Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050207a.jpg" width="353">
The JoC-ECRI (Journal of Commerce-Economic Cycle Research Institute) index of industrial commodity prices surged in three out of the last four weeks. The gains lifted the latest reading 2.7% above the February average though the y/y gain was a low 1.2% due to pricing strength this time, last year.
During the last ten years there has been a 45% correlation between the JoC-ECRI commodity price index and the six month change in factory sector industrial production.
Petroleum prices were up 8.9% last week versus February as a 10.4% rise in crude oil prices to $52.70 bolstered a 3.0% (43.8% y/y) increase in the price of benzene.
Textile prices finally showed some lift and were 2.7% higher versus February led by a 9.7% jump in the price of cotton (-29.5% y/y). Lumber prices also rose a strong 4.4% (9.8% y/y) and prices for lengths of structural composite jumped 6.6% (-21.3% y/y).
Metals prices rose 1.8% in the latest week versus February. Higher aluminum prices led the strength with a 3.1% rise versus last month (15.0% y/y) and zinc prices also surged 3.8% (20.3% y/y).
The KR-CRB (Knight Ridder-Commodity Research Bureau) commodity price index also rose the first of March by 1.6% versus February and it rose further during last week. The index differs from the JoC-ECRI version in that roughly half of the weighting reflects agricultural prices. The latest gains reflect higher prices for foodstuffs (-11.6% y/y) which have offset lower livestock prices (-5.7% y/y).

<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.haver.com/COMMENT/www.haverselect.com/dlx/USECON/@E8/@E803/@E80304/@E80304.HTM">JoC-ECRI Industrial Price Index</a></th>
<th scope="col">03/04/05</th>
<th scope="col">12/31/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">All Items</td>
<td>116.00</td>
<td>111.60</td>
<td>1.2%</td>
<td>112.78</td>
<td>91.97</td>
<td>79.53</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Textiles</td>
<td>67.00</td>
<td>64.40</td>
<td>-3.0%</td>
<td>65.83</td>
<td>65.09</td>
<td>59.73</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Metals</td>
<td>125.60</td>
<td>124.60</td>
<td>6.2%</td>
<td>118.15</td>
<td>84.57</td>
<td>75.14</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Miscellaneous</td>
<td>104.40</td>
<td>103.90</td>
<td>-15.6%</td>
<td>114.03</td>
<td>102.89</td>
<td>85.81</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Petroleum</td>
<td>264.40</td>
<td>216.50</td>
<td>53.5%</td>
<td>207.13</td>
<td>135.26</td>
<td>110.06</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">KR-CRB Spot Commodity Price Index</td>
<td>03/01/05</td>
<td>12/28/04</td>
<td>Y/Y</td>
<td>2004</td>
<td>2003</td>
<td>2002</td>
</tr>
<tr>
<td class="firstcol">All Commodities</td>
<td>294.44</td>
<td>293.42</td>
<td>-2.4%</td>
<td>293.42</td>
<td>282.59</td>
<td>244.31</td>
</tr>
</tbody>
</table>
 Thailand's Fourth Quarter GDP Shows Moderate Deceleration in Growth and Acceleration in Inflation During 2004 
by <a href="/comment/Curley.html">Louise Curley</a> March 7, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050307b.jpg" width="353">
Thailand&#39;s seasonally unadjusted Real Gross Domestic Product rose 5.05% in the fourth quarter of 2005 over the fourth quarter of 2004. The year over year rate of growth has decelerated during the year from the first quarter rate of 6,70%. For the year as a whole, GDP was up 6.05% in 2004, compared with 6.89% in 2003, 5.33% in 2002 and 2.17% in 2001.
A fall off in the year to year increase in private consumption and a much larger increase in imports than in exports largely offset increases in government consumption, inventories and gross fixed investment. The year to year changes in private consumption are compared with gross fixed investment in the first chart while the second chart compares the year to year changes in exports with those in imports.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050307c.jpg" width="353">
While real GDP growth, for the year as a whole, decelerated slightly in comparison with 2003, inflation as measured by the deflator more than doubled from 1.90% in 2003 to 4.55% in 2004.

