Tom Moeller

<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/060306c.jpg" width="353">
Factory inventories grew 0.5% in January following an upwardly revised 0.6% increase during December. Though the rate of inventory accumulation slowed sharply during the last year, the 3.5% y/y growth contrasts with outright decumulation from 2001 to 2003 and probably suggests only cautious management rather than a pessimistic outlook.
A 1.1% (2.4% y/y) increase in primary metals inventories was accompanied by a 1.1% (2.1% y/y) rise in fabricated metals, but both paled next to a 1.7% (6.9% y/y) gain in electrical equipment and a 1.1% (5.8% y/y) increase in machinery.
Total factory orders dropped 4.5% from December and the advance report of a 10.2% plunge in durable goods orders was mitigated only slightly to -9.9%. The drop reflected a huge 68.3% (+61.4% y/y) decline in nondefense aircraft and a 20.9% (+57.4% y/y) drop in defense aircraft &amp; parts. Factory orders less the transportation sector altogether rose 1.6% (8.3% y/y). 
Factory shipments increased 0.3% but less transportation shipments rose 1.4% (7.5% y/y), a gain inflated only slightly by higher petroleum prices.
Unfilled orders fell 0.7% after the 2.6% surge which was powered by higher aircraft orders. Less the transportation sector, backlogs rose 0.4% (10.5% y/y) for the second consecutive month.<a href="http://research.stlouisfed.org/publications/review/05/07/Gali.pdf"> </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/@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">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>0.5%</td>
<td>0.6%</td>
<td>3.5%</td>
<td>4.4%</td>
<td>7.7%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>-4.5%</td>
<td>1.6%</td>
<td>6.9%</td>
<td>8.5%</td>
<td>9.3%</td>
<td>3.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>0.3%</td>
<td>2.4%</td>
<td>7.2%</td>
<td>7.4%</td>
<td>9.5%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">Unfilled Orders</td>
<td>-0.7%</td>
<td>2.6%</td>
<td>16.1%</td>
<td>16.5%</td>
<td>8.4%</td>
<td>8.0%</td>
</tr>
</tbody>
</table>
</body>
</html>

Factory inventories grew 0.5% in January following an upwardly revised 0.6% increase during December. Though the rate of inventory accumulation slowed sharply during the last year, the 3.5% y/y growth contrasts with outright [...]

U.S. Factory Inventories Up, Orders Drop Belies Factory Strength

<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/060306a.jpg" width="353">
Crude oil prices have been quite strong of late. On Friday, spot WTI crude stood at $63.68 per barrel. Still down slightly from the early year highs near $68, prices have recovered from below $58.00 just two weeks ago.
That strength fueled inflationary concerns generally and lifted Friday&#39;s gold price to $565.00 per ounce, up $26 from two weeks earlier. Since 1980 there has been a 66% correlation between the level of gold prices and the y/y change in consumer prices.
Also during the last two weeks, industrial metal prices were strong due to indications of a resilient factory sector. The JoC-ECRI Industrial Metals Prices Index rose 4.1% (14.8% y/y) since mid-February due to a 7.8% (21.3% y/y) rise in aluminum ingot prices and a 2.7% (52.1% y/y) gain in high grade copper. In addition, prices of stainless steel scrap are up 18.8% (-4.3% y/y) since year end &#39;05.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060306b.jpg" width="353">
The laggard on the pricing scene has been natural gas. As of Friday, The Henry Hub price for gas fell to $6.59/mmbtu (-1.6% y/y), nearly half the high of $12.72 averaged during December. January&#39;s record warm temperatures did drop to a more seasonable cold during February, but warm temperatures during the last week hint that the end of the heating season is near.
Retail gasoline prices at $2.25 (16.6% y/y) per gallon also are off the earlier lows but very recently have fallen 10 cents from late January.
The Economic Outlook for the United States, a speech by Federal Reserve Vice Chairman Roger W. Ferguson, Jr. on Friday, is available <a href="http://www.federalreserve.gov/boarddocs/speeches/2006/20060303/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/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">02/28/06</th>
<th scope="col">12/27/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; (per bbl.)</td>
<td>$61.42</td>
<td>$58.16</td>
<td>18.8%</td>
<td>$58.16</td>
<td>$41.78</td>
<td>$32.78</td>
</tr>
<tr>
<td class="firstcol">Gold: Handy &amp; Harmon (per Troy Oz.)</td>
<td>$556.00</td>
<td>$568.75</td>
<td>28.3%</td>
<td>$507.40</td>
<td>$443.40</td>
<td>$416.25</td>
</tr>
</tbody>
</table>
</body>
</html>

Crude oil prices have been quite strong of late. On Friday, spot WTI crude stood at $63.68 per barrel. Still down slightly from the early year highs near $68, prices have recovered from below $58.00 just two weeks ago. That strength [...]

