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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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[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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RATS

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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.

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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

US labor's share of total income at a series low

Michael J. Moran

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Nonfarm payrolls rose 165K in October, marking one of the best readings of the past few years and easily beating the expected increase of 65K. Moreover, the results in August and September were revised upward by a combined total of 84K. The new figures left the six-month average at 82K, a far better performance than the average monthly increase of only 10K in all of 2025.

Several sectors stood out on the strong side of job growth. Employment in the business-service category jumped 70K, the strongest showing since mid-2022, when the economy was still experiencing the post-Covid boom. In addition, business services contributed importantly to the upward revisions in August and September (an additional 52K jobs). Manufacturing industries are showing signs of life, as they posted their fifth consecutive monthly gain (up 19K) and added 10K to the revisions total. The health-care sector, a reliable area for job growth, had posted below-average results in the prior five months, but the gain of 55K in October brought it close to its long-run average.

The headline unemployment rate dipped 0.1 percentage point to 4.1%, a reading comfortably within the range of 4.0-4.5% seen in the past two years (although above readings in the neighborhood of 3.5% in the latter part of 2022 and the early months of 2023). It was a “strong” drop in unemployment in the sense that job growth as measured by the household survey exceeded the increase in the size of the labor force (463K versus 421K). October marked the third consecutive month of strong gains for employment and the labor force in the household survey, ending a string of eight months of generally negative results.

Although the headline unemployment rate eased in October, the broad unemployment rate (the so-called U-6 measure) rose 0.3 percentage point to 7.9%. This measure includes individuals working part-time involuntarily and individuals who would like a job and have searched for employment in the past 12 months but have not looked in the past four weeks. Both of these metrics rose in October, contributing to the increase in broad unemployment. The jump in the U-6 measure reversed a good portion of the noticeable improvement since late last year.

Average hourly earnings rose 0.4% in October, matching the firmest increase of the year thus far. The latest results left the year-over-year change at 3.1%, about equal to the readings in the prior two months, suggesting that the downward trend in wage growth may be starting to stabilize.

The surge in energy prices this year has pushed CPI inflation above the annual increase in average hourly earnings, leaving a drop in aggregate real wage income. However, the financial position of the typical wage earner is difficult to assess because the recent period of negative real wage growth followed several years of real gains, which followed sharp real declines during the inflation burst in 2021-22. The ups and downs over the past several years have been largely offsetting, but individuals in total have registered real wage gains. Still, the surge in prices this year has been sharp enough to generate strains for many households. The strains certainly seem to have had an influence on the midterm elections.

The average workweek is an underappreciated element of the monthly employment report; it receives little attention in the financial press and is not scrutinized by financial market participants. However, it is an important indicator. The current workforce comprises more than 159 million individuals, and thus a change of just a few tenths of an hour can have a noticeable effect on production. The average workweek remained at 34.4 hours for the third consecutive month in October, a better showing than readings of 34.2 to 34.3 in the prior two years or so.

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

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- Payrolls posted a solid gain; Aug/Sep revised upward.
- Headline unemployment edged lower, although broad unemployment rose.
- Average hourly earnings exceeded expectations.

October Employment Report: Firm in Most Respects

Robert Brusca

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German industrial production rose by 0.7% in September after rising 1% in August. Consumer goods and capital goods sectors also had strong gains in each of the last two months. Intermediate goods showed milder and more erratic output results and trends.

Sequentially, IP headline gains are 0.5% over 12 months; that rises to a 1.5% annualized pace over six months but edges slightly lower to a 1.3% pace over three months. Still, there are output gains on all horizons, and the three-month and six-month gains are each stronger than the year-on-year.

Consumer goods output sequentially is less buoyant even over three months, largely because of a huge drop in July that gains in August and September could not erase. So, the sequential output trend for consumer goods is erratic despite two solid months of back-to-back gains. Capital goods output shows acceleration and building momentum, with its annualized pace at 8% over three months. Intermediate goods output shows contractions over each of the sequential horizons and a tendency toward deceleration.