<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/emerging.htm">Thailand: GDP</a> Year/Year % Changes&nbsp;</th>
<th scope="col">Q4 05</th>
<th scope="col">Q3&nbsp;05</th>
<th scope="col">Q2 05</th>
<th scope="col">Q1 05</th>
<th scope="col">2004</th>
<th scope="col">&nbsp;2003&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2002</th>
<th scope="col">&nbsp; 2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP (1988 Bahts)</td>
<td>5.05</td>
<td>6.09</td>
<td>6.44</td>
<td>6.70</td>
<td>6.05</td>
<td>6.89</td>
<td>5.33</td>
<td>2.17</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Private Consumption</td>
<td>5.14</td>
<td>5.63</td>
<td>5.68</td>
<td>6.17</td>
<td>5.65</td>
<td>6.44</td>
<td>5.28</td>
<td>4.12</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Government Consumption</td>
<td>5.18</td>
<td>0.27</td>
<td>4.94</td>
<td>7.03</td>
<td>4.13</td>
<td>2.00</td>
<td>1.78</td>
<td>2.49</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Gross Fixed Investment</td>
<td>16.16</td>
<td>12.01</td>
<td>12.86</td>
<td>16.65</td>
<td>14.35</td>
<td>11.88</td>
<td>6.54</td>
<td>1.13</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Inventories*</td>
<td>17.58</td>
<td>18.59</td>
<td>10.76</td>
<td>-27.31</td>
<td>19.63</td>
<td>9.04</td>
<td>6.15</td>
<td>10.14</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Exports</td>
<td>5.10</td>
<td>8.37</td>
<td>11.84</td>
<td>6.22</td>
<td>7.78</td>
<td>7.03</td>
<td>11.99</td>
<td>-4.21</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Imports</td>
<td>3.58</td>
<td>12.46</td>
<td>20.09</td>
<td>13.54</td>
<td>12.14</td>
<td>7.65</td>
<td>13.69</td>
<td>-5.50</td>
</tr>
<tr>
<td class="firstcol">Deflator</td>
<td>6.07</td>
<td>5.10</td>
<td>4.81</td>
<td>2.20</td>
<td>4.55</td>
<td>1.90</td>
<td>0.69</td>
<td>2.11</td>
</tr>
<tr class="odd">
<td class="firstcol">GDP (nominal)</td>
<td>11.42</td>
<td>11.51</td>
<td>11.55</td>
<td>9.05</td>
<td>10.89</td>
<td>6.09</td>
<td>6.09</td>
<td>4.28</td>
</tr>
</tbody>
</table>
</body>
</html>

The JoC-ECRI (Journal of Commerce-Economic Cycle Research Institute) index of industrial commodity prices surged in three out of the last four weeks. The gains lifted the latest reading 2.7% above the February average though the y/y [...]

Commodity Prices Broadly Higher

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/050304e.jpg" width="353">
Prices are picking up in Argentina but remain quiescent in neighboring Chile, according to broad inflation gauges published today for February. Argentina&#39;s CPI rose 0.8% in the month, following increases of 1.4% in each December and January. The year-on-year rate reached 8.1%, the highest since June 2003. All of the broad categories of prices are contributing to the renewed uptrend: food, clothing, and, in particular, housing. Thus, higher food and/or energy costs are not the culprits, nor is the currency, which has stabilized after it was floated in 2002. Moreover, the central bank is doing its part, as it is constraining the growth of its monetary base.
Wholesale prices continue to rise, although they are not accelerating. But increases during much of 2004, particularly in imported products, can certainly be cited as pushing on consumer prices. No doubt energy prices are playing some part here, and other items as well.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050304f.jpg" width="353">
Almost the opposite situation exists in Chile, where there is only very modest inflation. In February, the total CPI was flat with January&#39;s and the ex-food-and-energy core subset fell 0.2%. Remarkably, both of these gauges are below the comparable measures for the US, as seen in the second graph.
However, inflation is somewhat firmer than its low early last year, when even the 12-month change was briefly below zero. As in Argentina, this upshift is evident in several price categories; however, in several, such as clothing, the move is from notable deflation back more toward price stability.
Beyond that, there is little basis for comparison of the two countries&#39; inflation conditions. Argentina faces re-accelerating inflation in spite of a stable currency. Chile is incurring quite limited inflation, even as its currency value has cycled up and down and up over the last two years. Monetary growth there is also rapid and accelerating. Its wholesale prices, noted in the table below, have risen markedly over the last year, but that may well be related to the recent surge in Chile&#39;s chief export item, copper, as well as to the energy sector.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/emerging.htm">Latin America</a></th>
Monthly Rates
12-Month Changes
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Feb 2005</td>
<td>Jan 2005</td>
<td>Dec 2004</td>
<td>Feb 2005</td>
<td>2004</td>
<td>2003</td>
<td>2002</td>
</tr>
<tr>
<td class="firstcol">Argentina CPI</td>
<td>0.8</td>
<td>1.4</td>
<td>1.4</td>
<td>8.1</td>
<td>6.1</td>
<td>3.7</td>
<td>41.0</td>
</tr>
<tr class="odd">
<td class="firstcol">WPI</td>
<td>1.0</td>
<td>-1.0</td>
<td>0.9</td>
<td>6.8</td>
<td>7.9</td>
<td>2.0</td>
<td>118.0</td>
</tr>
<tr>
<td class="firstcol">Memo: Pesos/US$</td>
<td>2.9179</td>
<td>2.9448</td>
<td>2.9708</td>
<td>2.9191</td>
<td>2.9403</td>
<td>2.9472</td>
<td>3.1389</td>
</tr>
<tr class="odd">
<td class="firstcol">Chile: CPI</td>
<td>0.0</td>
<td>-0.1</td>
<td>0.1</td>
<td>2.2</td>
<td>2.4</td>
<td>1.1</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">ex Food &amp; Energy &quot;Core&quot;</td>
<td>-0.2</td>
<td>0.0</td>
<td>0.4</td>
<td>1.7</td>
<td>1.8</td>
<td>1.6</td>
<td>1.8</td>
</tr>
<tr class="odd">
<td class="firstcol">WPI</td>
<td>-0.2</td>
<td>0.4</td>
<td>-1.4</td>
<td>8.7</td>
<td>7.8</td>
<td>-1.0</td>
<td>10.4</td>
</tr>
</tbody>
</table>
</body>
</html>

