Tom Moeller

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The Producer Price Index for final demand rose 0.2% during July
(1.7% y/y) following two months of 0.1% gain. The rise matched expectations in
the Action Economics Forecast Survey. Producer prices excluding food &amp;
energy slipped 0.1% last month (+2.1% y/y) after a 0.3% strengthening. A 0.2%
rise had been expected. The PPI excluding food, beverages and trade services,
another measure of underlying price inflation, also edged 0.1% lower (+1.7% y/y)
after holding steady in June.

A 2.3% rise (-4.4% y/y) in energy prices added to the PPI
increase following two months of subtraction. The rise
reflected a 5.2% rebound (-6.7% y/y) in gasoline prices after two months of
decline. Home heating oil prices jumped 8.0% (0.2% y/y) following a 5.0% drop.
The cost of electric power rose 0.9% (2.2% y/y) following a 0.4% gain.
Offsetting these increases was a 1.3% decline (+1.3% y/y) in natural gas prices,
which was the fourth consecutive decline.

Food prices edged 0.2% higher (2.5% y/y) following a 0.6%
gain. Beef &amp; veal prices increased 1.8% (1.7% y/y) while fish prices rose
3.0% (3.9% y/y). The cost of dairy products rose 0.6% (1.2% y/) and fresh &amp;
dried vegetable costs improved 0.3% (43.3% y/y). These increases were offset by
a 4.1% decline (-7.2% y/y) in fresh fruit &amp; melon prices. Egg prices were
off 8.9% and down by roughly one-half y/y. Oilseed prices eased 0.3% (+2.7% y/y).

Prices for core goods for final demand edged 0.1% higher (1.2%
y/y) after holding steady for three straight months. Core finished consumer
goods prices rose 0.1% (2.2% y/y) after zero change in June. Core nondurable
consumer goods costs also gained 0.1% (2.7% y/y) and durable consumer goods
prices improved 0.1% (1.2% y/y) as well. Passenger car prices rose 0.4% both m/m
and y/y but appliance prices fell 0.6%. Private capital equipment costs increased
0.2% (2.2% y/y) after two months of 0.1% gain. Government goods prices less food
&amp; energy rose 0.2% (1.9% y/y) following two months of 0.1% improvement.

Services prices fell 0.1% (+2.3% y/y), but trade services
prices rose 0.2% (3.3% y/y) after strengthening 1.3%. The cost of trade of
finished goods rose 0.2% (3.2% y/y) following a 1.4% surge. Passenger
transportation fees increased 1.5% (5.5% y/y) and transportation &amp;
warehousing costs fell 0.3% (+2.1% y/y). Services prices less trade,
transportation &amp; warehousing were off 0.3% (+1.7% y/y).

Construction costs improved 0.6% (5.5% y/y). Private building
costs gained 0.6% (5.2% y/y) but government building costs rose 0.4% (6.0% y/y)
for a second month.

Prices for intermediate demand increased 0.2% (-2.0% y/y)
following three months of decline.

The PPI data can be found in Haver's USECON database.
Further detail can be found in PPI and PPIR. The expectations
figures are available 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" >Producer Price Index (SA, %)</th>
 <th scope="col" >Jul</th>
 <th scope="col" >Jun</th>
 <th scope="col" >May</th>
 <th scope="col" >Jul Y/Y</th>
 <th scope="col" >2018</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Final Demand</td>
 <td>0.2</td>
 <td>0.1</td>
 <td>0.1</td>
 <td>1.7</td>
 <td>2.9</td>
 <td>2.3</td>
 <td>0.4</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp; Excluding Food &amp; Energy</td>
 <td>-0.1</td>
 <td>0.3</td>
 <td>0.2</td>
 <td>2.1</td>
 <td>2.6</td>
 <td>1.9</td>
 <td>1.2</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp; Excluding Food, Energy
 &amp; Trade Services</td>
 <td>-0.1</td>
 <td>0.0</td>
 <td>0.4</td>
 <td>1.7</td>
 <td>2.8</td>
 <td>2.1</td>
 <td>1.2</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp; Goods</td>
 <td>0.4</td>
 <td>-0.4</td>
 <td>-0.2</td>
 <td>0.4</td>
 <td>3.4</td>
 <td>3.3</td>
 <td>-1.4</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Foods</td>
 <td>0.2</td>
 <td>0.6</td>
 <td>-0.3</td>
 <td>2.5</td>
 <td>0.2</td>
 <td>1.2</td>
 <td>-2.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Energy</td>
 <td>2.3</td>
 <td>-3.1</td>
 <td>-1.0</td>
 <td>-4.4</td>
 <td>10.2</td>
 <td>10.4</td>
 <td>-8.4</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;&nbsp;&nbsp;Goods Excluding
 Food &amp; Energy</td>
 <td>0.1</td>
 <td>0.0</td>
 <td>0.0</td>
 <td>1.2</td>
 <td>2.5</td>
 <td>2.2</td>
 <td>0.7</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp; Services</td>
 <td>-0.1</td>
 <td>0.4</td>
 <td>0.3</td>
 <td>2.3</td>
 <td>2.6</td>
 <td>1.8</td>
 <td>1.4</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Trade
 Services</td>
 <td>0.2</td>
 <td>1.3</td>
 <td>-0.5</td>
 <td>3.3</td>
 <td>1.8</td>
 <td>1.4</td>
 <td>1.3</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp; Construction</td>
 <td>0.6</td>
 <td>0.2</td>
 <td>0.0</td>
 <td>5.5</td>
 <td>4.0</td>
 <td>2.2</td>
 <td>1.1</td>
 </tr>
 <tr>
 <td class="firstcol" >Intermediate Demand - Processed Goods</td>
 <td>0.2</td>
 <td>-1.1</td>
 <td>-0.2</td>
 <td>-2.0</td>
 <td>5.3</td>
 <td>4.7</td>
 <td>-3.1</td>
 </tr>
 </tbody>
 </table>
 
