Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050504d.jpg" width="353">
The Institute for Supply Management reported that the April Business Activity Index for the non-manufacturing sector fell to 61.7 from 63.1 in March. The index had risen for two successive months but because of a sharp decline in January the average level so far this year of 61.0 is below the 2004 average. Consensus expectations had been for a reading of 61.0 in April.
Since the series&#39; inception in 1997 there has been a 50% correlation between the Business Activity Index and the q/q change in real GDP for services plus construction.
The new orders index dropped sharply to 58.8, its lowest in nearly two years, while the employment sub index also fell to the lowest level since January. 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.
Pricing power fell again m/m to the lowest level in over a year.
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.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">April &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Business Activity Index</td>
<td>61.7</td>
<td>63.1</td>
<td>66.9</td>
<td>62.4</td>
<td>58.2</td>
<td>55.1</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>61.9</td>
<td>65.6</td>
<td>66.9</td>
<td>69.0</td>
<td>56.8</td>
<td>54.0</td>
</tr>
</tbody>
</table>


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The Institute for Supply Management reported that the April Business Activity Index for the non-manufacturing sector fell to 61.7 from 63.1 in March. The index had risen for two successive months but because of a sharp decline in [...]

ISM Non-Manufacturing Index Fell Slightly

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050504a.jpg" width="353">
Sales of light vehicles in April managed to rise 3.7% versus March despite a meager 1.6% gain in sales of light trucks. According to Autodata Corporation total light vehicle sales rose to 17.46M.
Gasoline prices averaged a record $2.24 per gallon last month, up 25% versus a year earlier. In May, gasoline have backed off somewhat from last month&#39;s weekly high of $2.28 but the gain versus last year still is 21%.
The rise in sales of light trucks to 9.32M left the average of sales so far this year down 3.5% versus 9.06M during all of 2004. Sales of domestically made trucks rose 1.0% m/m (0.4% y/y) but sales of imported trucks jumped 5.6% (8.4% y/y).
Total auto sales rose 6.1% last month and the gain pulled the average level this year up 2.1% versus last.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050504b.jpg" width="353">
Imports&#39; share of the US market for new vehicles rose to 20.6% in April and has averaged 20.2% this year versus 19.9% in 2004.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
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<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED09/@ED0901/@ED0901.HTM">Light Vehicle Sales (SAAR, Mil. Units)</a></th>
<th scope="col">April</th>
<th scope="col">March</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">Total</td>
<td>17.46</td>
<td>16.85</td>
<td>5.0%</td>
<td>16.88</td>
<td>16.63</td>
<td>16.81</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>8.14</td>
<td>7.68</td>
<td>9.6%</td>
<td>7.49</td>
<td>7.62</td>
<td>8.07</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Trucks</td>
<td>9.32</td>
<td>9.17</td>
<td>1.4%</td>
<td>9.39</td>
<td>9.01</td>
<td>8.74</td>
</tr>
</tbody>
</table>
</body>
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Sales of light vehicles in April managed to rise 3.7% versus March despite a meager 1.6% gain in sales of light trucks. According to Autodata Corporation total light vehicle sales rose to 17.46M. Gasoline prices averaged a record [...]

U.S. Light Truck Sales Crimped by Higher Gasoline Prices

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050504a.jpg" width="353">
Sales of light vehicles in April managed to rise 3.7% versus March despite a meager 1.6% gain in sales of light trucks. According to Autodata Corporation total light vehicle sales rose to 17.46M.
Gasoline prices averaged a record $2.24 per gallon last month, up 25% versus a year earlier. In May, gasoline have backed off somewhat from last month&#39;s weekly high of $2.28 but the gain versus last year still is 21%.
The rise in sales of light trucks to 9.32M left the average of sales so far this year down 3.5% versus 9.06M during all of 2004. Sales of domestically made trucks rose 1.0% m/m (0.4% y/y) but sales of imported trucks jumped 5.6% (8.4% y/y).
Total auto sales rose 6.1% last month and the gain pulled the average level this year up 2.1% versus last.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050504b.jpg" width="353">
Imports&#39; share of the US market for new vehicles rose to 20.6% in April and has averaged 20.2% this year versus 19.9% in 2004.

