Tom Moeller

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The
deteriorating job market and uncertain prospects for improvement, plus
over-leverage from past spending, has prompted an end to the growth in
consumer credit. The Federal Reserve reported late-yesterday that
consumer credit outstanding fell during July for the sixth straight
month and for the tenth month since last summer. Perhaps more
impressive, however, is the magnitude of the cutbacks. The $21.5B July
decline was the record for any one month and double-digit monthly
declines have prevailed all this year. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090909c.jpg" align="right" border="0" height="265" width="353">
On a percentage basis the 4.2%
y/y decline is a record.Usage of non-revolving credit (autos
&amp; other consumer durables), which accounts for nearly
two-thirds of the total, fell a record $15.4B after a $10.7B June drop.
Except for the mid-1970s, these declines were enough to pull the
retrenchment to near the record for a two-month period in dollar terms
as well as on a percentage basis. The 2.6% y/y decline is near the
record. Additionally weighing on overall credit has been the tight rein
on revolving credit usage. During July, revolving credit outstanding
fell $6.1B for the tenth consecutive monthly drop. In percentage terms
the decline pulled the outstanding total down a record 7.1%. Despite
these huge declines, there arguably is more to come. Consumers have
been successful in reducing credit outstanding as a percentage of
disposable income to 22.7% from its 2005 high of 24.4%. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090909d.jpg" align="right" border="0" height="265" width="353">
However, these
levels compare to the lows near 16% in the early-1990s. Now that the
"shop-till-you-drop" mantra has been diffused by the aging population
of the U.S., a return to some lower level of credit usage is likely.
These figures are the major input to the Fed's quarterly Flow of Funds
accounts for the household sector. Credit data are available in
Haver's USECON database.&nbsp; The Flow of
Funds data are in Haver's FFUNDS database. 
 
The latest Beige Book from the U.S. Federal
Reserve Board can be found <a href="http://www.federalreserve.gov/fomc/beigebook/2009/20090909/fullreport20090909.pdf">here</a>.
The Credit Crisis and Cycle-Proof Regulation
from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/review/09/09/part1/Rajan.pdf">
here.</a>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Consumer
Credit Outstanding (m/m Chg, SAAR)</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>$-21.5B</td>
<td>&nbsp;$-15.6B</td>
<td>-4.2%</td>
<td>1.6%</td>
<td>5.6%</td>
<td>4.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revolving</td>
<td>$-6.1B</td>
<td>$-4.9B</td>
<td>-7.0%</td>
<td>1.9%</td>
<td>7.8%</td>
<td>5.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-revolving</td>
<td>$-15.4B</td>
<td>$-10.7B</td>
<td>-2.6%</td>
<td>1.4%</td>
<td>4.4%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
</body></html>

The deteriorating job market and uncertain prospects for improvement, plus over-leverage from past spending, has prompted an end to the growth in consumer credit. The Federal Reserve reported late-yesterday that consumer credit [...]

Consumer Credit Outstanding Falls For An Unprecedented Sixth Straight Month

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090909a.jpg" align="left" border="0">
German consumer prices fall Yr/Yr! - The headlines may read
that German inflation on the HICP measure is down again Yr/Yr but don&#8217;t
bite on that headline or on the nuance that it might be deflation time
in Europe. Nothing is farther form the truth. First of all, Germany&#8217;s
headline inflation rose by 0.7% from July even as it fell from August
of one year ago. Next, the German domestic inflation gauge rose by 0.5%
in the month and is up by a narrow 0.1% Yr/Yr, failing to confirm any
downtrend. Moreover, German domestic core (ex food and energy)
inflation rose by 0.2% and is up by 1.1% Yr/Yr. Inflation in Germany is
tame the core pace is steady, and deflation is nowhere in sight. 
 

The cards are stacked against deflation - For those who might
harbor deflation dreams let&#8217;s note that we are looking at data from
August. In September the German HICP index will rise by 0.1 index
points in 2008. So any rise less than 0.1 index points (less than 0.1%)
in Sept 2009, will take the headline German HICP lower again. But then
from September 2008 to August of 2009 every single month&#8217;s headline
price index (the index LEVEL) is below that of September 2008. If
German deflation is going to set in, that will have to happen on the
strength of current prices falling month-by-month in the future not
just rising more slowly than they did one year ago. 
 

There is no real deflation trend - Headline HICP inflation is
up in eight of the last nine months in terms of its month-to-month
changes. There is no real evidence that deflation has taken any hold in
Germany. Indeed, the chart on German Yr/Yr headline and core HICP
inflation shows that the headline rate, while still negative, has
upward momentum building. 
 

Growth is taking root - With German industrial orders up
strongly and orders in Europe expanding and revivals in consumer
sentiment being experienced, it seems that Europe and Germany are on
their way back to better times. While the economies on the continent
may continue to fall short of being in full employment, there is no
evidence to suggest that prices have much downside risk. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col">German HICP</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo %</td>
<td colspan="3">Saar %</td>
<td>Yr/Yr</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Aug-09</td>
<td>Jul-09</td>
<td>Jun-09</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
</tr>
<tr class="grey2">
<td class="firstcol">HICP Total</td>
<td>0.7%</td>
<td>-0.5%</td>
<td>0.5%</td>
<td>2.6%</td>
<td>0.6%</td>
<td>-0.1%</td>
<td>3.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Core</td>
<td>#N/A</td>
<td>0.1%</td>
<td>0.2%</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>1.9%</td>
</tr>
<tr class="grey3">
<td colspan="8">CPI</td>
</tr>
<tr class="grey2">
<td class="firstcol">All</td>
<td>0.5%</td>
<td>-0.4%</td>
<td>0.4%</td>
<td>1.9%</td>
<td>0.6%</td>
<td>0.1%</td>
<td>3.1%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; CPIxF&amp;E</td>
<td>0.2%</td>
<td>0.3%</td>
<td>0.0%</td>
<td>1.9%</td>
<td>1.3%</td>
<td>1.1%</td>
<td>1.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Food</td>
<td>-0.4%</td>
<td>-0.4%</td>
<td>0.5%</td>
<td>-1.1%</td>
<td>-3.0%</td>
<td>-2.7%</td>
<td>7.0%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Alcohol</td>
<td>0.4%</td>
<td>-0.8%</td>
<td>0.5%</td>
<td>0.0%</td>
<td>-0.7%</td>
<td>-1.5%</td>
<td>4.2%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Clothing &amp; Shoes</td>
<td>1.9%</td>
<td>-1.5%</td>
<td>-0.3%</td>
<td>0.4%</td>
<td>-0.4%</td>
<td>1.5%</td>
<td>1.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Rent &amp;Util</td>
<td>0.3%</td>
<td>-0.4%</td>
<td>0.2%</td>
<td>0.4%</td>
<td>-0.7%</td>
<td>-0.2%</td>
<td>3.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Health Care</td>
<td>0.0%</td>
<td>0.1%</td>
<td>-0.1%</td>
<td>0.0%</td>
<td>1.6%</td>
<td>0.7%</td>
<td>1.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Transport</td>
<td>2.4%</td>
<td>-1.1%</td>
<td>0.8%</td>
<td>8.9%</td>
<td>3.6%</td>
<td>-2.0%</td>
<td>4.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Communication</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.1%</td>
<td>0.4%</td>
<td>-0.9%</td>
<td>-1.6%</td>
<td>-3.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Rec &amp;Culture</td>
<td>0.5%</td>
<td>0.5%</td>
<td>-0.1%</td>
<td>3.6%</td>
<td>2.4%</td>
<td>2.1%</td>
<td>0.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Education</td>
<td>-0.5%</td>
<td>0.8%</td>
<td>-0.2%</td>
<td>0.6%</td>
<td>-8.2%</td>
<td>-5.1%</td>
<td>3.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Restaurant &amp; Hotel</td>
<td>-0.1%</td>
<td>0.2%</td>
<td>-0.2%</td>
<td>-0.4%</td>
<td>0.4%</td>
<td>1.7%</td>
<td>2.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Other</td>
<td>0.4%</td>
<td>0.3%</td>
<td>0.1%</td>
<td>3.0%</td>
<td>2.6%</td>
<td>1.8%</td>
<td>1.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Diffusion</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>81.8%</td>
<td>54.5%</td>
<td>18.2%</td>
<td>--</td>
</tr>
<tr class="grey1">
<td class="firstcol">Type:</td>
<td colspan="3">Diffusion: Current Compared
to</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Yr-Ago</td>
<td>--</td>
</tr>
</tbody>
</table>
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German consumer prices fall Yr/Yr! - The headlines may read that German inflation on the HICP measure is down again Yr/Yr but don’t bite on that headline or on the nuance that it might be deflation time in Europe. Nothing is farther [...]

