Tom Moeller

Perhaps the labor market showed a sign of improvement during April. That could be the implication of the latest report from the payroll processor ADP in their latest National Employment Report. It indicated that private nonfarm [...]

ADP Report: Rate Of Job Loss Slowed During April

Robert Brusca

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090505g.jpg" align="left" border="0" height="265" width="353">
The PPI is not the ECB&#8217;s mandated inflation variable. The
central bank prefers the broader consumer-based HICP. But the drop in
the PPI excluding construction at -0.8% in March, at -10.5% over three
months (saar), at -12.3% over 6 months (saar) and at a minus three
percent over 12-months is nonetheless a compelling piece of evidence
for the ECB to confront. Capital goods inflation at +1.5% Yr/Yr is the
high inflation reading for the three main sectors. Consumer goods
prices are lower by 1.2% over 12-months and intermediate goods prices
are lower by 4.1% over 12-months. Europeans are not as worried about
deflation as policymakers in the US, yet they can&#8217;t deny these trends. 
 

Inflation, its breadth and its trends all point to the nearly
complete absence of anything that could be called inflation. Indeed
there is growing evidence for those who want to worry about that
opposite concern: deflation. On top of that, the European economy is
very weak. 
 

The controversial aspect of this is that Europe&#8217;s finance
ministers are not applying any new stimulus and the head of the
European Commission, Jean-Claude Junker, said that no policies except
those that are already approved should be implemented. That appears to
be an oblique warning from Junker to EU countries not to go off on
their own with any new programs of assistance. Even so Junker admits to
a growing unemployment crisis in Europe. Of course Europe has a more
extensive social safety network than the US. But as the EU Commission
and the OECD and the IMF have cuts forecasts the EU Commission has been
prepared to sit idle and wait for the results of its past stimulus
plans to play out. Moreover, the ECB has been content to let the Bank
of England and the Federal Reserve take the more aggressive monetary
policy actions. 
 

So if there is a risk it is that Europe is getting behind the
curve and perhaps, along with that, a growing risk of deflation. The
continuing sharp drop in inflation &#8211; indeed, persisting negative rates
of inflation- hint at an ongoing economic unraveling. However, recent
economic data have suggested in several ways that the economic tailspin
had begun to enter a more controlled phase. 
 

In Spain, programs to arrest sharply rising unemployment seem
to be having some impact. In Germany a car scrappage scheme seems to
have boosted car registrations. The EU PMI for manufacturing shows a
rise in that key sensitive cyclical index that suggests the pace of
economic unraveling its slowing and that signal is echoed across Main
EMU countries. So while Europe&#8217;s policies may tread a riskier path that
those in the US there is also some evidence of economic responsiveness
to the counter cyclical policies already implemented and of course
there is that cushier social safety net in Europe. 
 

Nonetheless, this drop in the PPI is sharp, the largest drop
in 22 years. It is putting pressure on the ECB and is expected to
result in another rate cut from Europe&#8217;s central bank at its next
meeting. Reasons to oppose such a drop are increasingly scarce. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="7" scope="col">E-Area and UK PPI Trends </th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="2">M/M</td>
<td colspan="4">Saar</td>
</tr>
<tr class="grey3">
<td class="firstcol">E-Area</td>
<td>Mar-09</td>
<td>Feb-09</td>
<td>3-Mo</td>
<td>6-MO</td>
<td>Yr/Yr</td>
<td>Y/Y Yr Ago</td>
</tr>
<tr class="grey2">
<td class="firstcol">Total x Construct</td>
<td>-0.8%</td>
<td>-0.6%</td>
<td>-10.5%</td>
<td>-12.3%</td>
<td>-3.0%</td>
<td>5.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Capital Gds</td>
<td>-0.2%</td>
<td>0.1%</td>
<td>-0.6%</td>
<td>0.0%</td>
<td>1.5%</td>
<td>1.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Consumer Gds</td>
<td>-0.2%</td>
<td>-0.2%</td>
<td>-5.0%</td>
<td>-4.2%</td>
<td>-1.2%</td>
<td>5.0%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Intermediate&amp;Cap Gds</td>
<td>-0.9%</td>
<td>-1.0%</td>
<td>-14.1%</td>
<td>-13.8%</td>
<td>-4.1%</td>
<td>4.2%</td>
</tr>
<tr class="grey1">
<td colspan="7">&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol">MFG</td>
<td>-0.9%</td>
<td>-0.5%</td>
<td>-8.8%</td>
<td>-13.6%</td>
<td>-5.1%</td>
<td>5.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Germany</td>
<td>-0.7%</td>
<td>-0.7%</td>
<td>-10.2%</td>
<td>-6.4%</td>
<td>1.0%</td>
<td>3.2%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Gy ExEnergy</td>
<td>-0.5%</td>
<td>-0.5%</td>
<td>-5.9%</td>
<td>-5.7%</td>
<td>-1.4%</td>
<td>2.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Italy</td>
<td>-0.8%</td>
<td>-0.8%</td>
<td>-10.1%</td>
<td>-14.5%</td>
<td>-4.5%</td>
<td>6.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">UK</td>
<td>-0.9%</td>
<td>0.0%</td>
<td>1.3%</td>
<td>-15.2%</td>
<td>0.2%</td>
<td>13.6%</td>
</tr>
<tr class="grey4">
<td colspan="7" class="firstcol">E-zone Harmonized PPI ex construction</td>
</tr>
<tr class="grey3">
<td colspan="7" class="firstcol">The EA 13 countries are Austria,
Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,
the Netherlands, Portugal, Slovenia</td>
</tr>
</tbody>
</table>
</body></html>

The PPI is not the ECB’s mandated inflation variable. The central bank prefers the broader consumer-based HICP. But the drop in the PPI excluding construction at -0.8% in March, at -10.5% over three months (saar), at -12.3% over 6 [...]

