Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061107e.jpg" width="353">
By the many measures of family living expenditures the Ministry of Internal Affairs and Communications publishes, Japanese families have been reducing their living expenditures. The index of living expenditures for all households in Japan declined 2.8% in September. Those of worker households declined 3.35%. On seasonally adjusted bases, all households reduced spending on average in September by 1.97% in real terms and 2.16% in nominal terms.Comparable declines for the worker households were 2.42% and 2.32%. The September declines have, in most cases followed declines in August and July. The first chart showing the seasonally adjusted real living expenditure by all households is illustrative of declines in the various measures of household living expenditures over the recent quarter. In addition to the various indexes, data in yen are also available.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061107g.jpg" width="353">
The seasonally unadjusted data give details of the composition of expenditures. For example, in September, expenditures on food, fuel, light and water charges, medical care, education and culture all rose while expenditures on housing, furniture and household utensils, clothing and foot ware, transportation and communication and miscellaneous all declined. The second chart shows expenditures on medical care and transportation,<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061107h.jpg" width="353">
In addition to the seasonally adjusted data on expenditures, data are also available on income, disposable income and the propensity to consume. The propensity to consume for all households increased in August and September, in spite of the decline in expenditures since the decline in disposable income was greater than the decline in living expenditures. Even with the rise, the propensity to consume is still at a historically low level as can be seen in the third chart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061107f.jpg" width="353">
One would think that the living expenditure series might be a good indicator of consumer spending in the national accounts. The relationship, however, appears tenuous as can be seen in the fourth chart that compares the seasonally adjusted real living expenditures of all households with final consumption expenditures in GDP. Nevertheless, the recent trend in the real living expenditures looks ominous. (To compare the two series, we aggregated the monthly data of the living expenditure series on a quarterly basis and we put the Consumption data on an index with the same basis--(2005=100)--as the living expenditure series.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/JAPAN/@J8/@J808/@J808.HTM">Japan:&nbsp; Family Living Expenditures (2005=100)</a></th>
<th scope="col">Sep 06</th>
<th scope="col">Aug 06</th>
<th scope="col">Sep 05</th>
<th scope="col">M/M %</th>
<th scope="col">Y/Y %</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">All Households NSA </td>
<td>94.0</td>
<td>96.7</td>
<td>100.3</td>
<td>-2.79</td>
<td>-6.28</td>
<td>100.0</td>
<td>100.1</td>
<td>99.6</td>
</tr>
<tr>
<td class="firstcol">Worker Households&nbsp;NSA</td>
<td>92.3</td>
<td>95.5</td>
<td>99.2</td>
<td>-3.35</td>
<td>-6.96</td>
<td>100.0</td>
<td>99.8</td>
<td>98.5</td>
</tr>
<tr class="odd">
<td class="firstcol"> All Household SA </td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Real</td>
<td>94.5</td>
<td>96.4</td>
<td>100.5</td>
<td>-1.97</td>
<td>-5.97</td>
<td>100.0</td>
<td>100.5</td>
<td>100.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Nominal</td>
<td>95.2</td>
<td>97.3</td>
<td>100.5</td>
<td>-2.16</td>
<td>-5.27</td>
<td>100.0</td>
<td>100.8</td>
<td>100.4</td>
</tr>
<tr>
<td class="firstcol"> Worker Household SA </td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Real</td>
<td>92.7</td>
<td>94.9</td>
<td>99.3</td>
<td>-2.32</td>
<td>-6.65</td>
<td>100.0</td>
<td>100.3</td>
<td>98.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Nominal</td>
<td>93.2</td>
<td>95.5</td>
<td>99.1</td>
<td>-2.41</td>
<td>-5.95</td>
<td>100.0</td>
<td>100.7</td>
<td>99.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Propensity to Consume All HH (Nominal SA)(%)</td>
<td>70.3</td>
<td>69.8</td>
<td>74.7</td>
<td>0.5*</td>
<td>-4.4*</td>
<td>74.5</td>
<td>74.1</td>
<td>74.0</td>
</tr>
</tbody>
</table>
</body>
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By the many measures of family living expenditures the Ministry of Internal Affairs and Communications publishes, Japanese families have been reducing their living expenditures. The index of living expenditures for all households in [...]

Japanese Household Living Expenditures Decline Sharply: Implications for 3rd Q GDP?

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061107a.jpg" width="353">
 Retail prices for a gallon of regular unleaded gasoline drifted two cents lower last week to an average $2.20. On average during October, gasoline averaged $2.25 per gallon.
The spot market (NY harbor) price for a gallon of regular gasoline rose two cents yesterday to $1.53 versus an average $1.51 last week.
Oil prices have been rising recently with WTI Crude at $60.03 (0.9% y/y) yesterday, up from $58.88 averaged during October.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061107b.jpg" width="353">
Natural gas prices eased d/d yesterday to $6.75 per mmbtu (-24.0% y/y) but the Henry Hub price still was up from an average of $5.77 in October and $4.90 during September.
The Department of Energy reported that gasoline demand during the latest four weeks rose 5.0% from the year earlier period. That increase, however, understated the appetite for gasoline according to estimated figures from the Oil &amp; Gas Journal which indicated a 15.5% rise. These figures are available in the Haver OILWKLY database.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061107c.jpg" width="353">
The latest Short-Term Energy Outlook from the U.S. Energy Information Administration is available <a href="http://www.eia.doe.gov/emeu/steo/pub/contents.html">here</a>.
Oil Prices and the U.S. Trade Deficit from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2006/el2006-24.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">Weekly Energy Prices</a></th>
<th scope="col">11/06/06</th>
<th scope="col">10/30/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">US Retail Gasoline Price, Regular</td>
<td>$2.20</td>
<td>$2.22</td>
<td>-7.4%</td>
<td>$2.27</td>
<td>$1.85</td>
<td>$1.56</td>
</tr>
</tbody>
</table>


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Retail prices for a gallon of regular unleaded gasoline drifted two cents lower last week to an average $2.20. On average during October, gasoline averaged $2.25 per gallon. The spot market (NY harbor) price for a gallon of regular [...]

