Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070914a.jpg" width="353">
U.S. August, retail sales rose 0.3% after an upwardly revised 0.5% gain in July. The overall rise was in line with Consensus expectations for a 0.5% increase.
A shortfall, however, was registered by sales excluding autos which fell 0.4%. Any disappointment in that decline was mitigated by the upward revision to the July increase in sales to 0.7% from 0.4% reported initially. Consensus expectations were for a 0.2% gain in August.
Nonauto retail sales less gasoline fell 0.1%r (4.9% y/y) after a July gain that was revised to 0.8% from 0.6% reported last month.
Sales of discretionary items were generally firm last month. Furniture, home furnishings &amp; appliance stores rose 0.4% (2.5% y/y) after an upwardly revised 1.5% July increase that was nearly double the initial report. Sales at general merchandise stores rose 0.3% (5.6% y/y) after rising an unrevised 0.9% in July.Apparel store sales were the disappointment and fell 0.1% after a little revised 1.6% July.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070914b.jpg" width="353">
Reflecting weakness in the housing market, building material sales fell a hard 1.0% (-0.1% y/y) in August following a 0.8% July increase that was revised up from 0.2%.
Sales of nonstore retailers (internet &amp; catalogue) fell 1.0% (+6.9% y/y) but the prior month&#39;s initially reported gain of 0.4% was revised up to 1.3%. 
Sales by motor vehicle &amp; parts dealers rose 2.8% (3.0% y/y) but the 0.3% increase that was reported last month was revised now to show a 1.4% decline. Unit vehicle sales jumped 6.5% in August, spurred by new sales promotions.
Gasoline service station sales fell 2.4% reflecting a 1.7% m/m decline in gas prices at the pump to an average $2.79 per gallon (-3.4% y/y). The decline has since bottomed.

<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">August</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM">Retail Sales &amp; Food Services</a></td>
<td>0.3%</td>
<td>0.5%</td>
<td>3.7%</td>
<td>6.2%</td>
<td>6.6%</td>
<td>6.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>-0.4%</td>
<td>0.7%</td>
<td>3.9%</td>
<td>7.3%</td>
<td>7.6%</td>
<td>7.1%</td>
</tr>
</tbody>
</table>


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U.S. August, retail sales rose 0.3% after an upwardly revised 0.5% gain in July. The overall rise was in line with Consensus expectations for a 0.5% increase. A shortfall, however, was registered by sales excluding autos which fell [...]