Commodity Prices Strong - Except Natural Gas

<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/060306a.jpg" width="353">
Crude oil prices have been quite strong of late. On Friday, spot WTI crude stood at $63.68 per barrel. Still down slightly from the early year highs near $68, prices have recovered from below $58.00 just two weeks ago.
That strength fueled inflationary concerns generally and lifted Friday&#39;s gold price to $565.00 per ounce, up $26 from two weeks earlier. Since 1980 there has been a 66% correlation between the level of gold prices and the y/y change in consumer prices.
Also during the last two weeks, industrial metal prices were strong due to indications of a resilient factory sector. The JoC-ECRI Industrial Metals Prices Index rose 4.1% (14.8% y/y) since mid-February due to a 7.8% (21.3% y/y) rise in aluminum ingot prices and a 2.7% (52.1% y/y) gain in high grade copper. In addition, prices of stainless steel scrap are up 18.8% (-4.3% y/y) since year end &#39;05.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060306b.jpg" width="353">
The laggard on the pricing scene has been natural gas. As of Friday, The Henry Hub price for gas fell to $6.59/mmbtu (-1.6% y/y), nearly half the high of $12.72 averaged during December. January&#39;s record warm temperatures did drop to a more seasonable cold during February, but warm temperatures during the last week hint that the end of the heating season is near.
Retail gasoline prices at $2.25 (16.6% y/y) per gallon also are off the earlier lows but very recently have fallen 10 cents from late January.
The Economic Outlook for the United States, a speech by Federal Reserve Vice Chairman Roger W. Ferguson, Jr. on Friday, is available <a href="http://www.federalreserve.gov/boarddocs/speeches/2006/20060303/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/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">02/28/06</th>
<th scope="col">12/27/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; (per bbl.)</td>
<td>$61.42</td>
<td>$58.16</td>
<td>18.8%</td>
<td>$58.16</td>
<td>$41.78</td>
<td>$32.78</td>
</tr>
<tr>
<td class="firstcol">Gold: Handy &amp; Harmon (per Troy Oz.)</td>
<td>$556.00</td>
<td>$568.75</td>
<td>28.3%</td>
<td>$507.40</td>
<td>$443.40</td>
<td>$416.25</td>
</tr>
</tbody>
</table>
U.S. Factory Inventories Up, Orders Drop Belies Factory Strength 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 6, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060306c.jpg" width="353">
Factory inventories grew 0.5% in January following an upwardly revised 0.6% increase during December. Though the rate of inventory accumulation slowed sharply during the last year, the 3.5% y/y growth contrasts with outright decumulation from 2001 to 2003 and probably suggests only cautious management rather than a pessimistic outlook.
A 1.1% (2.4% y/y) increase in primary metals inventories was accompanied by a 1.1% (2.1% y/y) rise in fabricated metals, but both paled next to a 1.7% (6.9% y/y) gain in electrical equipment and a 1.1% (5.8% y/y) increase in machinery.
Total factory orders dropped 4.5% from December and the advance report of a 10.2% plunge in durable goods orders was mitigated only slightly to -9.9%. The drop reflected a huge 68.3% (+61.4% y/y) decline in nondefense aircraft and a 20.9% (+57.4% y/y) drop in defense aircraft &amp; parts. Factory orders less the transportation sector altogether rose 1.6% (8.3% y/y). 
Factory shipments increased 0.3% but less transportation shipments rose 1.4% (7.5% y/y), a gain inflated only slightly by higher petroleum prices.
Unfilled orders fell 0.7% after the 2.6% surge which was powered by higher aircraft orders. Less the transportation sector, backlogs rose 0.4% (10.5% y/y) for the second consecutive month.<a href="http://research.stlouisfed.org/publications/review/05/07/Gali.pdf"> </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/@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">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>0.5%</td>
<td>0.6%</td>
<td>3.5%</td>
<td>4.4%</td>
<td>7.7%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>-4.5%</td>
<td>1.6%</td>
<td>6.9%</td>
<td>8.5%</td>
<td>9.3%</td>
<td>3.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>0.3%</td>
<td>2.4%</td>
<td>7.2%</td>
<td>7.4%</td>
<td>9.5%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">Unfilled Orders</td>
<td>-0.7%</td>
<td>2.6%</td>
<td>16.1%</td>
<td>16.5%</td>
<td>8.4%</td>
<td>8.0%</td>
</tr>
</tbody>
</table>
2005 GDP in Thailand:  Last of Major Pacific Rim Countries to Report 
by <a href="/comment/Curley.html">Louise Curley</a> March 6, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060306d.jpg" width="353">
Thailand released data on its fourth quarter Gross Domestic Product today. GDP in the fourth quarter was 4.71% above the fourth quarter of 2004. For the year as a whole, the increase in GDP was 4.48%, compared with a rise of 6.16% last year. Slower growth in private consumption, gross fixed capital formation and exports of goods and services outweighed the positive impacts of lower imports, higher inventory accumulation and a sharp increase in government consumption expenditures.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060306e.jpg" width="353">
With the release of Thailand&#39;s data, 2005 data for all the countries, except Pakistan and Vietnam, in the Haver Data Base EMERGEPR are now available. (Data for Pakistan and Vietnam are reported only on an annual basis. The latest data are for 2004.)
Growth in most countries was below that of 2004. The exceptions were China, India and Indonesia. Growth in China and India showed little trend during the year, but was maintained at high levels--above 7% for India and above 9% for China. While growth in Indonesia, averaged an increase in 2005, the trend throughout the year was downward.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060306f.jpg" width="353">
The quarterly trend of year over year growth varied. In Malaysia, as in Indonesia, the trend was downward as shown in the first chart. In Singapore, South Korea, the Philippines and in Taiwan, there was a definite upward trend during the year. The second chart shows the year to year percent change in GDP for South Korea and Taiwan.Growth in Hong Kong and Thailand, like India and China showed little trend during the year. The year to year percent changes in GDP for these countries are shown in the third chart. 

