Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070828c.jpg" width="353">
The International Council of Shopping Centers (ICSC)-UBS survey reported that chain store sales increased 0.3% last week and made up the 0.3% decline during the week prior. 
Chain store sales this month are 0.2% ahead of the July average of sales which rose 0.4% from June. 
During the last ten years there has been a 45% correlation between the y/y change in chain store sales and the change in non-auto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070828d.jpg" width="353">
The leading indicator of chain store sales from ICSC-UBS fell 0.8% from prior week (1.0% y/y). 
Gasoline prices for regular, on average fell four cents last week to $2.75 per gallon (-3.4% y/y).
The average gas price so far in August is 6.0% lower than in July and prices have fallen 14.6% from their peak during May of $3.22 per gallon.
The market price for regular gasoline in N.Y. harbor rose yesterday to $2.07 (17.3% y/y) 3 above the July average.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a>&nbsp;</th>
<th scope="col">09/04/07&nbsp;</th>
<th scope="col">08/18/06&nbsp;</th>
<th scope="col">Y/Y&nbsp;</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
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<td class="firstcol">Total Weekly Chain Store Sales&nbsp;</td>
<td>483.4</td>
<td>482.0&nbsp;</td>
<td>2.5%&nbsp;</td>
<td>3.3%&nbsp;</td>
<td>3.6%</td>
<td>4.7%</td>
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The International Council of Shopping Centers (ICSC)-UBS survey reported that chain store sales increased 0.3% last week and made up the 0.3% decline during the week prior. Chain store sales this month are 0.2% ahead of the July [...]

U.S. Weekly Chain Store Sales Up, Gasoline Prices Down

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The Chicago Fed National Activity Index (CFNAI) rose to 0.18 in February from -0.08 in January, revised from -0.03, but stood below a reading of 0.34 in December, revised from 0.18, according to today’s report from the Federal Reserve Bank of Chicago.

The index's three-month moving average jumped to 0.15 last month from 0.07 in January and from -0.06 in December. It was the highest level since April 2022 and increased from a -0.25 low in November of last year. Research at the Chicago Fed indicates that an average reading of -0.70 or below is consistent with the economy being in a recession. The Diffusion Index, which measures the breadth of change in the component series, rose to 0.16 from 0.08 in January. It was increased from a low -0.28 in October.

The February index reflected positive readings in two of the four index components. The Production & Income index contributed 0.19 points to the overall index level after adding 0.02 points in January. It has been trending higher since -0.36 in July of last year. The contribution from the Employment, Unemployment & Hours series declined to 0.02 after surging to 0.08 in January. The contribution from the Personal Consumption & Housing index improved to -0.01 last month after falling sharply to -0.14 in January, which was the lowest reading since February 2021. Finally, the Sales, Orders & Inventories index contributed -0.01 point to the CFNAI in February, up from -0.04 in January.

The Chicago Fed indicated that forty-seven individual indicators made positive contributions to the CFNAI in February, while 38 made negative contributions. Fifty-one indicators improved from January to February, while 34 indicators deteriorated.

The CFNAI is a weighted average of 85 indicators of national economic activity. It is constructed to have an average value of zero and a standard deviation of one. Since economic activity tends toward trend growth rate over time, a positive index reading corresponds to growth above trend economic growth and a negative index reading corresponds to growth below trend.

These figures are available in Haver's **SURVEYS** database.

- Index recovers January’s decline. 
- Three-month average surges.
- Half of components rise.

Chicago Fed National Activity Index Rebounds in February

Tian Yong Woon

This week, we explore the growing impact of recent US policy moves—particularly President Trump’s “reciprocal” tariffs scheduled for April 2—with a spotlight on their implications for Asia. The effects of China’s retaliation to the US’s first round of 10% tariffs are already visible in the data (Chart 1). Similarly, in South Korea, the Biden administration’s tightening of chip export restrictions has likely contributed to a slump in the economy’s recent semiconductor exports to China (Chart 2). Despite these challenges, investor concerns about Trump’s upcoming "reciprocal" tariffs have been eased by reports suggesting they may not be a blanket measure, with certain economies potentially exempt. While the potential impact of these tariffs on Asia may initially seem significant, the effects are likely to be concentrated in a few economies, particularly India. This is mainly because, India still maintains one of the highest average tariff rates in the world (charts 3 and 4), despite progress in reducing tariffs over the years (Chart 5). In contrast, South Korea, though it has a relatively high average tariff rate, benefits from a very low effective tariff rate on US imports (Chart 6), thanks to its bilateral trade agreement with the US.

**Tariff effects on China**
Earlier, China responded to the US’s first round of 10% tariffs on Chinese imports by placing tariffs on certain energy products and large-engine cars from the US. The effects of these tariffs are already evident in the data, as shown in chart 1. Specifically, China’s imports of US cars have continued to decline sharply, and its imports of certain energy-related products have also decreased through the year so far. However, China’s overall imports from the US have increased on a year-over-year basis. Looking ahead, investors are likely focused on the impact of China’s second round of retaliatory tariffs, which mainly target US agricultural goods.