U.S. Retail Sales in Line With Forecasts in August but Trend Down

Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070913g.jpg" width="353">
The UK housing market, too, seems to be faltering. The monthly survey of the Royal Institute of Chartered Surveyors, RICS, shows a net decline in house prices in its August reading of -1.8%, the first decline since October 2005. The survey questions asks about developments over the past three months, so this is no quirk. The raw data show a drop from 20% in July to 10% in August in the portion of RICS members reporting higher home prices and an increase from 16% to 19% in the portion reporting lower prices. [Net balance figures are seasonally adjusted by RICS.]
In August, the average number of home sales per surveyor was 23.3 over three months. The average number of homes in their inventory at the end of August was 62.2, making a turnover ratio of 37.6%. While this is almost the same as in August 2006, it is down from a recent high of 46.6% in March.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070913h.jpg" width="353">
Further, buyer enquiries were reduced at a net 37% of firms, a deterioration from July&#39;s 27% and June&#39;s 19%. The raw response data showed a lower volume of enquiries at 61% of firms, the highest figure for August since 2004, which was 62%, the highest August value in the nine-year history of the survey.
A separate report from the UK Government&#39;s Department of Trade and Industry shows that orders for construction have already weakened. They fell 7.5% in July, following on 16.0% in June (seasonally adjusted in 2000 prices). These orders move widely from month to month, and looking at a 2-month % change gives an average of -11.9% in June and July, the weakest period since May/June 2003, -12.2%. Orders for new housing rose in July, by 15.7%, but they had dropped 32.7% in June. The two months had an average decline of 11.8%, the weakest performance since September/October 2001. Nonresidential construction orders, called here &quot;other work&quot;, fell 15.3% in July and 8.4% in June.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070913i.jpg" width="353">
Construction output is measured in the UK in quarterly data, reported for Q2 just a week ago. It looked pretty good. The total, &quot;all work&quot;, rose 0.8% from Q1 and 3.5% from a year ago. This was the strongest outcome since Q2 2004. However, the housing portion has already flattened out. New private housing output was virtually unchanged in Q2 after declining 2.1% in Q1; the year-on-year change showed modest growth of 1.1%. Obviously the customer traffic reported in the RICS survey and the downward path of orders for new housing don&#39;t suggest that an improvement is imminent.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">UK: RICS Survey, SA</th>
<th scope="col">Aug 2007*</th>
<th scope="col">July 2007*</th>
<th scope="col">June 2007*</th>
<th scope="col">Year Ago*</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">House Prices: % Balance</td>
<td>-1.8</td>
<td>+10.8</td>
<td>+10.7</td>
<td>+36.2</td>
<td>+28.3</td>
<td>-25.9</td>
<td>+6.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Sales/Stock Ratio, %</td>
<td>37.5</td>
<td>37.1</td>
<td>39.1</td>
<td>37.7</td>
<td>37.7</td>
<td>29.7</td>
<td>45.3</td>
</tr>
<tr class="odd">
<td class="firstcol">New Buyer Enquiries &nbsp;% Balance</td>
<td>-37</td>
<td>-27</td>
<td>-19</td>
<td>+26</td>
<td>+13</td>
<td>+6</td>
<td>-12</td>
</tr>
<tr>
<td colspan="8">SA*, % Change</td>
</tr>
<tr class="odd">
<td class="firstcol">Construction Orders</td>
<td>--</td>
<td>-7.5</td>
<td>-16.0</td>
<td>-3.7</td>
<td>+6.0</td>
<td>+6.0</td>
<td>+8.3</td>
</tr>
<tr class="odd">
<td class="firstcol">New Housing</td>
<td>--</td>
<td>+15.7</td>
<td>-32.7</td>
<td>-0.3</td>
<td>+1.7</td>
<td>+4.7</td>
<td>+15.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Other Work</td>
<td>--</td>
<td>-15.3</td>
<td>-8.4</td>
<td>-5.2</td>
<td>+8.0</td>
<td>+6.6</td>
<td>+5.4</td>
</tr>
</tbody>
</table>
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The UK housing market, too, seems to be faltering. The monthly survey of the Royal Institute of Chartered Surveyors, RICS, shows a net decline in house prices in its August reading of -1.8%, the first decline since October 2005. The [...]

