Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050401f.jpg" width="353">
The TANKAN Survey for March shows generally less favorable readings for Japanese business. But &quot;less favorable that what?&quot; News stories highlighted the so-called Headline Series, large manufacturing companies. These firms&#39; results for March came at +14, well below December&#39;s +22 and also weaker than December&#39;s forecast value for March of +15. This is the lowest outturn since March last year, which was +12 and also the first time since the late 2003 reorganization of the TANKAN survey that these firms have fallen short of their own forecast from just three months prior. Thus, the &quot;bad news&quot; in the TANKAN report.
Other segments of Japanese business performed relatively better, however. Large nonmanufacturing firms did better at +11 than their forecast of +10 and they held steady with December&#39;s result of +11. Medium and small companies had less positive assessments of their business conditions than in December, but better than they were expecting. Medium-sized manufacturing firms, for example, saw a result of +6, considerably better than their projection of +2. The performance still slowed from December, but there was not as much deterioration as they had anticipated.
The mixed picture in the TANKAN survey follows similarly mixed readings in other measures of Japanese activity. Industrial production fell in February following a strong January gain, and services (&quot;tertiary&quot;) activity also rose sharply in January. Unemployment ticked higher in February, but from a six-year low. Employment is very erratic, apparently struggling to establish a rising trend. The Japanese economy overall is struggling to establish a rising trend, and just as it seemed to be achieving that, much higher energy and raw material prices have acted to constrain those nascent gains. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050401g.jpg" width="353">
A reminder that in the Haver databases, we present the TANKAN data two ways. Owing to the restructuring of the survey classification scheme and new sampling last March, we have segregated the recent detail data into new series in the &quot;Japan&quot; database. In summary data in the &quot;G10&quot; database, we link the all industry-all enterprise data with the history that uses the old methodology. This broad aggregate is less affected by the Bank of Japan&#39;s reorganization of the categories. This special linked series dipped back below 0 in this report to -2, after two quarters of small positive values. Even so, these past three quarters still constitute the best performance in this series since 1991.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">JAPAN: Business Conditions:&nbsp; % Favorable minus % Unfavorable</th>
March 2005
December 2004
September 2004
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Forecast for Jun</td>
<td>Actual</td>
<td>Forecast for Mar</td>
<td>Actual</td>
<td>Forecast for Dec</td>
<td>Actual</td>
</tr>
<tr>
<td class="firstcol">All Firms</td>
<td>-2</td>
<td>-2</td>
<td>-3</td>
<td>1</td>
<td>0</td>
<td>2</td>
</tr>
<tr class="odd">
<td class="firstcol">Large Firms*</td>
<td>12</td>
<td>13</td>
<td>12</td>
<td>16</td>
<td>15</td>
<td>19</td>
</tr>
<tr>
<td class="firstcol">Manufacturing (&quot;Headline Series&quot;)</td>
<td>14</td>
<td>14</td>
<td>15</td>
<td>22</td>
<td>21</td>
<td>26</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonmanufacturing</td>
<td>10</td>
<td>11</td>
<td>10</td>
<td>11</td>
<td>10</td>
<td>11</td>
</tr>
<tr>
<td class="firstcol">Medium-Sized Firms**</td>
<td>-1</td>
<td>0</td>
<td>-1</td>
<td>2</td>
<td>3</td>
<td>5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>2</td>
<td>6</td>
<td>2</td>
<td>11</td>
<td>10</td>
<td>14</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonmanufacturing</td>
<td>-4</td>
<td>-4</td>
<td>-3</td>
<td>-4</td>
<td>-2</td>
<td>-2</td>
</tr>
<tr class="odd">
<td class="firstcol">Small Firms***</td>
<td>-11</td>
<td>-9</td>
<td>-12</td>
<td>-7</td>
<td>-9</td>
<td>-9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-2</td>
<td>0</td>
<td>-1</td>
<td>5</td>
<td>3</td>
<td>5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonmanufacturing</td>
<td>-15</td>
<td>-14</td>
<td>-18</td>
<td>-14</td>
<td>-16</td>
<td>-17</td>
</tr>
</tbody>
</table>
</body>
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The TANKAN Survey for March shows generally less favorable readings for Japanese business. But "less favorable that what?" News stories highlighted the so-called Headline Series, large manufacturing companies. These firms' results for [...]