Prices are picking up in Argentina but remain quiescent in neighboring Chile, according to broad inflation gauges published today for February. Argentina's CPI rose 0.8% in the month, following increases of 1.4% in each December and [...]

Inflation Accelerates in Argentina, Remains Low in Chile

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050304c.jpg" width="353">
Factory inventories jumped 1.3% in January led higher by broad based industry gains. Less petroleum which jumped 8.6% (18.3% y/y), inventories increased 1.0% (8.1% y/y).
Shipments out of the factory sector surged 1.4% but were notable for primary metals (32.0% y/y), machinery (20.6% y/y), computers &amp; electronics (11.1% y/y) and chemicals (11.7% y/y).
Orders to the factory sector rose 0.2%. The advance report of a 0.9% decline in durable goods was revised deeper to 1.3% (+11.4% y/y). Nondefense capital goods orders less aircraft was unrevised at +2.9% (17.1% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050304b.jpg" width="353">
Unfilled orders fell 0.2% for the first decline in a year. Fewer supply bottlenecks were indicated as the ratio of unfilled orders to shipments for durables fell sharply for the second month. 

<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/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory Survey</a> (NAICS)</th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>1.3%</td>
<td>0.1%</td>
<td>8.5%</td>
<td>7.5%</td>
<td>-1.3%</td>
<td>-1.8%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>0.2%</td>
<td>0.5%</td>
<td>11.3%</td>
<td>10.9%</td>
<td>3.7%</td>
<td>-1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>1.4%</td>
<td>1.2%</td>
<td>11.7%</td>
<td>10.5%</td>
<td>2.6%</td>
<td>-2.0%</td>
</tr>
<tr>
<td class="firstcol">Unfilled Orders</td>
<td>-0.2%</td>
<td>0.5%</td>
<td>8.9%</td>
<td>9.1%</td>
<td>4.2%</td>
<td>-6.1%</td>
</tr>
</tbody>
</table>
</body>
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Factory inventories jumped 1.3% in January led higher by broad based industry gains. Less petroleum which jumped 8.6% (18.3% y/y), inventories increased 1.0% (8.1% y/y). Shipments out of the factory sector surged 1.4% but were notable [...]

U.S. Factory Inventories Jumped in January

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050304d.jpg" width="353">
The February index of consumer sentiment from the University of Michigan fell to 94.1 versus the preliminary reading of 94.2 and 95.5 in January. Consensus expectations had been for 94.2. During the last ten years there has been a 74% correlation between the level of consumer sentiment and the y/y change in real PCE.
Consumer expectations fell 1.5% m/m but the decline was slightly less than initially estimated.
The reading of current conditions fell 1.5% m/m versus the preliminary read of no change. Sentiment regarding personal finances fell m/m but surged 9.0% vs. a year ago. During the last ten years there has been an 81% correlation between the current conditions index and y/y growth in payroll employment. Buying conditions for large household goods fell m/m but rose last quarter versus 4Q04.
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>94.1</td>
<td>95.5</td>
<td>-0.3%</td>
<td>95.2</td>
<td>87.6</td>
<td>89.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>109.2</td>
<td>110.9</td>
<td>5.4%</td>
<td>105.6</td>
<td>97.2</td>
<td>97.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Consumer Expectations</td>
<td>84.4</td>
<td>85.7</td>
<td>-4.6%</td>
<td>88.5</td>
<td>81.4</td>
<td>84.6</td>
</tr>
</tbody>
</table>
</body>
</html>

The February index of consumer sentiment from the University of Michigan fell to 94.1 versus the preliminary reading of 94.2 and 95.5 in January. Consensus expectations had been for 94.2. During the last ten years there has been a 74% [...]