German Prices Fall Yr/Yr Again-But It's NOT Deflation

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090909a.jpg" align="left" border="0">
German consumer prices fall Yr/Yr! - The headlines may read
that German inflation on the HICP measure is down again Yr/Yr but don&#8217;t
bite on that headline or on the nuance that it might be deflation time
in Europe. Nothing is farther form the truth. First of all, Germany&#8217;s
headline inflation rose by 0.7% from July even as it fell from August
of one year ago. Next, the German domestic inflation gauge rose by 0.5%
in the month and is up by a narrow 0.1% Yr/Yr, failing to confirm any
downtrend. Moreover, German domestic core (ex food and energy)
inflation rose by 0.2% and is up by 1.1% Yr/Yr. Inflation in Germany is
tame the core pace is steady, and deflation is nowhere in sight. 
 

The cards are stacked against deflation - For those who might
harbor deflation dreams let&#8217;s note that we are looking at data from
August. In September the German HICP index will rise by 0.1 index
points in 2008. So any rise less than 0.1 index points (less than 0.1%)
in Sept 2009, will take the headline German HICP lower again. But then
from September 2008 to August of 2009 every single month&#8217;s headline
price index (the index LEVEL) is below that of September 2008. If
German deflation is going to set in, that will have to happen on the
strength of current prices falling month-by-month in the future not
just rising more slowly than they did one year ago. 
 

There is no real deflation trend - Headline HICP inflation is
up in eight of the last nine months in terms of its month-to-month
changes. There is no real evidence that deflation has taken any hold in
Germany. Indeed, the chart on German Yr/Yr headline and core HICP
inflation shows that the headline rate, while still negative, has
upward momentum building. 
 

Growth is taking root - With German industrial orders up
strongly and orders in Europe expanding and revivals in consumer
sentiment being experienced, it seems that Europe and Germany are on
their way back to better times. While the economies on the continent
may continue to fall short of being in full employment, there is no
evidence to suggest that prices have much downside risk. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">German HICP</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo %</td>
<td colspan="3">Saar %</td>
<td>Yr/Yr</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Aug-09</td>
<td>Jul-09</td>
<td>Jun-09</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
</tr>
<tr class="grey2">
<td class="firstcol">HICP Total</td>
<td>0.7%</td>
<td>-0.5%</td>
<td>0.5%</td>
<td>2.6%</td>
<td>0.6%</td>
<td>-0.1%</td>
<td>3.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Core</td>
<td>#N/A</td>
<td>0.1%</td>
<td>0.2%</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>1.9%</td>
</tr>
<tr class="grey3">
<td colspan="8">CPI</td>
</tr>
<tr class="grey2">
<td class="firstcol">All</td>
<td>0.5%</td>
<td>-0.4%</td>
<td>0.4%</td>
<td>1.9%</td>
<td>0.6%</td>
<td>0.1%</td>
<td>3.1%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; CPIxF&amp;E</td>
<td>0.2%</td>
<td>0.3%</td>
<td>0.0%</td>
<td>1.9%</td>
<td>1.3%</td>
<td>1.1%</td>
<td>1.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Food</td>
<td>-0.4%</td>
<td>-0.4%</td>
<td>0.5%</td>
<td>-1.1%</td>
<td>-3.0%</td>
<td>-2.7%</td>
<td>7.0%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Alcohol</td>
<td>0.4%</td>
<td>-0.8%</td>
<td>0.5%</td>
<td>0.0%</td>
<td>-0.7%</td>
<td>-1.5%</td>
<td>4.2%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Clothing &amp; Shoes</td>
<td>1.9%</td>
<td>-1.5%</td>
<td>-0.3%</td>
<td>0.4%</td>
<td>-0.4%</td>
<td>1.5%</td>
<td>1.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Rent &amp;Util</td>
<td>0.3%</td>
<td>-0.4%</td>
<td>0.2%</td>
<td>0.4%</td>
<td>-0.7%</td>
<td>-0.2%</td>
<td>3.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Health Care</td>
<td>0.0%</td>
<td>0.1%</td>
<td>-0.1%</td>
<td>0.0%</td>
<td>1.6%</td>
<td>0.7%</td>
<td>1.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Transport</td>
<td>2.4%</td>
<td>-1.1%</td>
<td>0.8%</td>
<td>8.9%</td>
<td>3.6%</td>
<td>-2.0%</td>
<td>4.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Communication</td>
<td>0.0%</td>
<td>0.0%</td>
<td>0.1%</td>
<td>0.4%</td>
<td>-0.9%</td>
<td>-1.6%</td>
<td>-3.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Rec &amp;Culture</td>
<td>0.5%</td>
<td>0.5%</td>
<td>-0.1%</td>
<td>3.6%</td>
<td>2.4%</td>
<td>2.1%</td>
<td>0.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Education</td>
<td>-0.5%</td>
<td>0.8%</td>
<td>-0.2%</td>
<td>0.6%</td>
<td>-8.2%</td>
<td>-5.1%</td>
<td>3.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Restaurant &amp; Hotel</td>
<td>-0.1%</td>
<td>0.2%</td>
<td>-0.2%</td>
<td>-0.4%</td>
<td>0.4%</td>
<td>1.7%</td>
<td>2.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Other</td>
<td>0.4%</td>
<td>0.3%</td>
<td>0.1%</td>
<td>3.0%</td>
<td>2.6%</td>
<td>1.8%</td>
<td>1.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Diffusion</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>81.8%</td>
<td>54.5%</td>
<td>18.2%</td>
<td>--</td>
</tr>
<tr class="grey1">
<td class="firstcol">Type:</td>
<td colspan="3">Diffusion: Current Compared
to</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Yr-Ago</td>
<td>--</td>
</tr>
</tbody>
</table>
 
Consumer Credit Outstanding Falls For An Unprecedented Sixth Straight
Month 
by <a href="/comment/Moeller.html">Tom
Moeller</a> September 09, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090909b.jpg" align="right" border="0" height="265" width="353">The
deteriorating job market and uncertain prospects for improvement, plus
over-leverage from past spending, has prompted an end to the growth in
consumer credit. The Federal Reserve reported late-yesterday that
consumer credit outstanding fell during July for the sixth straight
month and for the tenth month since last summer. Perhaps more
impressive, however, is the magnitude of the cutbacks. The $21.5B July
decline was the record for any one month and double-digit monthly
declines have prevailed all this year. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090909c.jpg" align="right" border="0" height="265" width="353">
On a percentage basis the 4.2%
y/y decline is a record.
Usage of non-revolving credit (autos
&amp; other consumer durables), which accounts for nearly
two-thirds of the total, fell a record $15.4B after a $10.7B June drop.
Except for the mid-1970s, these declines were enough to pull the
retrenchment to near the record for a two-month period in dollar terms
as well as on a percentage basis. The 2.6% y/y decline is near the
record. Additionally weighing on overall credit has been the tight rein
on revolving credit usage. During July, revolving credit outstanding
fell $6.1B for the tenth consecutive monthly drop. In percentage terms
the decline pulled the outstanding total down a record 7.1%.
 Despite
these huge declines, there arguably is more to come. Consumers have
been successful in reducing credit outstanding as a percentage of
disposable income to 22.7% from its 2005 high of 24.4%. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090909d.jpg" align="right" border="0" height="265" width="353">
However, these
levels compare to the lows near 16% in the early-1990s. Now that the
"shop-till-you-drop" mantra has been diffused by the aging population
of the U.S., a return to some lower level of credit usage is likely.
These figures are the major input to the Fed's quarterly Flow
of Funds
accounts for the household sector.
 Credit data are available in
Haver's USECON database.&nbsp; The Flow of
Funds data are in Haver's FFUNDS database. 
 