September data conclude the data for Q3. On a full quarter-over-quarter basis, output is falling in two of three sectors. The exception is capital goods, where output posts a quarterly gain of just 0.4% at an annual rate.

To put growth in a greater perspective, annual growth rates of output ranked on data back to 2006 place total German IP growth at a 50.8 percentile standing. Capital goods have a 52.4 percentile standing for growth, while consumer goods growth is a laggard at a 36.7 percentile standing and intermediate goods at a 42.7 percentile standing. Only total IP growth and capital goods have standings above their respective 50% mark, placing them above their median gain on this horizon.

German manufacturing output, real orders, and real sales show erratic-to-weaker trends. Manufacturing output shows gains on all sequential horizons, while real orders and real sales are both showing significant declines as well as a pattern of deceleration. Manufacturing output and real sales are falling in Q3. But in terms of ranked year-over-year growth rates, real orders and real sales have standings above their historic median rates.

The survey indicators for the German economy show a progression toward strength over the last three months, and so do the sequential readings, for the most part. All the indicators are higher month-to-month. But their percentile standings, conducted on levels of these survey data, all register below median standings on data back to 2006. Recent performance is good, but it is weak in a historic context.

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Data for three early reporting EMU members, France, Spain, and Portugal, show output increases in September. However, their respective sequential footprints are not as upbeat. France shows output declines over each sequential horizon; Spain and Portugal are erratic. However, Spain’s IP growth rate over 12 months is above its median result, while France and Portugal have IP growth rates ranking near the lower third of their respective historic queues of growth rates for output.

On balance, the German data reported are fairly solid, with the surveys being quite upbeat. Real orders and real sales trends are cautionary and must be monitored. The three European reporters underline the fact that Europe is faring less well than Germany. Just another reason to be wary of good news. But what we do have here is a nice slug of good news. Maybe it can last?

Germany

German IP: Solid Gains in September; Strong Survey Results

Andrew Cates

**Half a pass-through**
Interest-rate expectations have moved higher this year, but long-term bond-yield forecasts have risen by much less. The Blue Chip Financial Forecasts panel has repeatedly revised its policy-rate outlook upwards, reflecting a more restrictive monetary environment, while making more modest adjustments to longer-term yields (chart 1). This divergence might suggest that forecasters expect tighter monetary policy to prove less persistent than current interest-rate settings imply, or that other forces are impacting longer-term yields. Japan provides an important contrast. There, long-term yield forecasts have risen more sharply than policy-rate expectations, reflecting growing concerns about government borrowing and fiscal sustainability. The broader message is that bond markets are responding not only to the outlook for monetary policy, but also to differences in fiscal conditions and the credibility of public finances.

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**The market has already voted**
South Korea offers a striking example of the gap between market prices and economic forecasts. The KOSPI has fallen sharply since its June peak, yet consensus growth projections have continued to improve (chart 2). Korea's position at the heart of the global semiconductor supply chain makes it especially sensitive to changes in expectations for AI spending. Its equity market may be signalling a turn in the investment cycle that forecasters have yet to acknowledge. Equities are imperfect predictors, of course, and a correction need not foreshadow an economic downturn. But the divergence may now be too large to dismiss.

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**Borrowers have stopped asking**
The latest Federal Reserve loan officer survey published this week offers a less reassuring view of the American economy. Demand for mortgages, commercial property loans and broader business credit has weakened sharply and together (chart 3). That matters because conventional (i.e. non-AI-related) investment has already been lacklustre. Large-scale technology construction may be sustaining aggregate capital spending, but it does not mean the wider private sector is eager to expand. Monetary policy could already be restraining the borrowers it reaches most directly, even as the most conspicuous investment boom continues elsewhere. This is an uncomfortable imbalance for the Fed — and a warning against treating strong headline investment as evidence of broad-based strength.