<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/@ED09/@ED0901/@ED0901.HTM">Light Vehicle Sales (SAAR, Mil. Units)</a></th>
<th scope="col">April</th>
<th scope="col">March</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">Total</td>
<td>17.46</td>
<td>16.85</td>
<td>5.0%</td>
<td>16.88</td>
<td>16.63</td>
<td>16.81</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>8.14</td>
<td>7.68</td>
<td>9.6%</td>
<td>7.49</td>
<td>7.62</td>
<td>8.07</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Trucks</td>
<td>9.32</td>
<td>9.17</td>
<td>1.4%</td>
<td>9.39</td>
<td>9.01</td>
<td>8.74</td>
</tr>
</tbody>
</table>
ISM Non-Manufacturing Index Fell Slightly 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 4, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050504d.jpg" width="353">
The Institute for Supply Management reported that the April Business Activity Index for the non-manufacturing sector fell to 61.7 from 63.1 in March. The index had risen for two successive months but because of a sharp decline in January the average level so far this year of 61.0 is below the 2004 average. Consensus expectations had been for a reading of 61.0 in April.
Since the series&#39; inception in 1997 there has been a 50% correlation between the Business Activity Index and the q/q change in real GDP for services plus construction.
The new orders index dropped sharply to 58.8, its lowest in nearly two years, while the employment sub index also fell to the lowest level since January. 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.
Pricing power fell again m/m to the lowest level in over a year.
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.

<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/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">April &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Business Activity Index</td>
<td>61.7</td>
<td>63.1</td>
<td>66.9</td>
<td>62.4</td>
<td>58.2</td>
<td>55.1</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>61.9</td>
<td>65.6</td>
<td>66.9</td>
<td>69.0</td>
<td>56.8</td>
<td>54.0</td>
</tr>
</tbody>
</table>
Mortgage Applications Lower Again in April 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 4, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050504c.jpg" width="353">
Total mortgage applications ticked up 0.2% last week but the change left the average level in April down 0.9% from March and down a third from last year&#39;s peak level, according to the Mortgage Bankers Association.
Applications to purchase a home were about unchanged w/w. Still, the April average rose 2.7% from March which rose 6.1% from February. During the last ten years there has been a 50% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance ticked 0.4% higher and the average in April fell 5.5% from March which fell 16.1% from February.
The effective interest rate on a conventional 30-year mortgage fell to 5.98% from 6.01%, the lowest level since early March. The effective rate on a 15-year mortgage also fell to 5.62%.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">04/29/05</th>
<th scope="col">04/22/05</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 class="odd">
<td class="firstcol">Total Market Index</td>
<td>714.1</td>
<td>712.4</td>
<td>-8.6%</td>
<td>735.1</td>
<td>1,067.9</td>
<td>799.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>482.5</td>
<td>482.0</td>
<td>0.0%</td>
<td>454.5</td>
<td>395.1</td>
<td>354.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,061.2</td>
<td>2,052.5</td>
<td>-18.1%</td>
<td>2,366.8</td>
<td>4,981.8</td>
<td>3,388.0</td>
</tr>
</tbody>
</table>
Euro-Zone Service Sector PMI Moves Narrowly in April, Maintaining Modest Growth 
by <a href="/comment/Stone.html">Carol Stone</a> May 4, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050504e.jpg" width="353">
Business activity in European service industries maintained a stable rate of modest expansion in April, according to the purchasing manager surveys conducted by NTC Research and reported today by Reuters, Inc.
T he overall services business activity index registered 52.76, off just slightly from March&#39;s 52.99. This index, a &quot;net balance&quot; indicator (% rising - % falling) has hovered around 53 for the last six months after slowing pretty consistently over the previous year. It had reached a peak of 57.5 in November 2003. Among the associated measures, new business and outstanding business both resemble the pattern in the &quot;business activity&quot; gauge, while employment has actually had a slight firming tendency over this general 18-month period.
An interesting facet of the European-wide information is an apparent worsening of profit margins. The index for prices charged narrowed by 1.9 points and fell below 50, showing that selling prices rose at fewer companies than they fell. But input prices increased on balance, from 57.72 to 57.98. This is not unusually high for this measure, but it does suggest that operating costs are exerting some pressure on these service producers. After five months of relative improvement in margins, in a single month this spread between selling prices and input prices lost some 45% of that improvement. The input prices, not surprisingly, are strongly influenced by import prices and other wholesale prices. In fact, correlation ratios between this services input price index and various price indicators, including the Euro-Zone import price index, producer price index and producer price index for energy, all run in a range of 80-90%. So rising energy prices as well as prices of other materials are weighing on service sector performance at the same time that these firms are unable to sustain rising selling prices to customers.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050504f.jpg" width="353">
Among various countries, recent business activity performances have differed. As seen in the table below, Germany&#39;s business activity index fell by about half-a-point in April, while that in France rose more than 3 points. The Italian index was off 4.34 points and in fact, with a reading below 50, showed an outright contraction in its service sector.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">PMI for Service Sector</th>
<th scope="col">April 2005</th>
<th scope="col">March 2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Euro-Zone*</td>
<td>52.76</td>
<td>52.99</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>51.32</td>
<td>51.80</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>57.69</td>
<td>55.44</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>48.35</td>
<td>52.69</td>
</tr>
</tbody>
</table>