The latest Beige Book from the U.S. Federal
Reserve Board can be found <a href="http://www.federalreserve.gov/fomc/beigebook/2009/20090909/fullreport20090909.pdf">here</a>.
The Credit Crisis and Cycle-Proof Regulation
from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/review/09/09/part1/Rajan.pdf">
here.</a>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Consumer
Credit Outstanding (m/m Chg, SAAR)</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>$-21.5B</td>
<td>&nbsp;$-15.6B</td>
<td>-4.2%</td>
<td>1.6%</td>
<td>5.6%</td>
<td>4.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revolving</td>
<td>$-6.1B</td>
<td>$-4.9B</td>
<td>-7.0%</td>
<td>1.9%</td>
<td>7.8%</td>
<td>5.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-revolving</td>
<td>$-15.4B</td>
<td>$-10.7B</td>
<td>-2.6%</td>
<td>1.4%</td>
<td>4.4%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>

</body></html>

German Prices Fall Yr/Yr Again-ButIt's NOT Deflation

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090908d.jpg" align="left" border="0" height="265" width="353">
Data on German industrial production were released today.
Production in July fell 0.9% from June, contrary to expectations of a
continued rise. Production of electricity and other utilities was off
4.0%, construction, 2.4%, mining and quarrying, 1.6% and manufacturing
0.5%. In terms of the kind of goods produced, production of consumer
goods was flat, that of investment goods, down 3.2%, and energy
production, down 3.9%. The only positive sector was the production of
intermediate goods, which rose 1.8% suggesting that the inventory
liquidation evident in the second quarter GDP report may be abating or
even reversing. The first chart shows the production of these goods.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090908e.jpg" align="right" border="0" height="265" width="353">
Data on manufacturing new orders were released yesterday and
were generally more positive than the production data, but still a
little cautionary in some of the details. The total volume of
manufacturing new orders increased 3.5% in July, The rise was due
entirely to a big increase of 10.3% in domestic new orders. Foreign
orders actually fell 2.3%. Orders for intermediate goods increased 5.2%
in the month of July while orders for investment goods were up 3.2%;
however, orders for consumer goods fell 1.5%. The second chart show the
orders for these three types of goods.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">GERMANY</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"> INDUSTRIAL PRODUCTION&nbsp;
(2005=100)</td>
<td>Jul 09</td>
<td>Jun&nbsp; 09</td>
<td>Jul 08</td>
<td>M/M %&nbsp;</td>
<td>Y/Y %</td>
<td>2008&nbsp;</td>
<td>2007 </td>
<td> 2006 </td>
</tr>
<tr>
<td class="firstcol">&nbsp;Electricity and other
utilities</td>
<td>92.4</td>
<td>96.2</td>
<td>97.6</td>
<td>-3.95</td>
<td>-5.23</td>
<td>96.3</td>
<td>98.0</td>
<td>101.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Construction</td>
<td>104.2</td>
<td>106.7</td>
<td>101.8</td>
<td>-2.34</td>
<td>2.36</td>
<td>108.2</td>
<td>108.9</td>
<td>105.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Mining and Quarrying</td>
<td>114.2</td>
<td>116.1</td>
<td>107.2</td>
<td>-1.64</td>
<td>6.43</td>
<td>110.4</td>
<td>12407</td>
<td>95.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Manufacturing</td>
<td>91.7</td>
<td>95.2</td>
<td>113.6</td>
<td>-0.54</td>
<td>-19.28</td>
<td>113.1</td>
<td>112.7</td>
<td>105.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Intermediate Goods</td>
<td>94.1</td>
<td>92.7</td>
<td>116.5</td>
<td>1.83</td>
<td>-18.97</td>
<td>114.0</td>
<td>114.6</td>
<td>107.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Investment Goods</td>
<td>87.9</td>
<td>90.8</td>
<td>116.2</td>
<td>-3.19</td>
<td>-24.35</td>
<td>116.9</td>
<td>114.8</td>
<td>105.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Consumer Goods</td>
<td>96.5</td>
<td>96.5</td>
<td>102.9</td>
<td>0.00</td>
<td>-6.22</td>
<td>104.3</td>
<td>106.3</td>
<td>102.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Energy Goods</td>
<td>90.5</td>
<td>94.2</td>
<td>96.1</td>
<td>-3.93</td>
<td>-5.83</td>
<td>95.7</td>
<td>98.3</td>
<td>100.9</td>
</tr>
<tr class="odd">
<td colspan="9" class="firstcol">MANUFACTURING NEW
ORDERS&nbsp;&nbsp; (2005=100)</td>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>90.7</td>
<td>87.6</td>
<td>113.3</td>
<td>3.54</td>
<td>-19.95</td>
<td>111.3</td>
<td>119.7</td>
<td>108.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Domestic</td>
<td>95.5</td>
<td>86.6</td>
<td>110.2</td>
<td>10.25</td>
<td>-13.34</td>
<td>108.3</td>
<td>114.8</td>
<td>106.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Foreign</td>
<td>86.5</td>
<td>88.5</td>
<td>116.0</td>
<td>-2.26</td>
<td>-25.43</td>
<td>113.8</td>
<td>124.0</td>
<td>110.8</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>97.0</td>
<td>9202</td>
<td>117.5</td>
<td>5.21</td>
<td>-17.45</td>
<td>113.1</td>
<td>118.7</td>
<td>110.2</td>
</tr>
<tr>
<td class="firstcol">Investment Goods</td>
<td>86.8</td>
<td>84.1</td>
<td>111.6</td>
<td>3.21</td>
<td>-22.22</td>
<td>110.9</td>
<td>121.7</td>
<td>108.8</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods</td>
<td>89.9</td>
<td>91.3</td>
<td>105.7</td>
<td>-1.53</td>
<td>-14.95</td>
<td>105.5</td>
<td>110.7</td>
<td>104.2</td>
</tr>
</tbody>
</table>
</body></html>

Data on German industrial production were released today. Production in July fell 0.9% from June, contrary to expectations of a continued rise. Production of electricity and other utilities was off 4.0%, construction, 2.4%, mining and [...]