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The Producer Price Index for final demand rose 0.2% during July (1.7% y/y) following two months of 0.1% gain. The rise matched expectations in the Action Economics Forecast Survey. Producer prices excluding food & energy slipped 0.1% [...]

U.S. Producer Price Index Increases; Core Prices Ease

Robert Brusca

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All of the OECD groups show declines in June and for the six months ended in June…all show declines for the previous six months as well. It is a well-flagged entrenched slowdown.

For data by country, all ten in the table show LEI values below 100 (100 signals ‘normal’ growth). Eight (Greece and China are exceptions) show current values weaker than six months ago. All (except Greece) also were weaker six months ago than over the six months before that.


<img border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/190808 2.png" width="660" height="250">


In addition to the clear falling of the levels of the OECD LEI values and the changes over six-month segments (the OECD’s preferred horizon for viewing these data), we create rankings on the OECD LEI values that illustrate how weak the current values are in absolute terms compared to each country’s historic record. Every country in the table is in the bottom 20th percentile of its historic range of values ranked on data back to the early 1990s. The OECD aggregate is in its lower 11th percentile, a strikingly weak reading. And Greece, while its ‘series as stronger’ in some of the change categories, does so only because it had been so extremely weak previously when clamped under the unrelenting yoke of EU imposed austerity.


<img border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/190808.png" width="660" height="330">


OECD LEI data point to ongoing weakening of a relatively severe and worsening nature. The OECD’s own interpretation is that the overall indicators point to relatively stable growth with weak growth signaled in the U.S., Germany and the EMU. I find this interpretation overly optimistic.

For a broad group of developing countries, there is clear evidence of LEI weakness. For three-month running (at least), about 2/3rds of the countries in the table show month-to-month declines. Over three months and six months, two thirds also show net declines. Over 12 months, over 3/4ths show declines. The simple level view of the OECD indicators shows that 78% are below the theoretically neutral reading of 100 that signals ‘average’ growth. Two thirds of the indicators show net lower readings over six months. 78% of all readings have weakening values over 12 months. And of the 14 countries in the table, only three have rank standings above a ranking of 50% which represents the historic average for each LEI series.

On balance, the OECD readings are not very reassuring. There are few LEI readings at or above 100 which is a level indicating normal or above normal growth. Nearly all observations indicate some sort of below average growth; in some cases that reading is close enough to ‘normal’ to call it ‘stable’ but the fact of the erosion and ongoing loss of momentum make that designation a bit too generous for me. I find the OECD LEIs a worrisome lot.


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All of the OECD groups show declines in June and for the six months ended in June…all show declines for the previous six months as well. It is a well-flagged entrenched slowdown. For data by country, all ten in the table show LEI [...]

OECD LEIs Continue to Decay

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Wholesale inventories were unchanged (7.6% y/y) during June
following an unrevised 0.4% May increase. A 0.2% rise was expected in the
Informa Global Markets Survey.