Survey Shows Net Reduction in House Prices; Construction Orders Already Down

Robert Brusca

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070914j.jpg" width="353">
Italy shows Yr/Yr inflation trends that are under the ECB&#146;s ceiling pace, at 1.7% compared to a 2% ceiling. The HICP is contained below 2% for both the 3-month and 6-month periods. But for Italy&#146;s national inflation measure inflation is showing a bit more kick. Its overall inflation rate on its national measure is 1.6% y/y, the same as for its ex-tobacco reading. But over three and six months, inflation is in the 2% to 2.5% range with both measures accelerating to 2.5% over three months.
Even so, Italy&#146;s diffusion measures do not confirm that this is much of an issue. For three months diffusion, which looks at the breadth of these trends, finds inflation to be accelerating in as many categories as it is decelerating with a neutral 50% diffusion reading. Over 6 months, diffusion is higher at 58.3%, but that is still not an enormous reading. Even with that diffusion reading national &#145;headline&#146; inflation for 6 months is at 2% largely because one of the falling categories for inflation, communications, saw prices fall at an outsized 12.7% (annual rate).
While Italy may have some of the same lurking inflation France has reported, the trends do not seem to be as entrenched. In terms of the HICP measure, the one we care for the most, inflation is still in very good shape. In these numbers we are probably seeing some of the impact of Italy&#146;s weak economy. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
 Italy HICP and CPI details
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo %</td>
<td colspan="3">Saar %</td>
<td>Yr/Yr</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td> Aug-07</td>
<td> Jul-07</td>
<td> Jun-07</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">HICP Total</td>
<td>0.2%</td>
<td>-0.1%</td>
<td>0.3%</td>
<td>1.5%</td>
<td>1.6%</td>
<td>1.7%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Core</td>
<td>#N/A</td>
<td>0.0%</td>
<td>0.1%</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>1.6%</td>
</tr>
<tr>
<td colspan="8"> CPI</td>
</tr>
<tr class="odd">
<td class="firstcol">All</td>
<td>0.1%</td>
<td>0.2%</td>
<td>0.3%</td>
<td> 2.5%</td>
<td> 2.0%</td>
<td>1.6%</td>
<td>2.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">CPI ex Tobacco</td>
<td>0.1%</td>
<td>0.3%</td>
<td>0.2%</td>
<td> 2.5%</td>
<td> 2.0%</td>
<td>1.6%</td>
<td>2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food</td>
<td>0.4%</td>
<td>0.4%</td>
<td>0.1%</td>
<td> 3.5%</td>
<td> 2.9%</td>
<td> 2.4%</td>
<td>2.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Alcohol</td>
<td>0.6%</td>
<td>-0.7%</td>
<td>0.4%</td>
<td> 1.4%</td>
<td>-0.2%</td>
<td>2.3%</td>
<td>5.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Clothing &amp; Shoes</td>
<td>0.2%</td>
<td>0.2%</td>
<td>0.1%</td>
<td> 1.5%</td>
<td>1.2%</td>
<td> 1.3%</td>
<td>1.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Rent &amp; Utilities</td>
<td>0.2%</td>
<td>0.0%</td>
<td>0.3%</td>
<td> 2.2%</td>
<td>0.7%</td>
<td>1.2%</td>
<td>6.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Housing &amp;Furniture</td>
<td>0.2%</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.5%</td>
<td> 3.5%</td>
<td> 2.7%</td>
<td>1.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Health Care</td>
<td>0.2%</td>
<td>0.1%</td>
<td>-0.2%</td>
<td>0.0%</td>
<td> 0.2%</td>
<td>-0.1%</td>
<td>-0.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Transport</td>
<td>-0.7%</td>
<td>0.6%</td>
<td>0.9%</td>
<td>3.0%</td>
<td> 4.7%</td>
<td>1.4%</td>
<td>3.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Communication</td>
<td>0.0%</td>
<td>0.0%</td>
<td>-1.0%</td>
<td> -3.9%</td>
<td>-12.7%</td>
<td>-8.4%</td>
<td>-4.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Recreation &amp;Culture</td>
<td>0.3%</td>
<td>0.1%</td>
<td>0.2%</td>
<td> 2.7%</td>
<td>0.3%</td>
<td> 1.0%</td>
<td>0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Education</td>
<td>0.1%</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.4%</td>
<td> 2.7%</td>
<td>2.1%</td>
<td>3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Restaurant &amp; Hotel</td>
<td>0.3%</td>
<td>0.3%</td>
<td>0.3%</td>
<td>3.9%</td>
<td> 4.2%</td>
<td> 3.2%</td>
<td>2.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Other</td>
<td>0.3%</td>
<td>0.2%</td>
<td>0.1%</td>
<td>2.3%</td>
<td> 3.2%</td>
<td>2.3%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Diffusion</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>50.0%</td>
<td> 58.3%</td>
<td>41.7%</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Diffusion: Compared to</td>
<td colspan="3">&nbsp;</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Yr-Ago</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body>
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Italy shows Yr/Yr inflation trends that are under the ECBs ceiling pace, at 1.7% compared to a 2% ceiling. The HICP is contained below 2% for both the 3-month and 6-month periods. But for Italys national inflation measure inflation [...]