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**Where the credit is going instead**
US credit has not disappeared. It has increasingly changed its route. US banks have expanded lending to non-bank financial institutions at a remarkable pace in recent months, and such loans now account for a much larger share of bank balance sheets than they did before the pandemic (chart 4). Some of that money ultimately supports borrowers through private funds and other intermediaries, making the final destination of credit harder to trace. The IMF has also drawn attention to complex financing arrangements within the technology sector. None of this proves that AI investment is chiefly funded through these channels. It does hint that conventional bank-loan data provide an incomplete picture of leverage and risk. A less visible credit cycle is not necessarily a safer one.

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**Lead times lengthen again**
This week’s manufacturing PMI surveys suggest that supply constraints are returning just as demand is becoming more uneven. Manufacturers across major economies report longer delivery times and renewed pressure on input costs (chart 5). Competition for electrical equipment and specialist components, alongside tariffs and disrupted trade routes, are probably adding to the strain. This is arguably not a repeat of the supply shock of 2021–22. But it is a reminder that inflation can persist even when ordinary borrowers and consumers are retrenching. Central banks face the familiar difficulty of responding to higher prices without unnecessarily amplifying weakness elsewhere.

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**No room at the margin**
Fiscal policy offers little comfort. France's debt burden has risen markedly since 2019, while its primary balance and credit standing have deteriorated. Japan faces its own scrutiny, and the UK is hardly immune. By contrast, several countries once regarded as Europe's fiscal weak links have reduced their debt ratios and improved their standing (chart 6). The old division between prudent core and vulnerable periphery no longer fits the evidence. That helps explain why sovereign bond investors are paying closer attention to fiscal credibility. Yet the deeper concern is what happens if private investment falters. Governments with limited fiscal room may find themselves asked to support an economy at precisely the moment markets are least willing to finance the response.

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The US midterm elections have significantly altered the political landscape in Washington. Democrats have secured control of both houses of Congress, ending unified Republican control and introducing a period of divided government for the remainder of President Trump's term. Concerns about living costs and the war with Iran appear to have influenced voting patterns, contributing to Democratic gains that exceeded expectations. The economic implications are arguably mixed. Divided government could limit the scope for further tax cuts and additional public spending, but may also complicate negotiations over budgets and federal borrowing. The election arrives at an awkward moment for markets. Confidence in the AI investment boom has already been shaken by doubts over financing, valuations and eventual returns. Greater scrutiny of data centres and energy demand adds another uncertainty, but politics did not create the underlying problem. Nor is technology the only source of unease. This week's charts show forecasters struggling to keep pace with changing interest-rate expectations (chart 1), a Korean equity market at odds with increasingly optimistic growth projections (chart 2), and a marked retreat in US loan demand (chart 3). Yet lending to non-bank financial institutions continues to expand (chart 4), supply pressures are reappearing (chart 5), and stretched public finances are unsettling sovereign bond markets (chart 6). The common theme is a world economy whose apparent resilience conceals growing imbalances — and markets that may be recognising them before forecasters do.

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Charts of the Week: When Expectations Meet Reality

Sandy Batten

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Nonfarm business productivity (output per hour) jumped 3.6% q/q saar in Q3 following an upwardly revised 2.1% quarterly gain in Q2 (previously 1.4%). The Action Economics Forecast Survey expected a 2.7% quarterly increase in productivity. Compared with a year, productivity was up 2.1%, slightly slower than 2.3% y/y in Q2. Since productivity growth began to accelerate at the beginning of 2023, it has grown at a well above trend 2.7% annual rate, likely a reflection of AI and other technology advances. Strong productivity is a key factor for boosting real incomes and restraining inflation pressures.

Nonfarm business output (a little different from real GDP) increased 3.7% q/q saar in Q3 versus an upwardly revised 2.4% in Q2 (previously 1.7%). By contrast, real GDP grew 3.4% q/q in Q3. Hours worked edged up 0.1% q/q in Q3 following an unrevised 0.3% quarterly increase in Q2. Compensation growth slowed to 2.9% in Q3 from an upwardly revised 4.0% increase in Q2 (previously 2.6%). Compared to a year ago, compensation growth slowed to 4.5% y/y from 4.9%. With quarterly productivity growth exceeding compensation growth in Q3, unit labor costs fell 0.7% q/q in Q3 after an upwardly revised 1.9% quarterly gain in Q2 (previously +1.2%). The Action Economics Forecast Survey looked for a 1.1% q/q increase in unit labor costs in Q3. The y/y rate of advance for unit labor costs slowed, to 2.4% y/y in Q3 from 2.6% in Q2.