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**Initial impacts of US chip controls**
The impact of US actions extends beyond China in Asia, with tangible effects now beginning to surface in South Korea. Notably, South Korea’s semiconductor exports to China (including Hong Kong) dropped by an additional 31.8% y/y in February, worsening from the 22.5% decline recorded in January. This decline has contributed to a broader downturn in the country’s total semiconductor exports, which fell by 3% y/y, as illustrated in chart 2. However, it is important to note that the slump in South Korea’s semiconductor exports to China is not directly linked to the current US administration’s actions. Rather, it is likely a result of the tighter restrictions on chip-making equipment and semiconductor development software imposed by the Biden administration late last year, which came into effect this year.

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**Asia’s exposures to US “reciprocal” tariffs**
Looking ahead, investors are closely focused on April 2, the date when Trump has announced the implementation of what he calls "reciprocal" tariffs. While the initial scope of these tariffs was unclear, some additional clarity emerged recently. It now appears that the new tariffs will apply only to economies with which the US has a trade deficit and that currently impose tariffs on the US. With this new information, investors’ initial concerns about blanket tariffs on all foreign economies have likely been alleviated, although much uncertainty remains. Additionally, Trump seems to be delaying the sector-specific tariffs he had previously considered. Given these developments, the next question is which economies will be most impacted by the upcoming tariffs. To begin addressing this while focusing on Asia, we examine the tariff rates imposed by the US's trading partners, as shown in chart 3. The chart illustrates the weighted average most-favoured-nation (MFN) tariff rates. Several economies stand out, particularly India and South Korea, followed by Southeast Asian economies like the Philippines, Thailand, and Indonesia, albeit to a lesser extent.

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Diving deeper, we examine the actual product-weighted tariff rates of these economies, as shown in Chart 4. The data reveals that the actual weighted tariff rates are often significantly lower than the reported MFN rates, likely due to trade agreements (bilateral or multilateral) that have reduced or eliminated some tariffs. However, the actual average tariff rates for India and South Korea are not much lower than their respective MFN rates. This raises the question of why these two economies maintain relatively high tariff rates compared to other Asian economies, such as Singapore, which imposes almost no tariffs on imports on average. Furthermore, especially in the case of India, the economy meets two key conditions for Trump’s “reciprocal” tariffs. First, the US runs a substantial trade deficit with India. Second, India already imposes high tariffs on US goods. As a result, these factors make India particularly vulnerable to Trump’s "reciprocal" measures if the tariffs take effect on April 2.

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**Potential effects on India**
Starting with India, despite still having relatively high import tariffs, the economy has made significant progress in reducing them in recent decades. As shown in chart 5, India’s weighted average tariff rate was above 50% in 1990, but it gradually decreased to below 10% by the late 2000s. However, this rate crept back above 10% in 2022. Additionally, the share of tariff lines with international peaks — meaning the proportion of items in India’s tariff schedule with rates above 15% — has dropped significantly from nearly 100% in the 1990s and early 2000s. That said, it is worth noting that the share can be influenced by the inclusion of more items in the tariff schedule. Ahead of the looming April 2 tariffs, India has already taken steps to engage with the US, likely in an effort to reduce or avoid the impact of these trade actions. For instance, India’s Commerce Minister has visited the US twice to discuss a potential trade deal. India seems to be taking broader steps as well to spur trade, as it continues to pursue free trade agreements with both the UK and the EU.

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**Potential effects on South Korea**
Turning to South Korea, while its average tariff rate is relatively high, just below India’s, a closer look at its specific relationship with the US suggests that the "reciprocal" tariffs on South Korea could be more muted. This is due to South Korea’s very low effective tariff rate on US imports, which was below 1% in 2024, according to the South Korean government. The reason for this low rate is largely the United States-Korea Free Trade Agreement (KORUS FTA), which, since its implementation in 2012, has eliminated tariffs on most US imports. Despite this, in light of the potential April 2 tariffs, South Korea’s trade minister has already requested exemptions from the US’ "reciprocal" tariffs, and both countries have established a working-level channel to discuss tariff-related issues.

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Asia

Economic Letter from Asia: Reciprocity

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The Industrial Materials Price Index from the Foundation for International Business and Economic Research (FIBER) edged 0.1% higher (-0.4% y/y) during the four weeks ended March 21, 2025. The rate of price improvement, however, slowed considerably from its 1.8% four-week high at the end of February. The level of the index stood at its highest point since the second week of October 2024.

Prices in the Metals group increased 4.3% (11.3% y/y) over the most recent four weeks. Tin prices rose 7.8% (26.5% y/y) in four weeks while lead prices increased 5.6% (0.5% y/y) in four weeks. Steel scrap costs rose 5.0% (-1.6% y/y) in four weeks and copper scrap costs increased 4.8% (10.7% y/y). Zinc prices improved 2.9% in four weeks (17.3% y/y), while aluminum costs edged 0.3% higher (21.0% y/y) in four weeks.