Subdued Inflation in Italy

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070913d.jpg" width="353">
U.S. retail gasoline prices have fallen 47 cents, or 15%, from the recent high of $3.22 in the middle of May. Momentum counts for something, but do the fundamentals behind gasoline prices argue for continued declines? The answer is a clear &quot;no.&quot;<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070913e.jpg" width="353">
First off, there&#39;s that spike in crude oil prices to roughly $80 per barrel. That is up 15% from the very recent low of $70 per barrel in early August.
Higher feedstock prices seem to suggest that retail prices will rise.
Easier demand for gasoline also contributed to the gasoline price drop. That decline could continue given that gasoline prices still are up nearly 20% from yearend &#39;06, but that is the only (somewhat flimsy) reason to expect price declines to continue. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070913f.jpg" width="353">
Other fundamentals suggest higher gasoline prices, and one is the low state of gasoline inventories. Gasoline inventories are down 16% this year and most recently have slipped 7% after a brief rebuilding this past Spring and early Summer.
Lower U.S. production of gasoline and lower imports of petroleum products which usually would lift inventory did not stem the inventory decline.
So it is the combination of higher crude oil prices and lower gasoline inventories that suggest a rise gasoline prices, and possibly soon. The good, but hardly great, news is that the rise will come from a level of gasoline prices relative to all other prices which is down roughly 39% from the high in 1980. 
Energy statistics are available daily in Haver Analytics&#39; DAILY database, weekly in WEEKLY and OILWKLY, monthly/quarterly in USECON and OGJ, and annual in OGJANN. Data from Energy Intelligence are also available in OMI, NGW and WGI.

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U.S. retail gasoline prices have fallen 47 cents, or 15%, from the recent high of $3.22 in the middle of May. Momentum counts for something, but do the fundamentals behind gasoline prices argue for continued declines? The answer is a [...]

Will Gasoline Prices Continue to Fall?

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070913c.jpg" width="353">
France&#146;s HICP is below 2% Y/Y at a 1.3% pace. It has since, in shorter periods of six months and three months, shown some upward pressure. The HICP core for August is not yet available, but it too has showed some pressure in recent months. France&#146;s own core CPI is an example as it is up by 0.4% in August. It is up by 1.5% Y/Y. Still, over three and six months, its pace is in the 2.2% to 2.3% range. That is not horrible but it is above the ECB ceiling rate of 2%. 
The red figures in the table below identify categories where inflation has accelerated relative to the previous period. (three months compared to six months; six months compared to year over year etc). They show that over six months inflation has heated up. And even with that, compared to six month ago three-month trends are somewhat mixed but still elevated themselves, on balance. 
Inflation over twelve months is lower than it was over the previous 12 months. The diffusion readings at the table bottom underscore what the headlines for inflation tell us on that score. The diffusion reading scans the 12 main CPI categories for trends; it finds inflation sharply higher over six months compared to 12 months in most CPI categories. It also finds it only slightly more elevated over three months than over six months. Diffusion readings above 50% indicate acceleration; below 50%, deceleration. Diffusion measures the breadth of inflation, not its intensity. 
Prices for alcohol and food are strong as well for restaurants and hotels. The ECB already is wary of food prices. France does seem to be experiencing some really strong pressure in inflation, though nothing terribly virulent.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
France HICP and CPI Details
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo %</td>
<td colspan="3">Saar %</td>
<td>Yr/Yr</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Aug-07</td>
<td>Jul-07</td>
<td>Jun-07</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
</tr>
<tr>
<td class="firstcol">HICP Total</td>
<td>0.3%</td>
<td>0.0%</td>
<td>0.2%</td>
<td>2.3%</td>
<td>2.7%</td>
<td>1.3%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">Core</td>
<td>#N/A</td>
<td>0.0%</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 colspan="8">CPI</td>
</tr>
<tr>
<td class="firstcol">All</td>
<td>0.3%</td>
<td>0.1%</td>
<td>0.2%</td>
<td>2.3%</td>
<td>2.5%</td>
<td>1.2%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">CPI excl Food &amp; Energy</td>
<td>0.4%</td>
<td>0.1%</td>
<td>0.1%</td>
<td>2.3%</td>
<td>2.2%</td>
<td>1.5%</td>
<td>1.4%</td>
</tr>
<tr>
<td class="firstcol">Food</td>
<td>0.7%</td>
<td>-0.2%</td>
<td>0.5%</td>
<td>4.4%</td>
<td>3.2%</td>
<td>1.2%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">Alcohol</td>
<td>2.9%</td>
<td>0.3%</td>
<td>0.4%</td>
<td>15.4%</td>
<td>9.5%</td>
<td>3.3%</td>
<td>0.2%</td>
</tr>
<tr>
<td class="firstcol">Clothing &amp; Shoes</td>
<td>0.3%</td>
<td>-0.7%</td>
<td>0.2%</td>
<td>-1.0%</td>
<td>4.1%</td>
<td>0.7%</td>
<td>-0.1%</td>
</tr>
<tr>
<td class="firstcol">Rent &amp; Utilities</td>
<td>0.1%</td>
<td>0.2%</td>
<td>0.5%</td>
<td>3.0%</td>
<td>2.8%</td>
<td>2.3%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">Health Care</td>
<td>0.1%</td>
<td>0.4%</td>
<td>0.0%</td>
<td>1.9%</td>
<td>0.4%</td>
<td>0.2%</td>
<td>0.2%</td>
</tr>
<tr>
<td class="firstcol">Transport</td>
<td>-0.4%</td>
<td>0.2%</td>
<td>0.4%</td>
<td>0.6%</td>
<td>4.3%</td>
<td>1.0%</td>
<td>3.5%</td>
</tr>
<tr>
<td class="firstcol">Communication</td>
<td>0.5%</td>
<td>0.0%</td>
<td>-0.1%</td>
<td>1.6%</td>
<td>-1.5%</td>
<td>0.9%</td>
<td>-7.0%</td>
</tr>
<tr>
<td class="firstcol">Recreation &amp; Culture</td>
<td>-0.1%</td>
<td>-0.2%</td>
<td>0.1%</td>
<td>-1.0%</td>
<td>-0.5%</td>
<td>-1.9%</td>
<td>-0.5%</td>
</tr>
<tr>
<td class="firstcol">Education</td>
<td>0.1%</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.4%</td>
<td>2.5%</td>
<td>2.3%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">Restaurant &amp; Hotel</td>
<td>0.8%</td>
<td>0.5%</td>
<td>0.3%</td>
<td>6.8%</td>
<td>4.8%</td>
<td>3.0%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">Other</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.1%</td>
<td>0.7%</td>
<td>1.8%</td>
<td>2.0%</td>
<td>3.0%</td>
</tr>
<tr>
<td class="firstcol">Diffusion</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>54.5%</td>
<td>81.8%</td>
<td>36.4%</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Type:</td>
<td colspan="3">Diffusion: Compared to</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Yr-Ago</td>
<td>--</td>
</tr>
</tbody>
</table>
</body>
</html>