Sharp, Widespread, PPI Drop Puts ECB On The Spot For A Rate Cut

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>

 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090505e.jpg" width="353">
Consumer spending recently has taken a firmer stance. Despite the news of weaker sales of light motor vehicle sales last month, chain store sales moved to a firmer footing. According to the International Council of Shopping Centers-Goldman Sachs Index store sales rose 0.7% last week and made up the decline of the prior period. The news for the full-month, however, is more encouraging. Added to increases early in the month, chain store sales for all of April rose 1.4% from the March average following that month&#39;s tepid 0.3% uptick.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090505f.jpg" width="353">
During the last ten years there has been a 64% correlation between the year-to-year growth in chain store sales and the growth in general merchandise sales. These weekly figures are available in Haver&#39;s SURVEYW database.
The ICSC-Goldman Sachs 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.
Moreover, the outlook for sales continued cautiously optimistic. The leading indicator of sales has been moving sideways since early February. While still negative, the year-to-year change has improved to a negative 2.0%, up from the 6% rate of decline last Fall.
A Minsky Meltdown: Lessons for Central Bankers from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2009/el2009-15.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">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">05/02/09</th>
<th scope="col">04/25/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>491.3</td>
<td>488.0</td>
<td>-0.8%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>


</html>

Consumer spending recently has taken a firmer stance. Despite the news of weaker sales of light motor vehicle sales last month, chain store sales moved to a firmer footing. According to the International Council of Shopping Centers- [...]

U.S. Chain Store Sales Rise Again

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>

 



<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090505c.jpg">
The service sector recovered its earlier losses last month. The April Composite Index for the nonmanufacturing sector from the Institute for Supply Management (ISM) rose to 43.7 last month from an unrevised reading of 40.8 during March. The latest was the highest level since October of last year and it was higher than Consensus expectations for a reading of 42.0. A level of the ISM index below 50 indicates declining activity. Since the series&#39; inception in 1997 there has been a 48% correlation between the level of the business activity index in the nonmanufacturing sector and the Q/Q change in real GDP for the services and the construction sectors.
Improved new orders led last month&#39;s gain in the overall ISM index. The orders index rose by nearly ten points from March to the highest level since the Fall. An index which measures the speed of vendor deliveries continued to suggest slack and fell sharply to its lowest level in the series&#39; history which dates back to 1997.<img align="right" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090505d.jpg">
The business activity sub-index also rose further last month to its highest level since last September. That rise came as the employment index made up its March decline and settled near its highest level in six months. Since the series&#39; inception in 1997 there has been a 56% correlation between the level of the ISM nonmanufacturing employment index and the m/m change in payroll employment in the service-producing plus the construction industries.
Pricing power continued under pressure. Though the price index ticked up slightly from March, it remained near its lowest level. Since its inception ten years ago, there has been a 60% correlation between the price index and the q/q change in the GDP services chain price index.
Beginning with the January 2008 Nonmanufacturing <cite>Report On Business</cite>&reg;, the composite index is calculated as an indicator of the overall economic condition for the non-manufacturing sector. It is a composite index based on the diffusion indices for four of the indicators (business activity, new orders, employment and supplier deliveries) with equal weights. The latest report from the ISM can be found <a href="http://www.ism.ws/ISMReport/NonMfgROB.cfm.">here</a>.
ISM surveys more than 370 purchasing managers in more than 62 industries including law firms, hospitals, government and retailers. The nonmanufacturing survey dates back to July 1997.
Today&#39;s testimony by Fed Chairman Ben S. Bernanke titled The Economic Outlook can be found <a href="http://www.federalreserve.gov/newsevents/testimony/bernanke20090505a.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/USECON/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">April &#39;08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Index</td>
<td>43.7</td>
<td>40.8</td>
<td>51.9</td>
<td>47.4</td>
<td>53.5</td>
<td>55.7</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>40.0</td>
<td>39.1</td>
<td>72.2</td>
<td>66.0</td>
<td>63.8</td>
<td>65.3</td>
</tr>
</tbody>
</table>


</html>

The service sector recovered its earlier losses last month. The April Composite Index for the nonmanufacturing sector from the Institute for Supply Management (ISM) rose to 43.7 last month from an unrevised reading of 40.8 during [...]

U.S. ISM Nonmanufacturing Index Recovers To Highest Level Since October

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090505a.jpg" width="353">
Regular gasoline prices last week moved higher to $2.08 per gallon, up 47 cents from the December low. Yesterday, prices moved higher still. The spot market price for a gallon of unleaded gasoline reached $1.52 on Monday, up from $1.38 averaged last week and it was the highest price since early November. The figures are reported by the U.S. Department of Energy and can be found in Haver&#39;s WEEKLY &amp; Daily databases.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090505b.jpg" width="353">
The rise in gasoline prices has been driven, in part, by higher crude oil prices. Prices averaged $51.07 last week for a barrel of West Texas Intermediate. Though that still was down slightly from the late-March high of $53.09, prices remained up from the December low of $32.37 per barrel. Prices reached a high of $145.66 last July. Yesterday, prices strengthened even further to $54.47. The latest increases occurred despite a 4.9% rise in crude oil production versus last year. The figures on crude oil production and inventories are available in Haver&#39;s Weekly Oil Statistics database.
Higher gasoline prices and economic weakness have lowered miles-driven, though the rate of decline has eased. Gasoline demand last week fell 2.1% y/y versus the 4.8% rate of decline seen last October. The change in demand is measured using the latest four weeks versus the same four weeks in 2008. Demand for all petroleum products was down 6.8% y/y led by a 41.5% drop in demand for residual fuel oil and a 13.5% drop in distillate demand. These numbers are available in Haver&#39;s OILWKLY database.
The price of natural gas continued to move lower to $3.29 per mmbtu (-69.4% y/y), down with the end of the winter heating season. At the lowest level since 2002, the latest average price was down by three-quarters from the high reached in early-July of $13.19/mmbtu.
The April 2009 Senior Loan Officer Opinion Survey on Bank Lending Practices from the Federal Reserve Board is available <a href="http://www.federalreserve.gov/boarddocs/SnLoanSurvey/200905/fullreport.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/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">05/04/09</th>
<th scope="col">04/27/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per Gallon, Regular)</td>
<td>2.08</td>
<td>2.05</td>
<td>-42.5%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; ($ per bbl.)</td>
<td>51.07</td>
<td>47.83</td>
<td>-55.7%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
</body>
</html>