Bad News -- but Not So Bad -- in Japan's "TANKAN" for March

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050401d.jpg" width="353">
The University of Michigan&#39;s March reading of consumer sentiment at 92.6 about matched Consensus expectations, ended the month down from the preliminary indication of 92.9 and was 1.6% lower than February.
Sentiment has fallen in each of the last three months and is off 10.8% from the January &#39;04 peak. During the last ten years there has been a 75% (inverse) correlation between the level of consumer sentiment and the unemployment rate.
The reading of current conditions fell for the second month. The 1.1% decline reflected a sharp decline in sentiment regarding current conditions for buying vehicles.
Consumer expectations slipped for the third consecutive month due to a drop in expected business conditions in six months. This reading is down 27.3% from the January &#39;04 high.
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">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">Consumer Sentiment</td>
<td>92.6</td>
<td>94.1</td>
<td>-3.3%</td>
<td>95.2</td>
<td>87.6</td>
<td>89.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>108.0</td>
<td>109.2</td>
<td>1.1%</td>
<td>105.6</td>
<td>97.2</td>
<td>97.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Consumer Expectations</td>
<td>82.8</td>
<td>84.4</td>
<td>-6.8%</td>
<td>88.5</td>
<td>81.4</td>
<td>84.6</td>
</tr>
</tbody>
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The University of Michigan's March reading of consumer sentiment at 92.6 about matched Consensus expectations, ended the month down from the preliminary indication of 92.9 and was 1.6% lower than February. Sentiment has fallen in each [...]

U.S. Consumer Sentiment Faded Further

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050401e.jpg" width="353">
The Institute for Supply Management reported that in March the Business Activity Index for the non-manufacturing sector rose for the second consecutive month to 63.1 from 59.8 the prior month.
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 rose to 62.1 while the employment sub index fell moderately m/m from the series&#39; high in February. 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 eased again m/m to the lowest level in 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">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Mar &#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>63.1</td>
<td>59.8</td>
<td>64.0</td>
<td>62.4</td>
<td>58.2</td>
<td>55.1</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>65.6</td>
<td>66.4</td>
<td>64.8</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 in March the Business Activity Index for the non-manufacturing sector rose for the second consecutive month to 63.1 from 59.8 the prior month. Since the series' inception in 1997 there [...]

ISM Non-Manufacturing Index Higher Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050401c.jpg" width="353">
The Institute of Supply Management reported that the Composite Index of activity in the manufacturing sector remained about unchanged in March at 55.2 versus 55.3 in February. Consensus expectations had been for 55.0.
During the last twenty years there has been a 69% correlation between the level of the Composite Index and the three month growth in factory sector industrial production.
Only the new orders (57.1) and inventories (54.1) components rose. The production index (56.5) continued its slide from the January &#39;04 peak of 69.0 and the employment index (53.3) reversed all of the prior two months&#39; gains. During the last twenty years there has been a 69% correlation between the level of the ISM Employment Index and the three month growth in factory sector employment.
The vendor deliveries index (52.5) fell sharply to the lowest level since 2003 and the index of export orders (55.4) also fell hard to the lowest in six months.
The prices paid index recovered more than all of the prior two months&#39; decline but remained off the April &#39;04 high of 88.0.

<table border="0" cellspacing="0" width="100%">
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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF02/@EF02.HTM">ISM Manufacturing Survey</a></th>
<th scope="col">March</th>
<th scope="col">Feb</th>
<th scope="col">March &#39;04</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">Composite Index</td>
<td>55.2</td>
<td>55.3</td>
<td>62.3</td>
<td>60.5</td>
<td>53.3</td>
<td>52.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>57.1</td>
<td>55.8</td>
<td>65.3</td>
<td>&nbsp;63.5</td>
<td>57.9</td>
<td>56.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>73.0</td>
<td>65.5</td>
<td>86.0</td>
<td>79.8</td>
<td>59.6</td>
<td>57.6</td>
</tr>
</tbody>
</table>
</body>
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The Institute of Supply Management reported that the Composite Index of activity in the manufacturing sector remained about unchanged in March at 55.2 versus 55.3 in February. Consensus expectations had been for 55.0. During the last [...]