<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/@PQ/@PQ2/@PQ2.HTM">Gross Domestic Product </a> &nbsp;Y/Y % Change</th>
<th scope="col">Q4 05 %</th>
<th scope="col">Q3 05 %</th>
<th scope="col">Q2 05 %</th>
<th scope="col">Q1 05 %</th>
<th scope="col">2005 %&nbsp;</th>
<th scope="col">2004 %</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">China</td>
<td>9.9</td>
<td>9.8</td>
<td>10.1</td>
<td>9.9</td>
<td>9.9</td>
<td>9.5</td>
</tr>
<tr>
<td class="firstcol">India</td>
<td>7.71</td>
<td>7.93</td>
<td>8.22</td>
<td>7.09</td>
<td>7.74</td>
<td>7.51</td>
</tr>
<tr class="odd">
<td class="firstcol">Hong Kong</td>
<td>7.38</td>
<td>7.82</td>
<td>7.35</td>
<td>6.57</td>
<td>7.28</td>
<td>8.60</td>
</tr>
<tr>
<td class="firstcol">Indonesia</td>
<td>4.92</td>
<td>5.67</td>
<td>5.64</td>
<td>6.21</td>
<td>5.60</td>
<td>5.06</td>
</tr>
<tr class="odd">
<td class="firstcol">Malaysia</td>
<td>5.12</td>
<td>5.25</td>
<td>4.35</td>
<td>6.20</td>
<td>5.23</td>
<td>7.14</td>
</tr>
<tr>
<td class="firstcol">Philippines</td>
<td>6.20</td>
<td>4.49</td>
<td>5.15&nbsp;</td>
<td>&nbsp;4.49</td>
<td>5.09&nbsp;</td>
<td>6.01&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Singapore</td>
<td>8.45&nbsp;</td>
<td>7.60</td>
<td>5.70</td>
<td>3.57</td>
<td>6.35</td>
<td>8.72</td>
</tr>
<tr>
<td class="firstcol">South Korea</td>
<td>5.39</td>
<td>4.55</td>
<td>3.39</td>
<td>2.75</td>
<td>4.03</td>
<td>4.66</td>
</tr>
<tr class="odd">
<td class="firstcol">Taiwan</td>
<td>6.51</td>
<td>4.40</td>
<td>3.02</td>
<td>2.59</td>
<td>4.12</td>
<td>6.13</td>
</tr>
<tr>
<td class="firstcol">Thailand</td>
<td>4.71</td>
<td>5.40</td>
<td>4.54</td>
<td>3.26</td>
<td>4.48</td>
<td>6.16</td>
</tr>
</tbody>
</table>
</body>
</html>

