it fell very
sharply in July to an index reading of 17.1 from 37.6 the month before.
German optimists are becoming a rarer breed.

German expectations for various stock sectors is at its lowest
reading since the full series began in April of 1999. Sector
expectations rank at 122 out of 122 months of history. Profit
expectations are abysmal.

But the German story is still more complicated. Ordinarily a
drop like this would bring expectations that the ECB would not continue
hiking rates or might even foster expectations of cutting them and
undermine the euro exchange rate. But this time the euro has popped up
to anew high Vs the dollar showing that US troubles have for the moment
trumped concerns that Germans might have about their own economy and
the EMU economy at large. I think this will pass. One thing that is
clear is that energy and financial problems are dragging down the
growth rates in the European economies but that at the current level,
the euro is just too high. I cannot see the euro moving significantly
higher from here.



<table border="0" cellspacing="0" width="100%">
<colgroup><col></colgroup>
<thead><tr>
<th scope="col" colspan="8">ZEW Economic Index For Germany</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="4">Level of Zew Index</td>
<td colspan="3">Averages</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Jul-08</td>
<td>Jun-08</td>
<td>May-08</td>
<td>Yr Ago</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
</tr>
<tr class="odd">
<td class="firstcol">Current</td>
<td>17</td>
<td>37.6</td>
<td>38.6</td>
<td>88.2</td>
<td>31.1</td>
<td>32.0</td>
<td>50.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Expectations</td>
<td>-63.9</td>
<td>-52.4</td>
<td>-41.4</td>
<td>10.4</td>
<td>-52.6</td>
<td>-45.0</td>
<td>-35.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td colspan="3">Percentiles</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Current</td>
<td>61.7</td>
<td>72.7</td>
<td>73.2</td>
<td>99.7</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Expectations</td>
<td>0.0</td>
<td>7.5</td>
<td>14.7</td>
<td>48.4</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">Percentiles are readings in this
period as percentile of the full range of values back to 1/92</td>
</tr>
</tbody>
</table>
</body></html>

The Zew index took a real turn for the worse. Expectations are on an all time low. German denial is coming rapidly to a close. Belief in the de-linked business cycle is going the way of belief in the tooth fairy. It’s something you [...]

ZEW Components Weak Expectations Are a Disaster

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080715d.jpg" width="353">
U.S. retail sales during June inched up just 0.1% after having risen a downwardly revised 0.8% in May. On a three-month basis overall retail sales rose at a 4.5% annual rate. The latest rise fell short of Consensus expectations for a 0.4% increase.
Sales of motor vehicles &amp; parts fell another 3.6% (-10.5% y/y) and they are down at a 27.0% annual rate during the last three months. The decline accompanied a 4.6% (-13.1% y/y) drop in unit motor vehicle sales last month.
Retail sales excluding autos rose 0.8% and the strong 1.2% rise in May was unrevised, boosted recently by receipts of the government&#39;s tax rebate checks. The latest increase was double Consensus expectations for a 0.4% rise, but a 4.6% (24.5% y/y) increase in sales at gasoline service stations accounted for much of the strength.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080715e.jpg" width="353">
Less gasoline &amp; autos retail sales inched up just 0.2% (3.6% y/y) which was the weakest increase since February. Nevertheless, on a three-month basis these sales still were strong and surged at an 8.8% annual rate during the last three months.
Folks attempted to avoid the higher gas prices by purchasing online. June sales of nonstore retailers (internet &amp; catalogue) rose 0.8% (8.1% y/y) following downwardly revised, but still strong, gains which exceeded 1.0% during the prior three months.
Sales at general merchandise stores rose 0.4% (5.6% y/y) following the 1.3% pop in May. Sales offurniture, home furnishings &amp; appliance, however, reversed all of the upwardly revised May surge of 1.0% (-0.1% y/y). Sales of furniture &amp; home furnishings declined 1.4% (-5.4% y/y). Apparel store sales rose 0.6% (2.9% y/y), about the same as they did during the prior three months.
Building materials &amp; garden equipment sales fell 0.9% (+1.5%% y/y) after gains which exceeded 2.0% during the prior two months.
Released yesterday, the Federal Reserve Board&#39;s final rule for home mortgage loans to better protect consumers and facilitate responsible lending can be found <a href="http://www.federalreserve.gov/newsevents/press/bcreg/20080714a.htm"> here</a>.
Doom &amp; Gloom in the Housing Markets: The Sequel from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/net/20080501/netpub.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">&nbsp;</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM">Retail Sales &amp; Food Services</a></td>
<td>0.1%</td>
<td>0.8%</td>
<td>3.0%</td>
<td>4.0%</td>
<td>5.8%</td>
<td>6.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>0.8%</td>
<td>1.2%</td>
<td>6.2%</td>
<td>4.5%</td>
<td>6.8%</td>
<td>7.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Less Gasoline</td>
<td>0.2%</td>
<td>0.8%</td>
<td>3.6%</td>
<td>4.1%</td>
<td>6.2%</td>
<td>6.4%</td>
</tr>
</tbody>
</table>