Durable goods inventories increased 0.3% (10.1% y/y) in June
after remaining unchanged in May. Machinery inventories, the largest sector,
grew 0.7% (12.4% y/y), while vehicle inventories, the second largest group,
eased 0.2% (+17.2% y/y). Electrical equipment inventories rose 0.3% (6.2% y/y).
Inventories of nondurable goods fell 0.4% (+3.6% y/y) after a 0.6% increase.
Drug inventories, which make up a quarter of nondurable inventories, fell 2.1%
(+1.8% y/y). Apparel inventories declined 0.5% (+12.8% y/y) and inventories of
chemicals were off 1.2% (+2.8% y/y). The value of petroleum inventories rose
2.2% (-7.6% y/y).

Wholesale sales edged 0.3% lower in June (-2.7% y/y)
following declines during the two preceding months. The Action Economics
Forecast Survey expected a 0.2% increase.

Durable goods sales rose 0.2% (-2.3% y/y) after holding
steady in May. Electrical equipment sales, the largest sector, fell 0.9% (-6.7%
y/y). Professional and commercial equipment shipments, which includes computers,
rose 0.9% (1.1% y/y). Motor vehicle sales eased 0.2% (+1.7% y/y). Nondurable
product sales fell 0.7% (-3.1% y/y) after a 1.2% decline. Drug sales,
which are nearly the largest category of nondurable sales, fell 0.4% (-0.6% y/y)
while apparel sales declined 3.1% (-10.3% y/y). Chemical shipments were off 1.2%
(-3.5% y/y) but grocery product sales rose 0.5% (2.1% y/y). Petroleum products
deliveries declined 2.3% (7.8% y/y), the third straight monthly fall.

The inventory-to-sales (I/S) ratio at the wholesale level was
unchanged at 1.36, the highest in just over three years.

The durable goods I/S ratio increased to 1.76, the highest
level since 2009. The machinery ratio rose to 2.75, while motor vehicles held
steady at 1.77, nearly a ten-year high. The I/S ratio for nondurable goods was
unchanged at 0.99. The paper industry I/S ratio rose to a record 1.23. The
drug industry I/S ratio slipped to 1.06 while the chemical industry ratio held
steady at 1.13. The petroleum industry I/S ratio gained to 0.36.

The wholesale trade figures and oil prices are available in
Haver's USECON database. The expectations figure for inventories is
contained in the MMSAMER database. Expectations for sales are 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" >Wholesale Sector - NAICS
 Classification&nbsp;(%)</th>
 <th>Jun</th>
 <th>May</th>
 <th>Apr</th>
 <th>Jun Y/Y</th>
 <th>2018</th>
 <th>2017</th>
 <th>2016</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" >Inventories</td>
 <td>0.0</td>
 <td>0.4</td>
 <td>0.8</td>
 <td>7.6</td>
 <td>7.1</td>
 <td>3.3</td>
 <td>1.9</td>
 </tr>
 <tr>
 <td class="firstcol" >Sales</td>
 <td>-0.3</td>
 <td>-0.6</td>
 <td>-0.4</td>
 <td>-2.7</td>
 <td>6.8</td>
 <td>6.3</td>
 <td>-1.2</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >I/S Ratio</td>
 <td>1.36</td>
 <td>1.36</td>
 <td>1.34</td>
 <td>1.26 (Jun '18)</td>
 <td>1.29</td>
 <td>1.30</td>
 <td>1.35</td>
 </tr>
 </tbody>
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Wholesale inventories were unchanged (7.6% y/y) during June following an unrevised 0.4% May increase. A 0.2% rise was expected in the Informa Global Markets Survey. Durable goods inventories increased 0.3% (10.1% y/y) in June after [...]

U.S. Wholesale Inventories Steady; Sales Decline

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Initial unemployment insurance claims declined to 209,000
(-3.5% y/y) during the week ended August 3 from 217,000 in the prior week,
revised from 215,000. The Action Economics Forecast Survey expected 215,000
initial claims. The four-week moving average of initial claims edged higher to
212,250 and remained above the 50-year low of 201,500 reached in April. During
the last twenty years, there has been a 69% correlation between the level of
initial jobless claims and the m/m change in payroll employment.

Continuing claims for unemployment insurance eased to 1.684
million (-3.9% y/y) in the week ending July 27 from an unrevised 1.699
million in the prior week. The four-week moving average of claimants slipped to 1.687 million.

The insured rate of unemployment remained at the record low 1.2%,
where it has been since May 2018. Data on the insured unemployment rate go back to 1971.

Insured rates of unemployment vary widely by state. During
the week ending July 20, the lowest rates were in South Dakota (0.28%), Indiana
(0.44%), Utah (0.46%), North Carolina (0.48%) and Florida (0.49%). The
highest rates were in California (1.82%), Rhode Island (1.85%), Pennsylvania
(2.01%), Connecticut (2.16%) and New Jersey (2.42%). Amongst other large states
the rate was 0.63% in Tennessee, 1.07% in Texas, 1.10% in Michigan and 1.42% in
New York. These state data are not seasonally adjusted.