Regular gasoline prices last week moved higher to $2.08 per gallon, up 47 cents from the December low. Yesterday, prices moved higher still. The spot market price for a gallon of unleaded gasoline reached $1.52 on Monday, up from [...]

Petroleum Prices Move Higher

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090505a.jpg" align="left" border="0" height="265" width="353">
Regular gasoline prices last week moved
higher to $2.08 per gallon, up 47 cents from the December low.
Yesterday, prices moved higher still. The spot market price for a
gallon of unleaded gasoline reached $1.52 on Monday, up from $1.38
averaged last week and it was the highest price since early November.
The figures are reported by the U.S. Department of Energy and can be
found in Haver's WEEKLY &amp; Daily databases.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090505b.jpg" align="right" border="0" height="265" width="353">
The rise in gasoline prices has been driven, in part, by higher
crude oil prices. Prices averaged $51.07 last week for a
barrel of West Texas Intermediate. Though that still was down slightly
from the late-March high of $53.09, prices remained up from the
December low of $32.37 per barrel. Prices reached a high of $145.66
last July. Yesterday, prices strengthened even further to $54.47. The
latest increases occurred despite a 4.9% rise in crude oil production
versus last year. The figures on crude oil production and inventories
are available in Haver's Weekly Oil Statistics
database.
Higher gasoline prices and economic weakness have lowered
miles-driven, though the rate of decline has eased. Gasoline
demand last week fell 2.1% y/y versus the 4.8% rate of
decline seen last October. The change in demand is measured using the
latest four weeks versus the same four weeks in 2008. Demand for
all petroleum products was down 6.8% y/y led by a 41.5% drop
in demand for residual fuel oil and a 13.5% drop in distillate demand.
These numbers are available in Haver's OILWKLY database.
The price of natural gas continued to move lower to $3.29 per
mmbtu (-69.4% y/y), down with the end of the winter heating season. At
the lowest level since 2002, the latest average price was down by
three-quarters from the high reached in early-July of $13.19/mmbtu.
The April 2009 Senior Loan Officer Opinion
Survey on Bank Lending Practices from the Federal
Reserve Board is available <a href="http://www.federalreserve.gov/boarddocs/SnLoanSurvey/200905/fullreport.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/WEEKLY/@W4/@W4.HTM">Weekly
Prices</a></th>
<th scope="col">05/04/09</th>
<th scope="col">04/27/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per
Gallon, Regular)</td>
<td>2.08</td>
<td>2.05</td>
<td>-42.5%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil,
WTI&nbsp; ($ per bbl.)</td>
<td>51.07</td>
<td>47.83</td>
<td>-55.7%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
U.S. ISM Nonmanufacturing Index
Recovers To Highest Level Since October 
by <a href="/comment/Moeller.html">Tom
Moeller</a> May 5, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090505c.jpg" align="left" border="0">
The service sector recovered its earlier losses last month.
The April Composite Index for the nonmanufacturing sector from the
Institute for Supply Management (ISM) rose to 43.7 last month from an
unrevised reading of 40.8 during March. The latest was the highest
level since October of last year and it was higher than Consensus
expectations for a reading of 42.0. A level of the ISM index below 50
indicates declining activity. Since the series' inception in 1997 there
has been a 48% correlation between the level of the business activity
index in the nonmanufacturing sector and the Q/Q change in real GDP for
the services and the construction sectors.
Improved new orders led last month's gain in the overall ISM
index. The orders index rose by nearly ten points from March to the
highest level since the Fall. An index which measures the speed of
vendor deliveries continued to suggest slack and fell sharply to its
lowest level in the series' history which dates back to 1997.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090505d.jpg" align="right" border="0">
The business activity sub-index also rose further last month
to its highest level since last September. That rise came as the
employment index made up its March decline and settled near its highest
level in six months. Since the series' inception in 1997 there has been
a 56% correlation between the level of the ISM nonmanufacturing
employment index and the m/m change in payroll employment in the
service-producing plus the construction industries.
Pricing power continued under pressure. Though the price index
ticked up slightly from March, it remained near its lowest level. Since
its inception ten years ago, there has been a 60% correlation between
the price index and the q/q change in the GDP services chain price
index.
Beginning with the January 2008 Nonmanufacturing <cite>Report
On Business</cite>®, the composite index is calculated as an
indicator of the overall economic condition for the non-manufacturing
sector. It is a composite index based on the diffusion indices for four
of the indicators (business activity, new orders, employment and
supplier deliveries) with equal weights. The latest report from the ISM
can be found <a href="http://www.ism.ws/ISMReport/NonMfgROB.cfm.">here</a>.
ISM surveys more than 370 purchasing managers in more than 62
industries including law firms, hospitals, government and retailers.
The nonmanufacturing survey dates back to July 1997.
Today's testimony by Fed Chairman Ben S. Bernanke titled The
Economic Outlook can be found <a href="http://www.federalreserve.gov/newsevents/testimony/bernanke20090505a.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/USECON/@EF/@EF03/@EF03.HTM">ISM
Nonmanufacturing Survey</a></th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">April '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Index</td>
<td>43.7</td>
<td>40.8</td>
<td>51.9</td>
<td>47.4</td>
<td>53.5</td>
<td>55.7</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>40.0</td>
<td>39.1</td>
<td>72.2</td>
<td>66.0</td>
<td>63.8</td>
<td>65.3</td>
</tr>
</tbody>
</table>
U.S. Chain Store Sales Rise Again 
by <a href="/comment/Moeller.html">Tom
Moeller</a> May 5, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090505e.jpg" align="left" border="0" height="265" width="353">
Consumer spending recently has taken a firmer stance. Despite
the news of weaker sales of light motor vehicle sales last month, chain
store sales moved to a firmer footing. According to the International
Council of Shopping Centers-Goldman Sachs Index store sales rose 0.7%
last week and made up the decline of the prior period. The news for the
full-month, however, is more encouraging. Added to increases early in
the month, chain store sales for all of April rose 1.4% from the March
average following that month's tepid 0.3% uptick.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090505f.jpg" align="right" border="0" height="265" width="353">
During the last ten years there has been a 64% correlation
between the year-to-year growth in chain store sales and the growth in
general merchandise sales. These weekly figures are
available in Haver's SURVEYW database.
The ICSC-Goldman
Sachs 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.