U.S. Consumer Sentiment Declined

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050304a.jpg" width="353">
Non-farm payrolls rose 262,000 in February, doubling the prior month&#39;s increase which was downwardly revised. Consensus expectations had been for a 225,000 rise.
From the separate household survey the unemployment rate rose to 5.4%. Employment fell 97,000 (+1.3% y/y) while the labor force expanded 153,000 (1.1% y/y). The labor force participation rate remained stable m/m at 65.8% versus a high in 2000 of 67.3%.
Factory sector payrolls recovered all of the lessened 20,000 January decline. The breadth of hiring gain narrowed, however, as indicated by a decline in the one month diffusion index to 43.5%. That index rose above 60% early in 2004.
Construction jobs rose 30,000 (4.0% y/y) versus a revised no change in January.
Private service producing payrolls rose 174,000 (2.1% y/y) led by a strong 81,000 (3.9% y/y) gain in professional &amp; business services. Education &amp; health services jobs rose 18,000 (2.4% y/y) and financial jobs rose 12,000 (2.1% y/y). Government employment increased 33,000 (0.9% y/y) though federal government jobs rose just 2,000 (-0.4% y/y).
The index of aggregate hours worked (employment times hours worked) rose 0.2% (+2.2% y/y) after an upwardly revised 0.2% January gain. In 1Q the index is 0.6% (AR) ahead of 4Q04.
Average hourly earnings rose were unchanged reflecting a 0.1% (+2.6% y/y) in private service producing earnings. Manufacturing earnings rose 0.2% (2.6% y/y).
Yesterday&#39;s speech by Fed Chairman Alan Greenspan on the tax system can be found <a href="http://www.federalreserve.gov/boarddocs/testimony/2005/20050303/default.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/@EB/@EB01/@EB01.HTM">Employment</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>262,000</td>
<td>132,000</td>
<td>1.8%</td>
<td>1.1%</td>
<td>-0.3%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>20,000</td>
<td>-20,000</td>
<td>0.4%</td>
<td>-1.2%</td>
<td>-4.9%</td>
<td>-7.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.7</td>
<td>33.7</td>
<td>33.8</td>
<td>33.7</td>
<td>33.7</td>
<td>33.8</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.0%</td>
<td>0.3%</td>
<td>2.5%</td>
<td>2.1%</td>
<td>2.7%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>5.4%</td>
<td>5.2%</td>
<td>5.6%</td>
<td>5.5%</td>
<td>6.0%</td>
<td>5.8%</td>
</tr>
</tbody>
</table>
</body>
</html>

Non-farm payrolls rose 262,000 in February, doubling the prior month's increase which was downwardly revised. Consensus expectations had been for a 225,000 rise. From the separate household survey the unemployment rate rose to 5.4%. [...]

U.S. Payrolls Firm

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050304a.jpg" width="353">
Non-farm payrolls rose 262,000 in February, doubling the prior month&#39;s increase which was downwardly revised. Consensus expectations had been for a 225,000 rise.
From the separate household survey the unemployment rate rose to 5.4%. Employment fell 97,000 (+1.3% y/y) while the labor force expanded 153,000 (1.1% y/y). The labor force participation rate remained stable m/m at 65.8% versus a high in 2000 of 67.3%.
Factory sector payrolls recovered all of the lessened 20,000 January decline. The breadth of hiring gain narrowed, however, as indicated by a decline in the one month diffusion index to 43.5%. That index rose above 60% early in 2004.
Construction jobs rose 30,000 (4.0% y/y) versus a revised no change in January.
Private service producing payrolls rose 174,000 (2.1% y/y) led by a strong 81,000 (3.9% y/y) gain in professional &amp; business services. Education &amp; health services jobs rose 18,000 (2.4% y/y) and financial jobs rose 12,000 (2.1% y/y). Government employment increased 33,000 (0.9% y/y) though federal government jobs rose just 2,000 (-0.4% y/y).
The index of aggregate hours worked (employment times hours worked) rose 0.2% (+2.2% y/y) after an upwardly revised 0.2% January gain. In 1Q the index is 0.6% (AR) ahead of 4Q04.
Average hourly earnings rose were unchanged reflecting a 0.1% (+2.6% y/y) in private service producing earnings. Manufacturing earnings rose 0.2% (2.6% y/y).
Yesterday&#39;s speech by Fed Chairman Alan Greenspan on the tax system can be found <a href="http://www.federalreserve.gov/boarddocs/testimony/2005/20050303/default.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/USECON/@EB/@EB01/@EB01.HTM">Employment</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>262,000</td>
<td>132,000</td>
<td>1.8%</td>
<td>1.1%</td>
<td>-0.3%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>20,000</td>
<td>-20,000</td>
<td>0.4%</td>
<td>-1.2%</td>
<td>-4.9%</td>
<td>-7.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.7</td>
<td>33.7</td>
<td>33.8</td>
<td>33.7</td>
<td>33.7</td>
<td>33.8</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.0%</td>
<td>0.3%</td>
<td>2.5%</td>
<td>2.1%</td>
<td>2.7%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>5.4%</td>
<td>5.2%</td>
<td>5.6%</td>
<td>5.5%</td>
<td>6.0%</td>
<td>5.8%</td>
</tr>
</tbody>
</table>
U.S. Consumer Sentiment Declined 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 4, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050304d.jpg" width="353">
The February index of consumer sentiment from the University of Michigan fell to 94.1 versus the preliminary reading of 94.2 and 95.5 in January. Consensus expectations had been for 94.2. During the last ten years there has been a 74% correlation between the level of consumer sentiment and the y/y change in real PCE.
Consumer expectations fell 1.5% m/m but the decline was slightly less than initially estimated.
The reading of current conditions fell 1.5% m/m versus the preliminary read of no change. Sentiment regarding personal finances fell m/m but surged 9.0% vs. a year ago. During the last ten years there has been an 81% correlation between the current conditions index and y/y growth in payroll employment. Buying conditions for large household goods fell m/m but rose last quarter versus 4Q04.
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