Gasoline Prices Drift Lower

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061107d.jpg" width="353">
Chain store sales last week recovered much of the declines during the prior two weeks with a 1.0% gain, according to the International Council of Shopping Centers (ICSC)-UBS. That pulled the opening level of sales in November 0.4% higher than the October average which fell 0.7% from September.
During the last ten years there has been a 45% correlation between the y/y change in chain store sales and the change in nonauto 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.
The leading indicator of chain store sales from ICSC-UBS fell 0.4% (+0.2% y/y) last week after an unchanged reading the prior period.
A Theory of Political Cycles from the Federal Reserve Bank of Richmond can be found <a href="http://www.richmondfed.org/publications/economic_research/working_papers/pdfs/wp05-4.pdf"> here</a>.
Politics and Exchange Rate Forecasts from the Federal Reserve Bank of Kansas City is available <a href="http://www.kc.frb.org/publicat/reswkpap/rwp96-02.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">11/04/06</th>
<th scope="col">10/28/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>466.4</td>
<td>461.8</td>
<td>2.3%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>


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Chain store sales last week recovered much of the declines during the prior two weeks with a 1.0% gain, according to the International Council of Shopping Centers (ICSC)-UBS. That pulled the opening level of sales in November 0.4% [...]

Chain Store Sales Recover

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061107d.jpg" width="353">
Chain store sales last week recovered much of the declines during the prior two weeks with a 1.0% gain, according to the International Council of Shopping Centers (ICSC)-UBS. That pulled the opening level of sales in November 0.4% higher than the October average which fell 0.7% from September.
During the last ten years there has been a 45% correlation between the y/y change in chain store sales and the change in nonauto 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.
The leading indicator of chain store sales from ICSC-UBS fell 0.4% (+0.2% y/y) last week after an unchanged reading the prior period.
A Theory of Political Cycles from the Federal Reserve Bank of Richmond can be found <a href="http://www.richmondfed.org/publications/economic_research/working_papers/pdfs/wp05-4.pdf"> here</a>.
Politics and Exchange Rate Forecasts from the Federal Reserve Bank of Kansas City is available <a href="http://www.kc.frb.org/publicat/reswkpap/rwp96-02.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">11/04/06</th>
<th scope="col">10/28/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>466.4</td>
<td>461.8</td>
<td>2.3%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>
Gasoline Prices Drift Lower 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 7, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061107a.jpg" width="353">
 Retail prices for a gallon of regular unleaded gasoline drifted two cents lower last week to an average $2.20. On average during October, gasoline averaged $2.25 per gallon.
The spot market (NY harbor) price for a gallon of regular gasoline rose two cents yesterday to $1.53 versus an average $1.51 last week.
Oil prices have been rising recently with WTI Crude at $60.03 (0.9% y/y) yesterday, up from $58.88 averaged during October.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061107b.jpg" width="353">
Natural gas prices eased d/d yesterday to $6.75 per mmbtu (-24.0% y/y) but the Henry Hub price still was up from an average of $5.77 in October and $4.90 during September.
The Department of Energy reported that gasoline demand during the latest four weeks rose 5.0% from the year earlier period. That increase, however, understated the appetite for gasoline according to estimated figures from the Oil &amp; Gas Journal which indicated a 15.5% rise. These figures are available in the Haver OILWKLY database.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061107c.jpg" width="353">
The latest Short-Term Energy Outlook from the U.S. Energy Information Administration is available <a href="http://www.eia.doe.gov/emeu/steo/pub/contents.html">here</a>.
Oil Prices and the U.S. Trade Deficit from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2006/el2006-24.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">Weekly Energy Prices</a></th>
<th scope="col">11/06/06</th>
<th scope="col">10/30/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">US Retail Gasoline Price, Regular</td>
<td>$2.20</td>
<td>$2.22</td>
<td>-7.4%</td>
<td>$2.27</td>
<td>$1.85</td>
<td>$1.56</td>
</tr>
</tbody>
</table>
  Japanese Household Living Expenditures Decline Sharply:  Implications for 3rd Q GDP? 
by <a href="/comment/Curley.html">Louise Curley</a> November 7, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061107e.jpg" width="353">
By the many measures of family living expenditures the Ministry of Internal Affairs and Communications publishes, Japanese families have been reducing their living expenditures. The index of living expenditures for all households in Japan declined 2.8% in September. Those of worker households declined 3.35%. On seasonally adjusted bases, all households reduced spending on average in September by 1.97% in real terms and 2.16% in nominal terms.Comparable declines for the worker households were 2.42% and 2.32%. The September declines have, in most cases followed declines in August and July. The first chart showing the seasonally adjusted real living expenditure by all households is illustrative of declines in the various measures of household living expenditures over the recent quarter. In addition to the various indexes, data in yen are also available.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061107g.jpg" width="353">
The seasonally unadjusted data give details of the composition of expenditures. For example, in September, expenditures on food, fuel, light and water charges, medical care, education and culture all rose while expenditures on housing, furniture and household utensils, clothing and foot ware, transportation and communication and miscellaneous all declined. The second chart shows expenditures on medical care and transportation,<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061107h.jpg" width="353">
In addition to the seasonally adjusted data on expenditures, data are also available on income, disposable income and the propensity to consume. The propensity to consume for all households increased in August and September, in spite of the decline in expenditures since the decline in disposable income was greater than the decline in living expenditures. Even with the rise, the propensity to consume is still at a historically low level as can be seen in the third chart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061107f.jpg" width="353">
One would think that the living expenditure series might be a good indicator of consumer spending in the national accounts. The relationship, however, appears tenuous as can be seen in the fourth chart that compares the seasonally adjusted real living expenditures of all households with final consumption expenditures in GDP. Nevertheless, the recent trend in the real living expenditures looks ominous. (To compare the two series, we aggregated the monthly data of the living expenditure series on a quarterly basis and we put the Consumption data on an index with the same basis--(2005=100)--as the living expenditure series.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/JAPAN/@J8/@J808/@J808.HTM">Japan:&nbsp; Family Living Expenditures (2005=100)</a></th>
<th scope="col">Sep 06</th>
<th scope="col">Aug 06</th>
<th scope="col">Sep 05</th>
<th scope="col">M/M %</th>
<th scope="col">Y/Y %</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">All Households NSA </td>
<td>94.0</td>
<td>96.7</td>
<td>100.3</td>
<td>-2.79</td>
<td>-6.28</td>
<td>100.0</td>
<td>100.1</td>
<td>99.6</td>
</tr>
<tr>
<td class="firstcol">Worker Households&nbsp;NSA</td>
<td>92.3</td>
<td>95.5</td>
<td>99.2</td>
<td>-3.35</td>
<td>-6.96</td>
<td>100.0</td>
<td>99.8</td>
<td>98.5</td>
</tr>
<tr class="odd">
<td class="firstcol"> All Household SA </td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Real</td>
<td>94.5</td>
<td>96.4</td>
<td>100.5</td>
<td>-1.97</td>
<td>-5.97</td>
<td>100.0</td>
<td>100.5</td>
<td>100.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Nominal</td>
<td>95.2</td>
<td>97.3</td>
<td>100.5</td>
<td>-2.16</td>
<td>-5.27</td>
<td>100.0</td>
<td>100.8</td>
<td>100.4</td>
</tr>
<tr>
<td class="firstcol"> Worker Household SA </td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Real</td>
<td>92.7</td>
<td>94.9</td>
<td>99.3</td>
<td>-2.32</td>
<td>-6.65</td>
<td>100.0</td>
<td>100.3</td>
<td>98.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Nominal</td>
<td>93.2</td>
<td>95.5</td>
<td>99.1</td>
<td>-2.41</td>
<td>-5.95</td>
<td>100.0</td>
<td>100.7</td>
<td>99.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Propensity to Consume All HH (Nominal SA)(%)</td>
<td>70.3</td>
<td>69.8</td>
<td>74.7</td>
<td>0.5*</td>
<td>-4.4*</td>
<td>74.5</td>
<td>74.1</td>
<td>74.0</td>
</tr>
</tbody>
</table>