Moreover, the outlook for sales continued cautiously
optimistic. The leading indicator of sales has been moving sideways
since early February. While still negative, the year-to-year change has
improved to a negative 2.0%, up from the 6% rate of decline last Fall.
A Minsky Meltdown: Lessons for Central Bankers
from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2009/el2009-15.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">ICSC-UBS
(SA, 1977=100)</a></th>
<th scope="col">05/02/09</th>
<th scope="col">04/25/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain
Store Sales</td>
<td>491.3</td>
<td>488.0</td>
<td>-0.8%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>
Sharp, Widespread, PPI Drop Puts
ECB On The Spot For A Rate Cut 
by <a href="/comment/Brusca.html">Robert
Brusca</a> May 5, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090505g.jpg" align="left" border="0" height="265" width="353">
The PPI is not the ECB&#8217;s mandated inflation variable. The
central bank prefers the broader consumer-based HICP. But the drop in
the PPI excluding construction at -0.8% in March, at -10.5% over three
months (saar), at -12.3% over 6 months (saar) and at a minus three
percent over 12-months is nonetheless a compelling piece of evidence
for the ECB to confront. Capital goods inflation at +1.5% Yr/Yr is the
high inflation reading for the three main sectors. Consumer goods
prices are lower by 1.2% over 12-months and intermediate goods prices
are lower by 4.1% over 12-months. Europeans are not as worried about
deflation as policymakers in the US, yet they can&#8217;t deny these trends. 
 

Inflation, its breadth and its trends all point to the nearly
complete absence of anything that could be called inflation. Indeed
there is growing evidence for those who want to worry about that
opposite concern: deflation. On top of that, the European economy is
very weak. 
 

The controversial aspect of this is that Europe&#8217;s finance
ministers are not applying any new stimulus and the head of the
European Commission, Jean-Claude Junker, said that no policies except
those that are already approved should be implemented. That appears to
be an oblique warning from Junker to EU countries not to go off on
their own with any new programs of assistance. Even so Junker admits to
a growing unemployment crisis in Europe. Of course Europe has a more
extensive social safety network than the US. But as the EU Commission
and the OECD and the IMF have cuts forecasts the EU Commission has been
prepared to sit idle and wait for the results of its past stimulus
plans to play out. Moreover, the ECB has been content to let the Bank
of England and the Federal Reserve take the more aggressive monetary
policy actions. 
 

So if there is a risk it is that Europe is getting behind the
curve and perhaps, along with that, a growing risk of deflation. The
continuing sharp drop in inflation &#8211; indeed, persisting negative rates
of inflation- hint at an ongoing economic unraveling. However, recent
economic data have suggested in several ways that the economic tailspin
had begun to enter a more controlled phase. 
 

In Spain, programs to arrest sharply rising unemployment seem
to be having some impact. In Germany a car scrappage scheme seems to
have boosted car registrations. The EU PMI for manufacturing shows a
rise in that key sensitive cyclical index that suggests the pace of
economic unraveling its slowing and that signal is echoed across Main
EMU countries. So while Europe&#8217;s policies may tread a riskier path that
those in the US there is also some evidence of economic responsiveness
to the counter cyclical policies already implemented and of course
there is that cushier social safety net in Europe. 
 