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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050503f.jpg" width="353">
The Confederation of British Industries&#39; (CBI&#39;s) Distributive Trades Survey released today, shows a weakening in current retail trade volume and in expected volumes. The percent balance between those who reported an increase in volume in April and those who report a decrease was -14%, compared with -9% in March and +30% in April, 2004.
In the March Survey, there were 3% more retailers who expected an increase in volume in April than those who expected a decrease. In the current survey, there are only 1% more retailers who expect an increase in volume than those who expect a decrease in May suggesting that retailers are almost equally balanced between those who expect May volume will increase and those who expect it to decrease.
Survey results for the wholesale trade sector were more positive. The balance of those reporting an increase in volume over those reporting a decrease rose to 2% from -17% in March in contrast to the expectations expressed in the March Survey when the balance in April was expected to be -7%. The current Survey expects that the balance of increases in wholesale volume over decreases will rise to16% in May.
Reported current and expected volumes in the Motor Trades are bleak. Although the balance of those reporting a decrease in volume over those reporting an increase improved in April to -28%, from -33%, in March, it was 46 percentage points below the +18% of April, 2004. In the March Survey, the expectation for motor trade volume was for a balance of -25%, not too different from the actual figure reported for April. In the current survey, the expectation is that balance of those expecting an increase over those expecting a decrease will increase still further to -33%.
The ability of the expected series to forecast subsequently reported balances is not particularly robust as measured by the correlation coefficient. The best, shown in the attached chart, is that for the motor trades, which has a correlation coefficient of 0.72, compared with that for retail trade of .53 and for wholesale trade, .27. The fact that the motor trades sector is relatively homogeneous while those of the retail and wholesale sectors are heterogeneous may account for better ability of expectations in the motor trades to predict the subsequently reported volume.

<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/UK/@U9/@U9.HTM">UK: Distributive Trade Survey</a></th>
<th scope="col">Apr 05</th>
<th scope="col">Mar 05</th>
<th scope="col">Apr 04</th>
<th scope="col">M/M dif</th>
<th scope="col">Y/Y&nbsp;&nbsp; dif</th>
<th scope="col">&nbsp;2004&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2003</th>
<th scope="col">&nbsp;2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Reported (Percent Balance)</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Retail Trade</td>
<td>-14</td>
<td>-9</td>
<td>30</td>
<td>-5</td>
<td>-44</td>
<td>24</td>
<td>14</td>
<td>23</td>
</tr>
<tr class="odd">
<td class="firstcol">Wholesale Trade</td>
<td>2</td>
<td>-17</td>
<td>38</td>
<td>19</td>
<td>-36</td>
<td>27</td>
<td>4</td>
<td>6</td>
</tr>
<tr>
<td class="firstcol">Motor Trade</td>
<td>-28</td>
<td>-33</td>
<td>18</td>
<td>5</td>
<td>-46</td>
<td>-8</td>
<td>-19</td>
<td>7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"></td>
<td>May 05</td>
<td>Apr 05</td>
<td>May 04</td>
<td>M/M dif</td>
<td>Y/Y&nbsp;&nbsp; dif</td>
<td>&nbsp;2004&nbsp;&nbsp;</td>
<td>&nbsp;2003</td>
<td>&nbsp;2002</td>
</tr>
<tr class="odd">
<td class="firstcol">Expected (Percent Balance)</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Retail Trade</td>
<td>1</td>
<td>3</td>
<td>34</td>
<td>-2</td>
<td>-34</td>
<td>25</td>
<td>18</td>
<td>29</td>
</tr>
<tr class="odd">
<td class="firstcol">Wholesale Trade</td>
<td>16</td>
<td>-7</td>
<td>32</td>
<td>22</td>
<td>-16</td>
<td>17</td>
<td>-1</td>
<td>1</td>
</tr>
<tr>
<td class="firstcol">Motor Trade</td>
<td>-33</td>
<td>-25</td>
<td>22</td>
<td>-8</td>
<td>-55</td>
<td>-8</td>
<td>-18</td>
<td>5</td>
</tr>
</tbody>
</table>
</body>
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The Confederation of British Industries' (CBI's) Distributive Trades Survey released today, shows a weakening in current retail trade volume and in expected volumes. The percent balance between those who reported an increase in volume [...]

