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[Matlab](http://matlab.com) by The MathWorks lets you access, visualize, and analyze historic time-series data to identify patterns or uncover complex relationships. From within a single environment you can:

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MATLAB

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[SASEHAVR](http://support.sas.com/documentation/cdl/en/etsug/67525/HTML/default/viewer.htm#etsug_sasehavr_gettingstarted01.htm) is a seamless interface between Haver and SAS data processing that enables SAS users to read economic and financial time series data that reside in a Haver Analytics DLX (Data Link Express) database. [SASEHAVR](http://support.sas.com/documentation/cdl/en/etsug/67525/HTML/default/viewer.htm#etsug_sasehavr_gettingstarted01.htm) requires both SAS/ETS and Base SAS Software.

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[RATS (Regression Analysis of Time Series) Econometric Software](https://estima.com) by Estima is a leading econometrics and time-series analysis software package. It provides ability to do linear and non-linear least squares, forecasting, SUR and ARIMA models and in addition, supports advanced techniques such as GMM, ARCH and GARCH models, state space models, and more.

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Estimating, evaluating, and forecasting ARIMA models

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Teaches econometrics and forecasting at the University of Colorado Denver. He has over 15 years of econometric experience in both the private and public sector.

Daniel L. Jerrett, Ph.D.

Abdel M. Zellou, Ph.D.

Bootcamp and Econometric Tools 1 & 2

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Haver partners with SmartMacro Labs to offer a two week immersive online course introducing participants to the power of the Python programming language. This applied hands-on training develops statistical economics skills with a concentration on economics and finance.

Gain proficiency in building modern time-series models in Python through real-world applications. Designed for professionals in both the public and private sector, the course does not require prior experience, assuming only that participants have a basic understanding of regression and statistical concepts.

Proficiency working in Jupyter notebooks and the Python environment

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Remote Training: Applied Time Series in Python

Consumers' short-term US inflation expectations still elevated while longer-term expectations of financial markets are steady

Tom Moeller

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The Conference Board's September Index of Consumer Confidence declined 3.7% (-5.0% y/y) to 94.2 during September. The decline came after weakening 0.9% in August, revised from down 1.3%, and increasing an unrevised 3.7% in July. A level of 95.5 had been expected in the Action Economics Forecast Survey. The index remained 16.5% below its peak last November.

The Present Situation index weakened 5.3% (+1.3% y/y) during September after easing 0.3% in August, revised from -1.2%, and slipping 0.2% in July. The Expectations Index declined 1.7% (-11.4% y/y) during September for the second consecutive month, after rising 8.7% in July.

The percentage of respondents assessing business conditions as “good” fell to 19.5% in September after rising to 21.8% in August. It was the weakest reading since April. The percentage assessing conditions as “bad” rose to 15.4% from 14.6% in August. The appraisal of weak labor market conditions continued as 26.9% described “jobs plentiful” versus 30.2% in August. That was down from a high of 56.7% in March of 2022. Jobs were viewed as “hard to get” by a steady 19.1% of respondents this month, but that was increased from a low of 10.5% in February 2023. The labor market differential calculated by Haver Analytics (the percentage of consumers who think jobs are plentiful minus the percentage who believe that jobs are currently hard to get) fell to 7.8% compared to 11.1% in August and 11.0% in July. This measure remained below a high of 47.1% in March 2022. It has a 60% correlation with the unemployment rate over the last ten years.

Expectations for business conditions deteriorated this month as a lessened 18.7% of respondents expect conditions to improve over the next six months, after 20.2% did so in August, while a lessened 22.3% expect them to worsen, after rising to 23.5% in August. On employment, 16.1% expect the number of jobs to increase over the next six months versus 17.9% in August. The percentage expecting the number of jobs to decline in the next six months eased to 25.6% after rising to 25.9% in August. A lessened 17.6% of respondents expect income to increase in six months, down from 18.8% in August. That remained off a high of 20.7% in November and compares to a lessened 11.7% who expect income to decrease, down from 13.3% in August.