ISM Factory Index About Stable

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050401a.jpg" width="353">
Non-farm payrolls rose just 110,000 in March and the prior month&#39;s gain was revised lower to 243,000. Consensus expectations had been for payrolls to rise 220,000 last month.
The household survey, however, indicated that the unemployment rate fell back to 5.2% as a result of a 357,000 (+1.5% y/y) worker rise in employment. The number of job losers fell 196,000 (-15.4% y/y). The labor force rose 25,000 (1.0% y/y) but the labor force participation rate held steady at a low 65.8% versus a high in 2000 of 67.3%.
Factory sector payrolls fell 8,000 and the prior month&#39;s gain was revised lower. The breadth of hiring gain rose slightly to a still narrow 44.0%. Six-month breadth was only 39.3%.
Private service producing payrolls rose 77,000 (1.9% y/y) in March and the prior month&#39;s gain was lowered. The slowdown in hiring versus earlier months spread throughout industry. Professional &amp; business service jobs grew 27,000 (3.8% y/y) and financial jobs edged up 2,000 (2.0% y/y). Jobs in retailing fell 9,700 (+0.6% y/y) though the gain in education &amp; health services jobs firmed to 23,000 (2.3% y/y). Total government employment rose 9,000 (0.8% y/y) but federal government jobs fell 1,000 (-0.4% y/y).
Construction jobs remained firm and rose 26,000 (3.6% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050401b.jpg" width="353">
The index of aggregate hours worked (employment times hours worked) rose 0.1% (+2.5% y/y) in March and the 1Q average is 2.0% (AR) ahead of 4Q04.
Average hourly earnings increased 0.3% but earnings in manufacturing fell 0.2% (2.4% y/y).
Gains in U.S. Productivity: Stopgap Measures or Lasting Change? from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2005/el2005-05.html">here</a>.
A Search for a Structural Phillips Curve from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr203.html"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB01/@EB01.HTM">Employment</a></th>
<th scope="col">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">Payroll Employment</td>
<td>110,000</td>
<td>243,000</td>
<td>1.6%</td>
<td>1.1%</td>
<td>-0.3%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-8,000</td>
<td>15,000</td>
<td>0.2%</td>
<td>-1.2%</td>
<td>-4.9%</td>
<td>-7.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.7</td>
<td>33.7</td>
<td>33.7</td>
<td>33.7</td>
<td>33.7</td>
<td>33.8</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.3%</td>
<td>0.1%</td>
<td>2.6%</td>
<td>2.1%</td>
<td>2.7%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>5.2%</td>
<td>5.4%</td>
<td>5.7%</td>
<td>5.5%</td>
<td>6.0%</td>
<td>5.8%</td>
</tr>
</tbody>
</table>
</body>
</html>

Non-farm payrolls rose just 110,000 in March and the prior month's gain was revised lower to 243,000. Consensus expectations had been for payrolls to rise 220,000 last month. The household survey, however, indicated that the [...]