Confederation of British Industry's (CBI'S) Distributive Trades Survey: Retail and Motor Trades Slow Sharply, [...]

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050503h.jpg" width="353">
The Federal Open Market Committee raised the target rate for federal funds an expected 25 basis points to 3.00%. The discount rate also was raised 25 basis points to 4.00%.
The unanimous decision to raise rates was the eighth since last June.
Today&#39;s press release from the Fed continued to contain a comment suggesting that rates could be raised again. &quot;The Committee believes that, even after this action, the stance of monetary policy remains accommodative ...&quot; The text also continued to mention that &quot;the Committee believes that policy accommodation can be removed at a pace that is likely to be measured.&quot;
In a more forthright comment on inflation than made in the past, the press release indicated &quot;Pressures on inflation have picked up in recent months and pricing power is more evident.&quot;
For the complete text of the Fed&#39;s latest press release please click <a href="http://www.federalreserve.gov/boarddocs/press/monetary/2005/20050503/default.htm">here</a>.
U.S. Monetary Policy: An Introduction from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/federalreserve/monetary/index.html"> here</a>.

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The Federal Open Market Committee raised the target rate for federal funds an expected 25 basis points to 3.00%. The discount rate also was raised 25 basis points to 4.00%. The unanimous decision to raise rates was the eighth since [...]

FOMC Lifts Funds Rate to 3.00%

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050503c.jpg" width="353">
Factory inventories rose 0.6% in March following an upwardly revised like increase in February. Higher oil prices recently have lifted these gains, but not a lot, as petroleum refinery inventories rose 3.2% (22.4% y/y). Less petroleum, inventories rose 0.5% (8.4% y/y).
Accumulation in the primary metals industry has been notable, up 30.3% y/y, and fabricated metal inventories also rose a strong 17.3% y/y. Machinery inventorieshave risen 11.1% this past year and electrical equipment inventories are up 7.9%. Inventories of furniture &amp; related products rose 12.2% y/y while inventories of apparel rose 7.5% y/y.
Factory shipments recovered nearly all of the prior month&#39;s drop with a 1.3% gain. Less transportation, shipments rose 1.6% (9.2% y/y) following a deepened 1.2% decline in February.
Orders to the factory sector ticked up 0.1%, restrained by a 2.3% decline in durable goods orders which was revised from the advance report of a 2.8% drop. The decline in orders for non-defense capital goods less aircraft was lessened to 4.0% (+2.7% y/y) from the advance report of a 4.7% shortfall.Nondurable goods orders, which equal shipments, rose 2.8% (10.4% y/y) led by a 19.8% (42.2% y/y) surge in petroleum. Less oil, orders for non-durables fell 0.4% (+5.5% y/y) for the second monthly drop.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050503b.jpg" width="353">
Unfilled orders fell 0.3% and lowered the ratio of unfilled orders to shipments for durables slightly.
Do Technological Improvements in the Manufacturing Sector Raise or Lower Employment? from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/files/wps/2005/wp05-5.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/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory Survey</a> (NAICS)</th>
<th scope="col">Mar</th>
<th scope="col">Feb</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>0.6%</td>
<td>0.6%</td>
<td>8.9%</td>
<td>7.5%</td>
<td>-1.3%</td>
<td>-1.8%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>0.1%</td>
<td>-0.5%</td>
<td>4.1%</td>
<td>10.9%</td>
<td>3.7%</td>
<td>-1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>1.3%</td>
<td>-1.5%</td>
<td>6.7%</td>
<td>10.5%</td>
<td>2.6%</td>
<td>-2.0%</td>
</tr>
<tr>
<td class="firstcol">Unfilled Orders</td>
<td>-0.3%</td>
<td>0.5%</td>
<td>6.8%</td>
<td>9.1%</td>
<td>4.2%</td>
<td>-6.1%</td>
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Factory inventories rose 0.6% in March following an upwardly revised like increase in February. Higher oil prices recently have lifted these gains, but not a lot, as petroleum refinery inventories rose 3.2% (22.4% y/y). Less [...]