Frances HICP is below 2% Y/Y at a 1.3% pace. It has since, in shorter periods of six months and three months, shown some upward pressure. The HICP core for August is not yet available, but it too has showed some pressure in recent [...]

France HICP Slowing but Unruly and over the ECB Ceiling Pace of 2% Over Shorter Horizons

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070913a.jpg" width="353">
Initial claims for unemployment insurance rose a bit last week, but only by 4,000 to 319,000. A much larger increase to 325,000 had been expected by a Consensus of economists that would have reversed roughly half of the prior week&#39;s 22,000 decline. The prior week&#39;s figure was revised down slightly to 315,000.
A claims level below 400,000 typically has been associated with growth in nonfarm payrolls. During the last six years there has been a (negative) 78% correlation between the level of initial claims and the m/m change in nonfarm payroll employment.
The four-week moving average of initial claims fell slightly to 324,000 (2.7% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070913b.jpg" width="353">
Continuing claims for unemployment insurance fell by 6,000, reversing one third of the prior week&#39;s large 18,000 increase. That rise was revised lower from a 25,000 gain reported initially. The continuing claims numbers lag the initial claims figures by one week.
Since yearend 2006, continuing claims have risen 173,000 or by 7.2%
Payroll employment has risen 870,000 (0.6%) since yearend.
The insured rate of unemployment was unchanged at 2.0%.
The Rise in U.S. Household Indebtedness: Causes and Consequences from the Federal Reserve Bank can be found <a href="http://www.federalreserve.gov/pubs/feds/2007/200737/200737pap.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/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">09/08/07 </th>
<th scope="col">09/01/07 </th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;319</td>
<td>315</td>
<td>2.2%</td>
<td>313</td>
<td>331</td>
<td>343</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,585</td>
<td>4.2%</td>
<td>2,545</td>
<td>3.3%</td>
<td>2,459</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial claims for unemployment insurance rose a bit last week, but only by 4,000 to 319,000. A much larger increase to 325,000 had been expected by a Consensus of economists that would have reversed roughly half of the prior week's [...]

