Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080813a.jpg" align="left" border="0" height="265" width="353">
The inflation story in EMU/EU is clear but not uncomplicated.
Inflation at 4% Yr/Yr has accelerated in terms of its headline the only
measure the ECB claims to have designs on. But oil prices have dropped.
That should pave the way for better times ahead. Mover over, the core
rate of inflation is 2.5% Yr/Yr - still &#8216;too high&#8217; - but its sequential
growth rates show that core inflation has been decelerating over the
recent 6-mos and three months. Moreover, this core deceleration is
observable across some key EMU countries including Italy. 
 

The most troublesome inflation patterns are in the UK. The BOE
has the same 2% inflation ceiling as the ECB. But its headline Yr/Yr
inflation rate is at 7.3% and really accelerating. Core UK inflation
also is blowing up at a 2.2% rate Yr/Yr, 2.9% over six months and 3.9%
over three months. 
 

The breakdown in global oil prices is good news for all
central banks, but the ECB is still in a bit of an inflation fix. The
ECB is getting in a more nettlesome position since its economy is
starting to show more pronounced weakness as core inflation abates. It
challenge &#8211; one it has not faced yet -- might be how to deal with
fading but still over-the-top inflation as growth begins to unwind more
sharply. 
 
 


<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">UK</td>
<td>0.6%</td>
<td>0.5%</td>
<td>0.7%</td>
<td>7.3%</td>
<td>5.4%</td>
<td>3.8%</td>
<td>2.3%</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 FE&amp;A</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">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">UK</td>
<td>0.3%</td>
<td>0.3%</td>
<td>0.4%</td>
<td>3.9%</td>
<td>2.9%</td>
<td>2.2%</td>
<td>2.2%</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>
</body></html>

The inflation story in EMU/EU is clear but not uncomplicated. Inflation at 4% Yr/Yr has accelerated in terms of its headline the only measure the ECB claims to have designs on. But oil prices have dropped. That should pave the way for [...]

Euro Headline Inflation is Unruly; Core Setting Down

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080813c.jpg" width="353">
U.S. retail sales last month dipped 0.1%, right on Consensus expectations. The decline followed an upwardly revised June rise of 0.3%. On a three-month basis overall retail sales rose at a 4.1% annual rate, even with last year&#39;s 4.0% increase.
The overall gain was diminished by another sharp decline in sales of motor vehicles &amp; parts. A 2.4% drop (-10.5% y/y) followed the 2.1% June decline (revised shallower) and they are down at a 19.7% annual rate during the last three months.
Retail sales excluding autos rose 0.4% in July. That increase about equaled Consensus expectations.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080813d.jpg" width="353">
Higher gas prices again lifted retail sales last month. Sales at gasoline service stations increased 0.8% (24.6% y/y) after gains of 4.0% and 3.3% during the prior two months. 
Less gasoline &amp; autos, retail sales rose 0.3% (3.4% y/y) following an upwardly revised 0.4% increase during June. Still, the latest increase was the weakest since February. Sales on a three-month basis rose at a firm 6.4% annual rate.
Purchases made from home continued strong as July sales of nonstore retailers (internet &amp; catalogue) jumped 1.1% (7.7% y/y). That followed an unrevised 0.8% June increase. On a three-month basis these sales rose at a 12.4% annual rate.
Sales at general merchandise stores rose 0.3% (5.2% y/y) following an upwardly revised 0.6% gain during June. Sales offurniture, home furnishings &amp; appliance reversed the June decline and rose 0.9% (-0.2% y/y). Sales of furniture &amp; home furnishings rose 1.0% (-4.8% y/y). Apparel store sales ticked up 0.2% (0.9% y/y).
Building materials &amp; garden equipment sales reversed their June decline and rose 0.3% (-1.0% y/y).
Unanchored Expectations? Interpreting the Evidence from Inflation Surveys from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2008/el2008-23.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">July</th>
<th scope="col">June</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>0.3%</td>
<td>2.6%</td>
<td>4.0%</td>
<td>5.8%</td>
<td>6.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>0.4%</td>
<td>0.9%</td>
<td>6.0%</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>0.3%</td>
<td>0.4%</td>
<td>3.4%</td>
<td>4.1%</td>
<td>6.2%</td>
<td>6.4%</td>
</tr>
</tbody>
</table>


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U.S. retail sales last month dipped 0.1%, right on Consensus expectations. The decline followed an upwardly revised June rise of 0.3%. On a three-month basis overall retail sales rose at a 4.1% annual rate, even with last year's 4.0% [...]