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<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061106c.jpg" width="353">
September manufacturing sales and new orders for Germany were released today. Sales increased 0.17% from August but were almost 6% above September, 2005. New orders, however, fell 2.5% in September, although they were 9.6% above a year ago. The decline in new orders was attributable to foreign orders which declined 6.2% in the month. Domestic order actually increased 1.5%. Both sales and new orders--domestic and foreign--are well above year ago levels.
New orders tend to be erratic, as a result, a change in one month&#39;s orders may not be indicative. If we take a three month moving average of the data, a smoother picture emerges. The first chart compares the actual new orders with the three month moving average. The three month moving average in September shows a 1.1% gain over the August value. In the second chart, which shows domestic and foreign new orders on a three month moving average basis, foreign new orders are virtually unchanged in September and domestic orders are somewhat better.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061106d.jpg" width="353">
The NTC Economics Ltd&#39;s Purchasing Managers&#39; Survey for manufacturing in German is suggesting some cooling. The diffusion indexes continue well above the 50 mark, that is indicative of increased activity, but in several indices, the October values are below the September values. The overall index for manufacturing is 58.32 for October, compared to 58.54 in September. Comparable data for the new orders index are 59.84 and 60.09; for export new orders, 56.26 and 57.09 respectively.
Deceleration in growth is not unusual after the good expansion Germany manufacturing has experienced since the beginning of 2005.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/GERMANY/@D6/@D64/@D64.HTM">Germany</a></th>
<th scope="col">Sep 06</th>
<th scope="col">Aug 06</th>
<th scope="col">Sep 05</th>
<th scope="col">M/M %</th>
<th scope="col">Y/Y %</th>
<th scope="col">2005 %</th>
<th scope="col">2004 %</th>
<th scope="col">2003&nbsp; %</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Manufacturing&nbsp; (2000=100)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Sales&nbsp;</td>
<td>115.1</td>
<td>114.9</td>
<td>108.6</td>
<td>0.17</td>
<td>5.99</td>
<td>3.27</td>
<td>3.92</td>
<td>-0.48</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; New Orders&nbsp;</td>
<td>121.5</td>
<td>124.6</td>
<td>110.5</td>
<td>-2.43</td>
<td>9.56</td>
<td>5.27</td>
<td>5.56</td>
<td>0.59</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Domestic</td>
<td>110.3</td>
<td>108.7</td>
<td>99.5</td>
<td>1.47</td>
<td>10.85</td>
<td>2.01</td>
<td>3.11</td>
<td>-0.12</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Foreign</td>
<td>135.6</td>
<td>144.4</td>
<td>125.2</td>
<td>-6.23</td>
<td>8.15</td>
<td>8.80</td>
<td>8.29</td>
<td>1.94</td>
</tr>
<tr>
<td class="firstcol">3 Month&nbsp; Moving Averages</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Total New Orders</td>
<td>122.1</td>
<td>120.8</td>
<td>110.1</td>
<td>1.08</td>
<td>10.90</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Domestic</td>
<td>108.1</td>
<td>106.0</td>
<td>100.9</td>
<td>1.98</td>
<td>7.14</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Foreign</td>
<td>139.5</td>
<td>139.3</td>
<td>123.9</td>
<td>0.14</td>
<td>12.59</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
</body>
</html>

September manufacturing sales and new orders for Germany were released today. Sales increased 0.17% from August but were almost 6% above September, 2005. New orders, however, fell 2.5% in September, although they were 9.6% above a [...]

