Tom Moeller

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The market for new motor vehicles regained positive momentum
last month as automakers aggressively cleared inventory in advance of the 2018
model selling season. Total sales of light vehicles jumped 15.0% during
September (4.8% y/y) to 18.57 million units (SAAR) from 16.14 million in August,
according to the Autodata Corporation. It was the highest level of sales since July 2005.

A 16.3% surge (11.6% y/y) in light truck sales led the sales
increase last month. The jump to 11.76 million sales (AR) was powered by
domestically-made light trucks which increased 16.5% (9.6% y/y) to 9.69 million
units. Imported light truck sales also showed strength with a 15.7% surge (22.0%
y/y) to a record 2.07 million units.

The passenger car market also strengthened during September
with a 12.9% rise (-5.2% y/y) to 6.81 million units. Domestically-produced
passenger car sales increased 13.6% last month (-5.5% y/y) to 4.95 million
units. Sales of imported passenger cars rose 10.9% (-4.4% y/y) to 1.85 million units.

Trucks' share of the U.S. vehicle market improved m/m to 63.3%,
but remained below December's high of 64.2%.

Imports share of the U.S. vehicle market eased to 21.1%.
Imports share of the passenger car market slipped to 27.2%. Imports share of the
light truck market was fairly steady at 17.6% but remained higher than the 12.7%
share during all of 2014.

U.S. vehicle sales figures are published by the Autodata
Corporation and can be found in Haver's USECON database.

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >Light Weight Vehicle Sales
 (SAAR, Million Units)</th>
 <th scope="col" >Sep</th>
 <th scope="col" >Aug</th>
 <th scope="col" >Jul</th>
 <th scope="col" >Sep Y/Y %</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 <th scope="col" >2014</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Total</td>
 <td >18.57</td>
 <td >16.14</td>
 <td >16.77</td>
 <td >4.8</td>
 <td >17.55</td>
 <td >17.42</td>
 <td >16.52</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Autos</td>
 <td >6.81</td>
 <td >6.03</td>
 <td >6.21</td>
 <td >-5.2</td>
 <td >7.10</td>
 <td >7.73</td>
 <td >7.92</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Domestic</td>
 <td >4.95</td>
 <td >4.36</td>
 <td >4.51</td>
 <td >-5.5</td>
 <td >5.20</td>
 <td >5.63</td>
 <td >5.68</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Imported</td>
 <td >1.85</td>
 <td >1.67</td>
 <td >1.70</td>
 <td >-4.4</td>
 <td >1.90</td>
 <td >2.10</td>
 <td >2.24</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Light Trucks</td>
 <td >11.76</td>
 <td >10.11</td>
 <td >10.55</td>
 <td >11.6</td>
 <td >10.44</td>
 <td >9.74</td>
 <td >8.60</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Domestic</td>
 <td >9.69</td>
 <td >8.32</td>
 <td >8.68</td>
 <td >9.6</td>
 <td >8.75</td>
 <td >8.37</td>
 <td >7.51</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Imported</td>
 <td >2.07</td>
 <td >1.79</td>
 <td >1.88</td>
 <td >22.0</td>
 <td >1.69</td>
 <td >1.38</td>
 <td >1.09</td>
 </tr>
 </tbody>
 </table>
 
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The market for new motor vehicles regained positive momentum last month as automakers aggressively cleared inventory in advance of the 2018 model selling season. Total sales of light vehicles jumped 15.0% during September (4.8% y/y) [...]

U.S. A "Yearend Sales Event" Spurs Vehicle Purchases

Robert Brusca

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The EMU PPI is accelerating in August. But its 0.6% gain follows a 0.1% drop in July. The PPI continues to be volatile. Its trend is hard to nail down. And gyrating oil prices have great impact on the path of the PPI.

The unrelenting and undiminished role of oil 
Oil continues to dominate the outlook for the PPI and the outlook for oil is muddied. We are coming off a period in which oil prices have firmed. Yet, for the fifth straight month, bankers have cut their outlook for oil prices. On the day, oil prices slipped taking Brent to $58.08 per barrel. Russian Energy Minister, Alexander Novak, today claimed there was no immediate need to talk about further oil output cuts. As a result, the outlook for oil continues to be uncertain and U.S. rig activation is back on a positive path after some slowdown.

The policy focus is not the PPI 
As always what matters for policy and for the ECB is what happens to consumer prices and the HICP measure that the ECB uses. The relationship between consumer prices and producer prices in the EMU is a loose one. When the PPI makes an exceptional move, there is usually some impact on the HICP but one that is muted. With oil prices suddenly having swung higher after a substantial period of declining, there has been some lift in the pace of the HICP but the headline and core rates continue well under the objectives set by the ECB. More recent news on EMU area wages show that wage increase have popped up to log a 2% gain. But it will take time to see if that move has any sustainability or follow-up or not.

Month-to-month 
Compared to July, the PPI is accelerating in all EMU reporters in the table except the financial center Luxembourg and Finland. Prices only fell in August in Luxembourg. Still, prices did fall in seven of 12 of these EMU countries in July.

Sequential trends 
Sequential growth rates 12-month to six-month to three-month show that inflation is up at a 2.5% pace over 12 months, but it is still showing price declines at a -1.8% annual rate over six months. Over three months, that pace is trimmed to -0.4% (SAAR).

Sectors 
Sector rates of growth show stability in price trends for capital goods locked in at a pace of 1%. Consumer goods price inflation is still sequentially falling. The pick-up for inflation is wholly from six-month to three-month and in intermediate goods, where oil prices pressures show up. On balance, despite some increase in activity in the EMU and optimism over growth, inflation is really only picking up in intermediate goods not for capital goods and not for consumer goods: it's still an oil phenomenon.

Shifting relationships 
In the U.S. where I have looked at the PMI growth 'phenomenon' more closely, I have discovered a shift in the relationship between the PMI and industrial production growth. It seems in this expansion at each growth rate for IP the corresponding PMI value is higher that it used to be. So while some speak of more 'buoyant economic reports' to me the PMIs are just another example of shifting and less meaningful economic relationships, like for the Phillips Curve. For some time, we have known that dropping unemployment rates should have created more wage and price inflation except they didn't. Still, policy in the U.S. remains geared to the Phillips Curve. Judging from the strong-seeming PMI readings, IP and the industrial sector would be expected to be much stronger, but it isn't. Not surprisingly the strong PMIs are taken as further evidence that Phillips Curves will come back to life. Some hopes spring eternal.

Decoupling and denial: square pegs vs. round holes 
In fact, in Japan today, following the stellar Tankan report released yesterday, Japanese firms actually pulled back on their inflation expectations in Q3. Companies there now expect consumer prices to advance by 0.7% in the year ahead instead of 0.8% as they did previously. This is just another example of decoupling. Old economic relationships are shifting. Central banks have their eye upon the hole and not upon the donut. They don't even realize that they are not watching that which has become less important. They remain eerily clueless or in denial about how the world has changed. Even when they admit out loud that they may be missing something, they do that just to cover their bases and continue to make policy as if the relationships of yore will spring back to life spontaneously. Well, who knows what they think at this point. Central bankers are not prepared for the great game of no-or-low inflation to go on. They are prepared for it to end; for normalcy. They warn of inflation overshooting when target-achievement might be their best-case scenario. Most importantly they have no plan 'B.' They are determined to pursue plan 'A' and to find different ways to justify it, such as the Fed's 'clever' plan to justify the start of tightening in the midst of a huge inflation undershoot as oil prices collapsed by appealing to its medium 'forecast.' The square peg of Fed policy has yet to find a round hole of reality that it could not be forced though. We are now waiting on Europe to see how things will go there.