<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/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>94.1</td>
<td>95.5</td>
<td>-0.3%</td>
<td>95.2</td>
<td>87.6</td>
<td>89.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>109.2</td>
<td>110.9</td>
<td>5.4%</td>
<td>105.6</td>
<td>97.2</td>
<td>97.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Consumer Expectations</td>
<td>84.4</td>
<td>85.7</td>
<td>-4.6%</td>
<td>88.5</td>
<td>81.4</td>
<td>84.6</td>
</tr>
</tbody>
</table>
US Factory Inventories Jumped in January 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 4, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050304c.jpg" width="353">
Factory inventories jumped 1.3% in January led higher by broad based industry gains. Less petroleum which jumped 8.6% (18.3% y/y), inventories increased 1.0% (8.1% y/y).
Shipments out of the factory sector surged 1.4% but were notable for primary metals (32.0% y/y), machinery (20.6% y/y), computers &amp; electronics (11.1% y/y) and chemicals (11.7% y/y).
Orders to the factory sector rose 0.2%. The advance report of a 0.9% decline in durable goods was revised deeper to 1.3% (+11.4% y/y). Nondefense capital goods orders less aircraft was unrevised at +2.9% (17.1% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050304b.jpg" width="353">
Unfilled orders fell 0.2% for the first decline in a year. Fewer supply bottlenecks were indicated as the ratio of unfilled orders to shipments for durables fell sharply for the second month. 

<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/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory Survey</a> (NAICS)</th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>1.3%</td>
<td>0.1%</td>
<td>8.5%</td>
<td>7.5%</td>
<td>-1.3%</td>
<td>-1.8%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>0.2%</td>
<td>0.5%</td>
<td>11.3%</td>
<td>10.9%</td>
<td>3.7%</td>
<td>-1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>1.4%</td>
<td>1.2%</td>
<td>11.7%</td>
<td>10.5%</td>
<td>2.6%</td>
<td>-2.0%</td>
</tr>
<tr>
<td class="firstcol">Unfilled Orders</td>
<td>-0.2%</td>
<td>0.5%</td>
<td>8.9%</td>
<td>9.1%</td>
<td>4.2%</td>
<td>-6.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050303e.jpg" width="353">
China&#39;s inflation is slowing further. In January, the 12-month change in the CPI was 1.9%, the third consecutive weaker pace and the slowest since October 2003. As noted in the table below, a slowdown in food prices accounts for a significant portion of the moderation in overall inflation.
The last couple of months have also seen less rapid increases in fuel prices. These are actually included in the separate group of data, &quot;retail prices&quot;, that is, the prices for merchandise sold in stores. The broader consumer price data, as those for other countries, also includes services, such as health care, recreation and so on. However, fuel prices are definitely related to trends in the broad CPI. A quick correlation analysis reveals that fuel price inflation with a one-month lead, has a 50% correlation with the movement of the CPI. Thus, while the Chinese government was concerned about rapid demand growth in China pressuring inflation, it seems more that food and fuel prices have greater force. At the same time, one can also argue that particularly in China, food and fuel prices might in fact be demand-driven as Chinese consumers are able to afford better diets and more fuel-using activities, such as heating and driving.
In the accompanying graph, we examine another facet of the Chinese consumer economy. Retail sales data, as in most countries, are quoted in nominal terms. For many years, then, retail sales and consumer prices moved in tandem, as the value of consumer purchases paralleled consumer prices. The correlation between the two for some periods was more than 90%. However, since 2002, this relationship has broken down. In 2002, retail sales sustained strong growth even as inflation was low. Last year, sales sagged in the summer and autumn in the face of higher consumer price inflation. This new pattern suggests a more demand-oriented response, in which slower prices encourage more buying and stronger prices send value-minded consumers away from the stores. Such a broad interpretation of a brief cycle of these monthly statistics is probably not warranted, but it&#39;s a phenomenon worth further scrutiny as the Chinese economy becomes more open and liberal in general.