Carol Stone, CBE

<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/060303d.jpg" width="353">
GDP growth in the Euro-Zone slowed in Q4 to 0.3% from 0.7% in Q3, according to the first full breakdown of Q4 data published this morning by Eurostat. These real growth rates are quoted in chained 2000 euros, adopted as the pricing methodology by Eurostat just three months ago.
Several major expenditure components of GDP contributed to the lower growth; most notably, private consumption fell outright by 0.2% and was up a sluggish 0.8% from a year ago. This was among the smallest year-on-year increases in the 10-year history of the data calculated on this basis. However, as we noted here yesterday, retail trade, at least in Germany, turned up sharply in January; perhaps this is a precursor to a better performance for consumer spending in general this quarter.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060303e.jpg" width="353">
Fixed capital formation moderated to a 0.8% gain in Q4 from 1.1% in Q3. This is still a respectable performance and brought the year to 2.2%, the strongest gain since the tech slowdown began in 2000.
Net exports decreased, encompassing smaller gains in both exports and imports. As with investment, though, the Q4 result followed much stronger outcomes in Q2 and Q3, so can hardly be characterized as &quot;weak&quot; in a broader context. Indeed, observers, including ourselves have noted repeatedly that the export sector is a main support to the European economies at present.
So 2005 ended at a slow pace in Europe. But as mentioned above, retail trade showed some life in Germany already in January, and sentiment surveys have also improved. The Olympics may even give some boost to this quarter&#39;s performance. The ECB policymakers must believe gains of that sort will take hold, as they raised their key interest rates yesterday for the second time in three months. M. Trichet&#39;s announcement in fact indicated a concern that recently improved economic activity would threaten inflation, which is already hovering above the desired 2% pace. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/EUROSTAT/@U2/@U219/@U21904/@U219042/@U219042.HTM">EuroZone12: GDP (Chained 2000 Euros)</a></th>
<th scope="col">Q3 2005</th>
<th scope="col">Q3 2005</th>
<th scope="col">Q2 2005</th>
<th scope="col">Q4 2004 (yr/yr*)</th>
Yearly Totals*
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2005</td>
<td>2004</td>
<td>2003</td>
</tr>
<tr>
<td class="firstcol">GDP</td>
<td>0.3</td>
<td>0.7</td>
<td>0.4</td>
<td>1.3</td>
<td>1.3</td>
<td>2.1</td>
<td>0.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Private Consumption</td>
<td>-0.2</td>
<td>0.5</td>
<td>0.3</td>
<td>0.8</td>
<td>1.3</td>
<td>1.5</td>
<td>1.0</td>
</tr>
<tr>
<td class="firstcol">Gross Fixed Capital Formation</td>
<td>0.8</td>
<td>1.1</td>
<td>1.0</td>
<td>2.2</td>
<td>2.1</td>
<td>2.3</td>
<td>0.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports</td>
<td>0.5</td>
<td>3.4</td>
<td>2.0</td>
<td>4.6</td>
<td>3.8</td>
<td>6.5</td>
<td>1.1</td>
</tr>
<tr>
<td class="firstcol">-Imports</td>
<td>0.9</td>
<td>3.1</td>
<td>2.3</td>
<td>4.5</td>
<td>4.5</td>
<td>6.6</td>
<td>2.9</td>
</tr>
</tbody>
</table>
</body>
</html>

GDP growth in the Euro-Zone slowed in Q4 to 0.3% from 0.7% in Q3, according to the first full breakdown of Q4 data published this morning by Eurostat. These real growth rates are quoted in chained 2000 euros, adopted as the pricing [...]

Euro-zone Growth Eases to 0.3% in Q4

<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/060303c.jpg" width="353">
The Institute for Supply Management (ISM) reported that the February Business Activity Index for the non-manufacturing sector recovered most of the prior month&#39;s loss with a 3.3 point advance to 60.1. A reading above 50 indicates expansion. The gain outpaced Consensus expectations for a rise to 58.0.
Since the series&#39; inception in 1997 there has been a 53% correlation between the level of the Business Activity Index and the q/q change in real GDP for services plus construction.
The employment index seemed to lead the m/m improvement and rose sharply to 58.2, the highest level since August. Since the series&#39; inception in 1997 there has been a 60% correlation between the level of the ISM non-manufacturing employment index and the m/m change in payroll employment in the service producing plus the construction industries. The new orders index was roughly stable after a sharp decline during January.
Pricing power deteriorated to the weakest level since June. Since inception eight years ago, there has been a 70% correlation between the price index and the y/y change in the GDP Services chain price index.
ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The non-manufacturing survey dates only to July 1997, therefore its seasonal adjustment should be viewed tentatively.
Business Activity Index for the non-manufacturing sector reflects a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index is a weighted average five components.
&quot;Measured Pace&quot; in the Conduct of Monetary Policy from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/mt/20060301/cover.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/USECON/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Feb &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Business Activity Index</td>
<td>60.1</td>
<td>56.8</td>
<td>60.4</td>
<td>60.1</td>
<td>62.5</td>
<td>58.3</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>64.8</td>
<td>67.2</td>
<td>67.0</td>
<td>67.9</td>
<td>68.8</td>
<td>56.6</td>
</tr>
</tbody>
</table>


</html>

The Institute for Supply Management (ISM) reported that the February Business Activity Index for the non-manufacturing sector recovered most of the prior month's loss with a 3.3 point advance to 60.1. A reading above 50 indicates [...]