Sales and New Orders and NTC's PMI Suggest Manufacturing in Germany Is Decelerating

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061106a.jpg" width="353">
The 3Q &#39;06 Composite Business Index published by the Manufacturers&#39; Alliance/MAPI fell for the second quarter to 64 from 71 the prior quarter. The figure was at the lowest level since the second quarter of 2003.
During the last ten years there has been a 69% correlation between the Composite Index Level and quarterly growth in US factory sector output.
The current orders index fell to 77 from 81 in 2Q and that was the lowest since late 2003. The 3Q export orders index, however, improved moderately to 75. During the last ten years there has been a 59% correlation between the export orders index and quarterly growth in real US exports.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061106b.jpg" width="353">
The profit margins index improved slightly to 75 from 74 in 2Q and so far in 2006 the quarters have averaged 77 versus an average 65 last year.Capital spending intentions for the coming year fell sharply 56 from the record high 86 in 2Q. During the last ten years there has been a 75% correlation between the capital spending index a q/q growth in business investment.
The survey of 60 senior financial executives representing a broad range of manufacturing industries reflects the views on current &amp; future business conditions. The business outlook index is a weighted sum of shipments, backlogs, inventories, and profit margin indexes.
For the latest US Business Outlook from the MAPI click <a href="http://www.mapi.net/html/prelease.cfm?release_id=2316">here</a>.
Confessions of a Data Dependent are Dallas Federal Reserve Bank President Richard W. Fisher Remarks before the New York Association for Business Economics and they are available <a href="http://dallasfed.org/news/speeches/fisher/2006/fs061102.cfm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveys/@SE/@SE.HTM">Manufacturers&#39; Alliance/MAPI Survey</a></th>
<th scope="col">3Q &#39;06</th>
<th scope="col">2Q &#39;06</th>
<th scope="col">3Q &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Business Index</td>
<td>64</td>
<td>71</td>
<td>66</td>
<td>70</td>
<td>76</td>
<td>67</td>
</tr>
</tbody>
</table>
</body>
</html>

The 3Q '06 Composite Business Index published by the Manufacturers' Alliance/MAPI fell for the second quarter to 64 from 71 the prior quarter. The figure was at the lowest level since the second quarter of 2003. During the last ten [...]

MAPI Business Outlook Survey Off Further

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061106a.jpg" width="353">
The 3Q &#39;06 Composite Business Index published by the Manufacturers&#39; Alliance/MAPI fell for the second quarter to 64 from 71 the prior quarter. The figure was at the lowest level since the second quarter of 2003.
During the last ten years there has been a 69% correlation between the Composite Index Level and quarterly growth in US factory sector output.
The current orders index fell to 77 from 81 in 2Q and that was the lowest since late 2003. The 3Q export orders index, however, improved moderately to 75. During the last ten years there has been a 59% correlation between the export orders index and quarterly growth in real US exports.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061106b.jpg" width="353">
The profit margins index improved slightly to 75 from 74 in 2Q and so far in 2006 the quarters have averaged 77 versus an average 65 last year.Capital spending intentions for the coming year fell sharply 56 from the record high 86 in 2Q. During the last ten years there has been a 75% correlation between the capital spending index a q/q growth in business investment.
The survey of 60 senior financial executives representing a broad range of manufacturing industries reflects the views on current &amp; future business conditions. The business outlook index is a weighted sum of shipments, backlogs, inventories, and profit margin indexes.
For the latest US Business Outlook from the MAPI click <a href="http://www.mapi.net/html/prelease.cfm?release_id=2316">here</a>.
Confessions of a Data Dependent are Dallas Federal Reserve Bank President Richard W. Fisher Remarks before the New York Association for Business Economics and they are available <a href="http://dallasfed.org/news/speeches/fisher/2006/fs061102.cfm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveys/@SE/@SE.HTM">Manufacturers&#39; Alliance/MAPI Survey</a></th>
<th scope="col">3Q &#39;06</th>
<th scope="col">2Q &#39;06</th>
<th scope="col">3Q &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Business Index</td>
<td>64</td>
<td>71</td>
<td>66</td>
<td>70</td>
<td>76</td>
<td>67</td>
</tr>
</tbody>
</table>
 Sales and New Orders and NTC's PMI Suggest Manufacturing in Germany Is Decelerating   
by <a href="/comment/Curley.html">Louise Curley</a> November 6, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061106c.jpg" width="353">
September manufacturing sales and new orders for Germany were released today. Sales increased 0.17% from August but were almost 6% above September, 2005. New orders, however, fell 2.5% in September, although they were 9.6% above a year ago. The decline in new orders was attributable to foreign orders which declined 6.2% in the month. Domestic order actually increased 1.5%. Both sales and new orders--domestic and foreign--are well above year ago levels.
New orders tend to be erratic, as a result, a change in one month&#39;s orders may not be indicative. If we take a three month moving average of the data, a smoother picture emerges. The first chart compares the actual new orders with the three month moving average. The three month moving average in September shows a 1.1% gain over the August value. In the second chart, which shows domestic and foreign new orders on a three month moving average basis, foreign new orders are virtually unchanged in September and domestic orders are somewhat better.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061106d.jpg" width="353">
The NTC Economics Ltd&#39;s Purchasing Managers&#39; Survey for manufacturing in German is suggesting some cooling. The diffusion indexes continue well above the 50 mark, that is indicative of increased activity, but in several indices, the October values are below the September values. The overall index for manufacturing is 58.32 for October, compared to 58.54 in September. Comparable data for the new orders index are 59.84 and 60.09; for export new orders, 56.26 and 57.09 respectively.
Deceleration in growth is not unusual after the good expansion Germany manufacturing has experienced since the beginning of 2005.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/GERMANY/@D6/@D64/@D64.HTM">Germany</a></th>
<th scope="col">Sep 06</th>
<th scope="col">Aug 06</th>
<th scope="col">Sep 05</th>
<th scope="col">M/M %</th>
<th scope="col">Y/Y %</th>
<th scope="col">2005 %</th>
<th scope="col">2004 %</th>
<th scope="col">2003&nbsp; %</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Manufacturing&nbsp; (2000=100)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Sales&nbsp;</td>
<td>115.1</td>
<td>114.9</td>
<td>108.6</td>
<td>0.17</td>
<td>5.99</td>
<td>3.27</td>
<td>3.92</td>
<td>-0.48</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; New Orders&nbsp;</td>
<td>121.5</td>
<td>124.6</td>
<td>110.5</td>
<td>-2.43</td>
<td>9.56</td>
<td>5.27</td>
<td>5.56</td>
<td>0.59</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Domestic</td>
<td>110.3</td>
<td>108.7</td>
<td>99.5</td>
<td>1.47</td>
<td>10.85</td>
<td>2.01</td>
<td>3.11</td>
<td>-0.12</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Foreign</td>
<td>135.6</td>
<td>144.4</td>
<td>125.2</td>
<td>-6.23</td>
<td>8.15</td>
<td>8.80</td>
<td>8.29</td>
<td>1.94</td>
</tr>
<tr>
<td class="firstcol">3 Month&nbsp; Moving Averages</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Total New Orders</td>
<td>122.1</td>
<td>120.8</td>
<td>110.1</td>
<td>1.08</td>
<td>10.90</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Domestic</td>
<td>108.1</td>
<td>106.0</td>
<td>100.9</td>
<td>1.98</td>
<td>7.14</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Foreign</td>
<td>139.5</td>
<td>139.3</td>
<td>123.9</td>
<td>0.14</td>
<td>12.59</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
</body>
</html>