U.S. Payroll Growth Slowed, Unemployment Fell

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050304a.jpg" width="353">
Non-farm payrolls rose just 110,000 in March and the prior month&#39;s gain was revised lower to 243,000. Consensus expectations had been for payrolls to rise 220,000 last month.
The household survey, however, indicated that the unemployment rate fell back to 5.2% as a result of a 357,000 (+1.5% y/y) worker rise in employment. The number of job losers fell 196,000 (-15.4% y/y). The labor force rose 25,000 (1.0% y/y) but the labor force participation rate held steady at a low 65.8% versus a high in 2000 of 67.3%.
Factory sector payrolls fell 8,000 and the prior month&#39;s gain was revised lower. The breadth of hiring gain rose slightly to a still narrow 44.0%. Six-month breadth was only 39.3%.
Private service producing payrolls rose 77,000 (1.9% y/y) in March and the prior month&#39;s gain was lowered. The slowdown in hiring versus earlier months spread throughout industry. Professional &amp; business service jobs grew 27,000 (3.8% y/y) and financial jobs edged up 2,000 (2.0% y/y). Jobs in retailing fell 9,700 (+0.6% y/y) though the gain in education &amp; health services jobs firmed to 23,000 (2.3% y/y). Total government employment rose 9,000 (0.8% y/y) but federal government jobs fell 1,000 (-0.4% y/y).
Construction jobs remained firm and rose 26,000 (3.6% y/y).
The index of aggregate hours worked (employment times hours worked) rose 0.1% (+2.5% y/y) in March and the 1Q average is 2.0% (AR) ahead of 4Q04.
Average hourly earnings increased 0.3% but earnings in manufacturing fell 0.2% (2.4% y/y).
Gains in U.S. Productivity: Stopgap Measures or Lasting Change? from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2005/el2005-05.html">here</a>.
A Search for a Structural Phillips Curve from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr203.html"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB01/@EB01.HTM">Employment</a></th>
<th scope="col">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">Payroll Employment</td>
<td>110,000</td>
<td>243,000</td>
<td>1.6%</td>
<td>1.1%</td>
<td>-0.3%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-8,000</td>
<td>15,000</td>
<td>0.2%</td>
<td>-1.2%</td>
<td>-4.9%</td>
<td>-7.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.7</td>
<td>33.7</td>
<td>33.7</td>
<td>33.7</td>
<td>33.7</td>
<td>33.8</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.3%</td>
<td>0.1%</td>
<td>2.6%</td>
<td>2.1%</td>
<td>2.7%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>5.2%</td>
<td>5.4%</td>
<td>5.7%</td>
<td>5.5%</td>
<td>6.0%</td>
<td>5.8%</td>
</tr>
</tbody>
</table>
ISM Factory Index About Stable 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 1, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050401c.jpg" width="353">
The Institute of Supply Management reported that the Composite Index of activity in the manufacturing sector remained about unchanged in March at 55.2 versus 55.3 in February. Consensus expectations had been for 55.0.
During the last twenty years there has been a 69% correlation between the level of the Composite Index and the three month growth in factory sector industrial production.
Only the new orders (57.1) and inventories (54.1) components rose. The production index (56.5) continued its slide from the January &#39;04 peak of 69.0 and the employment index (53.3) reversed all of the prior two months&#39; gains. During the last twenty years there has been a 69% correlation between the level of the ISM Employment Index and the three month growth in factory sector employment.
The vendor deliveries index (52.5) fell sharply to the lowest level since 2003 and the index of export orders (55.4) also fell hard to the lowest in six months.
The prices paid index recovered more than all of the prior two months&#39; decline but remained off the April &#39;04 high of 88.0.