Nonetheless, this drop in the PPI is sharp, the largest drop
in 22 years. It is putting pressure on the ECB and is expected to
result in another rate cut from Europe&#8217;s central bank at its next
meeting. Reasons to oppose such a drop are increasingly scarce. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="7" scope="col">E-Area and UK PPI Trends </th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="2">M/M</td>
<td colspan="4">Saar</td>
</tr>
<tr class="grey3">
<td class="firstcol">E-Area</td>
<td>Mar-09</td>
<td>Feb-09</td>
<td>3-Mo</td>
<td>6-MO</td>
<td>Yr/Yr</td>
<td>Y/Y Yr Ago</td>
</tr>
<tr class="grey2">
<td class="firstcol">Total x Construct</td>
<td>-0.8%</td>
<td>-0.6%</td>
<td>-10.5%</td>
<td>-12.3%</td>
<td>-3.0%</td>
<td>5.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Capital Gds</td>
<td>-0.2%</td>
<td>0.1%</td>
<td>-0.6%</td>
<td>0.0%</td>
<td>1.5%</td>
<td>1.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Consumer Gds</td>
<td>-0.2%</td>
<td>-0.2%</td>
<td>-5.0%</td>
<td>-4.2%</td>
<td>-1.2%</td>
<td>5.0%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Intermediate&amp;Cap Gds</td>
<td>-0.9%</td>
<td>-1.0%</td>
<td>-14.1%</td>
<td>-13.8%</td>
<td>-4.1%</td>
<td>4.2%</td>
</tr>
<tr class="grey1">
<td colspan="7">&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol">MFG</td>
<td>-0.9%</td>
<td>-0.5%</td>
<td>-8.8%</td>
<td>-13.6%</td>
<td>-5.1%</td>
<td>5.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Germany</td>
<td>-0.7%</td>
<td>-0.7%</td>
<td>-10.2%</td>
<td>-6.4%</td>
<td>1.0%</td>
<td>3.2%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Gy ExEnergy</td>
<td>-0.5%</td>
<td>-0.5%</td>
<td>-5.9%</td>
<td>-5.7%</td>
<td>-1.4%</td>
<td>2.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Italy</td>
<td>-0.8%</td>
<td>-0.8%</td>
<td>-10.1%</td>
<td>-14.5%</td>
<td>-4.5%</td>
<td>6.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">UK</td>
<td>-0.9%</td>
<td>0.0%</td>
<td>1.3%</td>
<td>-15.2%</td>
<td>0.2%</td>
<td>13.6%</td>
</tr>
<tr class="grey4">
<td colspan="7" class="firstcol">E-zone Harmonized PPI ex construction</td>
</tr>
<tr class="grey3">
<td colspan="7" class="firstcol">The EA 13 countries are Austria,
Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,
the Netherlands, Portugal, Slovenia</td>
</tr>
</tbody>
</table>
</body></html>

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090504c.jpg" align="left" border="0" height="265" width="353">
Europe&#8217;s PMI readings bounced sharply in April across EMU
nations. France made the second largest monthly rise at 3.59 points
just above the UK&#8217;s 3.35 point gain. From its cycle low, the UK has
made the greatest gain rising by 8 points with Spain and Austrian next
on gains of 6.1 and 5.9 points respectively from their cycle lows.
Italy has rebounded the least with a rise from its low reading of just
2.6 points. Looking at the levels of the indices in their respective
range of value they have occupied Italy is also the weakest followed by
Germany even though Italy&#8217;s raw MFG reading is higher than Germany&#8217;s. 
 

These statistics show us that Europe is stirring from its lows
across countries. The UK and France are making the largest initial
moves, while Germany, the EMU&#8217;s largest economy, is one of the worst
laggards. 
 

Just today the EU Commission has cut its outlook for growth in
EU this year, on Monday it revised lower its forecast for growth in the
European Union this year citing consumers reacting to the weakening
labor market and the slump in world trade as well as the effects of an
ongoing housing market correction. The commission, the executive arm of
the EU, presented its spring quarterly economic forecasts that
projected that gross domestic product in both the European Union and
the euro area would contract by 4 percent in 2009 and by 0.1 percent in
2010. 
 

So amid signs that the EMU economy may have begun to
decelerate at a slower rate paving the way for an eventual upturn the
EU commission has unleashed a more pessimistic outlook. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> NTC/Markit
MFG Indices</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>Feb-09</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Percentile</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro-13</td>
<td>36.83</td>
<td>33.93</td>
<td>33.55</td>
<td>34.77</td>
<td>34.70</td>
<td>40.75</td>
<td>13.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>35.40</td>
<td>32.36</td>
<td>32.14</td>
<td>33.30</td>
<td>33.36</td>
<td>41.43</td>
<td>12.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>40.10</td>
<td>36.51</td>
<td>34.81</td>
<td>37.14</td>
<td>36.92</td>
<td>41.55</td>
<td>21.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>37.21</td>
<td>34.59</td>
<td>34.99</td>
<td>35.60</td>
<td>35.56</td>
<td>40.40</td>
<td>11.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>34.61</td>
<td>32.92</td>
<td>31.85</td>
<td>33.13</td>
<td>31.47</td>
<td>35.64</td>
<td>21.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Austria</td>
<td>38.97</td>
<td>33.68</td>
<td>34.58</td>
<td>35.74</td>
<td>35.60</td>
<td>41.40</td>
<td>22.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Greece</td>
<td>40.88</td>
<td>38.17</td>
<td>38.88</td>
<td>39.31</td>
<td>40.19</td>
<td>45.98</td>
<td>15.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Ireland</td>
<td>36.10</td>
<td>35.12</td>
<td>33.20</td>
<td>34.81</td>
<td>36.39</td>
<td>39.99</td>
<td>13.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Netherlands</td>
<td>38.76</td>
<td>35.92</td>
<td>35.47</td>
<td>36.72</td>
<td>37.26</td>
<td>43.12</td>
<td>13.5%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">EU</td>
</tr>
<tr class="odd">
<td class="firstcol">UK</td>
<td>42.85</td>
<td>39.50</td>
<td>34.93</td>
<td>39.09</td>
<td>37.34</td>
<td>40.69</td>
<td>37.2%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">percentile
is over range since March
2000</td>
</tr>
</tbody>
</table>
</body></html>

Europe’s PMI readings bounced sharply in April across EMU nations. France made the second largest monthly rise at 3.59 points just above the UK’s 3.35 point gain. From its cycle low, the UK has made the greatest gain rising by 8 [...]