Myopia makes policy choices easier... but makes them more dangerous 
To me the global inflation shortfall is a true global phenomenon. It is not a bunch of idiosyncratic local events that simply happened to occur at the same time (surprise!). The first warnings came out of Japan and as everyone commiserated with Japan's problems and offered advice from afar the problem nonetheless spread. Some were sure that Japan's bout with deflation was all because of Japan's unique demographics. How did that one play out? Now we are assured that disinflation is no longer a problem. But with oil prices having ratcheted back up with so little overall impact, I'm not sure that is a conclusion that could stand up to close inspection. There are some slight wage pressures afoot in the EMU and in the U.S., but they are very slight and have yet to show staying power let alone escalation. And there is some unemployment backsliding in Spain reported today. If that sort of thing continues and spreads, wage pressures will be central banks' last worries. We are still not that long or far out of the soup.

Stirring the pots 
The U.S. pot is being stirred by hurricane effects of unknown dimension. In Europe, the Catalan problem has emerged; the feeling that with the German elections over Europe has dodged the bullet of 'populism' has proved wrong. And Germany still will be ruled by a less-united coalition. The same leader will prevail, but different compromises and policies will be afoot. The tensions in Italy with its Five-Star party are still present. The Kurds in Iraq have begun to stir up their own issues to the consternation of (at least) Iraq and Turkey. North Korea is still a big unsolved (unsolvable?) problem and U.S. President Donald Trump is still pressing many on the trade front while trying to enlist some of his 'trade adversaries' into cooperative groups for other geopolitical ends. Global diplomacy has never been so fractured. The geopolitical scene is more topsy-turvy than an owners' meeting in the NFL these days. And that's saying something.


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The EMU PPI is accelerating in August. But its 0.6% gain follows a 0.1% drop in July. The PPI continues to be volatile. Its trend is hard to nail down. And gyrating oil prices have great impact on the path of the PPI. The unrelenting [...]

EMU PPI Accelerates In August...But Does It Matter?

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Retail gasoline prices were little-changed last week
at $2.57 per gallon (14.3% y/y) and remained down from the $2.69 high
early last month. Haver Analytics constructs factors adjusting for the seasonal
variation in gasoline pump prices. The seasonally adjusted gasoline price held
steady at $2.53 per gallon.

WTI crude oil prices strengthened to $51.76 per barrel
last week (11.1% y/y), the highest level early-April. Prices eased yesterday to
$50.58 per barrel. Brent crude oil prices increased to $58.02 per barrel last
week, then declined to $56.07 per barrel yesterday.

Natural gas prices declined to $2.94/mmbtu last week (-1.1%
y/y) and were $2.81 yesterday.

In the week ended September 22, gasoline demand rose
0.6% y/y, while total petroleum product demand gained 1.3% y/y. Gasoline
inventories fell 4.4% y/y, while inventories of all petroleum products
declined 3.9% y/y. Crude oil input to refineries fell 10.0% y/y in the last four
weeks, compared to sharp y/y improvement earlier this year.

The energy price data are reported by the U.S. Department of
Energy. The petroleum demand and inventory figures are from the Oil &amp; Gas
Journal Weekly. These data can be found in Haver's WEEKLY database. The
daily figures are in DAILY and greater detail on prices, demand and
production, along with regional breakdowns, are in OILWKLY.

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >Weekly Energy Prices</th>
 <th scope="col" >10/02/17</th>
 <th scope="col" >09/25/17</th>
 <th scope="col" >09/18/17</th>
 <th scope="col" >Y/Y %</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 <th scope="col" >2014</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" >Retail Gasoline ($ per Gallon, Regular)</td>
 <td >2.57</td>
 <td >2.58</td>
 <td >2.63</td>
 <td >14.3</td>
 <td >2.31</td>
 <td >2.03</td>
 <td >2.30</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Light Sweet Crude Oil, WTI ($ per bbl.)</td>
 <td >51.76</td>
 <td >50.14</td>
 <td >49.07</td>
 <td >11.1</td>
 <td >43.22</td>
 <td >48.90</td>
 <td >93.64</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Natural Gas ($/mmbtu, LA, WSJ)</td>
 <td >2.94</td>
 <td >3.09</td>
 <td >2.95</td>
 <td >-1.1</td>
 <td >2.49</td>
 <td >2.62</td>
 <td >4.37</td>
 </tr>
 </tbody>
 </table>
 
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Retail gasoline prices were little-changed last week at $2.57 per gallon (14.3% y/y) and remained down from the $2.69 high early last month. Haver Analytics constructs factors adjusting for the seasonal variation in gasoline pump [...]

U.S. Gasoline Prices Remain Firm; Crude Oil Costs Strengthen

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The Tankan assessment 
Japan's Tankan survey turned out much stronger than expected. The closely-watched manufacturing gauge for large enterprises in Q3 soared to a reading of 22, up from 17 in Q2 which in turn had risen from 12 in Q1. The Tankan has been making great strides. The quarterly manufacturing reading's q/q gain ranks as in the top 21st percentile of all quarterly changes back to 2004. The four-quarter change ranks in the top 16th percentile. The level of the reading for the large enterprise gauge in Q3 2017 stands in its 72nd queue percentile and is the highest reading in 40 quarters making it last higher before the onset of the global recession and financial crisis in late-2007. The lesser watched nonmanufacturing index was unchanged quarter-to-quarter and already has a 92.6 percentile standing.

The Tankan outlook survey 
The Tankan report also has an outlook section. The outlook for large manufacturing establishments gained four points on the quarter and rose to a reading of 19 for Q4. At that level, the reading has an 83.6 queue percentile standing in its historic queue of data. The quarterly rise itself marks a top 19th percentile gain among all quarterly changes and the four-quarter gain of 13 points has been larger only 16% of the time. For nonmanufacturing, the outlook index has a reading of 19, a one-point quarter-to-quarter gain marking a 98.5 percentile queue standing. The combined standing of the two sectors has driven the outlook index for the large enterprise all-industry reading to its 85.5 percentile. But for medium-sized enterprises, the outlook for all of industry is at the highest value in the history of the survey and the same is true for small enterprises.

Other industries 
Aside from manufacturing that has a 72.2 percentile standing for its Q3 reading, there are Tankan readings for industries in the nonmanufacturing sector as well. Construction and personal services each have a 98.1 queue percentile reading in Q3. The "services for businesses" sector has an 88.9 percentile standing. Transportation has a strong 83.3 percentile standing. Real estate, restaurants & hotels and retailing industries have readings in the 70th percentile in Q3. Wholesaling has a 66th percentile standing.

Momentum 
The strongest gain relative to its one-year average comes from manufacturing followed by wholesaling. Transportation ranks as next best and there is a tie between services for businesses and retailing for the next slot. Restaurants & hotels are the clear lagging sector and the only one with a weaker Tankan reading in Q3 than over the previous year. Construction and real estate are two other relative laggard sectors, but they are both above their respective one-year average readings.