The expected rate of price inflation over the next twelve months fell to 5.8% in September and reversed the August increase to 6.1%. These remain up from a low of 5.0% last November. Fifty-two percent of respondents expect interest rates to rise this year, up from a 45.5% November 2024 low. The percentage of respondents expecting equity prices to increase over the next twelve months held steady at 48.9%, the most since January. The percentage expecting a decline in stock prices fell to 27.6% after rising to 30.2% in August.

The percentage of respondents planning to buy a home rose to 6.6% this month after rising slightly to 5.8% in August. Plans to purchase an automobile eased to 11.3% this month and reversed the August increase to 11.7%. These readings remain up from a low of 10.6% in April.

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

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- Confidence level is lowest since April.
- Present situation & expectation readings decline.
- Inflation expectations reverse August increase.

U.S. Consumer Confidence Falls Sharply in September; Inflation Expectations Ease

Sandy Batten

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Job openings edged up 19,000 (+0.3% m/m, -5.5% y/y) to 7.227 million in August from an upwardly revised 7.208 million in July (previously 7.181 million), according to the Job Openings and Labor Turnover Survey. This was the first monthly increase in three months. The job openings rate was unchanged at 4.3%, tying its lowest value since June 2020 and well below its record of 7.4% reached in March 2022. This rate is calculated as the ratio of job openings to total nonfarm employment plus openings. In August, the number of unemployed rose even more did the number of openings. So, the number of openings was less than the number unemployed for the second consecutive month. Apart from July and August, the last time openings exceeded unemployment was April 2021.

Private sector openings rose 56,000 (+0.9% m/m, -2.7% y/y) to 6.457 million in August, the first monthly increase in three months, versus 6.401 million in July. The private openings rate was unchanged at 4.5%. Openings in construction fell 115K in August, the first decline in three months. Manufacturing openings declined 29K, and professional and business services opening slid 39K, the third decline in the past four months. By contrast, leisure/hospitality openings increased 97K, their first increase in three months. Openings in private education and healthcare rebounded, rising 94K in August after having declined 342K in June and July. Government openings fell 37K in August, their sixth decline in the past seven months. The August decline reflected a 62K decline in federal government openings.

Total hiring fell 114,000 (-2.2% m/m, -2.0% y/y) to 5.126 million in August from 5.240 million in July. This was the fourth consecutive monthly decline and its lowest reading in over a year. The total hiring rate edged down to 3.2%, tying its lowest reading since April 2020 and well below rates that existed prior to the pandemic. Private sector hiring fell 113K (-2.3% m/m) in August to 4.805 million. This was also its fourth consecutive monthly decline to its lowest level in more than a year. The weakness was concentrated in a 91K decline in trade and transport hiring. Of the major sectors, only construction (+22K) and manufacturing (+4K) posted hiring gains in August. There were no hires in either the federal or state and local governments in August.

Total separations fell 110,000 (-2.1% m/m, -1.1% y/y) to 5.111 million in August from 5.221 million in July. The total separation rate slipped to 3.2%, tying its lowest reading since 2013. Private separations fell 126K (-2.6% m/m) to 4.781 million from 4.907 million in July, while government sector separations increased 16K, the first monthly rise in three months. Total quits declined 75K, the fourth monthly decline in five months. Private sector quits fell 76K, also the fourth monthly decline in the past five months. Quits are generally voluntary separations initiated by the employee. Therefore, the quits rate can serve as a measure of workers’ willingness or ability to leave jobs. The persistent decline in quits recently indicates that the labor market is becoming less dynamic and that general conditions are softening. In contrast, layoffs and discharges are involuntary separations initiated by the employer. Layoffs and discharges fell 62K to 1.725 million in August, the third decline in the past four months. Falling quits indicate that there is more difficulty finding a new job, while falling layoffs indicate that firms are less willing to layoff existing workers.