MAPI Business Outlook Survey Off FurtherĀĀ

Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061103f.jpg" width="353">
Canadian labor markets seem to be staging a comeback after something of a sinking spell during the summer. In October data reported this morning by StatCan, employment gained by 50,500 and the unemployment rate fell to 6.2%, the lowest since 6.1% in May and June.
Back in September we were puzzled about whether recent months&#39; job losses were a sign of sagging activity, or merely a correction after an outsized rise in May. After two months of increases, we probably can conclude that the latter is the more valid conclusion. In October, at 16,555,500, employment in Canada reached a new high.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061103g.jpg" width="353">
Further, the downtrend we thought we were seeing in the goods-producing sector may also be &quot;just a phase&quot;. September and October had gains of 18,000 and 9,000, respectively, in construction, mining and utilities. We&#39;d attribute these increases to added supply efforts in Canada&#39;s energy production. It is still the case that manufacturing jobs are declining.
Service industries have mixed performances. Some, like finance, business support services and accommodation and food services, are growing vigorously. But others, including professional and technical activities and information services, are waffling after extended uptrends. The service sector as a whole is gaining, but the sources of growth seem to be different most every month.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061103h.jpg" width="353">
The unemployment rate fell 0.2 point in October. Not all of that move represents good news, though. Along with the employment growth, the number of people in the labor force flattened out. The so-called participation rate, the labor force as a portion of the population over age 15, has edged lower, reaching 67.08%, the lowest since February&#39;s 67.02%; this rate peaked at 67.34% in July. These may look like small differences, but in Canada, each 0.1% in the participation rate represents about 26,000 people who are seeking work or deciding not to seek work. All these caveats aside, the decline in the unemployment rate obviously contains more good news than bad, and we are encouraged by the October labor data, which indeed seem to confirm that the declines in the summer were perhaps a &quot;vacation&quot; and labor markets have picked up once again.
These national Canadian data are contained in Haver&#39;s CANSIM database. Some detail is also available for the Provinces; those data are in CANSIMR.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/CANSIM/@C6/@C6.HTM">Canada&nbsp;</a> (Seasonally Adjusted)</th>
<th scope="col">Oct 2006</th>
<th scope="col">Sept 2006</th>
<th scope="col">Aug 2006</th>
<th scope="col">Year Ago</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Employment (000s)</td>
<td>16,555</td>
<td>16,505</td>
<td>16,488</td>
<td>16,268</td>
<td>16,169</td>
<td>15,949</td>
<td>15,672</td>
</tr>
<tr>
<td class="firstcol">Change, 000s/%</td>
<td>+50</td>
<td>+16</td>
<td>-16</td>
<td>1.8%</td>
<td>1.4%</td>
<td>1.8%</td>
<td>2.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Goods-Producing </td>
<td>+9</td>
<td>+18</td>
<td>-18</td>
<td>-0.4%</td>
<td>0.2%</td>
<td>1.7%</td>
<td>1.2%</td>
</tr>
<tr>
<td class="firstcol">Service-Producing</td>
<td>+2</td>
<td>+2</td>
<td>+30</td>
<td>2.8%</td>
<td>2.1%</td>
<td>1.8%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment (000s)</td>
<td>1,086</td>
<td>1,131</td>
<td>1,141</td>
<td>1,155</td>
<td>1,173</td>
<td>1,235</td>
<td>1,286</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>6.2</td>
<td>6.4</td>
<td>6.5</td>
<td>6.6</td>
<td>6.8</td>
<td>7.2</td>
<td>7.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Participation Rate (%)</td>
<td>67.08</td>
<td>67.14</td>
<td>67.21</td>
<td>67.20</td>
<td>67.20</td>
<td>67.54</td>
<td>67.54</td>
</tr>
</tbody>
</table>
</body>
</html>

Canadian labor markets seem to be staging a comeback after something of a sinking spell during the summer. In October data reported this morning by StatCan, employment gained by 50,500 and the unemployment rate fell to 6.2%, the [...]

Rebound in Canadian Labor Market after Summer Pause

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Previous Trump tariffs fading. A boost from new tariffs ahead?

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Underperforming German economy generating increased policy uncertainty relative to Europe and the US

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Nonfarm payrolls increased 177,000 (1.2% y/y) during April after rising 185,000 in March, revised from 228,000, and 102,000 in February, revised from 117,000. Expectations had been for a 130,000 rise in the Action Economics Forecast Survey. The latest figure left the three-month average change at 155,000 in April, down from 232,000 in January.

Average hourly earnings rose 0.2% during April after unrevised increases of 0.3% in March and 0.2% in February. Earnings growth of 3.8% y/y was below the 5.9% high in March 2022.