Conditions 
The Bank of Japan expects inflation to hit its 2% objective in the fiscal year ending in March 2020, as it argues (as does the Fed in the U.S.) that a tightening job market and solid economic growth will gradually push up prices. The Tankan produced an index gauging firms' views of the job market that showed that complaints of labor shortages, rather than excess staff, were at the highest since 1992. Large firms kept their capital spending plans intact. Big firms expect to increase capital expenditure by 7.7% in the current fiscal year ending in March 2018; that is roughly unchanged from their plans back in June.

On balance, the Tankan report is a breath of fresh air. The survey is closely watched and considered an important and reliable gauge for Japan's economy. The leadership from manufacturing in terms of momentum is a very satisfying finding. While inflation in Japan continues to lag, the Tankan report is reassuring that growth remains on path. It largely agrees with the updated manufacturing survey from Markit for Japan in September also released and finalized today. The Tankan is just another global example of a report that shows that growth continues and is improving despite a lack of progress in lifting inflation to target.

For Prime Minister Abe, the Tankan is support for his case that the economy is responding to his policies, an important consideration for a politician calling a snap election. To the BOJ, there is probably something comforting in this report, but there is no clear sense that this means the inflation target is more viable. Growth and inflation have decoupled globally recently; there is no sense in this report that inflation will perk up but on traditional analysis that would be expected. I would expect the BOJ to stay optimistic based on that scenario in the wake of this report.


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The Tankan assessment Japan's Tankan survey turned out much stronger than expected. The closely-watched manufacturing gauge for large enterprises in Q3 soared to a reading of 22, up from 17 in Q2 which in turn had risen from 12 in Q1. [...]

Japan's Tankan Marks 10-Year High Reading

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The value of construction put-in-place increased 0.5% (2.5%
y/y) during August following two months of sharp deterioration, -1.2% in July
and -0.8% in June. A 0.4% increase had been expected in the Action Economics
Forecast Survey.

Private sector building activity gained 0.4% (4.7 y/y) as
residential building activity rose by the same amount (11.6% y/y).
Nonresidential building activity improved 0.5% (-2.5% y/y), reflecting a 3.2%
increase (3.1% y/y) in the value of lodging construction. Commercial building
ticked 0.1% higher (10.4% y/y).

The value of public sector building activity gained 0.7%
(-5.1 y/y) after sharp declines in three of the prior four months. Conservation
&amp; development (-24.0% y/y), power facility production (-16.1% y/y) and
highway &amp; street construction (-6.0% y/y) have been notably weak.

The construction spending figures are in Haver's USECON
database and the expectations reading is contained in the AS1REPNA database.

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >Construction Put in Place
 (SA, %)</th>
 <th scope="col" >Aug</th>
 <th scope="col" >Jul</th>
 <th scope="col" >Jun</th>
 <th scope="col" >Aug Y/Y</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 <th scope="col" >2014</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Total</td>
 <td >0.5</td>
 <td >-1.2</td>
 <td >-0.8</td>
 <td >2.5</td>
 <td >6.7</td>
 <td >10.5</td>
 <td >11.4</td>
 </tr>
 </tbody>
 <tbody>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Private</td>
 <td >0.4</td>
 <td >-0.5</td>
 <td >0.1</td>
 <td >4.7</td>
 <td >9.2</td>
 <td >12.5</td>
 <td >15.4</td>
 </tr>
 </tbody>
 <tbody>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;&nbsp; Residential</td>
 <td >0.4</td>
 <td >0.2</td>
 <td >1.2</td>
 <td >11.6</td>
 <td >10.6</td>
 <td >13.8</td>
 <td >14.6</td>
 </tr>
 </tbody>
 <tbody>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;&nbsp; Nonresidential</td>
 <td >0.5</td>
 <td >-1.4</td>
 <td >-1.2</td>
 <td >-2.5</td>
 <td >7.6</td>
 <td >11.2</td>
 <td >16.3</td>
 </tr>
 </tbody>
 <tbody>
 <tr>
 <td class="firstcol" >&nbsp; Public</td>
 <td >0.7</td>
 <td >-3.3</td>
 <td >-4.1</td>
 <td >-5.1</td>
 <td >-0.4</td>
 <td >5.0</td>
 <td >1.9</td>
 </tr>
 </tbody>
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The value of construction put-in-place increased 0.5% (2.5% y/y) during August following two months of sharp deterioration, -1.2% in July and -0.8% in June. A 0.4% increase had been expected in the Action Economics Forecast Survey. [...]

U.S. Construction Spending Activity Improves Modestly

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Factories were humming last month. The ISM manufacturing
sector composite index jumped to 60.8 during September from August's unrevised
reading of 58.8. It indicated the 13th strait month of increased factory sector
activity, and the figure was at its highest level since May 2004. A level of 58.0
had been expected in the Action Economics Forecast Survey.

The new orders index increased to 64.6, the highest level in
six months. As a result of this strengthening, the supplier delivery series
surged to 64.4, indicating the slowest speeds of product delivery since July
2004. The production series ticked higher, but the inventories index fell
following sharp increases since 2015.

The employment figure increased slightly to 60.3, indicating
the twelfth straight month of payroll expansion. During the last ten years,
there has been an 88% correlation between the index and the m/m change in
factory sector employment. Twenty-four percent (NSA) of respondents reported
higher employment while seven percent indicated a decline.

The prices paid index surged to 71.5, its highest level since
May 2011. Forty-five percent (NSA) of respondents reported paying higher prices
while two percent paid less.

The export order index rose slightly to 57.0, down from its
June high but up sharply versus all of 2015. The import order index slipped and
remained below its July high. The order backlog series improved and was up
sharply from the 2015 low.

The ISM figures are diffusion indexes where a reading above
50 indicates increase. The figures from the Institute for Supply Management can
be found in Haver's USECON database. The expectations number can be found
in Haver's AS1REPNA database.

<a href="/comment/171002c.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/171002c.png"></a>
 <a href="/comment/171002d.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/171002d.png"></a>

<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >ISM Mfg (SA)</th>
 <th scope="col" >Sep</th>
 <th scope="col" >Aug</th>
 <th scope="col" >Jul</th>
 <th scope="col" >Sep'16</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 <th scope="col" >2014</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Composite Index</td>
 <td >60.8</td>
 <td >58.8</td>
 <td >56.3</td>
 <td >51.7</td>
 <td >51.5</td>
 <td >51.4</td>
 <td >55.6</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;New Orders</td>
 <td >64.6</td>
 <td >60.3</td>
 <td >60.4</td>
 <td >55.0</td>
 <td >54.7</td>
 <td >52.6</td>
 <td >58.9</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Production</td>
 <td >62.2</td>
 <td >61.0</td>
 <td >60.6</td>
 <td >53.3</td>
 <td >54.0</td>
 <td >53.5</td>
 <td >59.2</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Employment</td>
 <td >60.3</td>
 <td >59.9</td>
 <td >55.2</td>
 <td >50.0</td>
 <td >49.7</td>
 <td >51.0</td>
 <td >54.4</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Supplier Deliveries</td>
 <td >64.4</td>
 <td >57.1</td>
 <td >55.4</td>
 <td >50.8</td>
 <td >51.9</td>
 <td >50.7</td>
 <td >55.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Inventories</td>
 <td >52.5</td>
 <td >55.5</td>
 <td >50.0</td>
 <td >49.5</td>
 <td >47.2</td>
 <td >49.0</td>
 <td >50.8</td>
 </tr>
 <tr>
 <td class="firstcol" >Prices Paid Index (NSA)</td>
 <td >71.5</td>
 <td >62.0</td>
 <td >62.0</td>
 <td >53.0</td>
 <td >53.5</td>
 <td >39.8</td>
 <td >55.6</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

Factories were humming last month. The ISM manufacturing sector composite index jumped to 60.8 during September from August's unrevised reading of 58.8. It indicated the 13th strait month of increased factory sector activity, and the [...]