German Industrial Production Down: New Orders Up In July

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090908a.jpg">
Small business&#39; optimism improved last month as the severe economic weakness of early this year passed. The National Federation of Independent Business (NFIB) indicated, however, that the improvement was not enough to generate an increase in hiring intentions. Their small business optimism index rose to 88.6 during August after the slight July decline. The index remained improved from the lows of this past winter but were down from last year.During the last ten years, there has been an 85% correlation between the level of the NFIB index and the two-quarter change in real GDP.
The improvement in business&#39; sentiment has done little, however, to improve hiring intentions. The percentage of firms with one or more job openings slipped to just 8% during August, the lowest level since 1982. During the last ten years there has been a 74% correlation between the NFIB employment percentage and the six-month change in nonfarm payrolls. Still, the outlook has brightened slightly. The percentage of firms planning to raise employment rose to a net-zero from negative figures as low as -10 in March.<img align="right" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090908b.jpg">
Perhaps this negativism will improve if the economy turns around as expected. The percentage of small businesses expecting the economy to improve bounced off its lows to 10 and that was back near the spring high. The percentage expecting credit conditions to ease, however, remained in its recent low range while the percentage reporting that now is a good time to expand business held stable in its modestly positive range of recent months.
As is normally the case, improvement in firms&#39; capital spending intentions will wait for the economy to strengthen before they rise. During the next 3-6 months, plans for capital spending fell to a new series&#39; low. This weakness in investment continues to reflect poor profits. Forty-percent of firms are reporting lower earnings this quarter versus last, though that is improved from the net -47% in January.
The largest, single most important problems seen by business were poor sales (32%), taxes (18%, lower the recent 22% high), government requirements (11%), insurance cost &amp; availability (9%), competition from large businesses (8%) and inflation (5%).
The percentage of firms actually raising prices (-19) slipped and remained near the record low. During the last ten years there has been a 69% correlation between the six-month change in the producer price index and the level of the NFIB price index.The percentage of firms planning to raise prices improved to a net 8 from the March low of 0. Worker compensation also remained depressed near the series&#39; lows.<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090908c.jpg">
About 24 million small businesses exist in the United States. Small business creates 80% of all new jobs in America and the NFIB figures can be found in Haver&#39;s SURVEYS database.
Why Don&#39;t Lenders Renegotiate More Home Mortgages? Redefaults, Self-Cures, and Securitization from the Federal Reserve Bank of New England is available <a href="http://www.bos.frb.org/economic/ppdp/2009/ppdp0904.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S7/@S7.HTM">Nat&#39;l Federation of Independent Business</a></th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Small Business Optimism Index (SA, 1986=100)</td>
<td>88.6</td>
<td>86.5</td>
<td>-2.7%</td>
<td>89.8</td>
<td>96.7</td>
<td>98.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Percent of Firms With One or More Job Openings</td>
<td>8</td>
<td>9</td>
<td>15</td>
<td>18</td>
<td>24</td>
<td>25</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Percent of Firms Raising Avg. Selling Pric1es (Net)</td>
<td>-19</td>
<td>-19</td>
<td>26</td>
<td>17</td>
<td>15</td>
<td>20</td>
</tr>
</tbody>
</table>
</body>
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Small business' optimism improved last month as the severe economic weakness of early this year passed. The National Federation of Independent Business (NFIB) indicated, however, that the improvement was not enough to generate an [...]

U.S. Small Business Optimism Improves Slightly But Hiring Plans Drift To 27-Year Low

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090908a.jpg" align="left" border="0">
Small business' optimism improved last month as the severe
economic weakness of early this year passed. The National Federation of
Independent Business (NFIB) indicated, however, that the improvement
was not enough to generate an increase in hiring intentions. Their
small business optimism index rose to 88.6 during August after the
slight July decline. The index remained improved from the lows of this
past winter but were down from last year.During the last ten years,
there has been an 85% correlation between the level of the NFIB index
and the two-quarter change in real GDP.
The improvement in business' sentiment has done little,
however, to improve hiring intentions. The percentage of firms with one
or more job openings slipped to just 8% during August, the lowest level
since 1982. During the last ten years there has been a 74% correlation
between the NFIB employment percentage and the six-month change in
nonfarm payrolls. Still, the outlook has brightened slightly. The
percentage of firms planning to raise employment rose to a net-zero
from negative figures as low as -10 in March.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090908b.jpg" align="right" border="0">
Perhaps this negativism will improve if the economy turns
around as expected. The percentage of small businesses expecting the
economy to improve bounced off its lows to 10 and that was back near
the spring high. The percentage expecting credit conditions to ease,
however, remained in its recent low range while the percentage
reporting that now is a good time to expand business held stable in its
modestly positive range of recent months.
As is normally the case, improvement in firms' capital
spending intentions will wait for the economy to strengthen before they
rise. During the next 3-6 months, plans for capital spending fell to a
new series' low. This weakness in investment continues to reflect poor
profits. Forty-percent of firms are reporting lower earnings this
quarter versus last, though that is improved from the net -47% in
January.
The largest, single most important problems seen by business
were poor sales (32%), taxes (18%, lower the recent 22% high),
government requirements (11%), insurance cost &amp; availability
(9%), competition from large businesses (8%) and inflation (5%).
The percentage of firms actually
raising prices (-19) slipped and remained near the record low.
During the last ten years there has been a 69% correlation between the
six-month change in the producer price index and the level of the NFIB
price index.The percentage of firms planning
to raise prices improved to a net 8 from the March low of 0. Worker
compensation also remained depressed near the series' lows.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090908c.jpg" align="left" border="0">
About 24 million small businesses exist in the United States.
Small business creates 80% of all new jobs in America and the NFIB
figures can be found in Haver's SURVEYS database.
Why Don't Lenders Renegotiate More Home Mortgages?
Redefaults, Self-Cures, and Securitization from the Federal
Reserve Bank of New England is available <a href="http://www.bos.frb.org/economic/ppdp/2009/ppdp0904.pdf">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S7/@S7.HTM">Nat'l
Federation of Independent Business</a></th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Small Business Optimism Index
(SA, 1986=100)</td>
<td>88.6</td>
<td>86.5</td>
<td>-2.7%</td>
<td>89.8</td>
<td>96.7</td>
<td>98.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Percent of Firms
With One or More Job Openings</td>
<td>8</td>
<td>9</td>
<td>15</td>
<td>18</td>
<td>24</td>
<td>25</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Percent of Firms
Raising Avg. Selling Pric1es (Net)</td>
<td>-19</td>
<td>-19</td>
<td>26</td>
<td>17</td>
<td>15</td>
<td>20</td>
</tr>
</tbody>
</table>
 