Data on weekly unemployment claims going back to 1967 are
contained in Haver's WEEKLY database, and they are summarized monthly in USECON.
Data for individual states are in REGIONW. The expectations figure is
from the Action Economics Forecast Survey, carried in the AS1REPNA database.

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	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" >Unemployment Insurance (SA, 000s)</th>
 <th>08/03/19</th>
 <th>07/27/19</th>
 <th>07/20/19</th>
 <th>Y/Y %</th>
 <th>2018</th>
 <th>2017</th>
 <th>2016</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Initial Claims</td>
 <td>209</td>
 <td>217</td>
 <td>207</td>
 <td>-3.5</td>
 <td>220</td>
 <td>244</td>
 <td>262</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Continuing Claims&nbsp;</td>
 <td>--</td>
 <td>1,684</td>
 <td>1,699</td>
 <td>-3.9</td>
 <td>1,756</td>
 <td>1,961</td>
 <td>2,135</td>
 </tr>
 <tr>
 <td class="firstcol" >Insured Unemployment Rate (%)</td>
 <td>--</td>
 <td>1.2</td>
 <td>1.2</td>
 <td>
 1.2 
 (Jul 2018)
 </td>
 <td>1.2</td>
 <td>1.4</td>
 <td>1.6</td>
 </tr>
 </tbody>
 </table>
 
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Initial unemployment insurance claims declined to 209,000 (-3.5% y/y) during the week ended August 3 from 217,000 in the prior week, revised from 215,000. The Action Economics Forecast Survey expected 215,000 initial claims. The four- [...]