ISM Factory Sector Index Strengthens to 13-Year High

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Personal income increased 0.2% during August (2.8% y/y)
following a 0.3% July rise, revised from 0.4%. The latest gain matched
expectations in the Action
Economics Forecast Survey. Wages &amp; salaries remained unchanged (2.7% y/y)
following two months of strong gains. Rental
income grew 0.7% (6.5% y/y) after two months of 0.6% increase. Proprietors'
income advanced 0.3% (2.9% y/y) following declines in three of the prior four
months. Personal
interest income improved 0.2% (2.8% y/y) for a second straight month. That
followed three consecutive months of 0.9% decline. Dividend income also rose
0.2% (1.5% y/y) after a 0.5% increase. Personal
transfer receipts improved 0.3% (2.7% y/y) after two months of 0.2% increase. Social Security
payments ticked 0.1% higher (3.3% y/y) and Medicare payments gained an improved
0.3% (2.8%
y/y). Unemployment insurance benefits declined 1.0% (-11.2% y/y).
Disposable income inched up 0.1% (2.7% y/y) following a 0.2%
rise during July. Adjusted for price changes, take-home pay slipped 0.1% (+1.2% y/y)
and reversed July's increase.
Personal consumption expenditures ticked 0.1% higher last month
following an unrevised 0.3% rise. A 0.1% gain had been expected.
Adjusted for price change, personal spending eased 0.1% (+2.5% y/y), the first
decline since January. Real durable goods purchases declined 1.0% (+5.8% y/y),
pulled lower by a 2.7% drop (+2.4% y/y) in motor vehicle buying. Real furniture
purchases eased 0.2% (+6.3% y/y), but real spending on recreational goods &amp;
vehicles rose 0.1% (9.0% y/y). Constant dollar spending on nondurable items fell
0.2% (+1.7% y/y), off for the third straight month. Real purchases of clothing
&amp; footwear declined 0.8% (+1.0% y/y). Real spending on gasoline &amp; oil
declined 0.9% (-0.9% y/y), down for the fourth month in the last five. Real
spending on food &amp; beverages rose 0.3% (1.4% y/y). Real spending on services
improved 0.1% (2.2% y/y) for the third straight month. Real outlays on health
care rose 0.2% (2.8% y/y) but housing &amp; utilities expenditures eased 0.1%
(+0.3% y/y), the sixth monthly decline this year. Real recreation spending held
steady for the second straight month (3.2% y/y).&nbsp;
The personal savings rate held at 3.6%, but remained down from the 6.1% high during all of 2015. Personal saving
declined by roughly one quarter y/y.
The chain-type price index increased 0.2% (1.4% y/y), the
strongest increase since April. Excluding food &amp; energy, prices increased
0.1% (1.3% y/y) for the fourth straight month. Durable goods prices eased 0.1%
(-2.2% y/y), down for the seventh straight month. The price index for
recreational goods &amp; vehicles fell 0.7% (-3.8% y/y). Nondurable goods prices rose
0.5% (1.3% y/y) as gasoline prices jumped 5.8% (9.9% y/y). Services prices improved
0.2% (2.0%
y/y), following a 0.1% uptick.
The personal income &amp; consumption figures are available
in Haver's USECON database with detail in the USNA database. The
Action Economics figure is in the AS1REPNA database.
<table width="1769" class="centered" border="0" cellSpacing="0">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="910">Personal Income &amp; Outlays
 (%)</th>
 <th scope="col" width="122">Aug</th>
 <th scope="col" width="122">Jul</th>
 <th scope="col" width="122">Jun</th>
 <th scope="col" width="122">Aug Y/Y</th>
 <th scope="col" width="122">2016</th>
 <th scope="col" width="122">2015</th>
 <th scope="col" width="123">2014</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="910">Personal Income</td>
 <td align="center" width="122">0.2</td>
 <td align="center" width="122">0.3</td>
 <td align="center" width="122">0.0</td>
 <td align="center" width="122">2.8</td>
 <td align="center" width="122">2.4</td>
 <td align="center" width="122">5.0</td>
 <td align="center" width="123">5.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="910">&nbsp;&nbsp;Wages &amp; Salaries</td>
 <td align="center" width="122">0.0</td>
 <td align="center" width="122">0.5</td>
 <td align="center" width="122">0.4</td>
 <td align="center" width="122">2.7</td>
 <td align="center" width="122">2.9</td>
 <td align="center" width="122">5.1</td>
 <td align="center" width="123">5.1</td>
 </tr>
 <tr>
 <td class="firstcol" width="910">Disposable Personal Income</td>
 <td align="center" width="122">0.1</td>
 <td align="center" width="122">0.2</td>
 <td align="center" width="122">0.0</td>
 <td align="center" width="122">2.7</td>
 <td align="center" width="122">2.6</td>
 <td align="center" width="122">4.5</td>
 <td align="center" width="123">5.1</td>
 </tr>
 <tr>
 <td class="firstcol" width="910">Personal Consumption Expenditures</td>
 <td align="center" width="122">0.1</td>
 <td align="center" width="122">0.3</td>
 <td align="center" width="122">0.1&nbsp;</td>
 <td align="center" width="122">3.9</td>
 <td align="center" width="122">4.0</td>
 <td align="center" width="122">3.9</td>
 <td align="center" width="123">4.4</td>
 </tr>
 <tr>
 <td class="firstcol" width="910">Personal Saving Rate</td>
 <td align="center" width="122">3.6</td>
 <td align="center" width="122">3.6</td>
 <td align="center" width="122">3.7</td>
 <td align="center" width="122">4.9 
 (Aug '16)</td>
 <td align="center" width="122">4.9</td>
 <td align="center" width="122">6.1</td>
 <td align="center" width="123">5.7</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="910">PCE Chain Price Index</td>
 <td align="center" width="122">0.2</td>
 <td align="center" width="122">0.1</td>
 <td align="center" width="122">0.0</td>
 <td align="center" width="122">1.4</td>
 <td align="center" width="122">1.2</td>
 <td align="center" width="122">0.3</td>
 <td align="center" width="123">1.5</td>
 </tr>
 <tr>
 <td class="firstcol" width="910">&nbsp;&nbsp;Less Food &amp; Energy</td>
 <td align="center" width="122">0.1</td>
 <td align="center" width="122">0.1</td>
 <td align="center" width="122">0.1</td>
 <td align="center" width="122">1.3</td>
 <td align="center" width="122">1.8</td>
 <td align="center" width="122">1.3</td>
 <td align="center" width="123">1.6</td>
 </tr>
 <tr>
 <td class="firstcol" width="910">Real Disposable Income</td>
 <td align="center" width="122">-0.1</td>
 <td align="center" width="122">0.1</td>
 <td align="center" width="122">-0.0</td>
 <td align="center" width="122">1.2</td>
 <td align="center" width="122">1.4</td>
 <td align="center" width="122">4.2</td>
 <td align="center" width="123">3.6</td>
 </tr>
 <tr>
 <td class="firstcol" width="910">Real Personal Consumption Expenditures</td>
 <td align="center" width="122">-0.1</td>
 <td align="center" width="122">0.2</td>
 <td align="center" width="122">0.1</td>
 <td align="center" width="122">2.5</td>
 <td align="center" width="122">2.7</td>
 <td align="center" width="122">3.6</td>
 <td align="center" width="123">2.9</td>
 </tr>
 </tbody>
</table>