Manufacturing productivity growth slowed markedly in Q3, to 0.3% q/q saar from an upwardly revised 2.9% quarterly gain in Q2 (previously 2.4%). Factory output rose only 1.3% q/q in Q3 following an upwardly revised 5.8% q/q jump in Q2 (previously +5.4%). Hours worked increased 1.0% q/q, down from 2.9% (unrevised) in Q2. Compensation growth picked up to 3.0% from an upwardly revised 2.4% in Q2 (previously 2.1%). With the slowdown in productivity growth and the pickup in compensation growth, unit labor costs jumped 2.7% q/q in Q3 after a 0.4% quarterly decline in Q2 (previously -0.3%). Compared with a year ago, manufacturing unit labor costs were up 4.0% y/y, the highest yearly rate of advance since Q4 2024.

Today’s release also contained benchmark revisions from the beginning of 2021. They were modest but generally positive. Over the 22 quarters of revision, productivity grew at a revised 1.62% annual rate, compared to 1.50% prior to the revisions.

The productivity and labor cost data are available in Haver’s **USECON** database. The Action Economics expectations figures are in the **AS1REPNA** database.

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- Output per hour jumped a larger-than-expected and well above trend 3.6% q/q saar in Q3 with an upward revision to Q2.
- Compensation growth slowed to 2.9% q/q resulting in a 0.7% quarterly decline in unit labor costs. 
- Benchmark revisions back to the beginning of 2021 were modest but generally positive, pushing up productivity growth from Q4 2020 to 1.62% from 1.50%.

U.S. Productivity Jumped in Q3 2026

Kathleen Stephansen, CBE

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Initial claims for unemployment insurance dropped by 6,000 to 189,000 in the week ending October 31 from 195,000 in the week ending October 24, revised from 194,000. The four-week average was 194,750 in the October 31 week, down from 197,000 in the October 24 week, revised from 196,750. Claims matched the July 18 week’s level and remain range-bound at historically low levels. The Action Economics/Haver Analytics Survey looked for 196,000 claims to have been filed.

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—rose 23,000 to 1.718 million in the week ending October 24, up from 1.695 million in the week ending October 17, revised from 1.701 million. The four-week moving average was 1.710 million in the October 24 week, little changed from 1.709 million in the October 17 week. The insured unemployment rate was unchanged at 1.1% in the October 24 week.

The insured unemployment rate varies greatly across individual states and territories. In the week ending October 17, no state had a rate above 2.00%; the highest rates were in Massachusetts (1.71%), Washington (1.82%), and New Jersey (1.98%). The lowest rates were in South Dakota (0.22%), Louisiana (0.28%), Florida (0.31%), Alabama (0.33%), North Carolina and North Dakota (both 0.34%), Arkansas (0.37%), Iowa and Nebraska (both 0.39%), Kansas and Tennessee (both 0.43%), New Hampshire (0.46%), Georgia (0.47%), Kentucky, Mississippi and Virginia (all 0.48%), and Idaho (0.49%). Rates in other notable states include Texas (0.93%), Pennsylvania (1.21%), Illinois (1.28%), New York (1.40%) and California (1.70%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986.

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- New claims declined by 6,000 to 189,000 in the week of October 31.
- Continuing claims rose by 23,000 to 1.718 million in the week ending October 24.
- The insured unemployment rate held at 1.1% in the week of October 24.

U.S. Initial Unemployment Claims Dropped in the Week of October 31

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On the German long-term chart of year-over-year growth rates, we can see that German orders, both domestic- and foreign-sourced, while quite volatile, are making a consistent trend move to stronger ground.

The table, in contrast, focuses on growth rates over the last two years and principally over the last year and shorter horizons. On that shorter time horizon, orders are generally weakening.