ISM Nonmanufacturing Index Recovered

<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/060303a.jpg" width="353">
According to the University of Michigan, consumer sentiment fell throughout February, as indicated by a decline in the final month reading to 86.7 from the preliminary estimate of 87.4. Month to month, sentiment fell 4.9% and the decline outpaced Consensus expectations for decline to 87.5.
The m/m decline matched the Conference Board&#39;s report Tuesday that Consumer Confidence fell 4.8% (-2.6% y/y) during February.
Sentiment figures are not seasonally adjusted and during the last ten years there has been a 76% correlation between the level of consumer sentiment and the y/y change in real consumer spending.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060303b.jpg" width="353">
The current conditions index deteriorated 1.9% late in February and fell 4.3% for the full period as the index of personal finances fell 5.1% (-7.4% y/y) and the reading of buying conditions for large household goods fell 3.6% (0.0% y/y). Consumers&#39; assessment of gov&#39;t economic policy drooped 4.6% m/m (-10.8% y/y).
Consumer expectations held steady late in the month but for all of February were off 5.6% from January. The economic outlook deteriorated sharply with the index of expected business conditions during the next five years down 12.1% (-18.4% y/y) and the twelve month outlook off 8.6% (-15.8% y/y). Expectations for personal finances showed a m/m improvement of 1.7% (-3.9% y/y).
The mean expected inflation rate for the next twelve months was about stable m/m at 3.7%, still well below the 5.5% expected in October &amp; September.
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.
Income Taxes: Who Pays and How Much? from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/net/20060301/cover.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">Feb (Final)</th>
<th scope="col">Feb (Prelim.)</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>86.7</td>
<td>87.4</td>
<td>91.2</td>
<td>-7.9%</td>
<td>88.6</td>
<td>95.2</td>
<td>87.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>105.6</td>
<td>107.7</td>
<td>110.3</td>
<td>-3.3%</td>
<td>105.9</td>
<td>105.6</td>
<td>97.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Expectations</td>
<td>74.5</td>
<td>74.4</td>
<td>78.9</td>
<td>-11.7%</td>
<td>77.4</td>
<td>88.5</td>
<td>81.4</td>
</tr>
</tbody>
</table>
</body>
</html>

According to the University of Michigan, consumer sentiment fell throughout February, as indicated by a decline in the final month reading to 86.7 from the preliminary estimate of 87.4. Month to month, sentiment fell 4.9% and the [...]