U.S. Retail Sales Dipped As Expected, Internet & Catalogue Sales Jumped

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080813b.jpg" align="left" border="0" height="265" width="353">
Officials in Japan have become more worried in recent weeks
even saying that they cannot be sure that the economy is not now in
recession. It&#8217;s GDP for 2008-Q2 tells that story. GDP is declining at a
weak 2.4% pace in Q2 (Saar). The Yr/Yr pace of GDP growth has slowed
from an already weak 1.4% in 2007-Q4 to 1.2% in 2008-Q1 and now to 1.0%
in 2008-Q2. 
 

Private consumption is falling at a 1.9% pace. Gross fixed
capital formation is falling at a 6% rate. The investment rate for
capital equipment is -0.9% and for housing it&#8217;s a very weak -13%. Trade
is making a small subtraction from overall growth as imports are
dropping at better than a 10% rate as exports are falling at a nearly
9% ate. That results in a GDP subtraction because exports are so much
larger than imports in real terms than the smaller percentage decline
in exports is still a larger drop in real terms than the drop in
imports. 
 

Moreover, domestic demand in Japan is falling at a 2.5% annual
rate in 2008-Q2 and is falling year/year for the second quarter in a
row. No wonder Japan&#8217;s authorities are concerned and stimulus package
is being prepared. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="11" scope="col">Japan GDP
</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td colspan="2">Consumption</td>
<td colspan="3">Capital
Formation</td>
<td colspan="3">Trade&nbsp;</td>
<td>Domestic</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>GDP</td>
<td>Private</td>
<td>Public</td>
<td>Gross 
Fix 
Capital</td>
<td>Plants 
&amp;Eqpt</td>
<td>Housing</td>
<td>X-M: 
lbns E</td>
<td>Exports</td>
<td>Imports</td>
<td>Demand</td>
</tr>
<tr class="grey3">
<td colspan="11" class="firstcol">%
change Q/Q at annual
rates of change; X-M is Q/Q change in Bil Real Yen</td>
</tr>
<tr>
<td class="firstcol">Q2-08</td>
<td>-2.4%</td>
<td>-1.9%</td>
<td>0.3%</td>
<td>-6.0%</td>
<td>-0.9%</td>
<td>-13.0%</td>
<td>-0.4</td>
<td>-8.9%</td>
<td>-10.7%</td>
<td>-2.5%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Q1-08</td>
<td>3.2%</td>
<td>2.8%</td>
<td>-1.8%</td>
<td>2.8%</td>
<td>-0.2%</td>
<td>18.2%</td>
<td>2.4</td>
<td>14.4%</td>
<td>4.8%</td>
<td>1.4%</td>
</tr>
<tr>
<td class="firstcol">Q4-07</td>
<td>2.4%</td>
<td>1.4%</td>
<td>3.4%</td>
<td>-2.5%</td>
<td>4.3%</td>
<td>-33.8%</td>
<td>1.9</td>
<td>11.1%</td>
<td>3.3%</td>
<td>1.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Q3-07</td>
<td>1.0%</td>
<td>0.0%</td>
<td>0.3%</td>
<td>-4.2%</td>
<td>2.3%</td>
<td>-26.3%</td>
<td>2.5</td>
<td>11.0%</td>
<td>-1.2%</td>
<td>-1.0%</td>
</tr>
<tr class="odd">
<td colspan="11" class="firstcol">%
change Yr/Yr; X-M is
Yr/Yr change in Gap in Bil Real Yen</td>
</tr>
<tr class="grey1">
<td class="firstcol">Q2-08</td>
<td>1.0%</td>
<td>0.5%</td>
<td>0.5%</td>
<td>-2.6%</td>
<td>1.3%</td>
<td>-15.8%</td>
<td>6.3</td>
<td>6.5%</td>
<td>-1.2%</td>
<td>-0.3%</td>
</tr>
<tr>
<td class="firstcol">Q1-08</td>
<td>1.2%</td>
<td>1.3%</td>
<td>0.7%</td>
<td>-3.6%</td>
<td>-0.6%</td>
<td>-16.6%</td>
<td>7.6</td>
<td>11.0%</td>
<td>2.9%</td>
<td>-0.2%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Q4-07</td>
<td>1.4%</td>
<td>1.2%</td>
<td>1.4%</td>
<td>-3.8%</td>
<td>-0.2%</td>
<td>-21.5%</td>
<td>7.2</td>
<td>10.4%</td>
<td>2.3%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Q3-07</td>
<td>1.8%</td>
<td>1.8%</td>
<td>0.2%</td>
<td>-1.4%</td>
<td>0.4%</td>
<td>-11.3%</td>
<td>6.0</td>
<td>8.5%</td>
<td>1.5%</td>
<td>0.6%</td>
</tr>
<tr class="grey1">
<td class="firstcol">5-Yrs</td>
<td>2.0%</td>
<td>1.5%</td>
<td>0.8%</td>
<td>0.5%</td>
<td>4.4%</td>
<td>-4.0%</td>
<td>na</td>
<td>9.4%</td>
<td>4.3%</td>
<td>1.2%</td>
</tr>
</tbody>
</table>
</body></html>