</html>

U.S. retail sales during June inched up just 0.1% after having risen a downwardly revised 0.8% in May. On a three-month basis overall retail sales rose at a 4.5% annual rate. The latest rise fell short of Consensus expectations for a [...]

U.S. Retail Sales Rose Just Slightly in June

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080715a.jpg" width="353">
U.S. finished producer prices jumped another 1.8% during June after the 1.4% surge during May. The increase surpassed Consensus expectations for a 1.3% rise.
Finished energy prices led the increase with a 6.0% pop as gasoline prices surged another 9.0% (39.7% y/y). Natural gas prices continued strong and surged 6.6% (17.6% y/y). Residential electric power costs rose 0.8% (4.7% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080715b.jpg" width="353">
Finished consumer food prices surged by 1.5% (8.4% y/y), double the May increase. The strength continued to be led by fresh vegetables (34.0% y/y) and pasta products (37.3% y/y).
Less food &amp; energy, the gain in finished goods prices rose the same 0.2% as they did during May. The latest figure fell slightly short of expectations for a 0.3% rise. Prices of core finished consumer goods rose the same 0.3% (3.5% y/y) as they did in May and the three-month rate of rise remained down somewhat at 4.2%. Durable consumer goods prices rose 0.3% (1.6% y/y) after the 0.4% May fall. Capital equipment prices gained 0.3% (2.4% y/y).<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080715c.jpg" width="353">
Intermediate goods prices surged yet again, last month by 2.1%. Excluding food &amp; energy these prices jumped another 1.3%.
The crude materials PPI surged 3.7% due to a 5.4% (72.1% y/y) jump in energy prices. Crude food prices also doubled their May strength and surged 3.5% (20.8% y/y). Less food &amp; energy crude prices fell 0.2%.
Back to the Future with Keynes from the Federal Reserve Bank of Minneapolis can be found <a href="http://www.minneapolisfed.org/research/QR/QR3212.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</a> (%)</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Finished Goods</td>
<td>1.8</td>
<td>1.4</td>
<td>9.1</td>
<td>3.9</td>
<td>3.0</td>
<td>&nbsp;4.9&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.2</td>
<td>0.2</td>
<td>3.1</td>
<td>1.9</td>
<td>1.5</td>
<td>2.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>2.1</td>
<td>2.9</td>
<td>12.5</td>
<td>4.1</td>
<td>6.4</td>
<td>&nbsp;8.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>1.3</td>
<td>2.0</td>
<td>8.4</td>
<td>2.8</td>
<td>6.0</td>
<td>&nbsp;5.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>3.7</td>
<td>6.7</td>
<td>45.7</td>
<td>12.1</td>
<td>1.4</td>
<td>14.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-0.2</td>
<td>5.0</td>
<td>&nbsp;33.2</td>
<td>15.7</td>
<td>20.8</td>
<td>4.9</td>
</tr>
</tbody>
</table>
</body>
</html>

U.S. finished producer prices jumped another 1.8% during June after the 1.4% surge during May. The increase surpassed Consensus expectations for a 1.3% rise. Finished energy prices led the increase with a 6.0% pop as gasoline prices [...]

U.S. PPI Surged Again

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

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251103F4.jpg

251103G4.jpg

U.S. light vehicle sales dove 6.9% (-4.5% y/y) in October to 15.48 million units (SAAR) after holding steady at 16.62 million units in September. Sales fell broadly. 