<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/@EF02/@EF02.HTM">ISM Manufacturing Survey</a></th>
<th scope="col">March</th>
<th scope="col">Feb</th>
<th scope="col">March &#39;04</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">Composite Index</td>
<td>55.2</td>
<td>55.3</td>
<td>62.3</td>
<td>60.5</td>
<td>53.3</td>
<td>52.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>57.1</td>
<td>55.8</td>
<td>65.3</td>
<td>&nbsp;63.5</td>
<td>57.9</td>
<td>56.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>73.0</td>
<td>65.5</td>
<td>86.0</td>
<td>79.8</td>
<td>59.6</td>
<td>57.6</td>
</tr>
</tbody>
</table>
ISM Non-Manufacturing Index Higher Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 1, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050401e.jpg" width="353">
The Institute for Supply Management reported that in March the Business Activity Index for the non-manufacturing sector rose for the second consecutive month to 63.1 from 59.8 the prior month.
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 rose to 62.1 while the employment sub index fell moderately m/m from the series&#39; high in February. 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 eased again m/m to the lowest level in 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">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Mar &#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>63.1</td>
<td>59.8</td>
<td>64.0</td>
<td>62.4</td>
<td>58.2</td>
<td>55.1</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>65.6</td>
<td>66.4</td>
<td>64.8</td>
<td>69.0</td>
<td>56.8</td>
<td>54.0</td>
</tr>
</tbody>
</table>
U.S. Consumer Sentiment Faded Further 
by <a href="/comment/Moeller.html">Tom Moeller</a> April 1, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050401d.jpg" width="353">
The University of Michigan&#39;s March reading of consumer sentiment at 92.6 about matched Consensus expectations, ended the month down from the preliminary indication of 92.9 and was 1.6% lower than February.
Sentiment has fallen in each of the last three months and is off 10.8% from the January &#39;04 peak. During the last ten years there has been a 75% (inverse) correlation between the level of consumer sentiment and the unemployment rate.
The reading of current conditions fell for the second month. The 1.1% decline reflected a sharp decline in sentiment regarding current conditions for buying vehicles.
Consumer expectations slipped for the third consecutive month due to a drop in expected business conditions in six months. This reading is down 27.3% from the January &#39;04 high.
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">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">Consumer Sentiment</td>
<td>92.6</td>
<td>94.1</td>
<td>-3.3%</td>
<td>95.2</td>
<td>87.6</td>
<td>89.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>108.0</td>
<td>109.2</td>
<td>1.1%</td>
<td>105.6</td>
<td>97.2</td>
<td>97.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Consumer Expectations</td>
<td>82.8</td>
<td>84.4</td>
<td>-6.8%</td>
<td>88.5</td>
<td>81.4</td>
<td>84.6</td>
</tr>
</tbody>
</table>
Bad News -- but Not So Bad -- in Japan's "TANKAN" for March 
by <a href="/comment/Stone.html">By Carol Stone</a> April 1, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050401f.jpg" width="353">
The TANKAN Survey for March shows generally less favorable readings for Japanese business. But &quot;less favorable that what?&quot; News stories highlighted the so-called Headline Series, large manufacturing companies. These firms&#39; results for March came at +14, well below December&#39;s +22 and also weaker than December&#39;s forecast value for March of +15. This is the lowest outturn since March last year, which was +12 and also the first time since the late 2003 reorganization of the TANKAN survey that these firms have fallen short of their own forecast from just three months prior. Thus, the &quot;bad news&quot; in the TANKAN report.
Other segments of Japanese business performed relatively better, however. Large nonmanufacturing firms did better at +11 than their forecast of +10 and they held steady with December&#39;s result of +11. Medium and small companies had less positive assessments of their business conditions than in December, but better than they were expecting. Medium-sized manufacturing firms, for example, saw a result of +6, considerably better than their projection of +2. The performance still slowed from December, but there was not as much deterioration as they had anticipated.
The mixed picture in the TANKAN survey follows similarly mixed readings in other measures of Japanese activity. Industrial production fell in February following a strong January gain, and services (&quot;tertiary&quot;) activity also rose sharply in January. Unemployment ticked higher in February, but from a six-year low. Employment is very erratic, apparently struggling to establish a rising trend. The Japanese economy overall is struggling to establish a rising trend, and just as it seemed to be achieving that, much higher energy and raw material prices have acted to constrain those nascent gains. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050401g.jpg" width="353">
A reminder that in the Haver databases, we present the TANKAN data two ways. Owing to the restructuring of the survey classification scheme and new sampling last March, we have segregated the recent detail data into new series in the &quot;Japan&quot; database. In summary data in the &quot;G10&quot; database, we link the all industry-all enterprise data with the history that uses the old methodology. This broad aggregate is less affected by the Bank of Japan&#39;s reorganization of the categories. This special linked series dipped back below 0 in this report to -2, after two quarters of small positive values. Even so, these past three quarters still constitute the best performance in this series since 1991.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">JAPAN: Business Conditions:&nbsp; % Favorable minus % Unfavorable</th>
March 2005
December 2004
September 2004
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Forecast for Jun</td>
<td>Actual</td>
<td>Forecast for Mar</td>
<td>Actual</td>
<td>Forecast for Dec</td>
<td>Actual</td>
</tr>
<tr>
<td class="firstcol">All Firms</td>
<td>-2</td>
<td>-2</td>
<td>-3</td>
<td>1</td>
<td>0</td>
<td>2</td>
</tr>
<tr class="odd">
<td class="firstcol">Large Firms*</td>
<td>12</td>
<td>13</td>
<td>12</td>
<td>16</td>
<td>15</td>
<td>19</td>
</tr>
<tr>
<td class="firstcol">Manufacturing (&quot;Headline Series&quot;)</td>
<td>14</td>
<td>14</td>
<td>15</td>
<td>22</td>
<td>21</td>
<td>26</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonmanufacturing</td>
<td>10</td>
<td>11</td>
<td>10</td>
<td>11</td>
<td>10</td>
<td>11</td>
</tr>
<tr>
<td class="firstcol">Medium-Sized Firms**</td>
<td>-1</td>
<td>0</td>
<td>-1</td>
<td>2</td>
<td>3</td>
<td>5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>2</td>
<td>6</td>
<td>2</td>
<td>11</td>
<td>10</td>
<td>14</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonmanufacturing</td>
<td>-4</td>
<td>-4</td>
<td>-3</td>
<td>-4</td>
<td>-2</td>
<td>-2</td>
</tr>
<tr class="odd">
<td class="firstcol">Small Firms***</td>
<td>-11</td>
<td>-9</td>
<td>-12</td>
<td>-7</td>
<td>-9</td>
<td>-9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-2</td>
<td>0</td>
<td>-1</td>
<td>5</td>
<td>3</td>
<td>5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonmanufacturing</td>
<td>-15</td>
<td>-14</td>
<td>-18</td>
<td>-14</td>
<td>-16</td>
<td>-17</td>
</tr>
</tbody>
</table>