U.S. Initial Claims for Unemployment Insurance Fall

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The Mortgage Bankers Association reported that its total
Mortgage Applications Index rose 5.3% (46.5% y/y) during the week ending August
2 following five consecutive weeks of decline. Applications to refinance a loan
firmed 11.8% and more-than doubled y/y, up 115.9%. Purchase applications were
off 2.0% (+6.5% y/y), the fourth consecutive weekly decline.
The effective interest rate, which includes points, on a
15-year fixed-rate mortgage fell w/w to 3.47% from 3.55%. That compared to a
high of 4.71% early in November 2018. The effective rate on a 30-year fixed-rate
loan eased w/w to 4.11%, remaining below the November high of 5.33%. The
effective rate on a 30-year Jumbo mortgage fell to 4.04%. It remained below the
October peak of 5.09%. The rate on an adjustable 5-year mortgage dropped to 3.49%.
It's recent high was 4.52% averaged last October.
The average mortgage loan size increased w/w to $321,600 (11.2%
y/y), remaining below the record of $381,700 in late-March. For purchases, the
average loan size fell to $318,300 (+3.3% y/y). The average loan size for
refinancings increased to $324,500 (+22.9% y/y). These series date back to 1990.
Applications for fixed-rate loans rose by more than one-half
y/y, while adjustable rate loan applications rose 10.5% y/y.
The survey covers over 75% of all U.S. retail residential
mortgage applications and has been conducted weekly since 1990. Respondents
include mortgage bankers, commercial banks and thrifts. The base period and
value for all indexes is March 16, 1990=100. The figures for weekly mortgage
applications and interest rates are available in Haver's SURVEYW
database.
<table width="1871" class="centered" border="0" cellSpacing="0">
 <colgroup>
 <col>
 <col>
 <col>
 <col>
 <col>
 <col>
 <col>
 <col>
 </colgroup>
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="786">MBA Mortgage Applications (%,
 SA)</th>
 <th width="154">8/2/2019</th>
 <th width="154">7/26/2019</th>
 <th width="154">7/19/2019</th>
 <th width="154">Y/Y</th>
 <th width="155">2018</th>
 <th width="155">2017</th>
 <th width="155">2016</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" width="786">Total Market Index</td>
 <td align="center" width="154">5.3</td>
 <td align="center" width="154">-1.4</td>
 <td align="center" width="154">-1.9</td>
 <td align="center" width="154">46.5</td>
 <td align="center" width="155">-10.4</td>
 <td align="center" width="155">-17.8</td>
 <td align="center" width="155">15.6</td>
 </tr>
 <tr>
 <td class="firstcol" width="786">&nbsp;&nbsp;Purchase</td>
 <td align="center" width="154">-2.0</td>
 <td align="center" width="154">-3.0</td>
 <td align="center" width="154">-1.6</td>
 <td align="center" width="154">6.5</td>
 <td align="center" width="155">2.1</td>
 <td align="center" width="155">5.6</td>
 <td align="center" width="155">13.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="786">&nbsp;&nbsp;Refinancing</td>
 <td align="center" width="154">11.8</td>
 <td align="center" width="154">0.1</td>
 <td align="center" width="154">-2.1</td>
 <td align="center" width="154">115.9</td>
 <td align="center" width="155">-24.3</td>
 <td align="center" width="155">-34.0</td>
 <td align="center" width="155">17.3</td>
 </tr>
 <tr>
 <td class="firstcol" width="786">15-Year Mortgage Effective Interest Rate
 (%)</td>
 <td align="center" width="154">3.47</td>
 <td align="center" width="154">3.55</td>
 <td align="center" width="154">3.50</td>
 <td align="center" width="154">4.37 (Aug '18)</td>
 <td align="center" width="155">4.35</td>
 <td align="center" width="155">3.59</td>
 <td align="center" width="155">3.22</td>
 </tr>
 </tbody>
</table>
&nbsp;
&nbsp;
U.S. Home Affordability Improves as Mortgage Rates
Decline 
by <a href="http://www.haver.com/comment/Moeller.html">Tom
Moeller</a>&nbsp;&nbsp;August 7, 2019
The National Association of Realtors reported that its Fixed
Rate Mortgage Housing Affordability Index improved 1.3% to 151.9 during June (10.3%
y/y) after falling 1.6% in May. Despite the increase, affordability remained 28.8%
below the peak level during January 2013. 
The affordability increase occurred in June as principal
&amp; interest payments eased m/m to 16.5% of median income from 16.7% in May.
The percentage remained below its 18.2% peak in June 2018, but above the low of
11.6% in January 2013. Payments were pulled lower as the average mortgage
interest rate declined to 3.84% in June from 4.11% in May and was sharply below
December's high of 4.99%. Monthly principal &amp; interest payments fell
slightly to $1,082 per month. The median sales price of an existing home rose 4.5%
y/y to $288,900. Growth in median family income picked up to 3.5% y/y in June
from 3.4% during all of last year.
The Housing Affordability Index equals 100 when median family
income qualifies for an 80% mortgage on a median priced existing single-family
home. A rising index indicates more buyers can afford to enter the home-buying
market. Data on Home Affordability can be found in Haver's REALTOR
database. Interest rate data can be found in the WEEKLY and DAILY
databases.
<table width="1871" class="centered" border="0" cellSpacing="0">
 <thead>
 <tr>
 <th class="firstcol" width="850">Housing Affordability</th>
 <th width="145">Jun</th>
 <th width="145">May</th>
 <th width="145">Apr</th>
 <th width="145">Jun Y/Y</th>
 <th width="145">2018</th>
 <th width="146">2017</th>
 <th width="146">2016</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="850">Fixed Rate Housing Affordability Index</td>
 <td align="center" width="145">151.9</td>
 <td align="center" width="145">150.0</td>
 <td align="center" width="145">152.5</td>
 <td align="center" width="145">10.3%</td>
 <td align="center" width="145">147.8</td>
 <td align="center" width="146">159.1</td>
 <td align="center" width="146">167.7</td>
 </tr>
 <tr>
 <td class="firstcol" width="850">&nbsp; Payment as a Percent of Income</td>
 <td align="center" width="145">16.5</td>
 <td align="center" width="145">16.7</td>
 <td align="center" width="145">16.4</td>
 <td align="center" width="145">18.2</td>
 <td align="center" width="145">17.0</td>
 <td align="center" width="146">15.7</td>
 <td align="center" width="146">14.9</td>
 </tr>
 <tr>
 <td class="firstcol" width="850">&nbsp; Principal and Interest Payment</td>
 <td align="center" width="145">$1,082</td>
 <td align="center" width="145">$1,087</td>
 <td align="center" width="145">$1,065</td>
 <td align="center" width="145">-6.2%</td>
 <td align="center" width="145">$1,079</td>
 <td align="center" width="146">$967</td>
 <td align="center" width="146">$880</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="850">&nbsp; Median Sales Price (Existing
 Single Family Home)</td>
 <td align="center" width="145">$288,900</td>
 <td align="center" width="145">$280,900</td>
 <td align="center" width="145">$269,100</td>
 <td align="center" width="145">4.5%</td>
 <td align="center" width="145">$259,458</td>
 <td align="center" width="146">$247,508</td>
 <td align="center" width="146">$233,642</td>
 </tr>
 <tr>
 <td class="firstcol" width="850">&nbsp; Monthly Fixed Mortgage Rate&nbsp;&nbsp;</td>
 <td align="center" width="145">3.84%</td>
 <td align="center" width="145">4.11%</td>
 <td align="center" width="145">4.30%</td>
 <td align="center" width="145">4.74%</td>
 <td align="center" width="145">4.72%</td>
 <td align="center" width="146">4.20%</td>
 <td align="center" width="146">3.88%</td>
 </tr>
 <tr>
 <td class="firstcol" width="850">&nbsp; Median Family Income</td>
 <td align="center" width="145">$78,916</td>
 <td align="center" width="145">$78,238</td>
 <td align="center" width="145">$77,944</td>
 <td align="center" width="145">3.5%</td>
 <td align="center" width="145">$76,396</td>
 <td align="center" width="146">$73,891</td>
 <td align="center" width="146">$71,062</td>
 </tr>
 </tbody>
</table>