U.S. Consumer Sentiment Fell Throughout February

<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/060303a.jpg" width="353">
According to the University of Michigan, consumer sentiment fell throughout February, as indicated by a decline in the final month reading to 86.7 from the preliminary estimate of 87.4. Month to month, sentiment fell 4.9% and the decline outpaced Consensus expectations for decline to 87.5.
The m/m decline matched the Conference Board&#39;s report Tuesday that Consumer Confidence fell 4.8% (-2.6% y/y) during February.
Sentiment figures are not seasonally adjusted and during the last ten years there has been a 76% correlation between the level of consumer sentiment and the y/y change in real consumer spending.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060303b.jpg" width="353">
The current conditions index deteriorated 1.9% late in February and fell 4.3% for the full period as the index of personal finances fell 5.1% (-7.4% y/y) and the reading of buying conditions for large household goods fell 3.6% (0.0% y/y). Consumers&#39; assessment of gov&#39;t economic policy drooped 4.6% m/m (-10.8% y/y).
Consumer expectations held steady late in the month but for all of February were off 5.6% from January. The economic outlook deteriorated sharply with the index of expected business conditions during the next five years down 12.1% (-18.4% y/y) and the twelve month outlook off 8.6% (-15.8% y/y). Expectations for personal finances showed a m/m improvement of 1.7% (-3.9% y/y).
The mean expected inflation rate for the next twelve months was about stable m/m at 3.7%, still well below the 5.5% expected in October &amp; September.
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.
Income Taxes: Who Pays and How Much? from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/net/20060301/cover.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">Feb (Final)</th>
<th scope="col">Feb (Prelim.)</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>86.7</td>
<td>87.4</td>
<td>91.2</td>
<td>-7.9%</td>
<td>88.6</td>
<td>95.2</td>
<td>87.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>105.6</td>
<td>107.7</td>
<td>110.3</td>
<td>-3.3%</td>
<td>105.9</td>
<td>105.6</td>
<td>97.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Expectations</td>
<td>74.5</td>
<td>74.4</td>
<td>78.9</td>
<td>-11.7%</td>
<td>77.4</td>
<td>88.5</td>
<td>81.4</td>
</tr>
</tbody>
</table>
ISM Nonmanufacturing Index Recovered 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 3, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060303c.jpg" width="353">
The Institute for Supply Management (ISM) reported that the February Business Activity Index for the non-manufacturing sector recovered most of the prior month&#39;s loss with a 3.3 point advance to 60.1. A reading above 50 indicates expansion. The gain outpaced Consensus expectations for a rise to 58.0.
Since the series&#39; inception in 1997 there has been a 53% correlation between the level of the Business Activity Index and the q/q change in real GDP for services plus construction.
The employment index seemed to lead the m/m improvement and rose sharply to 58.2, the highest level since August. Since the series&#39; inception in 1997 there has been a 60% correlation between the level of the ISM non-manufacturing employment index and the m/m change in payroll employment in the service producing plus the construction industries. The new orders index was roughly stable after a sharp decline during January.
Pricing power deteriorated to the weakest level since June. Since inception eight years ago, there has been a 70% correlation between the price index and the y/y change in the GDP Services chain price index.
ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The non-manufacturing survey dates only to July 1997, therefore its seasonal adjustment should be viewed tentatively.
Business Activity Index for the non-manufacturing sector reflects a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index is a weighted average five components.
&quot;Measured Pace&quot; in the Conduct of Monetary Policy from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/mt/20060301/cover.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/USECON/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Feb &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Business Activity Index</td>
<td>60.1</td>
<td>56.8</td>
<td>60.4</td>
<td>60.1</td>
<td>62.5</td>
<td>58.3</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>64.8</td>
<td>67.2</td>
<td>67.0</td>
<td>67.9</td>
<td>68.8</td>
<td>56.6</td>
</tr>
</tbody>
</table>
Euro-zone Growth Eases to 0.3% in Q4 
by <a href="/comment/Stone.html">Carol Stone</a> March 3, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060303d.jpg" width="353">
GDP growth in the Euro-Zone slowed in Q4 to 0.3% from 0.7% in Q3, according to the first full breakdown of Q4 data published this morning by Eurostat. These real growth rates are quoted in chained 2000 euros, adopted as the pricing methodology by Eurostat just three months ago.
Several major expenditure components of GDP contributed to the lower growth; most notably, private consumption fell outright by 0.2% and was up a sluggish 0.8% from a year ago. This was among the smallest year-on-year increases in the 10-year history of the data calculated on this basis. However, as we noted here yesterday, retail trade, at least in Germany, turned up sharply in January; perhaps this is a precursor to a better performance for consumer spending in general this quarter.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060303e.jpg" width="353">
Fixed capital formation moderated to a 0.8% gain in Q4 from 1.1% in Q3. This is still a respectable performance and brought the year to 2.2%, the strongest gain since the tech slowdown began in 2000.
Net exports decreased, encompassing smaller gains in both exports and imports. As with investment, though, the Q4 result followed much stronger outcomes in Q2 and Q3, so can hardly be characterized as &quot;weak&quot; in a broader context. Indeed, observers, including ourselves have noted repeatedly that the export sector is a main support to the European economies at present.
So 2005 ended at a slow pace in Europe. But as mentioned above, retail trade showed some life in Germany already in January, and sentiment surveys have also improved. The Olympics may even give some boost to this quarter&#39;s performance. The ECB policymakers must believe gains of that sort will take hold, as they raised their key interest rates yesterday for the second time in three months. M. Trichet&#39;s announcement in fact indicated a concern that recently improved economic activity would threaten inflation, which is already hovering above the desired 2% pace. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/EUROSTAT/@U2/@U219/@U21904/@U219042/@U219042.HTM">EuroZone12: GDP ( Chained 2000 Euros)</a></th>
<th scope="col">Q3 2005</th>
<th scope="col">Q3 2005</th>
<th scope="col">Q2 2005</th>
<th scope="col">Q4 2004 (yr/yr*)</th>
Yearly Totals*
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2005</td>
<td>2004</td>
<td>2003</td>
</tr>
<tr>
<td class="firstcol">GDP</td>
<td>0.3</td>
<td>0.7</td>
<td>0.4</td>
<td>1.3</td>
<td>1.3</td>
<td>2.1</td>
<td>0.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Private Consumption</td>
<td>-0.2</td>
<td>0.5</td>
<td>0.3</td>
<td>0.8</td>
<td>1.3</td>
<td>1.5</td>
<td>1.0</td>
</tr>
<tr>
<td class="firstcol">Gross Fixed Capital Formation</td>
<td>0.8</td>
<td>1.1</td>
<td>1.0</td>
<td>2.2</td>
<td>2.1</td>
<td>2.3</td>
<td>0.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports</td>
<td>0.5</td>
<td>3.4</td>
<td>2.0</td>
<td>4.6</td>
<td>3.8</td>
<td>6.5</td>
<td>1.1</td>
</tr>
<tr>
<td class="firstcol">-Imports</td>
<td>0.9</td>
<td>3.1</td>
<td>2.3</td>
<td>4.5</td>
<td>4.5</td>
<td>6.6</td>
<td>2.9</td>
</tr>
</tbody>
</table>