**Orders overview**
Total orders show improved growth over 12 months compared to the growth rate a year ago. On a shorter view, however, comparing the six-month growth rate to the 12-month growth rate finds a step down to -4.7% over six months from 3.3% over 12 months, then comparing the three-month growth rate to the six-month growth rate, another step down to an -11.9% annual rate from a -4.7% annual rate occurs. Despite improvement in the year-over-year growth performance, the pattern of orders from the one-year horizon on shows a general weakening.

**Foreign vs. domestic patterns: inconsistent meets convoluted**
Foreign orders improve over 12 months compared to their year-ago growth rate, with the year-ago growth rate at -2.5% compared to +0.2% over the last 12 months. Over six months, that pace degrades to a -13% annual rate, then, over three months, it makes the most modest improvement to -12.1% from -13%. In contrast, domestic orders make a sharp improvement over 12 months compared to a year ago as the 12-month growth rate jumps to 7.9% compared to -1% a year ago. Over six months, that growth rate steps up from 7.9% to 9.1% at an annual rate, but then over three months, it falls back hard to a -12.1% growth rate.

**Monthly patterns**
Monthly growth rates tell somewhat similar stories about the twists and turns being convoluted and echoing the sequential pattern since the month-to-month data show an extremely weak August with a strong bounce-back in September, but that September bounce-back is paltry in comparative terms, compared to the setback experienced in August. Rolling all of this up into a pattern for the quarter-to-date results for the now-completed third quarter shows total foreign order growth falling at an 11.8% annual rate, as domestic orders surge ahead at a 21.8% annual rate, pushing total orders up at a paltry 0.7% annual rate. Evaluating performance by looking at the standing of the 12-month growth rates, those growth rates year-over-year for total orders have a 58.2 percentile standing driven substantially by domestic orders that have an 82.8 percentile standing against what are weak foreign growth rates for orders at a 38.1 percentile standing.

**Real sales overall and by sector**
Moving on to look at real sales and what's going on with sector sales expressed in real terms, we see a smaller increase in real sales that rose by 0.2% in September after rising by 0.1% in August compared to a 1.4% drop in July. Sequential real sales follow the pattern for orders, with the year-over-year growth rate at 1.8% stronger than a -2.6% year-ago pace, then, over six months that growth rate falls from 1.8% to -2.5%, and then over three months it falls again to -4.1%. Real sales across sectors generally follow this same pattern. The growth rates for manufacturing sales are nearly identical to the headline number for mining and manufacturing.

**EU Commission industrial confidence in EMU’s Big-Four economies**
The panel at the bottom looks at a sampling of the large monetary union economies, Germany, France, Italy, and Spain, comparing the results in terms of the EU industrial confidence metrics. These measures generally find improvement for the economies in September compared to August with France as the exception. In France, the September value of -5.3 was a decline from -3.3 in August, whereas the other countries experienced slightly less deeply negative assessments in September compared to August. The average data presented in the sequential pattern find Germany slightly improving on the EU industrial confidence index from a -15 reading over 12 months to -12.4 over six months, to -10.6 over three months, a clear progression toward improvement. Even France has a progression toward improvement although with a much slighter tendency for improvement. Italy and Spain also show small movements toward improvement from 12 months to six months, to three months. However, the 12-month change shows some mixed performance. Compared to a year ago, Germany and Italy show improvement, from their year-ago values, while France and Spain show deterioration. Evaluating the September industrial confidence level readings by comparing them to those back to 1990, we find all of them reside at a level at or above their 50th percentile except for Germany; the German reading has a 45.7 percentile standing, fewer than 5-percentile points below its median. Italy has a standing at its 52.6 percentile, France at its 59.7 percentile. In Spain, the ongoing success story of the Monetary Union, there is a 76.8 percentile standing.