German Industrial Production Down: New Orders Up In July 
by <a href="/comment/Curley.html">Louise
Curley</a> September 08, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090908d.jpg" align="left" border="0" height="265" width="353">
Data on German industrial production were released today.
Production in July fell 0.9% from June, contrary to expectations of a
continued rise. Production of electricity and other utilities was off
4.0%, construction, 2.4%, mining and quarrying, 1.6% and manufacturing
0.5%. In terms of the kind of goods produced, production of consumer
goods was flat, that of investment goods, down 3.2%, and energy
production, down 3.9%. The only positive sector was the production of
intermediate goods, which rose 1.8% suggesting that the inventory
liquidation evident in the second quarter GDP report may be abating or
even reversing. The first chart shows the production of these goods.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090908e.jpg" align="right" border="0" height="265" width="353">
Data on manufacturing new orders were released yesterday and
were generally more positive than the production data, but still a
little cautionary in some of the details. The total volume of
manufacturing new orders increased 3.5% in July, The rise was due
entirely to a big increase of 10.3% in domestic new orders. Foreign
orders actually fell 2.3%. Orders for intermediate goods increased 5.2%
in the month of July while orders for investment goods were up 3.2%;
however, orders for consumer goods fell 1.5%. The second chart show the
orders for these three types of goods.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">GERMANY</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"> INDUSTRIAL PRODUCTION&nbsp;
(2005=100)</td>
<td>Jul 09</td>
<td>Jun&nbsp; 09</td>
<td>Jul 08</td>
<td>M/M %&nbsp;</td>
<td>Y/Y %</td>
<td>2008&nbsp;</td>
<td>2007 </td>
<td> 2006 </td>
</tr>
<tr>
<td class="firstcol">&nbsp;Electricity and other
utilities</td>
<td>92.4</td>
<td>96.2</td>
<td>97.6</td>
<td>-3.95</td>
<td>-5.23</td>
<td>96.3</td>
<td>98.0</td>
<td>101.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Construction</td>
<td>104.2</td>
<td>106.7</td>
<td>101.8</td>
<td>-2.34</td>
<td>2.36</td>
<td>108.2</td>
<td>108.9</td>
<td>105.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Mining and Quarrying</td>
<td>114.2</td>
<td>116.1</td>
<td>107.2</td>
<td>-1.64</td>
<td>6.43</td>
<td>110.4</td>
<td>12407</td>
<td>95.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Manufacturing</td>
<td>91.7</td>
<td>95.2</td>
<td>113.6</td>
<td>-0.54</td>
<td>-19.28</td>
<td>113.1</td>
<td>112.7</td>
<td>105.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Intermediate Goods</td>
<td>94.1</td>
<td>92.7</td>
<td>116.5</td>
<td>1.83</td>
<td>-18.97</td>
<td>114.0</td>
<td>114.6</td>
<td>107.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Investment Goods</td>
<td>87.9</td>
<td>90.8</td>
<td>116.2</td>
<td>-3.19</td>
<td>-24.35</td>
<td>116.9</td>
<td>114.8</td>
<td>105.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Consumer Goods</td>
<td>96.5</td>
<td>96.5</td>
<td>102.9</td>
<td>0.00</td>
<td>-6.22</td>
<td>104.3</td>
<td>106.3</td>
<td>102.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Energy Goods</td>
<td>90.5</td>
<td>94.2</td>
<td>96.1</td>
<td>-3.93</td>
<td>-5.83</td>
<td>95.7</td>
<td>98.3</td>
<td>100.9</td>
</tr>
<tr class="odd">
<td colspan="9" class="firstcol">MANUFACTURING
NEW
ORDERS&nbsp;&nbsp; (2005=100)</td>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>90.7</td>
<td>87.6</td>
<td>113.3</td>
<td>3.54</td>
<td>-19.95</td>
<td>111.3</td>
<td>119.7</td>
<td>108.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Domestic</td>
<td>95.5</td>
<td>86.6</td>
<td>110.2</td>
<td>10.25</td>
<td>-13.34</td>
<td>108.3</td>
<td>114.8</td>
<td>106.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Foreign</td>
<td>86.5</td>
<td>88.5</td>
<td>116.0</td>
<td>-2.26</td>
<td>-25.43</td>
<td>113.8</td>
<td>124.0</td>
<td>110.8</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>97.0</td>
<td>9202</td>
<td>117.5</td>
<td>5.21</td>
<td>-17.45</td>
<td>113.1</td>
<td>118.7</td>
<td>110.2</td>
</tr>
<tr>
<td class="firstcol">Investment Goods</td>
<td>86.8</td>
<td>84.1</td>
<td>111.6</td>
<td>3.21</td>
<td>-22.22</td>
<td>110.9</td>
<td>121.7</td>
<td>108.8</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods</td>
<td>89.9</td>
<td>91.3</td>
<td>105.7</td>
<td>-1.53</td>
<td>-14.95</td>
<td>105.5</td>
<td>110.7</td>
<td>104.2</td>
</tr>
</tbody>
</table>
</body></html>

U.S. Small Business OptimismImproves Slightly But Hiring Plans Drift To 27-Year Low

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090904d.jpg" align="left" border="0" height="265" width="353">
Both Italy&#8217;s exports and imports are beginning to turn their
plunging growth rates higher. The Yr/Yr trend has begun to turn (see
chart) for both exports and imports. The balance did swing to surplus a
month ago but it still shows a reduced deficit in the current month
compared to earlier months. Over three months the export rate of
decline has been cut to an annual rate of about -8% compared to -18%
for imports. 
 

For exports transportation equipment, capital goods and other
goods are still showing outsized Yr/Yr declines of -20% or more. Food
exports and consumer goods exports are dropping at a slower pace of
less than 10%. 
 

Imports are showing Yr/Yr declines of 16% for capital goods
and 44% for other goods. Transport equipment imports are declining at
an 8.6% pace compared to foods and beverages with a drop of 0.7% and
consumer goods imports that are advancing Yr/Yr. services imports are
declining rapidly Yr/Yr as well. 
 

The more rapid drop in imports cuts the flow of an item that
diminishes growth since imports siphon off domestic demand to foreign
producers. Italy&#8217;s exports in contrast have held up better and are
maintaining their levels better than imports. In this way trade is
helping to prop up Italian GDP. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">Italy's
Trade Trends</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="3">m/mo % monthly rate</td>
<td colspan="4">Period Specified saar</td>
</tr>
<tr class="grey3">
<td class="firstcol">Seasonally Adjusted</td>
<td>Jun-09</td>
<td>May-09</td>
<td>Apr-09</td>
<td>3-MO</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr-Ago</td>
</tr>
<tr class="grey2">
<td class="firstcol">Current Account Bal</td>
<td>&#8364;&#8364; (2,378)</td>
<td>&#8364;&#8364; 470</td>
<td>&#8364;&#8364; (2,959)</td>
<td>&#8364;&#8364; (1,622)</td>
<td>&#8364;&#8364; (2,919)</td>
<td>&#8364;&#8364; (3,907)</td>
<td>&#8364;&#8364; (3,700)</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Goods Balance</td>
<td>&#8364;&#8364; 939</td>
<td>&#8364;&#8364; 1,662</td>
<td>&#8364;&#8364; 1,096</td>
<td>&#8364;&#8364; 1,232</td>
<td>&#8364;&#8364; 544</td>
<td>&#8364;&#8364; 1</td>
<td>&#8364;&#8364; 267</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Exports</td>
<td>-2.6%</td>
<td>-4.4%</td>
<td>5.1%</td>
<td>-8.2%</td>
<td>-30.9%</td>
<td>-23.7%</td>
<td>-4.4%</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Imports</td>
<td>0.5%</td>
<td>-7.0%</td>
<td>1.7%</td>
<td>-18.3%</td>
<td>-36.2%</td>
<td>-27.6%</td>
<td>0.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Services Balance</td>
<td>&#8364;&#8364; (788)</td>
<td>&#8364;&#8364; (429)</td>
<td>&#8364;&#8364; (1,061)</td>
<td>&#8364;&#8364; (759)</td>
<td>&#8364;&#8364; (822)</td>
<td>&#8364;&#8364; (814)</td>
<td>&#8364;&#8364; (488)</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Exports</td>
<td>3.6%</td>
<td>-5.5%</td>
<td>0.6%</td>
<td>-6.0%</td>
<td>-22.9%</td>
<td>-14.8%</td>
<td>5.7%</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Imports</td>
<td>9.3%</td>
<td>-13.7%</td>
<td>0.5%</td>
<td>-19.3%</td>
<td>-12.2%</td>
<td>-8.2%</td>
<td>-1.3%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Not Seasonally Adjusted</td>
<td colspan="7">All Yr/Yr</td>
</tr>
<tr class="grey2">
<td class="firstcol">Exports</td>
<td>Jun-09</td>
<td>&nbsp;</td>
<td>Jun-08</td>
<td>&nbsp;</td>
<td>Jun-07</td>
<td>&nbsp;</td>
<td>Jun-06</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Food&amp;Bev</td>
<td>-1.8%</td>
<td>&nbsp;</td>
<td>3.9%</td>
<td>&nbsp;</td>
<td>5.9%</td>
<td>&nbsp;</td>
<td>10.5%</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Capital Gds</td>
<td>-21.9%</td>
<td>&nbsp;</td>
<td>-3.7%</td>
<td>&nbsp;</td>
<td>15.1%</td>
<td>&nbsp;</td>
<td>10.8%</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Transport</td>
<td>-29.6%</td>
<td>&nbsp;</td>
<td>2.3%</td>
<td>&nbsp;</td>
<td>11.4%</td>
<td>&nbsp;</td>
<td>8.4%</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Consumer Gds</td>
<td>-9.4%</td>
<td>&nbsp;</td>
<td>-8.8%</td>
<td>&nbsp;</td>
<td>8.8%</td>
<td>&nbsp;</td>
<td>7.3%</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Other Gds</td>
<td>-32.0%</td>
<td>&nbsp;</td>
<td>-10.2%</td>
<td>&nbsp;</td>
<td>13.7%</td>
<td>&nbsp;</td>
<td>17.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Imports</td>
<td>Jun-09</td>
<td>&nbsp;</td>
<td>Jun-08</td>
<td>&nbsp;</td>
<td>Jun-07</td>
<td>&nbsp;</td>
<td>Jun-06</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Food&amp;Bev</td>
<td>-0.7%</td>
<td>&nbsp;</td>
<td>-1.9%</td>
<td>&nbsp;</td>
<td>3.3%</td>
<td>&nbsp;</td>
<td>7.2%</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Capital Gds</td>
<td>-16.1%</td>
<td>&nbsp;</td>
<td>-10.9%</td>
<td>&nbsp;</td>
<td>7.3%</td>
<td>&nbsp;</td>
<td>1.7%</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Transport</td>
<td>-8.6%</td>
<td>&nbsp;</td>
<td>-15.3%</td>
<td>&nbsp;</td>
<td>11.0%</td>
<td>&nbsp;</td>
<td>-0.5%</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Consumer Gds</td>
<td>1.3%</td>
<td>&nbsp;</td>
<td>-3.3%</td>
<td>&nbsp;</td>
<td>1.7%</td>
<td>&nbsp;</td>
<td>12.7%</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Other Gds</td>
<td>-44.9%</td>
<td>&nbsp;</td>
<td>18.0%</td>
<td>&nbsp;</td>
<td>0.0%</td>
<td>&nbsp;</td>
<td>45.5%</td>
</tr>
<tr class="grey1">
<td colspan="8" class="firstcol">Balances in Mlns of euros</td>
</tr>
</tbody>
</table>
</body></html>