Europe Begins to Cut Its Losses

Louise Curley

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090504h.jpg" align="right" border="0" height="265" width="353">
Manufacturing activity around the world appears to have
stopped contracting.Markit Economics reported today that the diffusion
indexes representing the opinions of purchasing managers in
manufacturing in a number of countries have continued to show
improvement in April. As the attached charts show, the PMI's in
countries in Eastern Europe and in the Far East reached their low
points at the end of last year. Those in Western Europe reached their
low points early this year.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090504i.jpg" align="right" border="0" height="265" width="353">
The best showing has been in the Far East. The PMI for India
reached 53.27% in April, putting manufacturing in India in an expansion
phase. China with a PMI of 50.05% has just inched into the expansion
phase. Although Japan's PMI of 41.42% indicates that manufacturing in
Japan is still contracting, the degree of contraction is well below
that reached at the end of last year. The first chart shows the PMI's
for India, China and Japan.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090504j.jpg" align="right" border="0" height="265" width="353">
Like Japan the PMI's in Eastern Europe suggest that degree of
contraction in manufacturing in Russia, Poland and the Czech Republic
is slowing, but they are still below the expansion phase, as shown in
the second chart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">
PURCHASING MANAGERS SURVEY OF MANUFACTURING</th>
<th scope="col">Apr 09</th>
<th scope="col">Mar&nbsp;09</th>
</tr>
</thead>
<tbody>
<tr class="grey5">
<td class="firstcol" colspan="3">Diffusion Indexes 50+ =
Expansion&nbsp; (SA)</td>
</tr>
<tr class="grey4">
<td class="firstcol">China</td>
<td>50.05</td>
<td>44.83</td>
</tr>
<tr class="grey4">
<td class="firstcol">Japan</td>
<td>41.42</td>
<td>33.83</td>
</tr>
<tr class="grey4">
<td class="firstcol">India</td>
<td>53.27</td>
<td>49.46</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="3">&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol">Czech Republic</td>
<td>38.61</td>
<td>33.95</td>
</tr>
<tr class="grey2">
<td class="firstcol">Poland</td>
<td>42.14</td>
<td>41.42</td>
</tr>
<tr class="grey2">
<td class="firstcol">Russia</td>
<td>43.43</td>
<td>41.97</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="3"></td>
</tr>
<tr class="grey1">
<td class="firstcol">Switzerland</td>
<td>34.69</td>
<td>32.62</td>
</tr>
<tr class="grey1">
<td class="firstcol">United Kingdom</td>
<td>42.85</td>
<td>39.50</td>
</tr>
<tr class="grey1">
<td class="firstcol">Euro Area</td>
<td>36.83</td>
<td>33.92</td>
</tr>
</tbody>
</table>
</body></html>

Manufacturing activity around the world appears to have stopped contracting.Markit Economics reported today that the diffusion indexes representing the opinions of purchasing managers in manufacturing in a number of countries have [...]

Most April Manufacturing PMI's Show a Lessening of Contraction: India's and China's Show Expansion

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

Only modest evidence of AI-related surge in US productivity growth

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

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

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

Our global data offering is unparalleled in terms of coverage, quality, and organization. We offer 290+ databases from 2500 government and private sources, a wealth of key survey and forecast data covering the world’s economies, and a robust offering of archive databases that drive machine learning for big data applications.

Optimized for precision analytics, our data is seamlessly integrated with Microsoft Office and all leading statistical packages through our DLX® software and platform independent HaverView™ website. We further offer direct database feeds, client server or cloud-based delivery, and RESTful API.


Privacy Policy

Disclaimer

Contact us

A premier time series data platform for the global strategy, research, and quant communities. 

New York

London

Singapore

Tokyo

Economy in Brief

Viewpoints

Contact Us

Our Data

Our Products

What We Do

Our Authors

About Us

Data News

Resources

Release Calendars

Training Center

Webinars

Newsletters

Download Software

For Clients

Live Updates

250506J8.jpg

250506K8.jpg

The U.S. trade deficit in goods and services (BOP basis) in March grew to $140.5 billion after narrowing slightly to $123.2 billion in February, revised from $122.7 billion, after widening to $130.7 billion in January according to the U.S. Census Bureau. A $136.7 billion deficit was expected by the Action Economics Forecast Survey. Exports rose 0.2% (6.7% y/y) in March after increasing 2.8% in February. This was accompanied by a 4.4% rise (27.1% y/y) rise in imports which came after m/m stability in February. In Q1’25, the deficit grew to an average $131.4 billion, after rising to an average $83.3 billion in Q4’24.

The trade deficit in goods (BOP basis) widened to a record $163.2 billion in March from $147.9	 billion in February, revised from $147.0 billion. Goods exports (customs value) rose 1.4% (7.0% y/y) in March, after increasing 3.6% in February. The latest increase reflected an 8.2% (8.4% y/y) surge in auto exports which came after a 12.7% strengthening. A 3.5% (4.0% y/y) gain occurred in industrial supplies & materials exports which followed a 5.1% rise. Foods, feeds & beverage exports rose 6.6% (1.4% y/y) after declining in four of the prior five month. Working lower, capital goods exports fell 2.5% (+13.9% y/y) in March after a 4.8% increase and nonauto consumer goods exports were off 1.1% (+3.4% y/y) in March after a 2.4% gain.

Imports of goods increased 5.5% (31.4% y/y) in March after a 0.2% February easing. Imports of nonauto consumer goods imports surged 27.9% (56.0% y/y) following a 3.1% February gain. Auto imports rose 6.6% (8.7% y/y) after a 1.2% rise. Capital goods imports rose 4.2% (22.5% y/y) following a 1.1% rise. Foods, feeds & beverage imports eased 0.4% (+11.1% y/y) following a 2.0% weakening. Industrial supplies & materials imports declined 12.4% (+39.5% y/y) after weakening 4.6% in February. Petroleum imports by end-use rose 1.5% (-4.2% y/y) after a 2.2% decline. Nonpetroleum imports increased 6.0% (32.5% y/y) after slipping 0.4% in February.