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

- Job openings edged up 0.3% m/m in August after declining in both June and July.
- Openings were less than the number of unemployed for the second consecutive month.
- Hiring declined 2.2% m/m in August, the fourth consecutive monthly decline.
- Total separations fell 2.1% m/m, reflecting declines in both quits and layoffs.

U.S. JOLTS—Openings Edged Up, Hiring and Layoffs Fell in August

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U.S. house prices slipped 0.1% (+2.3% y/y) during July after unrevised declines of 0.2% in June and 0.1% in May. The annual increase is well below its recent high of 7.1% in February 2024, according to the Federal Housing Finance Agency (FHFA) House Price Index.

House price changes were mixed across the nine Census divisions of the country. Prices in the Middle Atlantic region declined 1.2% (+5.1% y/y) and 0.8% (+2.4% y/y) in the East South Central region. In the Mountain region, prices were off 0.2% (+1.0% y/y) while in the West North Central region, prices also weakened 0.2% (+3.8% y/y) following three consecutive monthly increases. In New England house prices slipped 0.1% (+3.9% y/y). 

In the South Atlantic region, house prices were unchanged in July and rose 0.8% y/y. House prices in the East North Central region improved 0.3% (4.1% y/y) after two monthly declines, while in the West South Central region, prices rose 0.2% (1.7% y/y), up for the third straight month. In the Pacific region, house prices also were 0.2% higher both m/m and y/y, following five straight months of decline.

The FHFA house price index is a weighted purchase-only index that measures average price changes in repeat sales of the same property. An associated quarterly index includes refinancing the same kind of properties. The indexes are based on transactions involving conforming conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac. Only mortgage transactions on single-family properties are included. The FHFA data are available in Haver’s **USECON** database.

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- Prices edge lower for fourth straight month.
- Year-to-year increase is lowest since 2012.
- Monthly price changes are uneven amongst regions.

U.S. FHFA House Prices Ease in July

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The Pending Home Sales Index from the National Association of Realtors (NAR) strengthened 4.0% (3.8% y/y) during August to 74.7 after falling 0.3% in July, revised from -0.4%, and falling an unrevised 0.8% in June. The index remained 40.3% below its most recent peak of 125.1 in October 2021. The index is a forward-looking measure of home sales based on contract signings.

The drop in pending home sales occurred as the average rate on a 30-year mortgage fell to 6.59% in August after declining to 6.72% in July. It has weakened to an average 6.35% so far in September. These rates are down from a high of 7.04% in the third week of January, but remain well above a low of 5.22% in August 2022 and more than double a record-low 2.68% in December 2020.

Pending home sales were mixed last month in the four major regions of the country. Sales in the Midwest rose 8.7% (6.7% y/y) after falling 3.8% in July. In the South, sales improved 3.1% (4.2% y/y) after holding steady in July. Sales in the West increased 5.0% (0.2% y/y) after a 4.1% July rise. Working lower, pending home sales in the Northeast declined 1.1% (+2.6% y/y) after easing 0.5% in July.

The pending home sales index measures sales at the time the contract for the purchase of an existing home is signed, similar to the Census Bureau's new home sales data. In contrast, the National Association of Realtors' existing home sales data are recorded when the sale is closed, which is usually a couple of months after the sales contract has been signed. In developing the pending home sales index, the NAR found that the level of monthly sales contract activity leads the level of closed existing home sales by about two months.

The series dates back to 2001 and are available in Haver's **PREALTOR** database. Weekly mortgage interest rates from the Mortgage Bankers Association can be found in the **WEEKLY** database.

**Economic Outlook** by Federal Reserve Chair Jerome H. Powell can be found [here](https://www.federalreserve.gov/newsevents/speech/powell20250923a.htm).

- Sales rise to highest level since March.
- Increase follows declines in three of prior four months.
- Regional changes are mixed.