Officials in Japan have become more worried in recent weeks even saying that they cannot be sure that the economy is not now in recession. It’s GDP for 2008-Q2 tells that story. GDP is declining at a weak 2.4% pace in Q2 (Saar). The [...]

Japan's GDP Slows and Contracts

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080812k.jpg" align="left" border="0" height="265" width="353">
Consumer confidence in Japan, as measured by a diffusion
index, declined again in July and was at the lowest level recorded
since June 1982 when confidence was first measured. The history of the
index is shown in the first chart. Monthly data are available only
since April, 2004 and these, only on a seasonally unadjusted basis. The
index was 31.4 in July.
The index is the average of opinions regarding the consumers'
overall livelihood, the growth of income, employment prospects and
their willingness to buy durable goods. Opinions on all four have
deteriorated since early 2007 and, except for the employment prospects
are at all time lows, as shown in the second chart. Opinions on
employment prospects have been more volatile than those on the other
components of the index.
Retail sales for June were also released today. The year over
year changes in retail sales in the last three months have been close
to zero: 0.29% in June, 0.27% in May and 0.05% in April. The relation
of consumer confidence to actual retail sales is not very strong as can
be seen in the third chart that correlates consumer confidence with the
year to year change in retail spending. The R2 is
.36 indicating that consumer confidence explains only 36% of the year
to year changes in retail sales. While low confidence might suggest
lower spending, it may be that the rationale goes the other way. The
acceleration in the prices of food and beverages since the beginning of
the year, shown in the table below, has probably played a major role in
weakening confidence. 
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080812l.jpg" border="0" height="265" width="312">
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080812m.jpg" border="0" height="265" width="312"> 