&nbsp;
U.S. Consumer Credit Usage Eases 
by <a href="http://www.haver.com/comment/Moeller.html">Tom
Moeller</a>&nbsp;&nbsp;August 7, 2019
Individuals pared back their borrowing needs in June, but it remains strong. Consumer
credit outstanding increased $14.58 billion (5.1% y/y) after rising $17.81
billion in May, revised from $17.71 billion. It was the smallest increase in
three months. A $16.5 billion gain had been expected by the Action Economics
Forecast Survey.
Nonrevolving credit usage grew $14.68 billion (5.6% y/y)
during June, the strongest increase in six months. Borrowing from the federal
government, which issues over 40% of nonrevolving credit, rose 7.3% y/y.
Depository institutions lending (25% of credit) gained an accelerated 6.1% y/y.
Meanwhile, finance company balances edged 0.7% higher y/y and credit union loans
strengthened 8.7% y/y. Each of these sectors provide roughly 15% of nonrevolving
credit.
Revolving consumer credit balances eased $0.08 billion (+3.9%
y/y) in June following two months of strong increase. Credit provided by
depository institutions, which makes up 90% of revolving balances, grew 4.9%
y/y. Borrowing from credit unions (6% of the issuance) increased 8.4% y/y.
These Federal Reserve Board figures are break-adjusted and
calculated by Haver Analytics. The breaks in the series in 2005, 2010 and 2015
are the result of the incorporation of the Census and Survey of Finance
Companies, as well as changes in the seasonal adjustment methodology.
The consumer credit data are available in Haver's USECON
database. The Action Economics figures are contained in the AS1REPNA
database.
<table width="1871" class="centered" border="0" cellSpacing="0">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="906">Consumer Credit
 Outstanding (M/M Chg, SA)</th>
 <th scope="col" width="137">Jun</th>
 <th scope="col" width="137">May</th>
 <th scope="col" width="137">Apr</th>
 <th scope="col" width="137">Jun y/y</th>
 <th scope="col" width="137">2018</th>
 <th scope="col" width="138">2017</th>
 <th scope="col" width="138">2016</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="906">Total</td>
 <td align="center" width="137">$14.58 bil.</td>
 <td align="center" width="137">$17.81 bil.</td>
 <td align="center" width="137">$17.50 bil.</td>
 <td align="center" width="137">5.1%</td>
 <td align="center" width="137">4.7%</td>
 <td align="center" width="138">5.0%</td>
 <td align="center" width="138">6.8%</td>
 </tr>
 <tr>
 <td class="firstcol" width="906">&nbsp; &nbsp;Nonrevolving</td>
 <td align="center" width="137">14.68</td>
 <td align="center" width="137">10.32</td>
 <td align="center" width="137">10.81</td>
 <td align="center" width="137">5.6</td>
 <td align="center" width="137">5.3</td>
 <td align="center" width="138">4.8</td>
 <td align="center" width="138">6.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="906">&nbsp; &nbsp;Revolving</td>
 <td align="center" width="137">-0.08</td>
 <td align="center" width="137">7.48</td>
 <td align="center" width="137">6.68</td>
 <td align="center" width="137">3.9</td>
 <td align="center" width="137">3.1</td>
 <td align="center" width="138">5.6</td>
 <td align="center" width="138">6.8</td>
 </tr>
 </tbody>
</table>

&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;


</body>

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The Mortgage Bankers Association reported that its total Mortgage Applications Index rose 5.3% (46.5% y/y) during the week ending August 2 following five consecutive weeks of decline. Applications to refinance a loan firmed 11.8% and [...]