U.S. Pending Home Sales Strengthen in August as Mortgage Rates Fall

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Texas manufacturing activity weakened this month, according to the Texas Manufacturing Outlook Survey conducted by the Federal Reserve Bank of Dallas. The General Business Activity index declined to -8.7 during September from -1.8 in August, and remained below a high of +14.1 in January. A lessened 17.9% of respondents reported improved business activity in September while a higher 26.6% reported a worsening. The Future Business Activity index fell to 8.4 this month, its lowest level since May. The data were collected September 16-24 from 72 manufacturing firms.

The production index declined to 5.2 this month from 15.3 in August. A lessened 25.9% of respondents reported increasing production while an increased 20.7% reported lower. The employment index in September declined to -3.4 from +8.8 as a lessened 12.7% of respondents reported higher employment for the month and a higher 16.1% reported lower. The hours worked measure weakened to 3.4 from 15.0. The shipments reading declined to 6.7 after surging to a three-year high of 14.2 in August. The growth rate of new orders weakened to -6.4 after strengthening to 2.6 in August. The unfilled orders measure weakened to -8.4 from -5.1. The capital expenditures index remained positive at 13.3 after surging to 14.6 in August.

Inflation indicators eased this month. The index for prices received for finished goods declined to 11.17 after rising to 15.1 in August. It was below a June high of 26.1. A lessened 20.5% of respondents reported raising prices this month while a little-changed 8.8% reported lower prices. The index of prices paid for raw materials eased to 43.4 from 43.7, but remain well above a low of 1.0 in June 2023. The wages & benefits index of 15.9 this month compared to 15.4 in August and has been trending lower since a high of 55.0 in March 2022.

The Future Manufacturing Activity Index declined to 8.4 in September from 24.8 in August. It was the lowest reading since May. It reflected a smaller expected gain in production & shipments. Expected new orders growth continued to strengthen to its highest level since January. Expected employment declined sharply to its lowest level since June of last year while expected hours worked also declined. The future wages & benefits reading fell sharply after surging in each of the prior three months. The future capital spending reading eased to its lowest level in six months.

Each index is calculated by subtracting the percentage reporting a decrease in activity from the percentage reporting an increase. When all firms report rising activity, an index will register 100. An index will register -100 when all firms report a decrease. An index will be zero when the number of firms reporting an increase equals the number reporting a decrease. Data for the Texas Manufacturing Outlook, conducted by the Federal Reserve Bank of Dallas, can be found in Haver's **SURVEYS** database.

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- Current Conditions Survey is negative for seventh month in last eight.
- Production, new orders, shipments & employment weaken.
- Prices ease but wages & benefits improve.

Texas Manufacturing Activity Index Turns Negative & Expectations Weaken in September

Robert Brusca

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The European Monetary Union indexes for September showed slight uptick to 95.5 from 95.3 in August. However, at 95.5 the September reading was still below the July reading of 95.8, but it was above the June reading of 94.2. EU sentiment indexes have been moving sideways since the end of 2022 without much trend.

All the components except for construction rank and roughly their respective 20th to 30th percentiles of their historic queues of data. The exception is construction, where the sector has a 74.6 percentile standing and retailing with a nearly 46-percentile standing, leaving it marginally below its median. However, the industrial sector ranking is at its 26-percentile, services rank at their 27th percentile and consumer confidence is at its 20th percentile. On the whole that’s a collection of quite weak readings: one firm, one marginal and three weak.

Compared to January 2020 before COVID struck, all the sectors and the aggregate index are lower by about 8 to 10 points over the five-and-one-half-year period. The exception is the industrial sector, which is lower by only five points.

National sentiment monthly showed eight declines in September, compared to seven declines in August and only five month-to-month declines in July.

The sector rankings for large country industrial sentiment shows they're all ranking below 50% except for Spain. Spain also has the only above 50-percentiel standing for consumer confidence at a strong 96.5 percentile. Retailing has two of the large economies ranking above 50%: Italy and Spain. No service sector readings for the large economies are even close to neutral. Construction, however, ranks above the 50% mark in three of four large economics and in France, where it falls short and has a ranking that is still at its 45th percentile. Weakness is broadly shared across EMU sectors for the large and small alike.