&nbsp;
Chicago Purchasing Managers Index Strengthens 
by <a href="http://haver.com/comment/Moeller.html">Tom Moeller</a>&nbsp;&nbsp;September
29, 2017
The Chicago Purchasing Managers Business Barometer for
September rose to 65.2 following two months at 58.9. It was the highest level in
three months and well improved versus 54.0 twelve months ago.&nbsp; A slip to
58.5 had been expected in the Action Economics Forecast Survey. 
Based on these figures Haver Analytics constructs an index
that is comparable to the ISM Composite index, to be released Monday. This
figure rose to 61.3 from 55.7. It was the highest level since June and up from
52.9 last September. During the last ten years, there has been a 63% correlation
between the index and the q/q change in real GDP.
The component series each improved m/m. The new orders series
increased moderately but the backlog of unfilled orders reading surged to the
highest level since 1988. The supplier delivery index rose and roughly indicated
the slowest product delivery speeds since 2011. Production improved moderately.
The employment index strengthened to the highest level in
three months. Twenty percent (NSA) of respondents indicated an increase in
hiring while ten percent reported a decline. During the last ten years, there
has been an 81% correlation between the index level and the m/m change in
factory sector payrolls.
The prices paid index eased surged to the highest level since
July 2011. Forty six percent (NSA) of respondents reported paying higher prices
while five percent paid less.
The MNI Chicago Report is produced by MNI/Deutsche Borse
Group in partnership with ISM-Chicago. The survey covers a sample of over 200
purchasing professionals in the Chicago area with a monthly response rate of
about 50%. The ISM-Adjusted headline index is calculated by Haver Analytics
using these data to construct a figure with the ISM methodology. Summary data
are contained in Haver's USECON database, with detail, including the ISM-style
index, in the SURVEYS database. The Consensus expectations figure is
available in AS1REPNA.
&nbsp;
<table width="1769" class="centered" border="0" cellSpacing="0">
 <thead>
 <tr>
 <th class="firstcol" width="972">Chicago Purchasing Managers Index (%, SA)</th>
 <th scope="col" width="113">Sep</th>
 <th scope="col" width="113">Aug</th>
 <th scope="col" width="113">Jul</th>
 <th scope="col" width="113">Sep '16</th>
 <th scope="col" width="113">2016</th>
 <th scope="col" width="114">2015</th>
 <th scope="col" width="114">2014</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="972">General Business Barometer</td>
 <td align="center" width="113">65.2</td>
 <td align="center" width="113">58.9</td>
 <td align="center" width="113">58.9</td>
 <td align="center" width="113">54.0</td>
 <td align="center" width="113">53.1</td>
 <td align="center" width="114">50.3</td>
 <td align="center" width="114">60.7</td>
 </tr>
 <tr>
 <td class="firstcol" width="972">ISM-Adjusted General Business Barometer</td>
 <td align="center" width="113">61.3</td>
 <td align="center" width="113">55.7</td>
 <td align="center" width="113">58.0</td>
 <td align="center" width="113">52.9</td>
 <td align="center" width="113">52.0</td>
 <td align="center" width="114">51.6</td>
 <td align="center" width="114">59.3</td>
 </tr>
 <tr>
 <td class="firstcol" width="972">&nbsp;&nbsp;Production</td>
 <td align="center" width="113">63.3</td>
 <td align="center" width="113">61.9</td>
 <td align="center" width="113">60.8</td>
 <td align="center" width="113">57.5</td>
 <td align="center" width="113">54.7</td>
 <td align="center" width="114">52.5</td>
 <td align="center" width="114">64.5</td>
 </tr>
 <tr>
 <td class="firstcol" width="972">&nbsp;&nbsp;New Orders</td>
 <td align="center" width="113">67.5</td>
 <td align="center" width="113">61.2</td>
 <td align="center" width="113">60.3</td>
 <td align="center" width="113">55.0</td>
 <td align="center" width="113">55.7</td>
 <td align="center" width="114">50.4</td>
 <td align="center" width="114">63.8</td>
 </tr>
 <tr>
 <td class="firstcol" width="972">&nbsp;&nbsp;Order Backlogs</td>
 <td align="center" width="113">65.3</td>
 <td align="center" width="113">54.7</td>
 <td align="center" width="113">57.9</td>
 <td align="center" width="113">42.6</td>
 <td align="center" width="113">47.4</td>
 <td align="center" width="114">44.4</td>
 <td align="center" width="114">54.2</td>
 </tr>
 <tr>
 <td class="firstcol" width="972">&nbsp;&nbsp;Inventories</td>
 <td align="center" width="113">56.9</td>
 <td align="center" width="113">48.5</td>
 <td align="center" width="113">54.9</td>
 <td align="center" width="113">48.7</td>
 <td align="center" width="113">47.2</td>
 <td align="center" width="114">52.1</td>
 <td align="center" width="114">55.9</td>
 </tr>
 <tr>
 <td class="firstcol" width="972">&nbsp;&nbsp;Employment</td>
 <td align="center" width="113">56.0</td>
 <td align="center" width="113">47.5</td>
 <td align="center" width="113">52.6</td>
 <td align="center" width="113">49.2</td>
 <td align="center" width="113">49.4</td>
 <td align="center" width="114">50.3</td>
 <td align="center" width="114">56.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="972">&nbsp;&nbsp;Supplier Deliveries</td>
 <td align="center" width="113">62.6</td>
 <td align="center" width="113">59.3</td>
 <td align="center" width="113">61.5</td>
 <td align="center" width="113">54.1</td>
 <td align="center" width="113">52.8</td>
 <td align="center" width="114">52.5</td>
 <td align="center" width="114">56.5</td>
 </tr>
 <tr>
 <td class="firstcol" width="972">&nbsp;&nbsp;Prices Paid</td>
 <td align="center" width="113">74.3</td>
 <td align="center" width="113">58.9</td>
 <td align="center" width="113">60.9</td>
 <td align="center" width="113">55.8</td>
 <td align="center" width="113">53.1</td>
 <td align="center" width="114">46.8</td>
 <td align="center" width="114">61.0</td>
 </tr>
 </tbody>
</table>


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Personal income increased 0.2% during August (2.8% y/y) following a 0.3% July rise, revised from 0.4%. The latest gain matched expectations in the Action Economics Forecast Survey. Wages & salaries remained unchanged (2.7% y/y) [...]

U.S. Personal Income & Consumer Spending Growth Ease

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<a href="/comment/170929f.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/170929f.png"></a>
 <a href="/comment/170929g.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/170929g.png"></a>
The Chicago Purchasing Managers Business Barometer for
September rose to 65.2 following two months at 58.9. It was the highest level in
three months and well improved versus 54.0 twelve months ago.&nbsp; A slip to
58.5 had been expected in the Action Economics Forecast Survey. 
Based on these figures Haver Analytics constructs an index
that is comparable to the ISM Composite index, to be released Monday. This
figure rose to 61.3 from 55.7. It was the highest level since June and up from
52.9 last September. During the last ten years, there has been a 63% correlation
between the index and the q/q change in real GDP.
The component series each improved m/m. The new orders series
increased moderately but the backlog of unfilled orders reading surged to the
highest level since 1988. The supplier delivery index rose and roughly indicated
the slowest product delivery speeds since 2011, reflecting intense storm activity. Production improved moderately.