Light truck sales slid 6.9% (-1.4% y/y) in October to 12.90 million units, after rising 0.9% in September. Purchases of domestically-made light trucks fell 7.9% (+1.4% y/y) to 10.10 million units, the lowest level since February, after rising 3.4% in September. Sales of imported light trucks fell 2.8% (-10.3% y/y) to 2.80 million units, following a 7.4% September decline.

Trucks’ 83.3% share of the light vehicle market last month was steady with September and compared to 82.6% in August, and to 80.7% in October of last year. The share has averaged 82.4% so far this year versus 56.5% ten years earlier.

Passenger car sales declined 6.9% (-17.6% y/y) last month to 2.58 million, after falling 4.8% in September. Purchases of domestically-produced cars fell 7.2% (-16.5% y/y) last month to 1.93 million units, after weakening 7.1% in September. Imported auto sales declined 4.5% (-22.0% y/y) to 0.64 million units after holding steady in September.

Imports' 22.2% share of the U.S. light vehicle market rose from 21.4% in September. These compared to a high of 26.3% in November of 2023. Imports' share of the passenger car market edged up to 24.8% last month from 24.2% in September. It reached a high of 38.1% in September 2021. Imports' share of the light truck market increased to 21.7% last month from 20.8% in September.

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

251103H4.jpg

251103I4.jpg

- Light truck sales and auto purchases decline m/m.
- Total sales decline sharply y/y.
- Imports' market share declines.

U.S. Light Vehicle Sales Fall Sharply in October

251103J1.jpg

251103K1.jpg

Factory sector activity remains under pressure. The ISM U.S. manufacturing PMI declined to 48.7 in October after rising to 49.1 during September from 48.7 in August, according to the Institute for Supply Management. These figures are below the 50 expansion-contraction dividing line. As a result, they continue to indicate that the U.S. manufacturing sector weakened for the eighth consecutive month. The reading remained remain above, however, a low of 46.9 in October of last year. A November index of 49.4 had been expected in the Action Economics Forecast Survey.

The production component declined to 48.2 last month after rising to 51.0 in September. It remained increased from an April low of 44.0. A lessened 27.3% (NSA) of respondents reported higher production while an increased 22.0% reported lower output levels. The inventory reading fell to a 12-month low of 45.8 from 47.7 in September. A lessened 13.2% (NSA) of respondents raised inventories while a higher 21.7% shed them.

Working higher, the new orders index rose to 49.4 during October from 48.9 in September. An increased 20.4% (NSA) of respondents reported new orders improvement while 26.0% reported a decline. The employment index increased to a five-month high of 46.0 last month after rising to 45.3 in September. An increased 13.1% (NSA) of respondents more hiring while 22.3% reported less. The supplier delivery index rose to 54.2 in October from 52.6 in September. Twelve percent (NSA) of respondents reported slower product delivery speeds while 3.2% reported a quickening.

The prices index weakened to 58.0 (NSA) during October from 61.9 in September. It was below a high of 69.8 in April, and well above its low of 39.4 in December 2022. A lessened 27.3% of respondents reported higher prices, a nine month low, while an increased 8.7% reported lower.

In other series, the export orders index rose to a seasonally adjusted 44.5 in October after falling sharply to 43.0 in September. It remained up from 40.1 May low. The imports index edged up to 45.2 last month from 44.7 in September. The index is below a high of 52.6 in February.

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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- Decline reverses all of September increase.					
- Lower production offsets new orders rise.
- Price index falls to nine-month low.

U.S. ISM Manufacturing PMI Eases in October; Price Index Declines Sharply

Tian Yong Woon

This week, we review a wave of key developments across Asia following US President Trump’s tour of the region last week. A central theme concerned countries courting closer ties with the US to avoid harsher actions, while also boosting regional cooperation amid trade barriers and scrutiny of China. This push for closer ties has manifested through new and updated trade agreements—ironically driven by ongoing uncertainty in global trade and supply chains, with US–China relations at the core. A major outcome of Trump’s trip was the new US–China trade agreement, which included the US halving tariffs on Chinese fentanyl-related products to 10%, while China suspended rare earth export controls and resumed soybean purchases vital to the US (chart 1). Perhaps more importantly, the deal signalled a small conciliatory shift and avoided a potentially worse outcome. Beyond the US–China agreement at the APEC Summit in South Korea, the US–South Korea trade deal also gained more clarity. Under the deal, US auto tariffs on South Korea has fallen to 15%, matching the rate applied to Japan and likely providing relief for South Korean automakers (chart 2).