The services sector weakness in the EMU is quite important because it's a job producing sector. It’s no coincidence that consumer confidence and services in the EMU have the lowest standings. The outlook for the monetary union is going to depend a lot on how the forces of inflation develop as well as how the war in Ukraine develops. In the meantime, U.S. budget politics could rile markets, and we are told that China is trying to dazzle the Trump Administration with a trade deal if it backs off support of Taiwan independence. Both of these are potentially global market moving events that are in flux.

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Europe

EU Indexes Firm Slightly on the Month for EMU

Tian Yong Woon

This week, we examine the recent flurry of global trade developments and their potential impact on Asia. The previous multi-week tariff calm proved short-lived after US President Trump announced 100% tariffs on branded and patented pharmaceutical products last week. A point of relief lies in the exemption of economies such as the EU and Japan, owing to prior agreements on lower sectoral rates. On the flip side, other major exporters to the US, including India and Singapore, now face increased uncertainty (chart 1). Adding to the pressure, Trump also introduced a $100,000 fee on new H-1B visa applications, disproportionately affecting Indian nationals and workers in IT-related sectors, though visa issuance had already been declining in recent months, partly due to seasonality (chart 2).

In India, the central bank meets this week and is likely to pause again on rate cuts, as concerns over rupee weakness (chart 3) take precedence despite lingering growth risks from US tariffs and other headwinds. In China, the government announced it will no longer seek Special and Differential Treatment (SDT) in future WTO negotiations—a significant policy shift. The move comes amid slowing trade growth (chart 4) and ongoing efforts to pivot toward a consumption-led economy. Japan has experienced moderate currency weakness (chart 5) as investors reassess central bank policy ahead of the ruling party’s leadership vote on October 4th. Australia also faces a monetary policy decision this week, with markets expecting a rate hold amid rising price pressures (chart 6) and signs of economic stabilization.

**US pharmaceutical tariffs**
Last week, US President Trump announced new sectoral tariffs, imposing 100% duties on imports of brand-name or patented pharmaceuticals, effective October 1. This marks the first major tariff action in weeks, ending a brief lull in trade tensions. A key point of relief is that prior agreements with certain US trading partners, including the EU and Japan, provide exemptions, meaning the new steep tariff rate will not apply to them. In contrast, countries without such provisions will face the full 100% duty, which is likely to weigh on their growth through reduced export revenues. This includes major exporters to the US such as Switzerland and, in Asia, India and Singapore, among others (see chart 1). It should be noted, however, that the data shown below do not distinguish between generic and branded or patented pharmaceutical products. Additional points of possible relief include the fact that most of India’s pharmaceutical exports are generics, and that many exporters from Singapore already have plans to expand manufacturing capacity in the US.

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**US immigration policy**
Also of recent concern is US President Trump’s move to impose a $100,000 fee on any new H-1B visa petitions submitted from September 21st. This measure aligns with the administration’s broader hawkish stance on immigration and is likely to raise varying degrees of concern across countries. Although the fee applies to all H-1B applications, its impact will be particularly pronounced for Indian workers, who accounted for 71% of total applications in fiscal year 2024. Chinese workers came at a distant second, at 11.7%. By sector, applications remained concentrated in IT roles. Even before this latest clampdown, H-1B visa issuance had already declined toward last year’s lows (see chart 2), though some of this may reflect seasonal patterns, as visa issuance historically often dipped in the early months of the year. The new fee has raised concerns over the cost of securing top global talent and fears that highly skilled workers may increasingly seek more immigration-friendly advanced economies, such as the UK, which has been exploring initiatives to attract skilled talent.