The employment index strengthened to the highest level in
three months. Twenty percent (NSA) of respondents indicated an increase in
hiring while ten percent reported a decline. During the last ten years, there
has been an 81% correlation between the index level and the m/m change in
factory sector payrolls.
The prices paid index surged to the highest level since
July 2011. Forty six percent (NSA) of respondents reported paying higher prices
while five percent paid less.
The MNI Chicago Report is produced by MNI/Deutsche Borse
Group in partnership with ISM-Chicago. The survey covers a sample of over 200
purchasing professionals in the Chicago area with a monthly response rate of
about 50%. The ISM-Adjusted headline index is calculated by Haver Analytics
using these data to construct a figure with the ISM methodology. Summary data
are contained in Haver's USECON database, with detail, including the ISM-style
index, in the SURVEYS database. The Consensus expectations figure is
available in AS1REPNA.
<a href="/comment/170929h.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/170929h.png"></a>
 <a href="/comment/170929i.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/170929i.png"></a>



<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
 <tr>
 <th class="firstcol" >Chicago Purchasing Managers Index (%, SA)</th>
 <th scope="col" >Sep</th>
 <th scope="col" >Aug</th>
 <th scope="col" >Jul</th>
 <th scope="col" >Sep '16</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 <th scope="col" >2014</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >General Business Barometer</td>
 <td >65.2</td>
 <td >58.9</td>
 <td >58.9</td>
 <td >54.0</td>
 <td >53.1</td>
 <td >50.3</td>
 <td >60.7</td>
 </tr>
 <tr>
 <td class="firstcol" >ISM-Adjusted General Business Barometer</td>
 <td >61.3</td>
 <td >55.7</td>
 <td >58.0</td>
 <td >52.9</td>
 <td >52.0</td>
 <td >51.6</td>
 <td >59.3</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Production</td>
 <td >63.3</td>
 <td >61.9</td>
 <td >60.8</td>
 <td >57.5</td>
 <td >54.7</td>
 <td >52.5</td>
 <td >64.5</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;New Orders</td>
 <td >67.5</td>
 <td >61.2</td>
 <td >60.3</td>
 <td >55.0</td>
 <td >55.7</td>
 <td >50.4</td>
 <td >63.8</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Order Backlogs</td>
 <td >65.3</td>
 <td >54.7</td>
 <td >57.9</td>
 <td >42.6</td>
 <td >47.4</td>
 <td >44.4</td>
 <td >54.2</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Inventories</td>
 <td >56.9</td>
 <td >48.5</td>
 <td >54.9</td>
 <td >48.7</td>
 <td >47.2</td>
 <td >52.1</td>
 <td >55.9</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Employment</td>
 <td >56.0</td>
 <td >47.5</td>
 <td >52.6</td>
 <td >49.2</td>
 <td >49.4</td>
 <td >50.3</td>
 <td >56.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Supplier Deliveries</td>
 <td >62.6</td>
 <td >59.3</td>
 <td >61.5</td>
 <td >54.1</td>
 <td >52.8</td>
 <td >52.5</td>
 <td >56.5</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Prices Paid</td>
 <td >74.3</td>
 <td >58.9</td>
 <td >60.9</td>
 <td >55.8</td>
 <td >53.1</td>
 <td >46.8</td>
 <td >61.0</td>
 </tr>
 </tbody>
</table>


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The Chicago Purchasing Managers Business Barometer for September rose to 65.2 following two months at 58.9. It was the highest level in three months and well improved versus 54.0 twelve months ago. A slip to 58.5 had been expected in [...]

Chicago Purchasing Managers Index Strengthens

Surging orders for computers and electronics propelling durable goods orders

Next year's inflation forecasts are on the rise and above target

Disrupted global supply chains placing upward pressure on US goods prices

Construction of data centers has overtaken transportation construction in US

Elevated energy prices putting intense upward pressure on input prices around the globe

US is big leader in global surge in private AI investment

Larger-than-usual income tax refunds this year are supporting consumer spending

Sharply rising share of AI-related jobs

Inflationary impact of surge in oil prices larger in Europe than in the US

Futures market thinks the price of oil will recede significantly over the next six months

Recent pickup in US defense orders could help support overall growth ahead

Cost of transporting crude oil has soared to series high

Market-based inflation expectations have not yet reflected recent surge in oil prices

Global equity markets are fearing a major economic disruption from soaring oil prices

Is recent drop in sentiment signaling softer growth ahead?

With the Iran conflict, geopolitical risk has soared to alarming levels

Soaring AI-related investment in US underpinning strong contribution of business spending to overall growth

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

Global freight costs are on the rise while supply chain pressures are contained

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Michael J. Moran

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The monthly report on construction activity receives scant attention in the financial press, and investors and traders in financial markets typically pay little heed. However, it is a valuable report for economists, as it provides a broad-based view of building activity, covering private residential and business construction, as well as government-related activity. The figures feed into the calculation of GDP. Unfortunately, results have been soft since early 2025.

Total construction activity rose 0.1 percent in May, marking the third consecutive increase. However, the gains have not been especially large, averaging 0.3%, and they have barely dented the string of weak readings in the preceding 17 months. The year-over-year change in May totaled -1.5%.

Private residential construction, the largest component of the total (41% share), rose 0.3% in May, adding to an average gain of 1.1% in the prior two months and leaving a year-over-year increase of 1.8% (chart, upper left). Most of the advance in the past year was the result of improvements to existing homes (up 8.1%). Construction of new multi-family units has shown little net change in the past year or so, while new single-family building has traced a mild downward trend (off 4.0% in the past year). Public construction has been flat in the past year, with both the federal government and state and local governments showing little net change (chart, upper right).

Private nonresidential construction (34% of the total) has received considerable press attention in the past few years because of explosive growth in the building of data centers. Growth has indeed been vigorous. Building started in 2020 and grew moderately at first, but this sector took off in 2022, about the time when artificial intelligence models became publicly available (chart, lower left, in levels to show the strong trend more clearly). Average annual growth for the three years ended 2025 totaled 48%.

Interestingly, despite the rapid growth in the building of data centers, the private nonresidential sector has been the weakest area of the construction report, with activity trending lower since early 2025 (chart, lower right). Some components of private nonresidential construction have held steady or improved (e.g. amusement & recreation, electric power), but three areas stand out on the soft side: general office, commercial, and manufacturing.

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

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- Building activity in the US was firm in 2023 and 2024, but it has lost ground since then.
- Government-related construction and private residential building have been little changed in the past year or so.
- Private nonresidential construction has been notably weak, despite robust activity in the building of data centers.

Construction in May: Another Soft Reading

Winnie Tapasanun

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The Conference Board U.S. Consumer Confidence Index rose 0.7% m/m (-4.2% y/y) to a lower-than-expected 91.2 in June, the fourth monthly rise in five months, after a downwardly revised 3.4% decline to a four-month-low 90.6 in May (-0.7%; 93.1 initially). A reading of 94.3 had been expected in the Action Economics Forecast Survey. The June reading was 6.4% above a low of 85.7 in April 2025 but down from 95.2 in June 2025 and 19.1% below a high of 112.8 in November 2024.