Both Italy’s exports and imports are beginning to turn their plunging growth rates higher. The Yr/Yr trend has begun to turn (see chart) for both exports and imports. The balance did swing to surplus a month ago but it still shows a [...]

Italy's Trade Trends Turn

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090904a.jpg" width="353">
The August jobs figures from the Bureau of Labor Statistics gave conflicting signals. Suggesting some improvement in the labor market was payroll employment which declined the least of any month in a year, although the declines during the prior two months were revised deeper. Working the other way were the household survey figures. The unemployment rate, at 9.7%, jumped to its highest level since 1982. Together, the data hardly suggest that the recession is over, though downward momentum seems to have eased.
The length of the average workweek was stable m/m and q/q at 33.1. So far in the third quarter, aggregate hours worked (employment times hours) have fallen at a 2.6% annual rate after a 7.8% decline during 2Q.
Nonfarm payrolls fell 216,000 during August. That was less than the expected 228,000 decline however declines during the prior two months were revised deeper by a collective 49,000. The latest decline was the least since August of last year. Nevertheless, so far during this recession, employment has fallen by a total of 6.9 million, the record by far for a 20-month period. In percentage terms jobs are down 5.0% since the 2007 peak, also a record. Most recently, the payroll decline moderated to an average 318,000 over the last three months versus a peak three-month rate of 701,000 this past winter.
The jump in the unemployment rate to 9.7% from 9.4% compared with expectations for a smaller rise to 9.5%. The rate&#39;s cycle low of 4.4% occurred in October 2006. This level of the official unemployment rate pales, however, in comparison to the rate which includes &quot;marginally attached workers&quot; and those who are working part-time for economic reasons. It rose to 16.8%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090904b.jpg" width="353">
The increase in the overall jobless rate was due to a 392,000 (-3.9% y/y) fall in employment. That was easier than the worst monthly declines of this past winter but in-line with those of the last several months. It was accompanied by a modest 73,000 (-0.2% y/y) increase in the labor force after two months of sharp decline. The latest increase also saw a slight 38,000 decline in the number of &quot;discouraged workers&quot; after four months of increase. Also from the household survey, the median duration of unemployment slipped m/m to 15.4 weeks but that still was up from 8.3 weeks one year ago. The ranks of the long-term unemployed, however, rose slightly to 4.988 million.
From the payroll survey, the moderation in the rate of job loss continued to stem from smaller declines in both factory sector and private service payrolls. Manufacturing sector jobs fell 63,000 last month after a 43,000 July decline. These shortfalls compare to an average 161,000 monthly decline during the prior nine months. Employment in the private service sector dropped 62,000 last month (-3.2% y/y) after a 126,000 July drop. Here again the declines are easier than 289,000 average during the prior nine months. Finally, job cuts in the construction sector also have moderated, but to a lesser extent. Employment here fell a reduced 65,000 last month after a 73,000 July decline and an average 100,000 during the nine months ended June.
In the government sector employment continued down as budgets shrank with lower tax revenues. Government jobs fell 18,000 (-0.3% y/y) after a downwardly-revised 28,000 July drop. Jobs with the federal government fell 5,000 (+1.9% y/y) for the third decline in the last four months. The number of state gov&#39;t jobs fell 5,000 (-1.1% y/y) and local gov&#39;t payrolls fell 8,000 (-0.5% y/y for the third consecutive down month. Should the federal government bail out the states? Lessons from past recessions from the Federal Reserve Bank of Chicago can be found <a href="http://www.chicagofed.org/publications/fedletter/cflaugust2009_265.pdf">here</a>.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090904c.jpg" width="353">
Average hourly earnings rose 0.3% during August for the second consecutive month. The 0.5% three-month growth rate is up off its low but compares to roughly 4% growth from 2006 to 2008. Earnings in the factory sector rose 0.2% and the three-month growth rate rose to 0.5%. Growth durable sector&#39;s earnings rose to 0.7%. Earnings in the private service sector recovered to 0.4% during the last three months.
The figures referenced above are available in Haver&#39;s USECON database. Additional detail can be found in the LABOR and in the EMPL databases.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Employment: 000s</th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>-216</td>
<td>-276</td>
<td>-463</td>
<td>-4.3%</td>
<td>-0.4%</td>
<td>1.1%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Previous</td>
<td>--</td>
<td>-247</td>
<td>-443</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-63</td>
<td>-43</td>
<td>-123</td>
<td>-12.1%</td>
<td>-3.3%</td>
<td>-2.0%</td>
<td>-0.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>-65</td>
<td>-73</td>
<td>-79</td>
<td>-15.1%</td>
<td>-5.5%</td>
<td>-0.8%</td>
<td>4.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Service Producing</td>
<td>-80</td>
<td>-154</td>
<td>-251</td>
<td>-2.6%</td>
<td>0.2%</td>
<td>1.6%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Average Weekly Hours</td>
<td>33.1</td>
<td>33.1</td>
<td>33.0</td>
<td>33.7 (Aug. &#39;08)</td>
<td>33.6</td>
<td>33.8</td>
<td>33.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Hourly Earnings</td>
<td>0.3%</td>
<td>0.3%</td>
<td>0.1%</td>
<td>2.6%</td>
<td>3.8%</td>
<td>4.0%</td>
<td>3.9%</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate</td>
<td>9.7%</td>
<td>9.4%</td>
<td>9.5%</td>
<td>6.2% (Aug. &#39;08)</td>
<td>5.8%</td>
<td>4.6%</td>
<td>4.6%</td>
</tr>
</tbody>
</table>
</body>
</html>

The August jobs figures from the Bureau of Labor Statistics gave conflicting signals. Suggesting some improvement in the labor market was payroll employment which declined the least of any month in a year, although the declines during [...]