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">JAPAN&nbsp;&nbsp;</th>
<th scope="col">Jul 08</th>
<th scope="col">Jun&nbsp; 08&nbsp;</th>
<th scope="col">May&nbsp; 08&nbsp;</th>
<th scope="col">Apr 08&nbsp;</th>
<th scope="col">Mar 08&nbsp;</th>
<th scope="col">Feb 08</th>
<th scope="col">Jan 08&nbsp;&nbsp;</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer
Confidence&nbsp; Diffusion Index (%)</td>
<td>31.4</td>
<td>32.6</td>
<td>33.9</td>
<td>35.2</td>
<td>36.7</td>
<td>36.1</td>
<td>37.5</td>
<td>44.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Overall
livelihood</td>
<td>29.3</td>
<td>30.3</td>
<td>31.5</td>
<td>33.0</td>
<td>34.4</td>
<td>33.7</td>
<td>35.1</td>
<td>42.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Income
growth</td>
<td>36.3</td>
<td>36.5</td>
<td>36.6</td>
<td>.7.5</td>
<td>38.7</td>
<td>38.5</td>
<td>39.4</td>
<td>42.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Employment</td>
<td>30.7</td>
<td>32.8</td>
<td>34.9</td>
<td>36.0</td>
<td>37.6</td>
<td>37.0</td>
<td>38.6</td>
<td>48.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Willingness
to buy durable goods</td>
<td>29.2</td>
<td>30.9</td>
<td>32.7</td>
<td>34.2</td>
<td>36.2</td>
<td>34.8</td>
<td>36.7</td>
<td>45.7</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">CPI: Food &amp;
Beverage (Y/Y % )</td>
<td></td>
<td>3.59</td>
<td>2.38</td>
<td>1.99</td>
<td>1.54</td>
<td>1.20</td>
<td>0.50</td>
<td>0.34</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Retail
Sales&nbsp;(Y/Y % )</td>
<td></td>
<td>0.27</td>
<td>0.29</td>
<td>0.05</td>
<td>1.04</td>
<td>3.17</td>
<td>1.31</td>
<td>-0.13</td>
</tr>
</tbody>
</table>
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Consumer confidence in Japan, as measured by a diffusion index, declined again in July and was at the lowest level recorded since June 1982 when confidence was first measured. The history of the index is shown in the first chart. [...]

Japanese Consumer Confidence In July Lowest Ever Recorded: Retail Sales Stagnant

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080812i.jpg" width="353">
Small business optimism, according to the National Federation of Independent Business (NFIB), fell another 1.1% last month after having been roughly unchanged in June. The index was near the low in 1975 which was its second lowest level on record.
During the last ten years there has been a 70% correlation between the level of the NFIB index and the two quarter change in real GDP.
The percentage of respondents with one or more job openings revered most of the June improvement while the percent expecting the economy to improve rose slightly. Seventeen percent of respondents had one or more job openings. During the last ten years there has been a 71% correlation between the NFIB employment percentage and the y/y change in nonfarm payrolls. The percentage planning to raise employment was level m/m at 5%, near the least since early-2003.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080812j.jpg" width="353">
Six percent of respondents thought that now was a good time to expand the business, the least since 1982, and 37% of respondents expected lower earnings, a record low.
The percentage of firms actually raising prices shot up to 32%, the highest level since 1981. During the last ten years there has been a 64% correlation between the y/y change in the producer price index and the level of the NFIB price index. The percentage of firms planning to raise prices also surged to 38%, also its highest since 1981.
About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.
The NFIB figures can be found in Haver&#39;s SURVEYS database.

<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">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Small Business Optimism Index (1986=100)</td>
<td>88.2</td>
<td>89.2</td>
<td>-9.6%</td>
<td>96.7</td>
<td>98.9</td>
<td>101.6</td>
</tr>
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Small business optimism, according to the National Federation of Independent Business (NFIB), fell another 1.1% last month after having been roughly unchanged in June. The index was near the low in 1975 which was its second lowest [...]