<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/EMERGEPR/@P1/@P1.HTM">China: CPI</a>&nbsp; 12-Mo % Changes</th>
<th scope="col">Jan 2005</th>
<th scope="col">Dec 2004</th>
<th scope="col">Nov 2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Overall CPI</td>
<td>1.9</td>
<td>2.4</td>
<td>2.8</td>
<td>3.2</td>
<td>-0.4</td>
<td>-0.3</td>
</tr>
<tr>
<td class="firstcol">Food</td>
<td>4.0</td>
<td>4.9</td>
<td>5.0</td>
<td>8.6</td>
<td>0.5</td>
<td>-0.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Clothing</td>
<td>-1.6</td>
<td>-1.7</td>
<td>-1.8</td>
<td>-1.8</td>
<td>-2.9</td>
<td>-1.7</td>
</tr>
<tr>
<td class="firstcol">Housing</td>
<td>5.5</td>
<td>5.6</td>
<td>6.3</td>
<td>3.5</td>
<td>0.2</td>
<td>0.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Fuel*</td>
<td>16</td>
<td>17</td>
<td>22</td>
<td>6</td>
<td>12</td>
<td>-5</td>
</tr>
</tbody>
</table>
</body>
</html>

China's inflation is slowing further. In January, the 12-month change in the CPI was 1.9%, the third consecutive weaker pace and the slowest since October 2003. As noted in the table below, a slowdown in food prices accounts for a [...]

Chinese Inflation Falls Below 2% in January; Economy Becoming More Demand-Oriented?

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050303b.jpg" width="353">
Initial claims for unemployment insurance slipped 1,000 to 310,000 last week and the prior week&#39;s moderate rise was lessened. Consensus expectations had been for 315,000 claims.
The four week moving average of initial claims fell to 307,0000 (-13.6% y/y).
Continuing claims for unemployment insurance rose 12,000 and the prior week&#39;s decline was lessened to 52,000.
During the last ten years there has been a (negative) 75% correlation between the level of initial claims for unemployment insurance and the monthly change in payroll employment. There has been a (negative) 66% correlation with the level of continuing claims.
The insured rate of unemployment remained at 2.1%.

<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/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">02/26/05</th>
<th scope="col">02/19/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>310</td>
<td>311</td>
<td>-9.4%</td>
<td>343</td>
<td>402</td>
<td>404</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,650</td>
<td>-15.8%</td>
<td>2,926</td>
<td>3,531</td>
<td>3,570</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial claims for unemployment insurance slipped 1,000 to 310,000 last week and the prior week's moderate rise was lessened. Consensus expectations had been for 315,000 claims. The four week moving average of initial claims fell to [...]

Initial Jobless Insurance Claims Slipped

Even with expected tariff-induced increases in inflation, BCFF forecasters look for a more aggressive round of monetary easing

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

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Andrew Cates

**The global business cycle** 
The recent sharp decline in the Future Output Balance in the global composite PMI survey reflects a sudden deterioration in global business expectations. The sweeping tariffs, introduced in April 2025, have generated heightened uncertainty around trade policy and sparked fears of retaliatory actions from key trading partners. As a result, businesses worldwide are scaling back their expectations for future output, wary of rising costs, disrupted demand flows, and a broader shift toward protectionism that could undermine global economic momentum.

250507Z1.jpg

Note: The extreme declines in the Future Output Balance that were recorded in the early months of 2020 (at the height of the COVID pandemic) have been removed from this chart.