</html>

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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The Industrial Materials Price Index from the Foundation for International Business and Economic Research (FIBER) rose 0.6% (-3.6% y/y) during the four weeks ended May 9, 2025. The improvement followed sharp declines in April.

Miscellaneous group prices increased 2.4% (5.9% y/y) over the last four weeks. Natural rubber price soared 13.9% (11.7% y/y). The price of tallow (used in the soap industry) rose 10.6% (41.3% y/y) in four weeks but the cost of framing lumber declined 5.6%, but rose 7.3% y/y.

Prices in the Metals group edged 0.2% higher (-7.3% y/y) over the most recent four weeks. Variation in pricing was wide. Copper scrap prices rose 7.4% (-3.3% y/y) while lead costs rose 4.0% in four weeks (-11.1% y/y). The cost of aluminum increased 2.3% in four weeks, off 4.4% y/y. Working lower, the cost of steel scrap declined 8.1% (-11.6% y/) in four weeks while tin prices followed with a 4.9% decline (-2.9% y/y). Zinc prices eased 0.7% in four weeks and declined 10.3% y/y.

Crude Oil & Benzene group prices edged 0.1% higher (-19.4% y/y) in four weeks. The cost of West Texas Intermediate crude oil weakened 4.0% to $58.50 per barrel and was 25.6% lower y/y. The cost of the petrol-chemical benzene, used for making plastics & synthetic fibers, strengthened 8.5% (-41.8% y/y) in the last four weeks. Excluding crude oil, the industrial commodity price index rose 0.9% (-2.1% y/y) during the last four weeks.

Textile group prices edged 0.9% lower (-0.5% y/y) during the last four weeks. Burlap costs declined 14.3% (+7.4% y/y) but the cost of cotton rose 4.5% (-7.7% y/y) over four weeks.