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**India**
Given ongoing growth risks from US trade policy, investors are now focused on the Reserve Bank of India’s policy decision this Wednesday, with expectations for another rate pause. While supportive for growth, any additional rate cut would make India’s yield differentials less favourable, putting further pressure on the rupee, which has already depreciated about 8% on a nominal trade-weighted basis, according to our calculations (chart 3). A persistently weaker currency could also create a feedback loop with foreign portfolio outflows, reinforcing further depreciation. At the same time, a weaker rupee has mixed effects: it can boost India’s export competitiveness, but as a net importer, it also raises the cost of foreign goods.

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**China**
Moving to China, a major development last week saw the country announce it will no longer seek developing country Special and Differential Treatment (SDT) in current and future WTO negotiations. SDT benefits include longer implementation periods for agreements, enhanced trading opportunities, capacity-building support, and safeguards for developing countries’ trade interests. That said, China’s self-declared status as a developing nation remains unchanged. The announcement follows months of friction with the US, which has long criticized China for still benefiting from these advantages. While it resolves a key point of contention, significant US concerns remain over the sizable bilateral trade deficit and industrial overcapacity. On the domestic front, recent data showing slowing export growth alongside rising imports (chart 4) highlight a near-term challenge, as trade contributes less to overall growth. Although unfavourable in the short term, this dynamic also aligns with China’s broader shift toward a more consumption-led economy.

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**Japan**
Next, in Japan, investors are closely watching the ongoing leadership race for the ruling Liberal Democratic Party (LDP), as the winner is likely to become the country’s next prime minister. This week, attention will focus on candidates’ speeches and debates ahead of the party vote on October 4. Meanwhile, the yen has shown temporary weakness, particularly against the Euro and Swiss franc (chart 5), though it has held against the US dollar amid the latter’s recent decline. Recent yen weakness reflects investor reassessments of the Bank of Japan’s potential tightening path, uncertainty surrounding the leadership race, and its implications for Japan’s economic and fiscal outlook.

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**Australia**
Lastly, in Australia, investors will watch the Reserve Bank of Australia’s (RBA) interest rate decision, though the central bank is widely expected to hold rates steady amid rising inflation pressures. Key measures, including the RBA’s preferred trimmed mean, have edged toward the upper target of 3%, while headline CPI rose 3% y/y in August, driven by a 24.6% surge in electricity prices. Tight labour market conditions continue to support elevated wage growth and buoy services inflation. Additionally, signs of stabilization in the broader economy following prior rate cuts may further deter the RBA from easing this week.

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Asia

Economic Letter from Asia: Tariff Medicine

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Personal income increased 0.4% m/m (5.1% y/y) in August, the same monthly gain as in July. However, growth of wages and salaries slowed to 0.3% m/m (4.9% y/y) in August from 0.5% m/m in July, a likely indication of slowing labor market conditions. The Action Economic Forecast Survey looked for a 0.3% monthly gain in personal income in August. Real personal income (that is, after adjusting for inflation) inched up 0.1% m/m (2.3% y/y) after a 0.2% monthly rise in July. Real disposable income also increased 0.1% m/m (1.9% y/y) in August versus 0.2% m/m in July.

Personal consumption expenditures (PCE) posted another solid monthly gain, rising a larger-than-expected 0.6% m/m (5.6% y/y) in August on top of a 0.5% increase in both June and July. The Action Economics Forecast Survey looked for a 0.5% monthly gain. After adjusting for inflation, real PCE rose 0.3% m/m (2.7% y/y, the fastest annual pace since April) in August after a 0.4% m/m increase in July and a 0.3% m/m gain in June. The July/August average of real PCE stands 2.8% at an annual rate above the Q2 average. As PCE makes up around 2/3 of GDP, the solid July/August figure provides a strong base for Q3 GDP. With PCE growing a little faster than personal income in August, the saving rate slipped to 4.6% from 4.8% in July, which was revised up from 4.4%.