U.S. Initial Unemployment Insurance Claims Remained Low

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

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Nonfarm payrolls increased 177,000 (1.2% y/y) during April after rising 185,000 in March, revised from 228,000, and 102,000 in February, revised from 117,000. Expectations had been for a 130,000 rise in the Action Economics Forecast Survey. The latest figure left the three-month average change at 155,000 in April, down from 232,000 in January.

Average hourly earnings rose 0.2% during April after unrevised increases of 0.3% in March and 0.2% in February. Earnings growth of 3.8% y/y was below the 5.9% high in March 2022.

The unemployment rate, measured in the household survey, held m/m at an expected 4.2% in April, and compared to 4.1% in February and 4.0% in January. It reached a low of 3.4% in April 2023. The unemployment rate, including employees working part-time for economic reasons plus all marginally-attached workers, eased to 7.8% in April from 7.9% in March.

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

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

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

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

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

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

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

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

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- Job growth spreads across most sectors.
- Earnings growth trend decelerates.
- Jobless rate holds steady.

U.S. Job Growth Is Firm in April but March Gain Is Lessened

Winnie Tapasanun

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

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

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

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

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

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

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

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

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

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

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

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

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

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Globally Manufacturing Weakens

Andrew Cates

**China-US shipping activity** 
The economic fallout from escalating US-China trade tensions is becoming increasingly visible in the data. A clear example is the chart below, which highlights a sharp drop in vessel arrivals at the ports of Los Angeles and Long Beach, along with a notable decline in ships waiting offshore. These trends point to a tangible weakening in bilateral trade flows, as the effects of tit-for-tat tariffs imposed by both countries begin to bite. Given the outsized role the US and China play in global commerce, this slowdown is likely to reverberate through global supply chains, weighing on trade volumes, dampening demand, and curbing economic growth worldwide.

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**GDP growth in Q1**
Data this week showed that the US economy contracted, albeit modestly, in Q1 even as the euro area recorded a modest expansion—an unusual divergence. The contraction in US GDP can be largely attributed to a sharp increase in imports, as firms rushed to front-load purchases ahead of anticipated tariff hikes. In addition, domestic demand was subdued, with weaker contributions from both consumer spending and government consumption. This decoupling between the US and euro area economies is particularly striking given the current global focus on the US dollar. While the euro area has shown unexpected signs of resilience, the US downturn raises important questions about its underlying momentum, especially as trade dynamics and policy uncertainty continue to cloud the outlook.

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**The US dollar versus yield differentials**
Chart 3 below illustrates a sharp breakdown in the correlation between the US-Germany 10-year yield differential and the EUR/USD exchange rate. Historically, the dollar has moved closely with interest rate spreads, as yield-seeking capital flowed into US assets. But since early 2025—and more acutely following the April tariff actions—the dollar has weakened markedly even as the yield spread has narrowed only modestly. This decoupling underscores a critical shift: capital markets are reacting not just to monetary policy, but to rising trade and geopolitical uncertainty. In other words, the exchange rate is now being driven as much by risk sentiment as by interest rate arbitrage.

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**The US economy’s structural outperformance and the dollar**
A second dynamic, captured in the next chart, reveals a tight correlation between the US real effective exchange rate and the potential GDP growth differential between the US and euro area over the past 50-60 years. This raises the question: has dollar strength (until recently) merely been a reflection of US growth leadership—or are capital inflows themselves helping to sustain this growth outperformance? In effect, the tail may be wagging the dog. Global investors have long allocated capital to the US, attracted by its macroeconomic resilience, technological leadership, and deep, liquid financial markets. The danger now is that the US trade war may disrupt this equilibrium. A sharp or sustained reduction in capital inflows could undermine growth, weaken the dollar, and trigger broader financial instability. Moreover, reversing this dynamic is not straightforward—barring a credible structural resurgence in European (or Asian) growth, the global investment landscape remains tilted toward the US.