U.S. Small Business Optimism Fell Further

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080812h.jpg" width="353">
For June, the Bureau of Labor Statistics reported in the Job Openings &amp; Labor Turnover Survey (JOLTS) reported that the number of job openings ticked down 0.1% (-15.0% y/y) from May. The dip followed a 0.5% gain during May. Since their peak in January of 2007, the number of job openings have fallen 14%.
The job openings rate was unchanged during June at 2.6%. The latest figures are down from near 3% one year ago. The job openings rate is the number of job openings on the last business day of the month as a percent of total employment plus job openings.
The actual number of job openings in the manufacturing sector rose 0.4% (-25.6% y/y) in June from an upwardly revised May figure. Professional &amp; business services job openings recovered declines during the prior two months with a 9.9% (-0.6% y/y) increase. Job openings in the education &amp; health sectors rose by 6.3% (-2.8% y/y) after three consecutive months of decline but job openings in retail trade reversed the May increase with a 10.5% (-21.5% y/y) drop.
By region, openings in the West were off by one quarter from the year ago level. In the South they fell 11.2% y/y and in the Midwest openings fell a like 11.9%. In the Northeast job openings also fell 8.5% y/y
The hires rate ticked up to 3.1% but remained near the low for this cycle.The hires rate is the number of hires during the month divided by employment.The latest figure was near the lowest since 2003. The actual number of hires rose 5.1% (-10.5% y/y). Hires in the trade &amp; transportation sectors rose sharply m/m but remained down 4.6% from one year earlier.
The job separations rate held stable m/m at 3.1%, down from 3.7% at the peak. Separations include quits, layoffs, discharges, and other separations as well as retirements. The level of job separations fell 3.5% y/y.
The JOLTS survey dates only to December 2000 but has since followed the movement in nonfarm payrolls, though the actual correlation between the two series is low.
A description of the Jolts survey and the latest release from the U.S. Department of Labor is available <a href="http://www.bls.gov/news.release/pdf/jolts.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/@EB/@EB14/@EB14.HTM">JOLTS</a> (Job Openings &amp; Labor &nbsp;Turnover Survey)</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June &#39;07</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">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Job Openings, Total&nbsp;&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Rate (%)</td>
<td>2.6</td>
<td>2.6</td>
<td>3.0</td>
<td>2.8</td>
<td>3.0</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total (000s)</td>
<td>3,627</td>
<td>3,631</td>
<td>4,267</td>
<td>3,974</td>
<td>4,272</td>
<td>3,863</td>
</tr>
<tr class="odd">
<td class="firstcol">Hires, Total</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Rate (%)</td>
<td>3.1</td>
<td>3.0</td>
<td>3.5</td>
<td>41.9</td>
<td>43.4</td>
<td>43.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total (000s)</td>
<td>4,333</td>
<td>4,123</td>
<td>4,843</td>
<td>57,771</td>
<td>59,153</td>
<td>57,501</td>
</tr>
</tbody>
</table>
</body>
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For June, the Bureau of Labor Statistics reported in the Job Openings & Labor Turnover Survey (JOLTS) reported that the number of job openings ticked down 0.1% (-15.0% y/y) from May. The dip followed a 0.5% gain during May. Since [...]

JOLTS: Job Openings Stable in June, Hires Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080812g.jpg" width="353">
According to the International Council of Shopping Centers chain store sales fell 0.2% last week and that was enough to return the level of sales to where it was in the third week of June. Sales were still up 0.4% from the June average after that month&#39;s 0.5% rise.
During the last ten years there has been a 45% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
The leading indicator of chain store sales from ICSC-UBS slipped again by 0.3% (-6.1% y/y) after the 1.5% decline during the week prior.
The chain store sales figures are available in Haver&#39;s SURVEYW database.
Signal or Noise? Implications of the Term Premium for Recession Forecasting from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/epr/08v14n1/0807rose.pdf"> here</a>.
The Industrial evolution and the Demographic Transition from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/files/br/2008/q1/khan_demographic-transition.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">08/09/08</th>
<th scope="col">08/02/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>493.5</td>
<td>499.2</td>
<td>2.6%</td>
<td>2.8%</td>
<td>3.3%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>


</html>

According to the International Council of Shopping Centers chain store sales fell 0.2% last week and that was enough to return the level of sales to where it was in the third week of June. Sales were still up 0.4% from the June [...]

U.S. Chain Store Sales Lost Steam

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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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.

U.S. ISM Manufacturing PMI Contracts in July to a Nine-Month Low

Michael J. Moran

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Total construction activity fell 0.4 percent in June, continuing a soft trend that began in the middle of last year. After peaking in May 2024, total outlays have declined 3.6%. The retreat was modest at first, but the softness began to intensify last fall. Activity has now declined in nine of the past ten months, with the drop over this span totaling 3.1%. The private sector accounts for nearly all of the softness, with both residential and nonresidential contributing; public construction has continued to advance, although gains in recent months have been modest.

Private residential construction fell 0.7% in June, marking the 12th decline in the past 13 months and leaving activity 7.3% below the peak in May 2024. Hints of softness in private residential construction first appeared in mid-2023, when multi-family construction first stalled and then moved notably downward throughout 2024. Following the swoon in 2024, multi-family activity has stabilized in recent months.

However, single family building has taken the lead in pulling activity lower, declining for four consecutive months with pronounced retreats in the past three (average of -1.8%). Prospects for single-family construction do not seem bright, as the ups and downs in single-family housing starts have left little net growth in the past year; the past four months have been especially soft.