Trump’s visit to Japan was another highlight. Relations with new Prime Minister Takaichi got off to a strong start, and further details emerged on Japan’s previously cited $550 billion investment commitment in the US—substantial even relative to Japan’s existing direct investment there (chart 3). However, specifics on the timing and implementation of the investment remain limited. Meanwhile, at the ASEAN Summit earlier in the week, aside from Trump’s engagements, the bloc officially welcomed its 11th member—Timor-Leste—the first new member in decades—granting it access to the bloc’s mechanisms and potentially supporting a catch-up in economic development (chart 5). Looking ahead, the focus on China and Japan is likely to continue, with China set to release its October trade (chart 6) and CPI data, and Japan scheduled to report employee wages and household spending.

**The APEC summit**
The US and China made a modest but meaningful step forward on trade following the Trump–Xi meeting at the APEC Summit in South Korea. The US lowered tariffs on Chinese fentanyl-related products to 10% from 20% and suspended enforcement of rules targeting subsidiaries of blacklisted firms—previous points of contention for Beijing. In return, China pledged stronger efforts to curb fentanyl flows, paused rare earth export controls for a year, and resumed purchases of US soybeans—significant given its historically large share of US export demand (chart 1). While not a comprehensive reset, these moves eased immediate tensions and helped avert more severe outcomes, including Trump’s previously threatened 100% tariff hike. The tone of the meeting also suggests a more conciliatory shift, though relations remain fragile and the risk of renewed escalation is still material.

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Beyond the headline-grabbing US–China trade deal, the APEC Summit in South Korea also saw the US reach a trade agreement with South Korea. Under the deal, US tariffs on South Korean autos and auto parts have fallen to 15% from 25%, matching the US tariff rate on Japanese autos and providing relief to South Korea’s sizable automotive export sector (chart 2). The agreement also clarified South Korea’s supposed $350 billion investment in the US: $200 billion in cash, capped at $20 billion per year to avoid currency market distortions, with the remaining $150 billion directed toward shipbuilding cooperation. While also not a major breakthrough, the deal represents incremental progress, addressing prior uncertainties and signalling steps toward a more favourable trade framework.

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**US President Trump’s Japan Visit**
Turning to US President Trump’s visit to Japan last week, new Prime Minister Takaichi appears to have gotten off to a strong start, with Trump hailing US–Japan relations as entering a “NEW GOLDEN AGE.” The two countries signed several agreements, including a Technology Prosperity Deal, and deepened cooperation on critical minerals and rare earths. Japan’s previously vague $550 billion investment commitment in the US is now somewhat clearer: up to $332 billion will support critical US infrastructure, $30 billion will target AI, and $15 billion will go toward electronics and supply chains, among other areas. While the headline figure is substantial—even relative to Japan’s already significant direct investment assets in the US (chart 3)—the open-ended nature of the commitment and the lack of a clear timeline leave its actual impact uncertain.

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**The ASEAN summits**
Whilst US President Trump’s attendance at the ASEAN–US Summit in Malaysia dominated headlines, there were also several other notable developments at last week’s ASEAN meetings in Kuala Lumpur. Most prominently, Timor-Leste was officially admitted as ASEAN’s eleventh member, following a two-decade accession process during which the country actively aligned its political and economic frameworks with ASEAN standards. Membership grants Timor-Leste access to the bloc’s broader security and economic mechanisms and could open further avenues for trade, investment, and development cooperation. Nonetheless, the country still has considerable ground to make up relative to its new ASEAN peers, particularly in terms of both GDP and GDP per capita (chart 4).

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The accession of Timor-Leste into ASEAN aside, last week’s summits also brought a number of economic developments for the bloc. More concretely, ASEAN and China signed an upgrade to their free trade agreement last week, bringing the deal to so-called version 3.0. The upgraded deal (ACFTA 3.0) introduces commitments in new areas such as Digital Economy, Green Economy, and Supply Chain Connectivity, among other themes. And notably, just as the US and ASEAN have found common ground to collaborate in fields such as those relating to rare earths, given how the US has seen vulnerabilities arising from this space given China’s dominance in the field, China has taken the year’s US-China frictions to foster closer ties with its neighbours in the region, including the collectively sizable ASEAN bloc. Just by the trade dimension alone, China-ASEAN-11 trade has growth significantly this year (chart 2), although the economies’ total trade with the US also rose, and at a more significant pace, despite tariff measures.