U.S. Payroll Decline Eases But The Unemployment Rate Jumps To 26-Year High

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

Even with expected tariff-induced increases in inflation, BCFF forecasters look for a more aggressive round of monetary easing

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

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250820B5.jpg

Mortgage applications fell 1.4% (+22.7% y/y) in the week ending August 15 after rising 10.9% in the prior week, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications for purchase loans edged 0.1% higher (22.7% y/y) last week, following a 1.4% gain in the prior week. Applications to refinance a home loan fell 3.1% (+22.8% y/y) last week, following a 23.0% rise in the week of August 8.

The effective interest rate on a 30-year fixed-rate loan held steady at 6.86% in the week ending August 15 after falling from 6.94% in the first week of August. It was the lowest rate since the first week of March, down from a high of 7.28% in the second week of January. The rate on 15-year fixed-rate mortgages rose to 6.13% in the latest week from 6.09% in the week of August 8. Conversely, the rate on 30-year Jumbo loans decreased to 6.82% last week from 6.86% one week earlier. The rate on a 5-year ARM rose to 6.24% in the week of August 15 and reversed the prior week’s decline to 6.05%.

The share of applications for refinancing an existing loan eased to 46.1% of total applications in the week ending August 15 after rising to 46.5% in the prior week. The share hit a low of 34.6% in the fourth week of May. The adjustable-rate mortgage (ARM) share of activity declined to 8.60% in the latest week after rising to 9.60% in the week of August 8.

The average size of a mortgage loan fell 2.7% (+4.1% y/y) to $387,800 in the week of August 15, following a 4.5% rise in the prior week. The average size of a purchase loan edged 0.5% higher (0.6% y/y) to $429,000 in the latest week after falling 1.2% in the week ending August 8. The average size of a loan to refinance a mortgage fell 7.3% (+9.5% y/y) to $339,800 last week, after rising 18.3% to $366,400 in the prior week. It was increased from $277,900 in the last week of May.

The Mortgage Bankers Association Survey covers 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 **SURVEYS** database.

**Tracking Labor Market Stress** from the Federal Reserve Bank of San Francisco is available [here](https://www.frbsf.org/research-and-insights/publications/economic-letter/2025/08/tracking-labor-market-stress/).

- Purchase applications edge higher while loan refinancing declines.
- Effective fixed-interest rate on 30-year loans remains at four-month low.
- Average loan size declines.

U.S. Mortgage Applications Decline Last Week as Interest Rates Steady

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Total housing starts increased 5.2% (12.9% y/y) in July to 1.428 million (SAAR) after rising 5.9% in June to 1.358 million, revised from 1.321 million, and falling 8.3% to 1.282 in May, revised from 1.263 million, according to the U.S. Census Bureau. Total starts in July remained 22.5% below their peak of 1.820 million units reached in April 2022. The Action Economics Forecast Survey expected 1.30 million starts in July.

Single-family starts in July rose 2.8% (7.8% y/y) to 939,000 after falling 3.8% in June to 913,000, revised from 883,000, and edging 0.1% higher in May to 949,000, revised from 926,000. Multi-family starts surged 9.9% (24.1% y/y) in July to 489,000 after strengthening 33.6% in June to 445,000, revised from 438,000, and declining 26.0% to a little-revised 333,000 units in May.

Housing starts in the Midwest surged 33.3% (40.8% y/y) in July to 252,000 after rising 3.3% in June. Adding to this increase, starts in the South rose 19.2% (29.5% y/y) to 833,000 after holding steady in June. Offsetting these gains, starts in the West declined 27.5% (-14.4% y/y) to 232,000 after rising 8.1% in June. Housing starts in the Northeast declined 26.0% (-35.5% y/y) to 111,000 after increasing 44.2% in June.

Building permits declined 2.8% (-5.7% y/y) last month to 1.354 million after easing slightly in June. It was the fourth consecutive monthly decline. Single-family permits rose 0.5% (-7.9% y/y) in July to 870,000 after weakening for four straight months. Multi-family permits fell 8.2% (-1.4% y/y) to 484,000 after rising 6.5% in June. Building permits in the Northeast rose 25.2% (-7.9% y/y), and they edged up 0.5% (12.9% y/y) in the Midwest. In the South, building permits declined 4.6% (-6.1% y/y) while in the West, building permits weakened 10.1% (-15.2% y/y).

The housing starts and building permits figures can be found in Haver’s **USECON** database. The expectations figure is contained in the **AS1REPNA** database.

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- Increase brings starts to five-month high.
- Multi-family starts surge while single-family starts rise moderately.
- Building permits decline is led by multi-family.

U.S. Housing Starts Strengthen Unexpectedly in July

Winnie Tapasanun

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Online retail sales, formally known as retail e-commerce sales, rose a seasonally adjusted 1.4% q/q in Q2'25 to $304.2 billion following a 0.1% downtick in Q1’25 (0.0% initially) and a 1.7% increase in Q4’24 (unrevised), according to the U.S. Census Bureau. The Q2’25 reading was the 14th q/q gain in 15 quarters. The year-on-year rate of increase decelerated to 5.3% in Q2'25, the lowest since Q2'22, from 6.0% Q1’25. The latest y/y number was lower than 7.1% in Q2'24; thus, having remained significantly below a high of 45.3% in Q1'21 and a peak of 53.5% in Q2’20.

The Q2'25 rise in retail e-commerce sales compared to a 0.4% q/q gain (3.9% y/y) to $1,865.4 billion in total retail sales during the same period. This overall measure of retail sales excludes food services and restaurant sales. Retail e-commerce sales accounted for 16.3% of total retail sales in Q2'25 following 16.1% in Q1'25, registering the highest rate since Q2'20; the percentage was 16.1% in 2024, 15.3% in 2023, and 7.1% in 2015.

Details of the retail e-commerce sales data by sector are not seasonally adjusted. Sales of nonstore retailers, which accounted for 58.5% of total e-commerce sales, rose 5.3% (1.8% y/y) in Q2'25, the fourth q/q rise in five quarters, following a 20.7% decrease in Q1'25. Building materials & garden equipment sales recovered 34.7% (9.9% y/y), the largest q/q gain since Q2'20, reversing a 16.2% drop. Health & personal care sales rebounded 12.8% (1.7% y/y), the second q/q increase in three quarters, after having plummeted 40.9%.

Clothing accessory store sales rose 9.2% (-1.3% y/y) in Q2'25 after a 38.3% plunge in Q1'25. General merchandise store sales increased 8.4% (17.2% y/y) following a 20.9% drop. Sales of furniture & home furnishings rose 5.1% (4.4% y/y) after a 15.6% fall. Sporting goods, hobby, musical instrument & book sales grew 4.3% (6.7% y/y) following a 31.3% slump. These series registered the fourth q/q gain in five quarters.

Sales of motor vehicles & parts advanced 8.3% (15.9% y/y) in Q2'25, the largest of six straight q/q increases, on top of a 1.0% rise in Q1'25. Miscellaneous sales including gasoline stations recovered 2.6% (2.3% y/y), up for the second quarter in three, following a 2.3% decline. Food & beverage sales excluding food services rose 0.8% (15.5% y/y), the third q/q rise in four quarters, after a 0.1% easing.

E-commerce sales are goods and services ordered over an internet, mobile device (M-commerce), extranet, Electronic Data Interchange (EDI) network, electronic mail, or other comparable online system. Payment may or may not be made online and sometimes sale & price are negotiated. Total sales estimates are adjusted for seasonal variation, but not for price changes. They are also adjusted for trading-day differences and moving holidays.

Retail e-commerce sales data can be found in Haver's **USECON** database.

- Sales +1.4%, the 14th q/q rise in 15 qtrs.; +5.3% y/y, the lowest since Q2'22.
- Online share of total retail sales up to 16.3%, the highest since Q2'20.
- Nonstore sales rebound, up for the fourth quarter in five.
- Widespread gain in online sales led by bldg. materials & garden equipt. (+34.7% q/q).