The unemployment rate, measured in the household survey, held m/m at an expected 4.2% in April, and compared to 4.1% in February and 4.0% in January. It reached a low of 3.4% in April 2023. The unemployment rate, including employees working part-time for economic reasons plus all marginally-attached workers, eased to 7.8% in April from 7.9% in March.

In the **establishment survey**, private-sector employment rose 167,000 (1.2% y/y) after a 170,000 March increase. Factory sector jobs edged 1,000 lower (-0.7% y/y) following a 3,000 gain. Construction sector employment increased 11,000 (1.7% y/y), after rising 7,000 in March.

Private service-producing sector employment increased 156,000 (1.4% y/y) in April after improving 161,000 in March. Increases varied greatly amongst service sector categories. Private education & health sector employment rose 70,000 (3.4% y/y) last month following a 74,000 March increase. Leisure & hospitality employment rose 24,000 (1.3% y/y) after a 38,000 gain. Trade, transportation & utilities rose 32,000 (0.9% y/y) in April following a 25,000 March increase. Professional & business services employment rose 17,000 (-0.1% y/y) following a 3,000 rise while temporary help employment rose 3,600 (-3.9% y/y) following a 2,700 decline. Financial activities employment improved 14,000 (1.2% y/y) after a 6,000 gain. The number of information sector jobs held steady (-0.4% y/y) last month after falling 2,000 in March.

Government sector payrolls rose 10,000 (1.3% y/y) last month after increasing 15,000 in March. The number of local government jobs increased 13,000 (1.4% y/y) following a 17,000 gain. State government employment rose 6,000 (1.8% y/y) following a 2,000 March increase but federal government payrolls fell 9,000 (-0.3% y/y), the third consecutive monthly decline.

Private-sector average hourly earnings rose 0.2% (3.8% y/y) in April after increasing 0.3% in March. Earnings in the goods-producing sector eased 0.1% (+4.0% y/y) following a 0.6% gain. Earnings in construction rose 0.3% (3.6% y/y), after a 0.2% rise but factory sector earnings declined 0.3% (+4.3% y/y) after surging 0.8% in March. In the private services-sector, earnings rose 0.2% (3.7% y/y) in April for the third straight month. Information sector pay increased 1.0% (5.2% y/y) last month after easing 0.1%, and financial activities earnings rose 0.5% (4.3% y/y) for the second straight month. Trade, transportation & utilities sector pay increased 0.4% (3.4% y/y) after 0.6%. Professional & business sector earnings increased 0.1% (4.4% y/y) after 0.2% in March. Leisure & hospitality earnings held steady (+3.8% y/y) following a 0.6% March increase.

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The length of the average workweek held steady at 34.3 hours in April. The workweek in the goods-producing sector eased to 39.8 hours from 40.0 hours. The construction sector average workweek eased to 39.0 hours from 39.3 hours while the factory sector workweek moved lower to 40.0 hours from 40.2. The average workweek in the private service sector held at 33.2 hours. Professional & business service hours fell to 36.3 hours from 36.4 while trade, transportation & utilities hours improved to 34.3 from 34.0 hours. Private education hours rose slightly to 32.8, but leisure & hospitality held steady at 25.5 hours.

In the **household survey**, the unemployment rate held at 4.2% in April as employment rose 436,000 and the size of the labor force increased 518,000. The labor force participation rate edged up to 62.6% last month from 62.5% in March. It remained below the high of 63.3% early in 2020. The rate for teenagers declined to 36.9%. For workers aged 20-24, the rate held steady at 72.1%, up from 71.8% six months earlier. For workers aged 25-54 the rate rose to 83.6%, a five-month high. For individuals 55 and over, the rate improved to 38.4% in April.

The employment/population ratio for all workers in April rose to 60.0%. It remained below the peak reading of 61.1% in February, 2020 just prior to the pandemic.

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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- Job growth spreads across most sectors.
- Earnings growth trend decelerates.
- Jobless rate holds steady.

U.S. Job Growth Is Firm in April but March Gain Is Lessened

Winnie Tapasanun

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Total factory orders rose a slightly less-than-expected 4.3% m/m in March after rises of 0.5% in February and 1.8% in January, data from the U.S. Census Bureau showed. A 4.5% m/m March increase had been expected in the Action Economics Forecast Survey. The March reading was the third successive monthly rise and the largest since July 2024. The year-on-year rate accelerated to 6.0% in March, the highest since November 2022, from 2.3% in February. Notably, orders for nondefense aircraft & parts soared 139.0% in March following a 7.4% drop in February and a 92.9% surge in January. Factory orders excluding defense rose 4.8% (5.9% y/y), the largest of three straight m/m/ rises, after a 0.4% February increase. Factory orders excluding the transportation sector fell 0.2% (+1.1% y/y), the first m/m fall since August, after rising 0.3% in February, January and December.

Durable goods orders jumped 9.2% (11.9% y/y) in March, the third consecutive m/m gain and the biggest since July 2024, on top of a 0.8% increase in February (matching +9.2% m/m in the advance report on April 24). The March jump reflected m/m orders increases of 27.1% (the largest m/m surge since July 2024; 31.2% y/y) in transportation equipment, 1.1% (4.9% y/y) in primary metals, 0.5% (-0.4% y/y) in furniture & related products, 0.1% (2.5% y/y) in fabricated metal products, and 0.1% (0.9% y/y) in machinery. To the downside, durable goods orders for computers & electronic products (-1.3%; +2.7% y/y) and electrical equipment, appliances & components (-1.0%; +4.2% y/y) declined m/m in March.