In PCE, real spending on goods increased 0.7% m/m in August, the same monthly advance as in July. Purchases of durable goods rose 0.9% m/m following a 1.8% monthly jump in July. Sales of motor vehicles slipped 0.3% m/m in August following a 2.9% surge in July. Nondurable goods sales picked up in August, rising 0.5% m/m after edging up 0.1% m/m in July. Consumption of services gained 0.2% m/m, the same monthly rise as in each of the preceding three months.

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This report also contained benchmark revisions from the beginning of 2020 to the beginning of 2025. For annual data, these were relatively uneventful. After revision, personal income grew 6.3% saar from 2019 to 2024, up from 6.1% previously. Real disposable income rose 2.6% versus 2.3% previously. PCE increased 6.6% versus 6.5% while real PCE growth was unrevised at 2.9%. In general, in the benchmark revision, the monthly saving rate was revised up 0.4-1.0%-point per month, indicating a more solid financial position for households than previously estimated.

Inflation remained elevated in August, although this was generally expected, but it remains well above the Fed’s 2% target. The PCE price index increased 0.3% m/m in August, as expected, following a 0.2% monthly gain in July. The y/y rate rose to 2.7%, the fastest rate since February, from 2.6% in July. Goods prices inched up 0.1% m/m (0.9% y/y versus 0.6% y/y in July) with prices of durable goods falling 0.1% m/m and prices of nondurable goods rising 0.2% m/m. Prices of motor vehicles increased 0.7% m/m in August, their largest monthly gain since January. Prices of “other” durable goods soared 2.0% m/m, their largest increase since July 1991. The price of gasoline and other energy goods jumped 1.6% m/m in August, its largest gain since January.

Prices of services increased 0.3% m/m, the same monthly increase as in July. The y/y rate inched up to 3.6% from 3.5% in July. The core PCE price index (that is, excluding food and energy prices) rose 0.2% m/m in August, as expected and the same monthly increase as in July, with the y/y rate unchanged at 2.9%. Prices of services excluding energy and housing, a measure closely watched by the Fed, increased 0.3% (3.4% y/y) in August, up slightly from a 0.3% monthly increase in July.

The personal income and consumption figures are available in Haver’s **USECON** database with detail in the **USNA** database. The Action Economics forecasts are in **AS1REPNA**.

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- Personal income increased 0.4% m/m but compensation slowed.
- Real PCE increased 0.3% m/m in August on top of a 0.4% m/m increase in July.
- July/August real PCE up 2.8% annualized from Q2 average, providing a solid base for Q3 GDP growth.
- Headline PCE inflation edged up further to the fastest y/y pace since February.

U.S. Personal Income and Consumption Post Solid Gains in August; Inflation Edges Up

Andrew Cates

**Policy rate expectations**
Interest rate expectations have edged toward a milder easing profile in recent months—largely because several central banks are already well into their easing cycles. Based on the latest Blue Chip Financial Forecasts survey, the consensus now looks for the largest cuts in the US (≈–0.9 percentage points) and a smaller move in the UK (≈–0.5pp) over the next 12 months. Expected declines are more limited in Australia (≈–0.35pp), Canada (≈–0.25pp) and the euro area (≈–0.25pp), reflecting the late-cycle phase of easing already delivered. Japan remains the outlier on the upside (≈+0.25–0.30pp) as the Bank of Japan continues a gradual normalisation. The pattern points to cautious, data-dependent central banks: some scope to trim rates where growth is cooling, but a softer glide path in economies that have already banked meaningful cuts.

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**Signals of supply-side resilience**
Equity markets have been buoyed by hopes that AI-driven productivity gains will provide a new leg of support for global growth, though hard evidence in the macro data remains elusive. One encouraging sign, however, comes from high-frequency indicators such as the Citigroup Economic Surprise Index, which has shown a steady run of upside surprises in global growth data over the past several months. At the same time, the Inflation Surprise Index has persistently undershot expectations, pointing to milder-than-feared price pressures. Taken together, these developments hint at possible supply-side improvements—consistent with the idea that productivity may be quietly strengthening, even if traditional measures are slow to capture it. The question for investors is whether this early pattern is sustainable or merely a temporary alignment of cyclical forces.