U.S. Mortgage Loan Applications Increase as Interest Rates Decline

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<a href="/comment/190807n.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/190807n.png"></a>
 <a href="/comment/190807o.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/190807o.png"></a>

Individuals pared back their borrowing needs in June, but it remains strong.
Consumer credit outstanding increased $14.58 billion (5.1% y/y) after rising $17.81
billion in May, revised from $17.10 billion. It was the smallest increase in
three months. A $16.5 billion gain had been expected by the Action Economics
Forecast Survey.

Nonrevolving credit usage grew $14.68 billion (5.6% y/y)
during June, the strongest increase in six months. Borrowing from the federal
government, which issues over 40% of nonrevolving credit, rose 7.3% y/y.
Depository institutions lending (25% of credit) gained an accelerated 6.1% y/y.
Meanwhile, finance company balances edged 0.7% higher y/y and credit union loans
strengthened 8.7% y/y. Each of these sectors provide roughly 15% of nonrevolving credit.

Revolving consumer credit balances eased $0.08 billion (+3.9%
y/y) in June following two months of strong increase. Credit provided by
depository institutions, which makes up 90% of revolving balances, grew 4.9%
y/y. Borrowing from credit unions (6% of the issuance) increased 8.4% y/y.

These Federal Reserve Board figures are break-adjusted and
calculated by Haver Analytics. The breaks in the series in 2005, 2010 and 2015
are the result of the incorporation of the Census and Survey of Finance
Companies, as well as changes in the seasonal adjustment methodology.

The consumer credit data are available in Haver's USECON
database. The Action Economics figures are contained in the AS1REPNA database.

<a href="/comment/190807p.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/190807p.png"></a>
 <a href="/comment/190807q.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/190807q.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" >Consumer Credit
 Outstanding (M/M Chg, SA)</th>
 <th scope="col" >Jun</th>
 <th scope="col" >May</th>
 <th scope="col" >Apr</th>
 <th scope="col" >Jun y/y</th>
 <th scope="col" >2018</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Total</td>
 <td>$14.58 bil.</td>
 <td>$17.81 bil.</td>
 <td>$17.49 bil.</td>
 <td>5.1%</td>
 <td>4.7%</td>
 <td>5.0%</td>
 <td>6.8%</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; &nbsp;Nonrevolving</td>
 <td>14.68</td>
 <td>10.32</td>
 <td>10.81</td>
 <td>5.6</td>
 <td>5.3</td>
 <td>4.8</td>
 <td>6.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; &nbsp;Revolving</td>
 <td>-0.08</td>
 <td>7.48</td>
 <td>6.68</td>
 <td>3.9</td>
 <td>3.1</td>
 <td>5.6</td>
 <td>6.8</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

Individuals pared back their borrowing needs in June, but it remains strong. Consumer credit outstanding increased $14.58 billion (5.1% y/y) after rising $17.81 billion in May, revised from $17.10 billion. It was the smallest increase [...]

U.S. Consumer Credit Usage Eases

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<a href="/comment/190807e.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/190807e.png" align="left"></a>
In June, German manufacturing output declined on all fronts. Consumer goods output declined. Intermediate goods output declined. The output of capital goods declined. It makes you nostalgic for the good only days, like yesterday, when something good happened to orders and foreign orders surged. But the good news was short-lived. Output is staying on its declining ways with better than a 1% decline in each sector on the month. Orders probably will not report their good news of yesterday.

Sequential weakness 
Output is declining overall and for all three sectors on all horizons (three-months, six–months and 12-months) with only one exception. That is that over six months consumer goods output is rising but only at a 0.8% annualized rate. It is an exception in 'sign' only and it is still weak and declining on the other horizons. In fact, for IP overall, for intermediate goods and for capital goods, there is sequential weakening of growth rates as well. The declines get more severe over the most recent periods. IP is weak and it is weakening.

Europe is slowing…and so is everyone else 
Germany is slowing and Europe is slowing. Brexit is threatening. In Asia, three central banks that had been holding their 'fire' shot off rate cuts today. The central banks of New Zealand, Thailand, and India all cut rates today. India executed a 35bp rate cut. Australia reported out a sharp decline in its construction sector survey. The trade war is still raging and markets are reeling under the shock of a bullet they thought they had dodged. The ricochet has proved to be as damaging as a direct hit. In the end, China's decision to go back on its negotiating progress with the U.S. saying it could not provide the assurances it earlier had agreed to has proved to be a huge mistake that has enveloped the world in a much more hostile situation. It is China's own 'renegade' status that has caused the U.S. to seek so many safeguards in its negotiations and not just take China at its word. China is getting a lesson in what it really means to be a big player- instead of a bit –player- in the global economy. There are rights and there are responsibilities. China has only wanted the rights. Now it is learning about responsibility and rules of fair play.