**Global supply chain pressures**
Still, despite the marked deterioration in global business expectations, this second chart below provides a reassuring counterpoint: as of now, there is little evidence that global supply chain pressures have materially intensified. Both the New York Fed’s Global Supply Chain Pressure Index and the Baltic Exchange Dry Index remain relatively subdued, especially compared to the pandemic-era spikes of 2020–2022. While there has been heightened concern following the April 2025 US tariff announcements, these trade policy shifts have yet to translate into measurable physical disruption in logistics or freight rates. The stability of these indices suggests that although sentiment has taken a hit, global shipping networks and supply flows are, for now, absorbing the shock. However, this calm may prove fragile if the policy environment hardens further or retaliatory trade actions begin to compound the strain.

250507Z2.jpg

**Expectations for central banks’ policy rates** 
Adding to the picture of mounting economic caution, the latest Blue Chip Financial Forecasts survey reveals that expectations for policy easing over the next 12 months have become even more pronounced than in previous months. While earlier surveys had already pointed to a further extension of the global rate-cutting cycle, the latest results suggest forecasters now anticipate a deeper and more aggressive round of monetary easing—most notably from the US Federal Reserve, which is now expected to deliver nearly a full percentage point in rate cuts over the next 12 months. The sharp deterioration in business sentiment is reshaping the macro narrative: central banks are no longer simply guiding inflation lower, but are instead preparing to confront the risk of a deeper, demand-driven slowdown.

250507Z3.jpg

**Energy prices and inflation** 
Adding further context to the growing expectations for policy easing, oil prices have dropped sharply in recent weeks—driven by mounting concerns over global growth, as reflected in weakening business sentiment and softer demand indicators. The chart below provides a longer-run perspective on why this matters: energy prices have historically played a central role in shaping the global inflation trajectory. The strong positive correlation (r = 0.83) between median world energy price inflation and median core consumer price inflation underscores the powerful pass-through effects energy costs can have on broader price dynamics. While core inflation tends to be stickier, this historical relationship makes clear that sustained declines in energy prices often foreshadow broader disinflationary trends.

250507Z4.jpg

**Intangibles versus tangibles** 
Shifting focus from short-term cyclical risks to longer-term structural dynamics, the next chart below underscores a fundamental transformation in the composition of US investment: the economy has increasingly been built on intangibles. Over the past several decades, investment in intangible assets—such as software, intellectual property, R&D, and brand equity—has steadily climbed and, since the mid-2010s, has overtaken investment in both structures and equipment as a share of GDP. This shift reflects the rise of a knowledge-based, innovation-driven economy, but it also introduces new forms of vulnerability. Unlike physical capital, intangible assets rely heavily on trust, reputation, legal protections, and global openness. In this context, escalating trade frictions and a more confrontational US economic stance—as signalled by the recent tariff wave—risk eroding the goodwill and institutional credibility that underpin much of the value created by intangibles. If geopolitical uncertainty undermines the perceived reliability of US intellectual property protections or weakens global collaboration, it could pose a deeper structural challenge to future growth than any immediate cyclical downturn.

250507Z5.jpg

**Investment in Artificial Intelligence**
The centrality of intangibles to the US growth model is nowhere more evident than in the explosion of private investment in artificial intelligence. As this chart illustrates, global AI investment has surged over the past decade—reaching new highs in 2024—and the United States has consistently accounted for the lion’s share of that spending. This reflects not only America’s previous leadership in frontier technologies but also its dependence on intangible capital, from algorithms and data infrastructure to human expertise and institutional trust. However, this dominance also underscores the strategic stakes of current policy choices. In an environment of rising trade tensions and potential fragmentation, the foundations of US leadership in AI—cross-border collaboration, data openness, and global market access—could be at risk.

250507Z6.jpg

Financial market sentiment has rebounded in recent weeks, buoyed by signs of de-escalation in the US-led trade war and growing confidence that central banks—particularly the Federal Reserve—will step in with more rate cuts to cushion any fallout. Yet beneath the surface, a more sobering picture of the global economy persists. For example, latest PMI surveys reveal that global business expectations have slumped to their lowest levels since the pandemic, reflecting widespread unease about the growth outlook (chart 1). While supply chain pressures have so far remained contained, suggesting no repeat of the logistical chaos seen during the pandemic (chart 2), the latest Blue Chip Financial Forecasts survey reveals that forecasters are now pencilling in deeper and more widespread monetary easing than previously anticipated—an acknowledgment that demand is faltering (chart 3). Falling oil prices further reinforce this view: they are both a symptom of weakening global demand and a potential source of disinflation, reducing the urgency for central banks to maintain tight policy (chart 4). At the structural level, the US economy's increasing reliance on intangible assets—ranging from intellectual property to reputation—has made it more vulnerable to geopolitical frictions and the erosion of global trust (chart 5). This risk is compounded by America's dominant role in AI investment, a sector symbolic of both its economic strengths and its exposure to international perceptions (chart 6). The longer-term challenge, then, is not just navigating the current downturn, but ensuring that the institutional goodwill and cross-border openness that support the modern US economy are not sacrificed in a more fragmented and uncertain global order.