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**Summing up**
On balance, we have disappointing data for Germany over the near term although still evidence that viewed more broadly there is improvement in train for the German economy. The EU industrial confidence data are mixed on the Big-Four EMU economies, although the sequential ratings suggest that there was improvement in train there. These economies continue to face an uncertain future with the war in Ukraine and still unsettled conditions in Iran that are hard to characterize and continue to be associated with an unusual elevation in oil prices and the interruption of other supply lines. Meanwhile, central banks are raising rates, with the Bank of England joining the club, offering a rate hike today and warning that there could be more ahead. Investors are also trying to puzzle out the implications for global policy of the substantial and unexpected loss of power by Republicans in the midterm elections in the United States, raising the question of how different the next two years might look. So far, the market reaction seems to be positive, but that's going to be something to continue to watch. Markets often like it when there's political impasse, and the U.S. may be exactly in that situation for the next two years.

German Orders Make Strong Jump, but from a Too-Deep Hole

Winnie Tapasanun

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The U.S. ISM Services PMI declined to a lower-than-expected 54.5 in October from 54.9 in September and 55.4 in August, data from the Institute for Supply Management showed, indicating expansion in the services sector for the 28th straight month but at the slowest pace since July. The Action Economics Forecast Survey had expected 54.7 for October. The latest reading was above 52.0 in October 2025 and a low of 49.4 in June 2024, while remaining below its recent high of 56.1 in February and a record-high 67.5 in November 2021. The 12-month average was 54.3, pointing to continued growth in the U.S. services sector.

Haver Analytics constructs a composite index combining the services index and the manufacturing reading. This index slipped to 54.6 in October from 54.9 in September and 55.3 in August, signaling expansion for the 17th consecutive month but at the weakest pace since July. The latest result was above 51.6 in October 2025 and a low of 49.3 in June 2024, albeit remaining below a high of 55.7 in February and a record-high 66.7 in November 2021. These series date back to July 1997.

In the latest services survey, the business activity index fell to 53.8 in October from 56.5 in September and 61.7 in August, indicating continued expansion in business activity for 28 months in a row but at the slowest rate since September 2025. The index was above a low of 50.0 in June 2024 but below a peak of 70.9 in November 2021. In October, 20.8% of respondents (NSA) reported higher activity while 11.4% reported an activity decline. The new orders index decreased to 55.9 in October from 59.8 in September and 60.9 in August, reflecting expansion in new orders for the 17th successive month but at the slowest pace since June. The index was above a low of 47.2 in May 2025 but below a high of 61.0 in February 2023 and a record-high 69.2 in October 2021. In October, 26.1% of respondents (NSA) reported higher new orders while 9.0% reported declines. Meanwhile, the supplier deliveries index (NSA) rose to 56.7 in October from 53.2 in September, indicating slower performance in supplier deliveries for the 23rd straight month, following one month in faster territory in November 2024.

On the labor front, the employment index advanced to 51.4 in October from 50.1 in September, showing employment activity in the services sector expanded for the second straight month after contracting in August and July. The latest reading was above a low of 43.5 in December 2023 but below a high of 54.1 in June 2023 and a peak of 58.9 in April 2021. In October, an increased 16.6% of respondents (NSA) indicated higher employment while a lessened 13.5% reported declines.

On the inflation front, the prices index, above 70 for the seventh time in eight months, edged down to a still-elevated 73.0 in October from 74.0 in September, indicating prices paid by services organizations for materials and services had risen (i.e., above 50) since June 2017. The index was well above a low of 53.9 in March 2024 but below a peak of 83.7 in March 2022. In October, 48.6% of respondents (NSA) reported higher prices while only 4.0% reported price declines.

Additionally, the new export orders index rebounded to 55.2 in October from 46.9 in September, showing new export orders expanded for the fourth time in five months. The imports index climbed to 54.2 in October from 52.9 in September, marking the eighth expansion in nine months. The inventories index slid to 55.4 in October from 57.8 in September, indicating inventories expanded for the ninth consecutive month but at the weakest pace since July, while the inventory sentiment index edged up to 52.1 from 51.7, showing continued expansion since May 2023. The backlog of orders index increased to 58.0 in October from 56.6 in September, marking the fastest pace of expansion since July 2022, following an 11-month period of contraction from March 2025 through January 2026. These series are not seasonally adjusted and not included in the ISM Services PMI total.