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**US competitiveness versus Europe, China and Japan** 
The next chart below examines relative unit labour costs across major economies since 2011. The US and China have seen a broadly similar trajectory, with steady increases in relative cost structures, while the euro area has remained flat and Japan has seen dramatic improvement. This suggests that, from a cost competitiveness standpoint, the US is not uniquely disadvantaged vis-à-vis China. However, as we discuss further below, this parallel erosion of cost competitiveness is occurring at much higher nominal wage levels in the US, which blunts its ability to regain export share through tariff-related shifts alone. The trade war strategy—absent a corresponding improvement in productivity or structural reforms—risks imposing costs without delivering material competitiveness gains.

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**Average wages in selected developed and developing economies**
This point is reinforced by the final chart, which shows estimates for average monthly wages across countries in 2024. US labour remains much more expensive than in peer or emerging economies. So even if China’s costs rise in tandem with the US, the global supply chain has ample alternatives. 'China plus one' strategies are accelerating, and the US remains structurally misaligned with low-cost production hubs. Tariffs aimed at reshoring supply chains are unlikely to deliver sustained gains unless accompanied by deep supply-side reforms, and risk further disincentivizing foreign direct investment if global firms perceive US trade policy as erratic or punitive.

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Financial markets found a measure of calm this week, buoyed by some subtle shifts in tone from US policymakers. A softening in the administration’s rhetoric around trade tariffs coupled with a less confrontational stance toward Federal Reserve Chair Jerome Powell, helped ease tensions that had roiled markets earlier in the month. Equities rebounded modestly, and volatility indicators edged lower, reflecting cautious optimism that the worst of the policy shocks may be behind us. But beneath the surface, significant downside risks persist. New shipping data point to a pronounced slowdown in US-China trade flows (chart 1), suggesting the damage from recent tariff escalations is already rippling through global supply chains. Meanwhile, incoming data for the US revealed an unexpected contraction in the economy in Q1 and further signs of weakness in the labour market (chart 2). The US dollar, in the meantime, while long supported by superior growth and yield differentials, has begun to decouple from traditional drivers (charts 3 and 4) suggesting growing pressure on capital flows. At the same time, structural imbalances are drawing renewed scrutiny: unit labour cost comparisons show the US steadily losing competitiveness (chart 5), while nominal wage disparities remain stark versus China and other Asian economies, further complicating any effort to restore trade balance without broader reforms (chart 6). In short, while markets may be drawing temporary comfort from a pause in tariff brinkmanship, the deeper economic and financial vulnerabilities exposed this month remain unresolved—and increasingly central to the global macro narrative.

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Charts of the Week: Tariff Truce, Tenuous Trust

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U.S. light vehicle sales dropped 2.9% (+6.5% y/y) to 17.31 million units (SAAR) in April after surging 10.8% to 17.82 million units in March. The retreat in April vehicle sales accompanied a 1.7% y/y rise in real disposable income through March, which compared to 2.0% growth last year.

Sales declines were broad-based last month. Light truck sales fell 1.3% (+9.9% y/y) during April to 14.34 million units (SAAR), after rising 12.4% in March. Purchases of domestically-made light trucks declined 1.2% (+11.9% y/y) to 11.02 million units, after jumping 12.5% in March. Sales of imported light trucks fell 1.8% (+4.4% y/y) to 3.32 million units, following an 11.6% March surge.

Trucks’ record 82.8% share of the light vehicle market last month compared to 81.5% in March and 80.3% in April of last year. The share averaged 80.3% during all of 2024 versus 53.3% ten years earlier.

Auto sales also declined last month, down 9.5% (-7.5%) to 2.97 million units (SAAR) following a 3.5% March rise. The decline reversed all of the increase over the prior two months. Purchases of domestically-produced cars fell 9.8% (-4.3% y/y) last month to 2.22 million units, after rising 3.8% in March. Sales of imported autos declined 9.6% (-15.7% y/y) to 0.75 million units, following a 2.5% March increase.

Imports' 23.5% share of the U.S. light vehicle market was little changed from 23.6% in March and compared to a May 2023 low of 22.9% and a high of 26.3% in November of 2023. Imports' share of the passenger car market held steady at 25.3% last month and compared to 27.7% in April of last year. It reached a high of 38.7% in September 2021. Imports' share of the light truck market eased to 23.2% last month after falling to 23.3% in March.

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

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- Light truck sales pull back, while auto sales tumble.
- Both domestic and imported sales decline.
- Imports' market share slips further.

Economy in Brief: September 2007

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