Consumers' views of present economic conditions weakened for the second consecutive month in June, while the views of future economic conditions improved m/m. The Present Situation Index—which assesses current business and labor market conditions—fell 2.5% m/m (-12.5% y/y) to 116.4 in June, the lowest level since February 2021, following a 4.0% drop to 119.4 in May and two successive m/m increases. The index was lower than 133.0 in June 2025 and 25.0% below a high of 155.3 in June 2023. The Expectations Index—which measures the short-term outlook for income, business, and labor market conditions—rose 4.2% m/m (6.4% y/y) to 74.4 this month, the highest level since December and the second increase in three months, after a 2.7% decline to 71.4 in May. The index was higher than 69.9 in June 2025, while 20.6% below a high of 93.7 in November 2024.

Labor market readings showed less optimism this month. The jobs gap—representing the difference between respondents indicating that jobs are plentiful and those saying jobs are hard to get—dropped to 2.4% in June, the lowest reading since February 2021, from 5.0% in May. Calculated by Haver Analytics, this series had an 85% correlation with the unemployment rate over the last 20 years. The jobs plentiful measure inched up to 24.9% of respondents in June from 24.8% in May (the lowest since February 2021). Perceptions of the current labor market weakened, with the jobs hard-to-get measure rising to 22.5% this month, the highest level since January 2021, from 19.8% in May.

Consumers generally viewed business conditions as slightly more favorable compared to last month. Current business conditions were perceived as good by 20.0% of respondents in June, up from 19.2% in May but below a high of 23.4% in June 2023. Expectations that business conditions would improve in six months were 19.0% of respondents, up from 18.8% in May but below a high of 24.7% in November 2024. More jobs were expected in six months by 15.2% of respondents, slightly down from 16.6% in May and below a high of 22.8% in November 2024. The percentage expecting rising income rose to 20.8% in June from 19.2% in May, the highest since February 2020 and above a low of 14.4% in February 2023.

Inflation expectations eased this month but remained elevated. The expected inflation rate in twelve months slipped to 6.0% in June, the lowest since February, after holding at 6.2% for three straight months. The latest reading was below a high of 7.0% in April 2025 but above a low of 5.0% in November 2024. In June, 61.5% of respondents expected that interest rates would rise over the next twelve months, down from 62.4% in May but up from 42.1% in January 2024.

The share of respondents planning to buy a home within six months rebounded to 6.6% in June from 6.5% in May. It was below its most recent high of 7.0% in April but above a low of 4.6% in February 2024. Those planning to buy automobiles rose to 13.3% of respondents this month from 12.6% in May; it was up from a low of 10.6% in April 2025. Meanwhile, the share of respondents planning a vacation within six months declined to 39.1%, the lowest since April 2021, from 41.4% in May.

The Consumer Confidence data are available in Haver’s **CBDB** database. The total indexes, which are indexed to 1985=100, appear in **USECON**, and market expectations are in **AS1REPNA**.

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- Headline up 0.6 pts. to 91.2 in June, below expectations; fourth m/m increase in five mths.
- Present Situation Index down 3.0 pts. to 116.4, lowest since Feb. ’21.
- Expectations Index up 3.0 pts. to 74.4, a six-month high.
- Consumers less optimistic about current business & labor market conditions; more upbeat about future business & financial conditions.
- Inflation expectations down to 6.0%, lowest since Feb., as lower oil prices in recent weeks eased consumer inflation fears.

U.S. Consumer Confidence Rebounds in June from a Four-Month Low

Sandy Batten

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Total job openings edged up 0.1% m/m (+3.9% y/y) to 7.594 million in May from a downwardly revised 7.585 million in April (previously 7.618 million), according to the Job Openings and Labor Turnover Survey. Even with only a small rise, the level of openings in May was the highest since May 2024. Accordingly, the job openings rate (the ratio of openings to nonfarm employment plus openings) was unchanged at 4.6% in May. The April and May readings for the job openings rate were the highest since November 2024. In May, the number of unemployed fell while the number of openings edged up. Consequently, the number of openings rose further above the number of unemployed for the second consecutive month, another sign that previously observed softening in labor market conditions may be reversing.

Private sector openings were essentially unchanged in May from April, edging up 2,000 (+4.3% y/y) with the private job openings rate unchanged at 4.8%. The sluggishness in private openings in May was due entirely to a 119,000 decline in private education and health care openings. However, this followed a total increase of 298,000 in March and April. Openings increased in all other major sectors, led by a 95,000 increase in openings in leisure and hospitality. Openings were up 32,000 in construction, 33,000 in manufacturing, and 37,000 in trade and transportation. Total government openings rose 7,000 in May after an upwardly revised 63,000 jump in April (previously +47,000).

Total hiring slipped 0.9% m/m (-3.0% y/y) to 5.170 million in May from an upwardly revised 5.215 million in April (previously 5.116 million). This was the third monthly decline in hiring in the past four months. The hiring rate was unchanged in May at 3.3%. Private sector hiring fell 1.6% m/m (-3.5% y/y) in May, also the third monthly decline in the past four months. The weakness in hiring in May was concentrated in trade and transportation (-56,000) and in construction (-24,000). Manufacturing posted a small decline while professional and business services, and private education and health care posted small increases. Leisure and hospitality hiring rose 15,000, the second monthly increase in the past three months. Total government hiring increased 32,000 in May.

Total separations increased 1.3% (-3.5% y/y) to 5.101 million in May from an upwardly revised 5.038 million in April (previously 4.978 million). Both quits (+22,000) and layoffs (+41,000) increased in May with no change in other separations. The separation rate in May was unchanged at 3.2%. Private separations also rose 1.3% m/m (+62,000, -2.9% y/y) in May. Private quits increased 37,000, private layoffs rose 27,000, while other private separations declined 2,000. The rise in private layoffs was concentrated in construction (+47,000), trade and transportation (+52,000), and private education and healthcare (+52,000). Layoffs declined 18,000 in manufacturing, fell 37,000 in professional and business services, and decreased 50,000 in leisure and hospitality. Even with the rise in private quits in May, they have been trending down in 2026, implying that workers are feeling less comfortable with their employment prospects and hence are choosing to remain in their current jobs.

On the whole, employers remain cautious in hiring. Furthermore, workers are sufficiently unsure of their alternative employment prospects that they are refraining from leaving their current position. Still, openings have gradually risen since the end of last year after having gradually fallen throughout 202 and once again exceed the number of unemployed.

The Job Openings and Labor Turnover Survey (JOLTS) data are available in Haver’s **USECON** database.

- Openings edged up 9,000 but to the highest level since May 2024.
- However, hiring fell 45,000 for the third monthly decline in the past four months.
- Separations rose 63,000 with increases in both quits and layoffs.

U.S. JOLTS: Openings and Hiring Little Changed in May

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**Some inflation progress, but not enough**: The headline HICP in June for the largest monetary union economies have largely broken lower, with the exception of Spain. The German headline HICP fell by 0.1% in June after being flat in May. In France, the price index fell by 0.5% in June after growing by 0.3% in May. In Italy, the June index rose by 0.1% after rising by 0.3% in May. In Spain, June brought a 0.3% increase after a 0.2% increase in May.

**Core or ex-energy (Germany)**: The core inflation readings are available for Germany, Italy, and Spain. In the case of Germany, it's an index excluding energy only. June brought a 0.1% increase for the German index, a 0.1% decline for Italy's core index, and a 0.2% increase for Spain’s core measure. On balance, these are a good collection of results from the standpoint of the ECB that has an inflation target of 2% for the European Monetary Union as a whole, but no guidance for individual countries.