The inflation-adjusted goods trade deficit (customs value) deepened to $150.9 billion in March from $136.9 billion in February. Real exports rose 1.6% (5.3% y/y) after a 3.0% February increase, while real imports rose 5.8% (29.8% y/y) in March following a 0.5% February slip.

The services trade surplus narrowed to $23.0 billion in March after increasing to $23.8 billion in February. It reached a peak of $25.7 billion in November of last year. Service exports fell 0.9% (+5.7% y/y) after a 0.8% decline in February. Construction services exports rose 1.0% (37.7% y/y) after increasing 2.0% in February. Travel services exports fell 7.1% (-3.7% y/y) and financial exports increased 0.9% (7.3% y/y). Transport exports rose 3.1% (2.4% y/y). Service imports eased 0.1% (+10.8% y/y) in March following a 0.8% gain. Maintenance & repair services declined 1.5% (+32.1% y/y) while imported transport services increased 3.1% (2.4% y/y). Imported travel services fell 7.1% (-3.7% y/y) while charges for use of intellectual property rose 0.2% (14.4% y/y).

The U.S. goods trade deficit with China narrowed to a seasonally adjusted $24.8 billion in March from $26.6 billion in February. Exports to China declined 8.2% (-10.5% y/y) while imports weakened 7.2% (-2.7% y/y). The deficit with the European Union deepened to a record $48.3 billion in March from $30.9 billion in February. Exports rose 10.9% (14.5% y/y) while imports soared 34.0% (65.4% y/y). The deficit with Japan deepened to $5.8 billion from $5.2 billion in February. Exports rose 1.8% (8.8% y/y) and imports rose 6.4% (9.9% y/y).

The international trade data, including relevant data on oil prices, 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**.

250506L8.jpg

250506M8.jpg

- Goods deficit grows as imports surge ahead of tariff imposition.
- Exports edge higher, led by autos.
- Petroleum product imports fall as crude oil prices decline.

U.S. Trade Deficit Deepens to Record in March

Tian Yong Woon

This week, we focus on trade developments between the US and major Asian economies. Early indications coming out of US-India trade talks seem encouraging, with terms such as “forward most-favoured-nation” for the US and “zero-for-zero” tariffs appearing in news reports — terms which, if enacted, would represent a significant win for the US. India stands to benefit greatly as well if key exports to the US, such as pharmaceuticals (chart 1), receive substantial tariff relief. The benefits could be strongly mutual if a deal also grants the US greater access to India’s large auto consumer market, particularly for major US electric vehicle (EV) producers, given that EV adoption in India remains at a very early stage (chart 2).

Turning to South Korea, discussions also appear to be progressing at a healthy pace, although details remain limited and ongoing domestic political challenges continue to hinder substantive breakthroughs. Nonetheless, the South Korean won has shown signs of stabilisation, while local equity markets have remained buoyant (chart 3). Recent trade data for April has also provided some investor relief, as weak exports to the US were more than offset by a strong performance in semiconductor shipments (chart 4).

In Japan, the race to secure a trade deal with the US is well underway, with automotive exports expected to be a key focal point given their significance to Japan’s economy and the US being a major export destination (chart 5). China, however, remains a notable outlier, with formal trade talks with the US not yet underway. Still, the US-China trade relationship continues to be the most closely watched, given its scale and potential impact on global growth and trade dynamics. While markets await China’s official April trade data, early indicators such as port activity already suggest a decline in bilateral trade flows (chart 6).

**US-India trade talks**
US-India trade discussions have reportedly been progressing rapidly, with both sides having already finalized in April the terms of reference for talks, setting the stage for formal negotiations. One early sign of favourable momentum is India’s possible offering of a “forward most-favoured-nation” clause to the US. This would ensure the US always receives the most favourable tariff terms, ahead of any other trade partner. If enacted, this would be a significant win for the US and a major leap forward in the US-India trade relationship. Another reported breakthrough involves India’s reported proposal of “zero-for-zero” tariffs on steel, auto components, and pharmaceuticals—offered on a reciprocal basis up to a certain quantity. If agreed, this would be mutually beneficial, especially as pharmaceuticals remain one of the US economy’s key imports from India, as shown in chart 1. On a separate note, and more recently, India’s phone exports to the US have reportedly gained prominence. With steep US tariffs on China, firms like Apple are increasingly incentivised to accelerate production shifts to India.

250506T1.jpg

Additionally, India’s proposed “zero-for-zero” tariff plan for auto parts may galvanise US access to India’s large domestic auto market, which has remained comparatively insulated due to high import tariffs. Another area to watch in the trade talks is electric vehicle (EV) imports, especially given US EV giant Tesla’s continued interest in expanding into the Indian market. That said, EV adoption in India remains in its early stages by many measures. While India has an immense middle class with future sales potential, EVs accounted for only about 2% of new cars sold in 2023, as shown in chart 2. This is well below levels seen in other Asian economies like China, or leaders in this space like Norway, where nearly all new cars sold are EVs. Challenges remain in unlocking the domestic Indian market—particularly around affordability and the underdeveloped state of EV infrastructure.

250506T2.jpg

**US-South Korea trade talks**
Discussions on the US-South Korea trade front also appear to be progressing at a steady pace, with technical talks reportedly having concluded in Washington last week. However, details remain limited, and full-scale negotiations have not yet begun. Complicating matters is South Korea’s domestic political landscape. With the country heading into a snap presidential election on June 3, Vice Industry Minister Park has said there is no chance of a comprehensive deal being reached before then. Still, both sides have committed to working toward an agreement before the expiration of Trump’s 90-day reciprocal tariff pause on July 8. In financial markets, the won continues to swing but remains above its year-to-date lows (chart 3). Meanwhile, South Korean equities have been lifted by a softening in trade rhetoric from both the US and China, as well as optimism around the US-South Korea talks.

