Haver Analytics
Haver Analytics

Economy in Brief

  • Drop in leading index follows first rise in two years.
  • Coincident Indicators exhibit strength.
  • Lagging index holds steady after two monthly increases.

More Commentaries

  • Registrations for cars in Europe for March fell by 8.8% month-to-month after falling by 1% in February. January, however, had been a strong month for registrations in Europe. The sequential trends are mixed and do not show a clear way forward. The 12-month change in sales/registrations falls 4.7%. Over six months registrations fall harder at an 11.9% annual rate, but then over three months registrations gain at a 7% annual rate. These data are prone to volatility. To adjust for that, I execute the same calculations on three-month average data to smooth out the volatility and let the trend shine through. Unfortunately, this procedure still does not produce a clearer picture of trend.

    Chart 1, executed on year-over-year growth rates, shows registrations gradually losing momentum among reporting countries. Sequential growth rates across countries finds Germany and Spain with accelerating sales/registrations. France and Itay with fairly clear trends showing decelerating sales. Meanwhile, the U.K. trend shows confusion with no clear pattern emerging.

    Looking very broadly, all reporting countries show registrations lower in March everywhere except for France, in 2024 compared to January 2020 before Covid struck. France is the lone exception that shows registrations in March higher by just 2.2% than they were over four years ago. That is not exactly a stunning success.

  • Investors have grown increasingly cautious about the economic outlook in recent days, partly thanks to heightened geopolitical instability in the Middle East. That Fed Chair Powell has also expressed greater concern about the US inflation outlook has not helped, not least as higher oil prices (and the resilience of the US economy) had already been unsettling investors’ inflation expectations. The timing of this week’s publication of a more optimistic economic outlook from the IMF (see chart 1) also appears a little unfortunate. The extent to which those forecasts may be jeopardized will arguably now hinge on the interplay between geopolitical instability, oil prices, inflation and monetary policy (see charts 2, 3, 4 and 5). It is noteworthy, nevertheless, and against these considerations, that China’s economy has also been punching more positively according to some additional data that were published this week (see chart 6).

    • Applications surge in second week of April.
    • Purchase applications jump while refinance applications rise modestly.
    • Interest rates rise markedly.
  • When the Music Stopped, or at Least the Inflation Progress... U.K. inflation on the HICP measure eased to 0.4% in March from 0.5% in February. The month-to-month CPIH measure also rose by 0.4% from 0.5% in February. The CPIH excluding food, energy, alcohol, and tobacco rose by 0.4%, the same as in February. The Bank of England looks at several inflation gauges; it targets HICP, which rose 3.2% year-over-year in March and slowed slightly from its year-over-year pace of 3.4% a month ago. The HICP steps inflation down to 2.7% over six months but then inflation rises at a 3.9% annual rate over three months, not what the Bank of England was looking or hoping for. The CPIH is 3.7% year-over-year, down to 3.3% at an annual rate over six months and up to an even worse 4.4% over three months. The core CPIH that excludes food, energy, alcohol, and tobacco, pretty much all things necessary or fun in life, rose by 4.7% over 12 months, cooled to 3.7% over six months, but then ticked up to 3.8% at an annual rate over three months.

    Inflation makes progress, but not reliably enough The bottom line is that inflation, as represented by either six-month or three-month inflation rates, is generally lower than it was over 12 months ago, indicating ongoing progress on the inflation front. However, the progress isn't as substantial as the Bank of England would like to see; there's some backtracking over three months compared to six months that's not what monetary policy is looking for to gain confidence that inflation will continue to fall toward target.

    Diffusion results are mixed Sequential diffusion- Diffusion calculations applied to the categories in the table showed an inflation over 12 months that exhibits diffusion of 23% compared to inflation rates of 12-months ago. The diffusion measure is the percentage of categories where inflation is accelerating period-to-period. Over six months, diffusion falls to 7.7%. HICP inflation on that comparison fell to 2.7% from 3.2%. The diffusion calculation comes from comparing the inflation rate in each category over six months to the same category over 12 months. If the inflation rate is higher over six months than over 12 months, we count it as acceleration. Acceleration was quite rare over six months, occurring only for housing and household expenditures. However, over three months with the HICP rising to 3.9% compared to 2.7% over six months, diffusion jumped from 7.7% to 61.5%. Being above 50% is critical because it means inflation is accelerating in more categories than it is decelerating and that tends to add more authenticity to the acceleration of inflation over three months. It tells us that the acceleration was not just because of a few rogue categories or several large increases in categories that had a high weight, but rather it's something that's broad-based.

    Monthly diffusion- Monthly data are more lenient on the diffusion front. In March diffusion is only 38.5% with the month-to-month gain of 0.4%, below a 0.5% rise in February. Inflation is accelerating in March in only 38.5% of the categories. However, in February inflation rose 0.5% compared to 0.1% in January and inflation accelerated in 61.5% of the categories, clearly over half of them. In January with that low inflation print of 0.1%, inflation accelerated in only 30.8% of the categories. Over the last three months, the diffusion data were quite good for two months and moderately bad for one of them. However, when we go back to the table to look at the three-month changes compared to six-month changes, the BOE has that high 61.5% diffusion number staring us in the face.

    • Rise in production follows upward revision to February gain.
    • Factory output improves moderately; utilities production increases.
    • Capacity utilization edges higher.
    • Single-family and multi-family starts reverse February gains.
    • Starts decline throughout most of the country.
    • Building permits fall to eight-month low.
  • The ZEW survey improved as U.S., German and EMU current conditions and macroeconomic expectations (where surveyed) all increased on a month-to-month basis.

    Table 1 summarizes the shift with the TEXT reflecting month-to-month changes. On that basis, there were improvements (increased strength) in 15 of 16 surveyed metrics. However, the text COLOR reflects the relative value of the underlying queue ranking series. Only two queue rankings in the table, the U.S. economic situation and German economic expectations in April are above their respective historic medians on data back to 1992 (and, hence, print black in the table). This means most series are still quite weak and, while improving month-to-month, still emerging from sub-normal conditions.

    • Surge in core sales is led by nonstore retailers.
    • Vehicle sales decline.
    • Gasoline sales jump with higher prices.