U.S. Factory Inventories Rose

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Chain store sales gained 0.5% during the final week of April according to the International Council of Shopping Centers (ICSC)-UBS survey. The increase raised the average of sales in April 0.4% versus March when sales fell 0.2%.
During the last ten years there has been a 56% correlation between the y/y change in chain store sales and the change in non-auto retail sales less gasoline, as published by the US Census Department. Chain store sales correspond directly with roughly 14% of non-auto retail sales less gasoline.
The leading indicator of chain store sales from ICSC ticked 0.1% (-0.3% y/y) higher, the third consecutive weekly rise following three declines.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
Reexamining the Consumption-Wealth Relationship: The Role of Uncertainty from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/staff_reports/sr202.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">04/30/05</th>
<th scope="col">04/23/05</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">Total Weekly Chain Store Sales</td>
<td>458.0</td>
<td>455.8</td>
<td>3.0%</td>
<td>4.6%</td>
<td>2.9%</td>
<td>3.6%</td>
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Chain store sales gained 0.5% during the final week of April according to the International Council of Shopping Centers (ICSC)-UBS survey. The increase raised the average of sales in April 0.4% versus March when sales fell 0.2%. [...]

Chain Store Sales Gain

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050503d.jpg" width="353">
Challenger, Gray &amp; Christmas reported that job cut announcements in April fell 33.0% to the lowest level since November 2000. The three month average of job cut announcements fell to the lowest level since last September.
During the last ten years there has been an 84% (inverse) correlation between the three month moving average of announced job cuts and the three month change payroll employment.
Job cut announcements fell sharply m/m in the consumer goods (-18.2% y/y), industrial goods (-27.1% y/y), telecommunication (-96.1% y/y) and transportation industries but declines elsewhere were limited.
Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.
Challenger also reported that announced hiring plans recovered some of the prior month&#39;s decline with a 21.3% rise.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</a></th>
<th scope="col">April</th>
<th scope="col">Mar</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>
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<td class="firstcol">Announced Job Cuts</td>
<td>57,861</td>
<td>86,396</td>
<td>-19.8%</td>
<td>1,039,175</td>
<td>1,236,426</td>
<td>1,431,052</td>
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Challenger, Gray & Christmas reported that job cut announcements in April fell 33.0% to the lowest level since November 2000. The three month average of job cut announcements fell to the lowest level since last September. During the [...]

Challenger Layoff Count Lowest Since 2000

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.”

250507L1.jpg

250507M1.jpg

- 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

250507F4.jpg

250507G4.jpg

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.

250507H4.jpg

250507I4.jpg

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


U.S. Consumer Credit Rebounded in March

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

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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**.

250506L8.jpg

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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: May 2005

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ISM Non-Manufacturing Index Fell Slightly

U.S. Light Truck Sales Crimped by Higher Gasoline Prices

U.S. Light Truck Sales Crimped by Higher Gasoline Prices

Confederation of British Industry's (CBI'S) Distributive Trades Survey: Retail and Motor Trades Slow Sharply, [...]

FOMC Lifts Funds Rate to 3.00%

U.S. Factory Inventories Rose

Chain Store Sales Gain

Challenger Layoff Count Lowest Since 2000