250506T3.jpg

Turning to the hard trade data, South Korea’s more complete April numbers offered some initial relief to investors. The economy still managed to post moderate export growth, surprising many, despite a nearly 7% y/y decline in exports to the US, as shown in chart 4. One of the key drivers was semiconductors, which recorded double-digit y/y growth for the second consecutive month. However, these figures likely do not yet reflect the full initial impact of the steep mutual tariffs between the US and China. Firmer indications may emerge in the coming months. By then, though, attention will likely have shifted toward the outcome of US trade talks with key partners, as the end of its 90-day reciprocal tariff pause draws near.

250506T4.jpg

**US-Japan trade talks**
Turning to Japan, there is a sense of cautious optimism, with Japan’s chief trade negotiator Akazawa expressing hope for a US-Japan trade deal by June, following the second and most recent round of talks held in Washington last week. A key point of interest is whether Japan can negotiate an exemption from the current 25% automotive tariffs imposed by the US. This is especially significant given the importance of the US as a destination for Japanese auto exports, as shown in chart 5, and the central role the sector plays in Japan’s broader manufacturing economy. Also worth noting is a recent clarification by Japan’s Finance Minister Kato, who walked back earlier remarks and stated that Japan will not use the sale of US Treasuries as a bargaining tool. The clarification may help defuse a potential point of friction between the two sides as trade discussions continue.

250506T5.jpg

**US-China trade developments**
Turning to US-China trade developments — while progress here has lagged, this relationship remains the most closely watched, given its potentially large impact if meaningful movement occurs. Recent messaging from both sides has softened, stepping back from the fiery exchanges and tariff escalations seen earlier in April, offering some interim relief for investors. China has reportedly exempted certain US imports from tariffs, including specific pharmaceutical and industrial chemical products. However, on US-China trade talks, they remain at a very early stage, with China merely “evaluating” the prospect of negotiations with the US. This suggests we are still far from anything resembling a formal deal. Investors are now closely watching for first-round effects of US tariffs, which are expected to appear in China’s April trade numbers due later this week. Early signs point to a slowdown. For example, vessel traffic at the Los Angeles–Long Beach port remains at range lows, hinting at reduced shipments from China.

250506T6.jpg

Asia

Economic Letter from Asia: Art of the Deal

250505N12.jpg

250505O12.jpg

The U.S. ISM Services PMI rose to 51.6 during April, after falling sharply to 50.8 in March from 53.5 in February, according to today’s report by the Institute for Supply Management. The reading indicated service sector expansion for the tenth consecutive month, although the rate of expansion has slowed significantly. The index hit a recent high of 55.8 in October of last year and remains below the all-time high of 67.5 in November 2021. The Action Economics Forecast Survey expected 50.2 for April.

Haver Analytics constructs a composite index combining the services index and the manufacturing index released on Thursday. This index rose to 51.2 in Apri from 50.6 in March. The latest figure remains above its June low of 49.1.

Amongst the services component series, the employment index led last month’s improvement in the overall index. It rose to 49.0 after falling sharply to 46.2 in March. Higher employment was reported by a slightly improved 14.6% (NSA) of respondents while a lessened 16.4% reported a decline. The new orders index rose to 52.3 after falling to 50.4 in March. A higher 22.4% (NSA) of respondents reported a rise in orders while a lessened 15.3% reported a decline. Reporting slower delivery speeds, the supplier delivery series edged up to 51.3 in April after falling to 50.6 in March. Working lower, the business activity series declined to 53.7 after rising to 55.9 in March. A higher 26.2% (NSA) of respondents reported improved activity while a lessened 14.0% reported deterioration.

On the inflation front, the prices index surged to 68.9 in April after easing to 62.8 in March. A greatly increased 39.6% (NSA) of respondents reported higher prices while a lessened 1.9% reported lower prices. The index was increased from its December 2022 low 53.1 and stood at its highest level since October 2022.

Additionally, the new export orders index increased to 48.6 (NSA) in April following a decline to 45.8 in March from 52.1 in February. Just 14.8% of survey respondents reported higher exports while an increased 17.7% reported a decline. The imports index plummeted to 44.3 last month from 52.6 in March. A greatly lessened 4.7% of respondents reported higher imports while a doubled 16.2% reported a decline. The inventory change index jumped to 53.4, a six-month high. The order backlog index edged up to 48.0 in April after falling sharply to 47.4 in March. A lessened 12.2% of respondents reported higher backlogs while a fewer 16.2% reported a decline. 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, while 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.

250505P12.jpg

250505Q12.jpg

- Total index remains near nine-month low.
- Employment, new orders & supplier deliveries edge up. Business activity weakens. 
- Prices Index strengthens to roughly two-year high.

U.S. ISM Services PMI Edges Higher in April; Prices Strengthen

250502A5.jpg

250502B5.jpg

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.

250502C5.jpg

250502D5.jpg

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.

250502X5.jpg

250502F5.jpg

- 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

250502F32.jpg

250502G32.jpg

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.

250502H32.jpg

250502I32.jpg

- 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.

Economy in Brief: May 2009

Jump to:

ADP Report: Rate Of Job Loss Slowed During April

Sharp, Widespread, PPI Drop Puts ECB On The Spot For A Rate Cut

U.S. Chain Store Sales Rise Again

U.S. ISM Nonmanufacturing Index Recovers To Highest Level Since October

Petroleum Prices Move Higher

Petroleum Prices Move Higher

Europe Begins to Cut Its Losses

Most April Manufacturing PMI's Show a Lessening of Contraction: India's and China's Show Expansion