Charts of the Week: Relief Rally Meets Recession Risk

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At today’s meeting of the Federal Open Market Committee, the target range for the Fed funds rate was left unchanged at 4.25% to 4.50%. This followed reductions at three consecutive meetings in the fall of 2024. Rates remain below the high of 5.25% to 5.50% in place in mid-September. Today’s target range matched expectations in the Action Economics Forecast Survey.

The statement following the meeting indicated that, “The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook has increased further. The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen.”

“The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.”

The Fed continued, “The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage backed securities.”

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- FOMC holds funds rate target at late-December level.
- Risk assessments include higher unemployment & inflation.

FOMC Targeted Funds Rate Range Is Unchanged; Increased Risks Acknowledged

Kathleen Stephansen, CBE

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Consumer credit outstanding rose $10.2 billion (1.9% y/y) during March after declining by $0.6 billion (+1.7% y/y) during February, revised from a decline of $0.8 billion (+1.7% y/y. A $10.0 billion rise had been expected in the Action Economics Forecast Survey. As a percentage of disposable personal income, consumer credit was 22.4% in March, compared to 22.9% one year earlier.

Nonrevolving credit outstanding rose $8.3 billion (1.5% y/y) in March after easing $0.3 billion (1.3% y/y) in February. Nonrevolving credit held by depository institutions declined 7.8% y/y in March after declining 9.0% y/y in February. Finance company debt holdings rose 0.8% y/y, while credit union holdings eased 1.9% y/y in March. Nonrevolving debt held by the federal government rose 3.4% y/y.

In March, revolving credit outstanding, which includes credit cards, rose $1.9 billion (2.9% y/y) following a decline of $0.3 billion (2.9% y/y) in February. Revolving credit outstanding held by depository institutions fell 1.5% y/y. Revolving credit held by finance companies dropped 12.2% y/y, while that held by credit unions rose 3.7% y/y.

The consumer credit figures from the Federal Reserve Board are break-adjusted and calculated by Haver Analytics. The breaks in the series in 2005, 2010 and 2015 are the result of the incorporation of data from the Census and the Survey of Finance Companies, as well as changes in the seasonal adjustment methodology. The consumer credit data are available in Haver’s **USECON** database. The Action Economics forecast figures are contained in the **AS1REPNA** database.

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- Consumer credit rises close to expectations.
- Nonrevolving and revolving credit rise.


U.S. Consumer Credit Rebounded in March

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Mortgage applications increased 11.0% (26.0% y/y) in the week ended May 2, after declining 4.2% in the week ended April 25, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications to purchase a home rose 11.1% (12.9% y/y) in the week ended May 2 after declining 4.4% in the previous week. Loan applications to refinance a home loan also increased 11.1% (51.0% y/y) in the latest week after falling 3.7% in the prior week.

The effective interest rate on a 30-year fixed rate loan of 7.03% in the week ended May 2 compared to 7.08% in the prior week. The effective rate on a 15-year fixed rate loan of 6.34% in the week ended May 2 followed 6.36% in the prior week. The rate on a 30-year jumbo loan declined to 6.99% in the latest week from 7.06% in the prior week, while the rate on a 5-year ARM eased	to 6.08% in the week ended May 2 from 6.12% in the prior week.

The share of applications to refinance an existing mortgage slipped to 37.1% in the week ended May 2 from 37.3% in the prior week. The share of loans with an adjustable rate rose to 8.3% in the latest week from 7.4% one week earlier.

The average size of a mortgage loan rose 4.2% (3.8% y/y) to $400,200 in the week ended May 2, after slipping 0.7% to $384,100 in the prior week. The average size of a loan to purchase a home increased 1.0% (0.2% y/y) to $444,300 in the latest week from $440,100 in the week prior. The average size of a loan to refinance an outstanding mortgage increased 12.3% (27.6% y/y) last week to $325,400 from $289,800 one week earlier.

The Mortgage Bankers Association Survey covers 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver’s **SURVEYS** database.

- Purchase & refinancing loan applications jump.
- Effective interest rates remain range-bound.
- Average loan size increases.

Mortgage Applications Surge as Interest Rates Ease Last Week

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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 fell 4.1% (-10.2% y/y) after a 2.9% decline. Nonpetroleum imports increased 6.0% (34.8% y/y) after holding steady 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 decreasing 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 2.6% 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 1.2% (1.7% y/y). Imported travel services fell 2.2% (5.3% y/y) while charges for use of intellectual property rose 1.0% (13.6 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**.

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- 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.

Economy in Brief: March 2005

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