The ISM Services PMI is a composite index consisting of four equally weighted diffusion indexes: Business Activity, New Orders, Employment, and Supplier Deliveries. A reading above 50 indicates expansion in the services sector; below 50 suggests contraction. Supplier Deliveries is the only ISM index that is inversed; a reading above 50 indicates slower deliveries. The ISM figures are available in Haver's **USECON** database, with additional detail in the **SURVEYS** database. The expectations figure from Action Economics is in the **AS1REPNA** database.

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- ISM Services PMI down slightly to 54.5 in Oct., still above the 12-month avg. of 54.3.
- Business Activity (53.8) lowest since Sept. ’25; expanding for the 28th consecutive mth.
- New Orders (55.9) lowest since June; growing for 17 mths. running. 
- Employment (51.4) highest since February; second successive mth. above 50.
- Prices Index (73.0) down modestly but above 70 for the seventh time in eight mths., indicating prices rising since June ’17.

U.S. ISM Services PMI at a Three-Month Low, Still Indicating Expansion for the 28th Straight Month

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The U.S. trade deficit in goods and services (BOP basis) narrowed slightly to $105.0 billion in September from an upwardly revised $105.7 billion in August (previously -$105.6 billion), according to the U.S. Census Bureau. The Action Economics Forecast Survey looked for a deficit of $107.9 billion. The goods deficit narrowed to $135.9 billion in September from $136.6 billion in August while the services surplus was essentially unchanged at +$30.9 billion.

The real (inflation-adjusted) trade deficit in goods widened to $119.5 billion (2017$) in September from $116.0 billion in August. For all of Q3, the real deficit totaled $341.6 billion versus $277.8 billion in August. This marked widening in the real deficit was already noted in the release of the first estimate of real GDP for Q3 where it was reported that the widening of the trade deficit subtracted 3.3%-points from overall real GDP growth in Q3.

Exports of goods and services increased 1.9% m/m (+10.0% y/y) in September on top of a 1.6% monthly gain in August. These two consecutive months of increased exports followed three consecutive monthly declines. Goods exports (Census basis) rose 2.5% m/m (12.6% y/y) in September, the largest monthly gain since April. Increases were widely spread across major end-use categories. Exports of food and feeds jumped 13.3% m/m, the largest monthly increase since October 2021. Exports of capital goods excluding autos increased 5.5% m/m, the third consecutive monthly rise. Exports of consumer goods ex autos increased 3.7% m/m, the third increase in the past four months. By contrast, auto exports slumped 5.6% m/m, the third consecutive monthly decline and the fifth decline in the past six months. Services exports increased 0.7% m/m (+4.4% y/y) in September following a 0.3% monthly rise in August. Transport exports increased 0.8% m/m; travel was up 1.8% m/m; charges for the use of intellectual property rose 0.6% m/m, the fourth consecutive monthly gain.

Imports of goods and services increased 1.2% m/m (21.3% y/y) in September, a slowdown from a 4.4% monthly gain in August. Goods imports (Census basis) increased 2.4% m/m (28.2% y/y) in September but were generally weak apart from imports of capital goods with goods imports declining in four of the six major end-use categories. The importance of AI-related investment continued to dominate with imports of capital goods ex autos up 7.9% m/m (77.8% y/y). In the past three months, capital goods imports have risen 25.5%. Excluding capital goods imports, the remainder of imports fell 1.9% m/m, the third monthly decline in the past four months. Imports of consumer goods ex autos rose 4.1% m/m in September, more than offsetting a 0.8% monthly decline in August. Service imports increased 1.0% m/m (3.0% y/y) in September following a 0.5% m/m increase in August. The September increase was led by a 1.8% m/m gain in transport imports and a 3.4% m/m gain in travel imports.

By country, the goods trade deficit with China widened to $17.9 billion in September from $16.4 billion in August. This was the widest deficit with China since April 2025. The trade deficit with the European Union widened to $14.2 billion in September from $11.0 billion in August. The trade deficit with Japan increased to $4.8 billion in September from $3.7 billion in August.