**Sequentially**: Sequentially, the headline inflation rate shows progress in Germany and France, while excesses are stubborn in Italy and Spain. Over 12 months, all the inflation rates are excessive, but France is only technically excessive and probably acceptable at 2.1% year-over-year. Germany's increase over 12 months is 2.4%, Italy's is 3.1%, and Spain’s is 3.6%. The progression of inflation from 12-months to 6-months to 3-months shows accelerations over six months compared to 12 months for France and Italy, while Germany and Spain show decelerations. However, Spain's six-month inflation rate is still 3.3%. Germany has dropped to 2.2%, France is at 3.3%, and Italy has jumped up to 5.5%. Over three months, the German headline inflation rate is zero and France has fallen to 2%, but in Italy’s headline pace has accelerated to 6.9% and Spain remains at 3.3%. These are all compounded rates of change over three months.

**Three-month trends are mixed**: None of this is really surprising since oil prices have been surging over the period and are now starting to decline. Over 12 months, the oil price is down by 22.6%; over six months, it’s down by 37% at an annual rate; and over three months, the oil price is flat. Much of this price action is still quite recent. These figures are for Brent crude measured in euros. Over three months, German inflation is flat for the headline HICP, while France’s inflation rate is down to 2%. In Italy, the three-month pace is 6.9%; in Spain it’s at 3.3%. Headline inflation still has a somewhat erratic performance over three months, although it's quite acceptable in Germany and France and quite not acceptable in Italy and Spain.

**Core inflation is lower but still too high**: Core inflation shows much more moderation because the behavior of energy prices leaves core inflation largely unaffected. If the core is affected, it occurs only after a more substantial knock-on effects from other industries. German ex-energy inflation is at 2.3% over 12 months and then settles down to a 2% annualized pace over six months and three months. Italian core inflation is golden on all three periods, at 1.5% over 12 months, down to 1.4% over six months, and down to 1.2% over three months. Spain's core inflation is excessive, although it is making progress toward a more agreeable rate from a European standpoint. Spain’s core inflation is 2.9% over 12 months, remains at 2.9% over six months, then decelerates to a 2.4% annualized rate over three months. 

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**Policy**: The ECB has already started to raise rates and warned that there could be more ahead, depending on circumstances. However, we are seeing signs here that inflation is beginning to behave, particularly for the core measures. We could see the headlines improve more dramatically if oil prices continue to drop as they have been. Growth in the European area has been mixed on the continent; in the United Kingdom, growth is showing signs of weakening as the U.K. inflation rate has dropped rather sharply.

**Outlook**: The outlook is still guarded. There continues to be a war in Ukraine and unsettled conditions in the Middle East, including concerns over the Strait of Hormuz where Iran continues to say that it wants to be in control of traffic through the Strait. That position doesn't seem likely to be palatable to the U.S, although time will tell what kind of deal, if any, emerges from that conflict. Inflation developments are going to depend importantly on what happens with oil and how open the Strait becomes. As we can see, Germany and Italy already present relatively controlled core inflation rates. The rest of the monetary union should follow suit as all prices should continue to behave and follow oil prices lower. It has been a long period with inflation misbehaving. The core and ex-energy inflation statistics show us that over the last five years, Germany has had a compounded ex-energy inflation rate of 3.8%, Italy 3.1%, and Spain 3.9%. These are readings excluding energy and over that five-year period. Oil and energy are not the only price concerns. Energy prices had a compounded annual rate increase of 9.7% over the last five years. Monetary policy has gotten far behind where it's supposed to be and has allowed prices to rise far more than they should have. Central banks need to pay more attention to hitting their inflation targets in the future; they can't keep missing to this extent and convince anybody that they have a viable credible inflation target at 2%.

Europe

Large EU Economies Show Some Inflation Cooling

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Headline indexes for the European Monetary Union improved in June to a reading of 95.0 from 93.7 in May. The index had been stronger at 96.4 in March; however, it fell to 93.3 in April, recovered slightly to 93.7 in May, and has now reached 95.0. While still below its March high, the index has made progress in the wake of the outbreak of war-like conditions and the closure of the Strait of Hormuz.

**Sector performance**
The industrial reading for the sector, at -8, has a 36.3 percentile standing, which better than the headline index for the Monetary Union with a 25.4 percentile standing. The EMU-wide sector index, consumer confidence, improved to a net diffusion reading of -17.7 in June from -19 in May, but that still leaves it with a very weak 8.1 percentile standing, the lowest among sector readings. Retailing improved to a net diffusion reading of -10 in June from -11 in May and posted a 38.1 percentile standing. The construction sector deteriorated, falling back to -5 from -4 in May; it has been undergoing steady degradation since at least March, but it still has a 68.4 percentile standing. It is the only sector with a percentile standing above 50, placing it above its historic median. The services sector had a net diffusion reading of +3, identical to its May reading and has a 24-percentile standing.

**Sector index ranking**
The sector readings clearly show that the monetary union is exhibiting a number of sectors with subpar growth; beyond ‘subpar,’ many are quite weak. The exception is—and has been for some time—the construction sector, which continues to perform above average and post an above-median metric. It is, perhaps surprising that we often think of consumer confidence as being relatively forward-looking, but in this schematic, consumer confidence is the weakest of the sectors; in fact, like statistics from the U.S., we find the same prevailing situation with consumer readings exceptionally weak. These weak consumer readings coexist with much stronger retailing readings and stronger industrial readings, although both of those are below their historic medians in Europe. This report is a sort of gut check for what consumer confidence means; it may not be as important as we used to think it was. Although the business cycle at this juncture seems to be concentrated more on the supply side and on recovery in the business community, that effect compounded by the influence of AI is much stronger in the U.S. than in Europe.

**Country detail – Large economies**
The country detail shows 16 of 20 early reporting countries with only one of the top four countries showing a decline month-to-month, and that's France. France recorded a 0.2% decline in June, while Germany posted a 1.9% increase, Italy gained 1.3%, and Spain rose 0.7%. Spain had the lone small decrease in May, while in April all of the large countries showed significant monthly declines in their overall indexes in the wake of the onset of the war with Iran.

**Smaller economies in EMU**
Apart from the Big Four economies, 12 other EMU members report in June; of those, 5 showed month-to-month declines in their country level indexes. This was up from three showing declines in May, although it was a vast improvement from April, when all of the country indexes turned negative and generated substantial month-to-month declines, except for Slovakia and Lithuania.

**Big Four economy rankings**
Among the Big Four economies, the strongest ranking reading in June is Spain at a 52.3 percentile standing, followed by Italy at a 41.6 percentile standing, France at a 22.7 percentile standing, and Germany at an 18.7 percentile standing.

**Other economy rankings**
Among the other 12 countries, the percentile standing readings range from a high of 76.1% for Greece to a low of 9.3% for Austria. Five of 12 of the smaller EMU members have percentile standings of 50% or greater, putting them above their historic medians, while the other 7 have rankings that range from a high of 44.6% in Portugal to a low of 9.3% in Austria.

**Summing up**
Conditions in the monetary union have improved over the last two months after a substantial stumble in the wake of the war in the Middle East with Iran and the closure of the Strait of Hormuz. However, the rebound in the European recovery is in gear; it is slow and measured. Conditions are still weak on balance.