U.S. Retail E-Commerce Sales Rise in Q2'25

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Retail gasoline prices for all grades, on average, inched up to $3.25 per gallon (-7.1% y/y) last week after falling to $3.24 one week earlier. Prices remained above their low of $3.13 in the week of December 9. The recent high was $3.79 in the week ending April 22, 2024. Their all-time high of $5.11 occurred in the week ending June 13, 2022. The retail price for on-highway diesel fuel fell to $3.71 per gallon (+0.7% y/y) in the week of August 18 after easing to $3.75 in the prior week. The latest diesel price stood well below a high of $4.63 in the week ending September 18, 2023 and a peak of $5.81 in the week ending June 20, 2022.

The price of West Texas Intermediate crude oil declined to $63.31 per barrel (-19.7% y/y) in the week ended August 15 from $64.71 in the prior week. The drop left prices at the lowest level since the first week of June. Prices remained above a $59.04 low in the second week of May. The cost of crude oil peaked at $120.46 in the week of June 10, 2022. Yesterday, the price was $63.96 per barrel. The price of European Brent crude fell to $67.17 per barrel (-18.6% y/y) in the week of August 15, after falling to $68.17 in the prior week. Prices remained below a recent high of $95.61 in the week of September 29, 2023 and below a peak of $127.40 in June 2022. The price was $68.18 per gallon yesterday.

Natural gas prices slipped to an average $2.94/mmbtu (+38.0% y/y) in the week ended August 15, after falling to an average $2.99/mmbtu in the prior week. Prices remained well above a low of $1.40/mmbtu in the week of March 15, 2024 but below their peak of $9.56 in the week of August 26, 2022. Yesterday, the price was $2.96 per mmbtu.

Gasoline demand declined 1.5% y/y in the four weeks ending August 8, following a 2.2% y/y decline in the prior four weeks. Demand for all petroleum products rose 2.9% y/y in the four weeks ending August 8, after a 1.6% y/y increase in the previous four-week period. Crude oil input to refineries rose 4.2% y/y in the four weeks ending August 8, after a 2.9% y/y gain in the prior four weeks.

Gasoline inventories rose 1.8% y/y in the week ending August 8 after a 0.9% y/y in the prior week. Residual fuel oil inventories fell 25.7% y/y in the week of August 8, after a 25.8% y/y fall in the prior week. Crude oil inventories rose 2.8% y/y in the week of August 8 after a 2.7% y/y rise in the previous week.

Measured in days’ supply, gasoline inventories stood at 25.0 days in the week of August 8, unchnged from the prior week. The recent low was 22.9 days in the week of November 8, 2024. The supply of crude oil held at 25.0 days in the week of August 8, and remained below a high of 31.9 days in the week of March 3, 2023.

These data are reported by the Energy Information Administration of the U.S. Department of Energy. The price and supply/demand data can be found in Haver’s **WEEKLY** & **USENERGY** database.

U.S. Energy Prices Are Mixed in Latest Week

Tian Yong Woon

This week, we examine recent developments in US-China trade and assess the broader implications of US trade actions for the BRIC bloc—Brazil, Russia, India, and China. Last week, the US and China extended their tariff truce by 90 days, a move welcomed by equity markets (chart 1). While this pause eased fears of renewed trade tensions, it remains temporary and fragile, with no durable resolution in sight.

As for China’s economy, July data disappointed: retail sales, industrial production, and fixed-asset investment all missed expectations (chart 2). This may signal that tariffs are beginning to bite, as earlier growth drivers—such as some front-loading of imports and one-off consumption boosts like China’s durable-goods subsidy—are fading (chart 3). Newer measures, including loan-interest subsidies, may provide some interim relief. Meanwhile, the property sector remains under heavy strain, with further price and investment declines evidenced in July (chart 4).

In the broader regional context, US trade measures may inadvertently push trading partners closer together, complicating Washington’s bilateral strategy. The BRIC bloc shows tentative signs of greater alignment, though this has yet to appear in data for trade flows (chart 5). China and India, however, are warming toward one another: Foreign Minister Wang Yi’s visit to India this week—focused on the Himalayan border among other issues—suggests an improving dialogue. Separately, discussions at the national level to restart direct flights between the two countries also signal a thaw. Full economic integration remains distant, but the scale of both economies suggests significant potential if relations continue to improve (chart 6).

**The US-China tariff truce**
Last week, the US and China announced a 90-day extension to their mutual tariff truce. Although largely expected, the move still generated further equity market gains (see chart 1). This contrasts sharply with worst-case scenarios earlier this year, when tensions peaked and Washington imposed sweeping tariffs of 145% on Chinese imports — levels that would have severely disrupted global trade and growth if sustained. Instead, both sides agreed to keep additional tariffs at 10% until November 10, allowing more time to pursue a durable trade deal. Still, this is merely a pause rather than progress. 

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**The China docket**
In the meantime, China’s latest monthly data releases were watched closely and offered valid reasons for caution despite earlier signs of resilience. More specifically, retail sales, industrial production, and fixed-asset investment (chart 2) all missed expectations, suggesting US tariff and non-tariff measures are beginning to weigh on growth alongside persistent domestic headwinds. Also, China’s unemployment rate inched higher, while property prices continued to decline. If such weakness persists, calls for additional policy support will grow, even though debt-fuelled measures risk merely trading today’s problems for tomorrow’s.

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**China retail sales**
Diving deeper into the individual releases, chart 3 highlights the gradual slowdown in China’s retail sales in recent months, with growth easing to 3.7% y/y in July. By product category, the deceleration reflects weaker automobile sales — amid authorities’ clampdown on carmaker price wars — and softer furniture sales, suggesting a one-off boost from the government’s durable-goods subsidy programme may now be fading. Clearer confirmation could come if sales growth of other subsidized goods, such as home appliances, also begin to weaken. Still, retail spending — and broader consumption activity — may gain fresh support from China’s new loan-interest subsidy programme, which covers both consumer borrowing and eligible service-sector business loans.

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**China property prices and investment**
Moving next to China’s beleaguered property market, the sector has shown no meaningful recovery for several years. Prices remain on a downtrend, and repeated investor attempts to call a bottom have proven futile. The latest data offered no relief: property prices continued to decline, while investment in the sector fell 12% y/y year-to-date in July (chart 4). That said, the pace of price declines has slowed sharply compared with last year. Even so, what was once a major engine of China’s growth continues to shrink into a shadow of its former self.

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**The BRIC bloc**
While recent trade measures appear favourable for the US, lowering partner tariffs and modestly raising Washington’s own rates, significant risks remain. Such moves could push US trading partners closer together, undermining the administration’s strategy of leveraging bilateral negotiations. One potential area of alignment is the BRIC bloc — Brazil, Russia, India, and China. Although hard data have yet to show major shifts (see chart 5), recent headlines suggest small steps toward deeper cooperation. That said, Russia remains constrained by heavy US sanctions and pressure, as reflected in trade flows with its closest partners.

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Digging a little further, China and India have recently begun to ease their decades-long frosty ties, partly in response to this year’s US trade tensions. A key sign of improving relations is China’s Foreign Minister Wang Yi’s high-profile visit to India from Monday to Wednesday this week. The visit focused on, among other topics, the disputed Himalayan border — which, if resolved, would mark a major step in restoring bilateral relations — and trade across the border. Other indicators of a warming relationship include ongoing talks to restart direct flights, suspended during the pandemic. Given the sheer size of their populations and economies, as shown in chart 6, a fully developed China-India economic partnership could unlock immense potential. However, the path to meaningful economic integration remains at an early stage, with numerous hurdles still to navigate.

Economy in Brief: September 2009

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