</html>

<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/060302e.jpg" width="353">
Four widely diverse areas reported retail trade today for January. Generally, these reports indicated some strength. In Hong Kong, for example, sales were up 11.6% over a year ago, extending a firmer performance into a second month. In a larger area, Germany&#39;s sales rebounded to a 2.2% year-on-year gain after being down in December. Australia and Estonia also had favorable sales increases in January.
The Hong Kong retail sales firmed noticeably for consumer electronics, and clothing had a modest increase, apparently picking up after a lull in late summer and autumn. Also in that region of the world, sales in Australia gained 4.2% from January 2005, with the food and hospitality sectors leading. Department stores and recreation good were both down from a year ago.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060302f.jpg" width="353">
For Germany, only total sales are available in their initial release. However, notably, the improvement here corresponds to the improved sentiment of retail trade business executives reported in the Ifo survey. In detail Ifo data released Tuesday, the Business Climate Index for that sector was 96.0 in January, the third highest since 2001. Then for February, the index climbed more than 4 points to 100.7, its first reading above 100 since the base year of 2000. The correlation between year-to-year percent changes in this index and in actual retail sales is 0.44. Correlations of other Ifo indexes are even better; for instance, the total index is 0.53 and the index for consumer goods less food is 0.62. Thus, business executives of related production industries are at least as concerned about the performance in final sales as managers of the stores themselves.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060302g.jpg" width="353">
Finally, retail sales gains were good in Estonia. The year-on-year pace in January was 23%, although this magnitude partly reflects a base effect in which January 2005 was quite weak. So, when we look at the seasonally adjusted data calculated by Haver Analytics, we see that the latest figure actually shows a small decrease from December&#39;s amount. Despite this modest setback, volume growth in Estonia has actually been quite strong, up 18.8% from a year ago and off just 0.4% from December. The last three months of 2005 averaged 2.5% month-to-month gains in the volume index. Thus, Estonian consumer demand appears quite buoyant. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Retail Trade, Yr/Yr % Changes</th>
<th scope="col">Jan 2006</th>
<th scope="col">Dec 2005</th>
<th scope="col">Nov 2005</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Hong Kong</td>
<td>11.6</td>
<td>6.8</td>
<td>4.2</td>
<td>6.8</td>
<td>10.8</td>
<td>-2.3</td>
</tr>
<tr>
<td class="firstcol">Australia</td>
<td>4.2</td>
<td>3.9</td>
<td>3.8</td>
<td>2.8</td>
<td>7.2</td>
<td>6.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>2.2</td>
<td>-0.5</td>
<td>1.1</td>
<td>1.5</td>
<td>2.0</td>
<td>-0.5</td>
</tr>
<tr>
<td class="firstcol">Estonia</td>
<td>23.0</td>
<td>16.4</td>
<td>14.9</td>
<td>12.4</td>
<td>15.5</td>
<td>9.5</td>
</tr>
</tbody>
</table>
</body>
</html>

Four widely diverse areas reported retail trade today for January. Generally, these reports indicated some strength. In Hong Kong, for example, sales were up 11.6% over a year ago, extending a firmer performance into a second month. [...]

January Retail Trade Gains in 4 Very Diverse Places

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

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

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

250507A20.jpg

250507B20.jpg

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

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 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**.

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

250506C2.jpg

250506D2.jpg

Retail gasoline prices for all grades improved to an average $3.27 per gallon (-13.1% y/y) in the week ended May 5 and reversed the prior week’s easing to $3.26. Prices were $3.37 per gallon to begin the month but remained above their low of $3.13 in the week of December 9. An earlier high was $3.79 in the week ending April 22, 2024. The all-time high of $5.11 occurred in the week ending June 13, 2022. The retail price for on-highway diesel fuel eaed to $3.50 per gallon (-10.2% y/y) in the week of May 5 from $3.51 in the prior week. The latest diesel price stood well below a high of $4.63 in the week ending September 18, 2023 and a peak of $5.81 in the week ending June 20, 2022.