The 'strong man' of Europe is on his knees 
Germany shows weakness across just about all of its manufacturing or industrial measures. It shows broad-based ongoing declines in the second quarter. Ireland, Portugal and Sweden, also early IP reporters, also show output weakness and declines or flat output over three months as well as 12 months.

Macroeconomic investment 
I look at this as a period of investment in the future. We are investing in the reeducation of China as to how it will have to behave in the future regardless how big it gets. There are standards for behavior and all nations must compete fairly. The U.S. is also laying down new ground rales for its trade relations with other developed nations that have been granted freer access to the U.S. market than U.S. firms have had access to their markets. The idea is to level the playing field for trade in general, not just regarding China.

The missing link 
But the missing piece is still that there is no mechanism for the oversight of exchange rates and arguably it is misaligned exchange rates that were the trigger for all these trade imbalances to arise and to persist. Foreign exchange rate misalignment was behind the trade war. Fixing that remains as an extremely important problem that must be addressed and so far has only been ignored.


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In June, German manufacturing output declined on all fronts. Consumer goods output declined. Intermediate goods output declined. The output of capital goods declined. It makes you nostalgic for the good only days, like yesterday, when [...]

German IP Drops Again

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 <a href="/comment/190807j.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/190807j.png"></a>
 <a href="/comment/190807k.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/190807k.png"></a>

The National Association of Realtors reported that its Fixed
Rate Mortgage Housing Affordability Index improved 1.3% to 151.9 during June (10.3%
y/y) after falling 1.6% in May. Despite the increase, affordability remained 28.8%
below the peak level during January 2013.

The affordability increase occurred in June as principal
&amp; interest payments eased m/m to 16.5% of median income from 16.7% in May.
The percentage remained below its 18.2% peak in June 2018, but above the low of
11.6% in January 2013. Payments were pulled lower as the average mortgage
interest rate declined to 3.84% in June from 4.11% in May and was sharply below
December's high of 4.99%. Monthly principal &amp; interest payments fell
slightly to $1,082 per month. The median sales price of an existing home rose 4.5%
y/y to $288,900. Growth in median family income picked up to 3.5% y/y in June
from 3.4% during all of last year.

The Housing Affordability Index equals 100 when median family
income qualifies for an 80% mortgage on a median priced existing single-family
home. A rising index indicates more buyers can afford to enter the home-buying
market. Data on Home Affordability can be found in Haver's REALTOR
database. Interest rate data can be found in the WEEKLY and DAILY databases.

<a href="/comment/190807l.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/190807l.png"></a>
 <a href="/comment/190807m.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/190807m.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" >Housing Affordability</th>
 <th>Jun</th>
 <th>May</th>
 <th>Apr</th>
 <th>Jun Y/Y</th>
 <th>2018</th>
 <th>2017</th>
 <th>2016</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Fixed Rate Housing Affordability
 Index</td>
 <td >151.9</td>
 <td >150.0</td>
 <td >152.5</td>
 <td >10.3%</td>
 <td >147.8</td>
 <td >159.1</td>
 <td >167.7</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Payment as a Percent of Income</td>
 <td >16.5</td>
 <td >16.7</td>
 <td >16.4</td>
 <td >18.2</td>
 <td >17.0</td>
 <td >15.7</td>
 <td >14.9</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Principal and Interest Payment</td>
 <td >$1,082</td>
 <td >$1,087</td>
 <td >$1,065</td>
 <td >-6.2%</td>
 <td >$1,079</td>
 <td >$967</td>
 <td >$880</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Median Sales Price (Existing
 Single Family Home)</td>
 <td >$288,900</td>
 <td >$280,900</td>
 <td >$269,100</td>
 <td >4.5%</td>
 <td >$259,458</td>
 <td >$247,508</td>
 <td >$233,642</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Monthly Fixed Mortgage Rate&nbsp;&nbsp;</td>
 <td >3.84%</td>
 <td >4.11%</td>
 <td >4.30%</td>
 <td >4.74%</td>
 <td >4.72%</td>
 <td >4.20%</td>
 <td >3.88%</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Median Family Income</td>
 <td >$78,916</td>
 <td >$78,238</td>
 <td >$77,944</td>
 <td >3.5%</td>
 <td >$76,396</td>
 <td >$73,891</td>
 <td >$71,062</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

The National Association of Realtors reported that its Fixed Rate Mortgage Housing Affordability Index improved 1.3% to 151.9 during June (10.3% y/y) after falling 1.6% in May. Despite the increase, affordability remained 28.8% below [...]

U.S. Home Affordability Improves as Mortgage Rates Decline

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: August 2019

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