The international trade data can be found in Haver’s **USECON** database. Detailed figures on international trade are available in the **USINT** and **USTRADE** databases. The expectations figures are from the Action Economics Forecast Survey in **AS1REPNA**.

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- The deficit in goods and services narrowed to $105.0 billion in September from $105.7 billion in August.
- This capped off a quarter in which the trade deficit widened markedly, subtracting 3.3%-points from overall GDP.
- The goods deficit narrowed to $135.9 billion in September, while the services surplus was essentially unchanged at $30.9 billion.
- Exports rose 1.9% m/m, led by strong increases in exports of food and feeds and of capital goods.
- Imports increased by 1.2% m/m, once again dominated by increased AI-related capital goods imports.

U.S. Trade Deficit Narrowed Slightly in September

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The anxiously anticipated October CPI report was stronger than expected and was not received well by financial markets. The headline CPI increased 0.4% m/m following a 0.6% monthly decline in September. The core index (excluding food and energy prices) rose 0.3% m/m, the same monthly increase as in September. The Action Economics Forecast Survey looked for a 0.3% monthly gain in the headline index and a 0.2% m/m increase in the core rate. Due to the federal government shutdown at this time last year, there was no October 2025 CPI calculated. Consequently, a year/year rate for October 2026 was not released. However, Haver Analytics estimated an October 2025 value which then enables the calculation of a year/year change for October 2026. This calculated year/year rate increased in October for both the headline and the core indexes. The headline y/y rate rose to 4.1%, the highest since May, from 3.7% in September. The core y/y rate increased to 2.8%, also the highest since May, from 2.6% in September.

Combined with the much stronger-than-expected employment report released last week, today’s firmer-than-expected inflation report has convinced financial markets that a 25bps increase in the fed funds rate is all but assured at the next FOMC meeting on December 8-9. There will be one more employment report before the next FOMC meeting, but today’s CPI report was the last one before that meeting. The fed funds futures market is currently pricing in a 99% probability of a 25bps increase in December. Moreover, one Fed official has noted that the current inflation environment may even bring into consideration a larger than 25bps increase in December.

Increases in shelter and food prices were major factors behind the increase in the headline rate in October. Shelter prices increased 0.3% m/m while food prices jumped 0.5% m/m, the largest increase of this year. Together, the two increases accounted for almost 50% of the increase in the headline rate. Energy prices continued to rise in October but only by 0.7% m/m following a 5.2% m/m jump in September with gasoline prices up 1.0% m/m in October. Natural gas price eased 0.8% m/m in October, their second consecutive monthly decline.

Goods prices excluding food and energy rose 0.2% m/m in October, down slightly from a 0.3% monthly gain in September. A 1.2% m/m decline in prices of used cars and trucks tempered widespread increases in all other major components. Services prices excluding energy increased 0.3% m/m in October, down slightly from a 0.4% m/m gain in September. Prices of transportation services rose 0.8% m/m, their largest monthly increase since January, following a 0.6% m/m increase in September. Medical services prices rose 0.3% m/m in October, the same monthly gain as in September. The 0.3% m/m rise in shelter prices was led by a 0.7% m/m increase in other lodging away from home.

CPI services prices less energy services and the two rent measures is a relatively new core measure that is watched carefully by the Federal Reserve. It increased 0.4% m/m in October, the same monthly increase as in September, with the y/y rate rising to 3.5% from 3.1% in September, another bit of discouraging news for the Fed.

The Consumer Price figures can be found in Haver's **USECON** database. The expectations figure is contained in the **AS1REPNA** database.

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- The headline CPI increased 0.4% m/m in October with the core index rising 0.3% m/m, both slightly larger than expectations.
- Y/Y rates (calculated by Haver) continued to rise.
- Shelter prices rose 0.3% m/m, accounting for more than 30% of the increase in the headline rate.
- Food prices jumped 0.5% m/m, the largest increase this year, while the rise in energy prices slowed markedly.

U.S. Consumer Prices Increased More Than Expected in October

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