Nondurable goods orders, which equal nondurable goods shipments, fell 0.3% (+0.4% y/y) in March, the first m/m fall since September, after a 0.1% uptick in February. The March fall reflected m/m drops of 2.4% (-9.3% y/y) in petroleum & coal products and 0.9% (-1.2% y/y) in apparel. To the upside, the following nondurable goods shipments rose m/m in March: leather & allied products (1.5%; 8.6% y/y), beverage & tobacco products (0.7%; 5.8% y/y), paper products (0.6%; 2.3% y/y), printing (0.3%; 3.8% y/y), textile mills (0.3%; 0.8% y/y), chemical products (0.2%; 5.4% y/y), plastics & rubber products (0.2%; 0.4% y/y), food products (0.1%; 1.8% y/y), and textile products (0.1%; 2.1% y/y).

Total shipments slipped 0.1% (+2.0% y/y) in March, the first m/m easing since October, after a 0.7% increase in February. Excluding transportation, shipments were virtually unchanged m/m (+1.1% y/y) in March following six straight m/m gains. Shipments of durable goods industries inched up 0.1% (3.8% y/y) in March, the smallest of four consecutive m/m increases, after a 1.3% advance in February. This reflected m/m durable goods shipments rises of 1.2% (5.6% y/y) in primary metals, 0.9% (0.1% y/y) in furniture & related products, 0.8% (-0.2% y/y) in nonmetallic mineral products, 0.4% (0.0% y/y) in machinery, 0.3% (1.8% y/y) in fabricated metal products, 0.2% (4.5% y/y) in computers & electronic products, 0.2% (-2.1% y/y) in wood products, and 0.1% (3.0% y/y) in electrical equipment, appliances & components. In contrast, durable goods shipments for transportation equipment (-0.5%; +7.3% y/y) and miscellaneous durable goods (-0.1%; +2.9% y/y) fell m/m in March following three successive m/m increases.

Unfilled orders rose 2.0% (2.3% y/y) in March, up for the eighth month in nine, after a 0.1% uptick in February. Excluding transportation, unfilled orders dipped 0.1% (+0.7% y/y) in March, the first m/m easing since May 2024, after holding steady in February. Backlogs of durable goods rose 2.0% (2.3% y/y) in March, reflecting m/m rises of 3.1% (3.1% y/y) in transportation equipment and 0.2% (2.4% y/y) in electrical equipment, appliances & components.

Inventories edged up 0.1% (0.9% y/y) in March, the fifth straight m/m increase, after rising at the same pace in the prior two months. Excluding transportation, inventories were up 0.1% (0.5% y/y) in March, the fifth consecutive m/m rise. Durable goods inventories ticked up 0.1% (1.0% y/y) in March after holding steady in February and January; nondurable goods inventories edged up 0.1% (0.8% y/y), the fifth successive m/m increase.

The factory sector data are available in Haver’s **USECON** database. The Action Economics Forecast Survey is in the **AS1REPNA** database.

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- March manufacturers’ new orders +4.3% m/m; +6.0% y/y, highest since Nov. ’22.
- Durable goods orders (+9.2%) jump m/m, while nondurable goods orders (-0.3%) and shipments (-0.1%) decline m/m.
- Transportation equipt. orders +27.1% m/m, w/ a 139.0% m/m surge in nondefense aircraft & parts orders.
- Unfilled orders +2.0%, the eighth m/m rise in nine months.
- Inventories +0.1%, the fifth consecutive m/m increase.

U.S. Factory Orders Increase for the Third Straight Month in March

Robert Brusca

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The global manufacturing data showed broad weakening in April as conditions weakened across more than half of the contributing early reporters in the S&P survey of manufacturing. Of the 18 early reporting countries, more than half of them showed deceleration over six months and 12 months. Over three months, only 8 of 18 showed deterioration and that's about as good as it got in this report. In the current month, month-to-month changes showed more than half of the survey contributors showing weaker results than the month before. In the S&P framework, manufacturing improved month-to-month for the U.S.; however, looking at sequential averages for the U.S., U.K., European monetary union, Canada, and Japan, we see a steady weakening and results over 12 months, over six months versus 12 months, and for three months versus 6 months. The highly developed countries are not doing particularly well.

Asian economies are also showing slight deterioration but doing a little better than the developed countries in general.

Only five of the 18 reporting countries have queue percentile standings in their data back to January 2021 that are above their medians. Readings at or above the 50% mark are at or above the median standing. Canada is showing the weakest manufacturing result on record over this span, in terms of its queue percentile standing which is at 0 in the current month.

I showed the graphic for the Baltic dry goods index in this report rather than statistics on the manufacturing PMI data because the Baltic data, which reflect shipping volume for dry goods - that is excluding things like oil - is weak but it's only in the neighborhood where it's been for some time. There has been a great deal of talk about how tariffs may have impacted trade flows, expected trade flows, shipping, shipping rates, and the like. However, according to the Baltic dry goods index, there isn't much evidence that this is occurring right now and affecting the current data. That may still lie ahead but for now it's not baked in the cake.

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Globally Manufacturing Weakens

Andrew Cates

**China-US shipping activity** 
The economic fallout from escalating US-China trade tensions is becoming increasingly visible in the data. A clear example is the chart below, which highlights a sharp drop in vessel arrivals at the ports of Los Angeles and Long Beach, along with a notable decline in ships waiting offshore. These trends point to a tangible weakening in bilateral trade flows, as the effects of tit-for-tat tariffs imposed by both countries begin to bite. Given the outsized role the US and China play in global commerce, this slowdown is likely to reverberate through global supply chains, weighing on trade volumes, dampening demand, and curbing economic growth worldwide.

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**GDP growth in Q1**
Data this week showed that the US economy contracted, albeit modestly, in Q1 even as the euro area recorded a modest expansion—an unusual divergence. The contraction in US GDP can be largely attributed to a sharp increase in imports, as firms rushed to front-load purchases ahead of anticipated tariff hikes. In addition, domestic demand was subdued, with weaker contributions from both consumer spending and government consumption. This decoupling between the US and euro area economies is particularly striking given the current global focus on the US dollar. While the euro area has shown unexpected signs of resilience, the US downturn raises important questions about its underlying momentum, especially as trade dynamics and policy uncertainty continue to cloud the outlook.