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Looking ahead, investors will focus on a series of China-related releases this week, notably the Caixin PMI readings, as well as October trade and CPI inflation data. These indicators will help gauge the economy’s performance under ongoing US tariffs and assess domestic demand and supply conditions, all in the broader context of recent US–China interactions during Trump’s Asia tour. In Japan, attention will turn to updated data on employee wages and household spending, which—together with developments in the external environment—will shape expectations for the Bank of Japan’s future policy stance. Elsewhere in the region, investors will watch interest rate decisions from Australia and Malaysia, where rates are expected to remain unchanged, as well as GDP readings from Indonesia and the Philippines.

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Asia

Economic Letter from Asia: Come Together

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The Industrial Materials Price Index from the Foundation for International Business and Economic Research (FIBER) improved 0.3% during the four weeks ended October 31, 2025 after holding steady in the prior four week period. The index increased 0.8% y/y.

**Metals** group prices increased 4.3% (6.1% y/y) in the last four weeks as the cost of aluminum rose 7.0% (9.5% y/y). Copper scrap prices improved 6.5% (16.4% y/y) while zinc prices strengthened 6.8% in four weeks (3.0% y/y). Steel scrap prices rose 2.3% (-6.6% y/y) and tin prices increased 2.2% (16.1% y/y). Lead prices improved 1.1% (unchanged y/y) in four weeks.

Prices in the **Textile** group increased 1.2% during the last four weeks, and rose 2.4% y/y. The cost of burlap strengthened 14.5% in the last four weeks while surging 37.6% over the last year. Offsetting this rise, cotton prices fell 1.2% and declined 5.8% y/y.

**Miscellaneous** group prices weakened 3.0% in the last four weeks, unchanged y/y, as framing lumber prices fell 6.5% (+4.1% y/y). The cost of tallow, used for frying & baking, declined 13.1% (+11.2% y/y) in four weeks. Offsetting this weakness, natural rubber prices held steady (-10.1% y/y).

Prices in the **crude oil & benzene** group declined 1.7% (-9.3% y/y) in the last four weeks. The cost of West Texas Intermediate crude oil fell 3.1% in four weeks to $60.80 per barrel and declined 11.7% y/y. The price was increased from a low of $58.47 in the third week of the month. The price of the petro-chemical benzene fell 2.9% (-23.3% y/y) in four weeks.

**Excluding crude oil**, the industrial commodity price index rose 0.5% (1.6% y/y) over the last four weeks, the same as during the prior four weeks.

The Foundation for International Business and Economic Research (FIBER) develops economic measurement techniques as applied to business cycles and inflation in the U.S. and other market economies. The commodity price data can be found in Haver's **DAILY**, **WEEKLY**, **USECON** and **CMDTY** databases.

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- Metals and textile prices strengthen.
- Framing lumber costs backpedal.
- Crude oil prices weaken.

FIBER: Industrial Commodity Price Index Edges Higher in Latest Four Weeks

Andrew Cates

**US monetary policy**
This first chart shows that Chair Powell’s cautious tone in the aftermath of this week’s FOMC meeting led markets to scale back expectations for further near-term easing. Fed funds futures for late 2025 through mid-2026 rose slightly, signalling that investors now expect a shallower and slower easing cycle than before. While the rate cut itself confirmed the Fed’s gradual pivot toward easier policy, markets interpreted Powell’s remarks as suggesting that a December move is not guaranteed and that the central bank remains wary of declaring victory on inflation too soon.

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**The global business cycle**
The latest flash PMI surveys for October highlight a still-divergent global picture, with services-led resilience offsetting persistent manufacturing weakness. Activity remains strongest in India and the United States, both comfortably in expansion territory, while Germany has shown one of the clearest signs of improvement within the euro area after a long period of contraction. The broader euro area and UK readings point to modest but positive momentum, suggesting that growth is stabilising rather than accelerating. In contrast, France remains mired below the 50 threshold, signalling continued contraction, and Japan and Australia are treading water with only marginal gains.