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**US company formation**
Another piece of evidence that hints at a possible shift in US productivity dynamics comes from the combination of rising business formation and stronger measured output per hour. Applications for high-propensity businesses—those most likely to generate sustained employment—have climbed markedly in recent years, and in parallel official productivity data have also shown a clear upturn since the pandemic shock. While both series are volatile and subject to revision, the persistence of this improvement suggests that the US may be entering a more dynamic phase of firm creation and efficiency gains. If AI adoption is acting as a catalyst for both new business models and more efficient production, then these developments could represent an early macro-level reflection of that trend.

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**US productivity trends**
Formal productivity gauges for the non-financial corporate sector have lifted above trend, but the rebound should be treated cautiously. Much of the recent strength may reflect post-COVID normalization—hours and capacity settling after stop-start disruptions, compositional shifts as weaker firms exited and re-entered, and cyclical capital deepening as investment caught up—alongside measurement noise and future revisions. These data are consistent with the possibility of underlying efficiency gains, including from digital and AI adoption, but they are not yet proof of a structural break. We’ll need sustained outperformance across multiple data vintages—and through a softer growth patch—to distinguish a true productivity revival from a cyclical bounce-back.

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**Semiconductor trade**
One area where the footprint of AI investment is already visible is in the semiconductor trade data. South Korea’s early export figures and Japan’s shipment values both show a sharp rebound over the past year, reversing the slump seen in 2022–23. Given that advanced chips are the essential input for AI infrastructure—from data centres to training models—this recovery provides a tangible sign of how global demand is being reshaped by the AI buildout. While semiconductor cycles are notoriously volatile and influenced by broader electronics demand, the scale and persistence of the current upswing suggest something more structural may be at play, reinforcing the idea that AI-related capital spending is starting to leave a measurable imprint on global trade flows.

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**Global defence spending**
While AI investment has dominated headlines as a prospective driver of global growth, it is important not to overlook other forces shaping capital spending. Defence outlays have accelerated, and while they are often prompted by geopolitical risk, parts of this spending can be productivity-enhancing—for example, investment in cyber security, advanced computing, space and satellite networks, resilient supply chains, and dual-use manufacturing that diffuses into the civilian economy. Even so, the opportunity cost and signalling effect of higher military budgets matter: they can crowd out other forms of capex, and the underlying uncertainty can weigh on trade, supply chains, and investor confidence. Taken together, these dynamics argue for caution: the AI boom may be fostering optimism about a new productivity era, but the broader backdrop—marked by rising defence demand with mixed spillovers and uneven sources of capex—still leaves the outlook fragile.

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Global financial markets have remained resilient in recent days, supported by a combination of easing inflation concerns, steady growth data, and hopes that geopolitical risks may ease following news of a potential Israel–Gaza peace plan. At the same time, investors are watching closely for signs of a US government shutdown, which could delay the release of key economic indicators, including Friday’s nonfarm payrolls report. Against this backdrop, the charts this week highlight a set of themes shaping the outlook. Policy rate expectations have shifted little, with markets still pricing in further cuts across most major economies over the next 12 months, with Japan the notable outlier (chart 1). In the meantime, optimism surrounding AI’s productivity potential continues to drive market sentiment, and while hard evidence in the data remains limited, there are tentative signs of improvement—global growth surprises have been positive (chart 2), US productivity and business formation are showing some improvement (charts 3 and 4), and semiconductor trade is rebounding as AI-related demand rises (chart 5). Yet caution is warranted: formal productivity measures may still reflect post-COVID cyclical effects, and the upswing in military spending underscores how geopolitical instability is also driving global investment trends, tempering the more upbeat AI narrative (chart 6).

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Charts of the Week: Signals, Surprises and Shifts

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