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**The US dollar versus yield differentials**
Chart 3 below illustrates a sharp breakdown in the correlation between the US-Germany 10-year yield differential and the EUR/USD exchange rate. Historically, the dollar has moved closely with interest rate spreads, as yield-seeking capital flowed into US assets. But since early 2025—and more acutely following the April tariff actions—the dollar has weakened markedly even as the yield spread has narrowed only modestly. This decoupling underscores a critical shift: capital markets are reacting not just to monetary policy, but to rising trade and geopolitical uncertainty. In other words, the exchange rate is now being driven as much by risk sentiment as by interest rate arbitrage.

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**The US economy’s structural outperformance and the dollar**
A second dynamic, captured in the next chart, reveals a tight correlation between the US real effective exchange rate and the potential GDP growth differential between the US and euro area over the past 50-60 years. This raises the question: has dollar strength (until recently) merely been a reflection of US growth leadership—or are capital inflows themselves helping to sustain this growth outperformance? In effect, the tail may be wagging the dog. Global investors have long allocated capital to the US, attracted by its macroeconomic resilience, technological leadership, and deep, liquid financial markets. The danger now is that the US trade war may disrupt this equilibrium. A sharp or sustained reduction in capital inflows could undermine growth, weaken the dollar, and trigger broader financial instability. Moreover, reversing this dynamic is not straightforward—barring a credible structural resurgence in European (or Asian) growth, the global investment landscape remains tilted toward the US.

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**US competitiveness versus Europe, China and Japan** 
The next chart below examines relative unit labour costs across major economies since 2011. The US and China have seen a broadly similar trajectory, with steady increases in relative cost structures, while the euro area has remained flat and Japan has seen dramatic improvement. This suggests that, from a cost competitiveness standpoint, the US is not uniquely disadvantaged vis-à-vis China. However, as we discuss further below, this parallel erosion of cost competitiveness is occurring at much higher nominal wage levels in the US, which blunts its ability to regain export share through tariff-related shifts alone. The trade war strategy—absent a corresponding improvement in productivity or structural reforms—risks imposing costs without delivering material competitiveness gains.

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**Average wages in selected developed and developing economies**
This point is reinforced by the final chart, which shows estimates for average monthly wages across countries in 2024. US labour remains much more expensive than in peer or emerging economies. So even if China’s costs rise in tandem with the US, the global supply chain has ample alternatives. 'China plus one' strategies are accelerating, and the US remains structurally misaligned with low-cost production hubs. Tariffs aimed at reshoring supply chains are unlikely to deliver sustained gains unless accompanied by deep supply-side reforms, and risk further disincentivizing foreign direct investment if global firms perceive US trade policy as erratic or punitive.

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Financial markets found a measure of calm this week, buoyed by some subtle shifts in tone from US policymakers. A softening in the administration’s rhetoric around trade tariffs coupled with a less confrontational stance toward Federal Reserve Chair Jerome Powell, helped ease tensions that had roiled markets earlier in the month. Equities rebounded modestly, and volatility indicators edged lower, reflecting cautious optimism that the worst of the policy shocks may be behind us. But beneath the surface, significant downside risks persist. New shipping data point to a pronounced slowdown in US-China trade flows (chart 1), suggesting the damage from recent tariff escalations is already rippling through global supply chains. Meanwhile, incoming data for the US revealed an unexpected contraction in the economy in Q1 and further signs of weakness in the labour market (chart 2). The US dollar, in the meantime, while long supported by superior growth and yield differentials, has begun to decouple from traditional drivers (charts 3 and 4) suggesting growing pressure on capital flows. At the same time, structural imbalances are drawing renewed scrutiny: unit labour cost comparisons show the US steadily losing competitiveness (chart 5), while nominal wage disparities remain stark versus China and other Asian economies, further complicating any effort to restore trade balance without broader reforms (chart 6). In short, while markets may be drawing temporary comfort from a pause in tariff brinkmanship, the deeper economic and financial vulnerabilities exposed this month remain unresolved—and increasingly central to the global macro narrative.

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Charts of the Week: Tariff Truce, Tenuous Trust

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U.S. light vehicle sales dropped 2.9% (+6.5% y/y) to 17.31 million units (SAAR) in April after surging 10.8% to 17.82 million units in March. The retreat in April vehicle sales accompanied a 1.7% y/y rise in real disposable income through March, which compared to 2.0% growth last year.

Sales declines were broad-based last month. Light truck sales fell 1.3% (+9.9% y/y) during April to 14.34 million units (SAAR), after rising 12.4% in March. Purchases of domestically-made light trucks declined 1.2% (+11.9% y/y) to 11.02 million units, after jumping 12.5% in March. Sales of imported light trucks fell 1.8% (+4.4% y/y) to 3.32 million units, following an 11.6% March surge.

Trucks’ record 82.8% share of the light vehicle market last month compared to 81.5% in March and 80.3% in April of last year. The share averaged 80.3% during all of 2024 versus 53.3% ten years earlier.

Auto sales also declined last month, down 9.5% (-7.5%) to 2.97 million units (SAAR) following a 3.5% March rise. The decline reversed all of the increase over the prior two months. Purchases of domestically-produced cars fell 9.8% (-4.3% y/y) last month to 2.22 million units, after rising 3.8% in March. Sales of imported autos declined 9.6% (-15.7% y/y) to 0.75 million units, following a 2.5% March increase.

Imports' 23.5% share of the U.S. light vehicle market was little changed from 23.6% in March and compared to a May 2023 low of 22.9% and a high of 26.3% in November of 2023. Imports' share of the passenger car market held steady at 25.3% last month and compared to 27.7% in April of last year. It reached a high of 38.7% in September 2021. Imports' share of the light truck market eased to 23.2% last month after falling to 23.3% in March.

U.S. vehicle sales figures can be found in Haver's **USECON** database. Additional detail by manufacturer is in the I**NDUSTRY** database.

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- Light truck sales pull back, while auto sales tumble.
- Both domestic and imported sales decline.
- Imports' market share slips further.

Economy in Brief: November 2006

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