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**Consumer confidence in the US and Europe** 
Consumer confidence trends have diverged across major economies in 2025. In the UK, sentiment has improved gradually, supported by easing inflation and lower interest rates. In the euro area, confidence has stabilised after a prolonged downturn, though households remain wary. By contrast, US confidence has slipped further, probably reflecting a softening labour market, slowing wage growth, and heightened concern about job security. Overall, global consumer sentiment remains fragile and uneven, suggesting that household spending could stay subdued even if price pressures recede and monetary policy becomes more accommodative.

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**Credit conditions in the euro area** 
The latest data on Euro Area M3 growth underline that monetary conditions remain mildly restrictive, even after the ECB’s recent rate reductions. Money growth has decelerated sharply over the past year, with only a limited contribution from private-sector credit and little net support from lending to government. The ECB’s Q4 Bank Lending Survey, released this week, suggests that while financing conditions are beginning to ease, credit dynamics remain weak. Banks reported a further net tightening of credit standards for firms, reflecting continued risk aversion, even as loan demand from businesses and households picked up modestly thanks to lower interest rates and improving sentiment.

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**The UK manufacturing sector**
Turning to the UK, the latest CBI Industrial Trends Survey offers little sign of improvement in manufacturing conditions. The balance of firms reporting excess stocks of finished goods has fallen further into negative territory, consistent with efforts to run down inventories amid weak demand and high uncertainty. And on that score, the share of firms citing uncertainty about demand over the next year as a constraint on capital expenditure has shifted up, highlighting persistent caution in investment planning. Together, these indicators point to a sector still struggling to regain momentum after a protracted slowdown—one where firms are prioritising cost control and liquidity preservation over expansion, despite an easing in headline inflation and gradual monetary policy support.

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**Traded goods price inflation**
The Drewry Container Index, which tracks global shipping costs for a standard 40-foot container, has fallen back in recent months from the elevated levels seen in 2024, reflecting softer global trade volumes and a partial unwinding of last year’s supply-chain pressures. Even so, concerns have re-emerged that new US tariff measures and associated logistical bottlenecks could push freight rates and producer price inflation (PPI) higher in the coming months. The final chart below illustrates how closely traded goods price inflation, represented by Haver’s aggregation of PPI inflation for advanced economies, has tended to move with swings in container shipping costs. While traded goods inflation remains subdued for now, any renewed disruptions to global shipping routes or tariff-driven frictions could quickly feed through to higher input costs—especially in manufacturing sectors reliant on long and complex supply chains.

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Global equity markets are once again flirting with record highs, buoyed by renewed optimism that the global economy can achieve a soft landing—and by persistent enthusiasm over the potential productivity gains from AI-related investment. The Federal Reserve’s decision to cut rates by 25bps this week—its second this autumn—initially reinforced expectations that global monetary policy is shifting toward a more accommodative stance. However, Chair Powell’s reminder that a further cut in December was “not inevitable” tempered that optimism and was met with some disappointment in financial markets (chart 1). Even so, the broader tone remains constructive, though it contrasts with a still-fragile macro environment. Renewed conflict in Gaza, the ongoing US government shutdown, and intensifying trade tensions have kept risk sentiment uneven and underscored the fragility of the recovery. The latest flash PMIs (chart 2) show modest global expansion led by services, while manufacturing continues to struggle. Consumer confidence (chart 3) tells a similar story: sentiment has weakened in the US as the labour market softens, stabilised in the euro area, and improved slightly in the UK. In the euro area, sluggish money and credit growth (chart 4) and the ECB’s latest bank-lending survey confirm that financial conditions remain mildly restrictive despite recent rate cuts. The UK CBI Industrial Trends Survey (chart 5) points to manufacturers reducing inventories and deferring investment plans amid demand uncertainty. Externally, the Drewry Container Index (chart 6) has fallen back from 2024’s elevated levels, signalling easing supply-chain pressures and subdued traded-goods inflation—though tariff realignments remain a potential source of friction.

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Economy in Brief: July 2008

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U.S. Consumer Price Index Jumped 1.1%, Y/Y Gain The Most Since 1991

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U.S. Business Inventories' Trend Growth Slower

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U.S. PPI Surged Again

U.S. PPI Surged Again