Miscellaneous group prices improved 0.1% during the last four weeks and rose 0.6% y/y. Framing lumber prices jumped 7.5% over the last four weeks and increased 9.1% y/y. The price of natural rubber eased 0.6% (-7.7% y/y) while tallow prices fell 8.3% (+17.9% y/y) in four weeks.

Textile group prices eased 0.4% (-3.7% y/y) during the last four weeks. Burlap costs slipped 0.3% but rose (+13.4% y/y). The cost of cotton fell 2.5% (-27.7% y/y) in the latest four weeks.

Prices in the Crude Oil & Benzene group declined 6.2% (-15.6% y/y) in four weeks. The cost of West Texas Intermediate crude oil slumped 6.2% to $67.37 per barrel and was 17.7% lower y/y. The cost of the petro-chemical benzene, used for making plastics & synthetic fibers, weakened 18.7% (-39.0% y/y) in the last four weeks. Excluding crude oil, the industrial commodity price index rose 0.5% (0.7% y/y) during the last four weeks.

The Foundation for International Business and Economic Research (FIBER) develops economic measurement techniques as applied to business cycles and inflation in the U.S. and other market economies. The commodity price data can be found in Haver's **DAILY**, **WEEKLY**, **USECON** and **CMDTY** databases.

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- Metals prices surge.
- Lumber prices strengthen.
- Crude oil costs decline.

FIBER: Industrial Commodity Prices Are Little Changed in Latest Four Weeks

Robert Brusca

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The INSEE industry climate index settled lower in March at 95.9, down from 97.0 in February. The index is lower than its year-ago value of 102.1 and since 2001 it has been this low or lower only 7.5% of the time. Despite the sense of some stability in manufacturing in the tabular data for the last year, the chart (of data since 2014) and the table’s own presentation of the queue standing reveals manufacturing to be at a relative weak standing in March.

Manufacturing production expectations have a 34.4 percentile standing but did improve slightly from the February reading of -14.8. The recent trend of production weakens on the month to a lower quartile standing at its 23.7 percentile. The personal likely trend, which is the reading for each respondent gives to the prospects for his own industry, ticked higher in March to a 40.5 percentile standing. That is better than the percentile for industry over all but still below the level that marks the historic median – a standing at the 50th percentile.

Orders and demand as well as foreign orders and demand each weakened. They each have standing at or below their respective 20th percentile around the lower one-fifth of all historic readings. In addition, the March reading for orders and demand are substantially weaker than they were a year ago and the slippage has been worse for foreign orders.

In contrast, inventory level show few changes and are similar to their year-ago readings and close to their historic median.

Prices have moved to lower readings in recent months. However, price trends and level readings are higher than they were a year ago. In terms of rankings, the own likely price trend is at a 61.5 percentile standing, above its historic median while the manufacturing price level has a relatively weak 36.1 percentile standing.

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**INSEE on services**
The services climate readings show a very slight easing in recent months and more significant drop from a year ago. The smoothed data echo a modest ongoing slippage. All the rankings are in their respective lower one-third of historic observations.

The outlook improved to -6 in March from -8 in February. It is unchanged over 12 months. Its historic ranking is at this 44th percentile, modestly below its historic median.

Observed and expected services sales trend weakened in March; both are weaker on balance than one-year ago. And both are weak with historic queue standings that are in their bottom 25-percentiles.

Sales prices strengthened in March to zero. But these are weaker readings than one year ago and yet are queue percentile standings that rank above their historic medians, 66.3 percentile for the observed trend, and 54.6 percentile for the expected trend.

Employment strengthened both as observed and expected in March, but readings are still weaker than one-year ago. And they are below their historic means and medians. Employment ranks in its 28.2 percentile as observed and weaker in its 9.5 percentile as expected.

The chart at the top of this report shows the downtrend in place for both services and manufacturing. While services are stronger on balance and weakening less than manufacturing, both sectors are skidding.

However, European analysis requires some perspective since military spending is ramping up in the wake of the U.S. trying to put more of the burden for European defense on Europe. Germany is stepping up military spending and much of the rest of Europe should follow suit. That should also break European trends up to better performance and away from existing stagnant or deteriorating trends, making past trends less important as determinants of future results. We should begin to see wider separation in surveys like these that give results for the observed trend and the expected trend separately.

U.S. Weekly Chain Store Sales Up, Gasoline Prices Down

Summary

Tom Moeller

More Economy in Brief

Chicago Fed National Activity Index Rebounds in February

Economic Letter from Asia: Reciprocity

FIBER: Industrial Commodity Prices Are Little Changed in Latest Four Weeks

INSEE Manufacturing and Services Steady-to-Weaker