The price of West Texas Intermediate crude oil declined to $59.64 per barrel (-26.4% y/y) in the week ended May 2, after rising to $63.09 per barrel in the prior week. Prices remained below a high of $91.45 in the week of September 29, 2023. The cost of crude oil peaked at $120.46 in the week of June 10, 2022. Yesterday, the price was $57.13 per barrel. The price of European Brent crude oil declined to $63.50 per barrel (-25.9% y/y) in the week of May 2 from $67.92 in the previous week. Prices remained well below a recent high of $95.61 in the week of September 29, 2023 and compared to a peak of $127.40 in the week of June 10, 2022.

Natural gas prices improved to an average $3.09 per mmbtu (+88.4% y/y) in the week ended May 2, after falling to $3.00/mmbtu in the prior week. Prices remained well above a low of $1.40/mmbtu in the week of March 15, 2024 but below their peak of $9.56 in the week of August 26, 2022. Yesterday’s price was $3.26/mmbtu.

Gasoline demand rose 3.2% y/y in the four weeks ending April 25 following a 0.4% y/y decline in the prior four weeks. Demand for all petroleum products improved 0.3% y/y in the four weeks ending April 25 after a 0.4% y/y rise in the previous four-week period. Crude oil input to refineries eased 0.1% y/y in the four weeks ending April 25 after a 1.3% y/y decline in the prior four weeks.

Gasoline inventories slipped 0.7% y/y in the week ending April 25 after a 1.2% y/y rise in the week ending April 18. Residual fuel oil inventories fell 18.7% y/y in the week of April 25, after a 19.0% y/y fall in the prior week. Crude oil inventories rose 1.4% y/y in the week of April 25 after a 2.6% y/y rise in the previous week.

Measured in days’ supply, gasoline inventories fell w/w to 25.5 days in the week of April 25 from 26.4 days in the prior. The recent low was 22.9 days in the week of November 8. The supply of crude oil eased w/w to 27.9 days in the week of April 25 after three weeks at 28.3 days, and remained below a high of 31.9 days in the week of March 3, 2023.

These data are reported by the Energy Information Administration of the U.S. Department of Energy. The price and supply/demand data can be found in Haver’s **WEEKLY** & **USENERGY** database.

- Gasoline prices edge higher.
- Crude oil prices decline.
- Natural gas costs rise.

U.S. Energy Prices Remain Mixed in Latest Week

Robert Brusca

250506E.jpg

Not many respondents are showing absolute slowing. Only five this month. Only six over the last three months on average. The median total PMI score fell to 49.7 showing contraction in April from 51.1 in March. The average fared slightly better. The 12-months to 6-months to 3-months show a moderate but consistent slowing. The breadth of slowing is wide with 60.9% of survey respondents slowing over three months compared to six months.

The percentile standings show the most strength for the BRIC group with reading above 50% (that marks the median). All other groupings have standings below the 50% mark indicating that they are below their respective medians of the last four-plus years.

Over every horizon from 12-months to 6-months to 3-months, more than 50% of the respondents show a weakening (slowing) in their PMI responses.

Among the largest economies, only Italy has a composite PMI standing above its median (above 50%).

Only 9 of 24 respondents have PMI ranked percentile standings above the 50% mark. That underlines the weakness in composite conditions and the breadth of the weakness.
 
Services sectors no longer are providing the lift to offset ongoing weakness in manufacturing. The differences among countries are narrowing.

Economic conditions across countries may be narrowing for several reasons, one being that the COVID period and then the shock reaction to Russia's invasion from Ukraine put all countries on the same timeline as central banks have been leaning against the shockwaves from those 2 events. As a result of those events, inflation flared but has more recently been falling. Still, inflation continues to be over the top of targets with the European Monetary Union right now making the most progress and Japan facing more late cycle weakness with excessive inflation than other countries in the mix. More recently aggressive tariff policy the United States has put all countries on their back foot and puts everyone on notice that the future has become a lot more uncertain. Central banks that were progressing toward rate cuts now are worried about the possibility of more inflation from tariffs or from the possibility of recession from tariffs - tariffs up the ante on uncertainty as well as on risk. What we see in this month's PMI statistics is a gradual continued erosion as the perceived risk here is that things get steadily but slowly worse as firms, investors, and consumers began to pull in their horns and prepare for something bad to happen not knowing what that might be.

Economy in Brief: March 2006

Jump to:

U.S. Factory Inventories Up, Orders Drop Belies Factory Strength

Commodity Prices Strong - Except Natural Gas

Commodity Prices Strong - Except Natural Gas

Euro-zone Growth Eases to 0.3% in Q4

ISM Nonmanufacturing Index Recovered

U.S. Consumer Sentiment Fell Throughout February

U.S. Consumer Sentiment Fell Throughout February

January Retail Trade Gains in 4 Very Diverse Places