Improvements to existing structures contributed to weakness with sharp declines early in the year, but this area has posted small gains in the past three months. Home improvements (i.e. additions and renovations) should not be ignored in assessing residential construction, as they typically represent 35 to 40 percent of private activity.

Private nonresidential construction fell 0.3 percent in June, reinforcing the downward drift that has been in place since the start of 2024. This sector has posted 11 declines in the past 18 months. While activity grew in several months over this span, most of the increases were minuscule. The net effect of the ups and downs was a drop of 6.6% (annual rate of 4.4%). Total nonresidential activity has several components, and some have advanced in the past year or so, but none has posted an impressive performance. Two areas, lodging (hotel, motels, resorts) and commercial (retail and wholesale), have been notably soft.

250801P40.jpg

The public sector has started to sputter after two years of strong activity. Building was vigorous in 2023, growing 21.8% (December to December), and activity advanced an additional 2.4% in 2024. Growth so far this year has been modest on balance. Most months have registered gains, but they offset declines in the closing months of last year by only a small margin. Activity in June was 0.1% above the reading in October (the high point in 2024). Both state and Local governments and the federal sector have posted similar performances: robust in 2023, moderate in 2024, and hesitating this year.

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

- Private building, both residential and nonresidential, drifting lower.
- Public construction hesitating after two strong years.

U.S. Construction: Sluggish in June

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Manufacturing PMIs in the S&P framework were mixed in July. However, the median reading edged slightly higher rising to 48.6 in July from 48.5 in June. But both of these are significantly weaker than the 49.1 reading in May. Manufacturing continues to post PMI readings that are below 50 indicating sector contraction on a fairly broad basis in July among the 17 reporting countries in the table plus the euro area. Only India and Vietnam reported PMI readings above 50 indicating sector expansion in July. In June, three of these jurisdictions showed readings above 50; in May, only three had readings above 50 as well. It remains a difficult time for manufacturing globally.

The readings for the manufacturing PMIs also show slippage in the medians from 12-months to six-months to three-months. The 12-month median is 49.2, the six-month median at 48.8, and the three-month median at 48.7. The bottom line is that most manufacturing sectors show contraction, and the contractions are generally getting slightly worse.

However, on an individual basis over three months about two-thirds of the reporters showed an improvement. Over six months just under 40% showed improvement and over a year about 44% of them showed improvement compared to the year before. Only the three-month versus six-month comparison shows a majority of reporters indicating better performance in July.

The ranked or queue standings metrics that place these individual readings for July in their queue of data over the last 4 ½ years, show standings above 50% which put the individual readings above their medians for this period. And only six of these eighteen reporting jurisdictions sported readings above 50%. Those were for the euro area, Germany, France, and India. India has a rating well above 50% at its 96th percentile; Malaysia has a reading above 50% and Vietnam has a reading well above 50% at its 74th percentile.

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The global economy has been put through the ringer with shocks from a war in Ukraine, stepped up military action in the Middle East, threats in the Straits of Hormuz, and an aggressive tariff policy from the United States, affecting global trade- a significant factor for manufacturing. These events have wrong-footed manufacturing globally. During this period, the inflation threat has dissipated; however, in most countries, inflation still slightly overshoots its target where central banks have such targets.

The U.S. has a particularly large number of policy changes afoot. Its manufacturing sector is still struggling. And recent employment data there indicate what appears to be a broader slowdown in the economy. Job growth in the U.S. has slowed and U.S. trends now show consumer spending slowing along with weaker and downwardly revised job growth. Put together, these are signals to watch closely.

Economy in Brief: August 2008

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Euro Headline Inflation is Unruly; Core Setting Down

U.S. Retail Sales Dipped As Expected, Internet & Catalogue Sales Jumped

U.S. Retail Sales Dipped As Expected, Internet & Catalogue Sales Jumped

Japan's GDP Slows and Contracts

Japanese Consumer Confidence In July Lowest Ever Recorded: Retail Sales Stagnant

U.S. Small Business Optimism Fell Further

JOLTS: Job Openings Stable in June, Hires Up

U.S. Chain Store Sales Lost Steam