The Foundation for International Business and Economic Research (FIBER) develops economic measurement techniques as applied to business cycles and inflation in the U.S. and other market economies. The commodity price data can be found in Haver's **DAILY**, **WEEKLY**, **USECON** and **CMDTY** databases.

250509D1.jpg

250509B1.jpg

- Metals prices are mixed.
- Crude oil prices fall sharply.
- Textile prices ease.

FIBER: Industrial Commodity Price Movement Diverges in Latest Four Weeks

250509L1.jpg

250509M1.jpg

Wholesale trade inventories increased 0.4% (2.2% y/y) during March after rising 0.5% in February, revised from 0.3% after a 0.8% January rise. The increase compared to expectations for a 0.5% rise in the Informa Global Markets Survey and compared to a 0.6% gain in the advance report issued two weeks ago.

Durable goods inventories rose 0.6% in March (1.5% y/y) after rising 0.5% in February. Machinery inventories, the largest sector, increased 0.6% (1.7% y/y) while inventories of motor vehicles & parts, the second largest grouping, rose 1.2% (0.8% y/y). Furniture inventories strengthened 2.7% (6.8% y/y) while electrical equipment inventories declined 1.0% (-3.1% y/y). Inventories of nondurable goods edged 0.1% higher (3.4% y/y). Drug inventories, which make up one-quarter of nondurable inventories, advanced 1.0% (4.6% y/y). Grocery inventories, the second largest category, rose 0.4% (8.3% y/y). Apparel inventories fell 0.8% (-6.5% y/y) and chemical inventories rose 2.1% both m/m and y/y. Petroleum inventories increased 0.7% (0.3% y/y).

Sales at the wholesale level rose 0.6% (6.1% y/y) in March after rising 2.0% in February and falling 0.9% in January. A 0.9% March rise had been expected in the Action Economics Forecast Survey.

Durable goods sales rose 1.0% (8.5% y/y) in March after strengthening 3.2% in February. Sales of electrical equipment & electronic goods, the largest sector, rose 2.5% (20.9% y/y), after a 2.3% rise. Professional and commercial equipment sales, which includes computers, rose 1.2% (11.9% y/y), while vehicle sales declined 1.0% (1.1% y/y). Sales of machinery improved 0.7% (4.2% y/y). Nondurable product sales rose 0.3% (3.9% y/y) in March after gaining 0.9% in February. Drug store sales, the largest category, increased 2.8% (13.4% y/y), while grocery store sales eased 0.2% (+4.3% y/y). Sales of apparel weakened 0.8% (+3.5% y/y) while paper sales declined 1.7% (0.5% y/y). Petroleum product sales fell 4.6% both m/m and y/y.

The inventory-to-sales (I/S) ratio at the wholesale level remained at 1.30 in March and has been moving lower for the last two years.

The wholesale I/S ratio for durable goods eased to 1.69 in March and also has been trending lower. The machinery ratio fell to 2.92 while motor vehicles rose to 1.78. The I/S ratio for nondurable goods slipped to 0.93 and remained down from 1.02 early in 2023. The drug industry ratio eased to 0.94. Apparel's I/S ratio held at 2.06, but remained below its 2.28 level one year earlier, and has been declining since early 2023. The petroleum industry I/S ratio rose to 0.33.

The wholesale trade figures are available in Haver's **USECON** database. The expectations figure for inventories is contained in the **MMSAMER** database. Expectations for sales are from the **AS1REPNA** database.

**Assessing Maximum Employment** from Federal Reserve Governor Adriana D. Kugler is available [here](https://www.federalreserve.gov/newsevents/speech/kugler20250509a.htm).

250509N1.jpg

250509O1.jpg

- Inventories trend higher y/y.
- Sales increase broadly.
- Inventory-to-sales ratio steadies.

U.S. Wholesale Inventories & Sales Increase in March

250508N2.jpg

250508O2.jpg

Nonfarm labor productivity fell 0.8% (SAAR) during Q1’25 after increasing 1.7% in Q4’24, revised from 1.5%. A 0.6% decline had been expected in the Action Economics Forecast Survey. It was the first productivity decline since Q2’22. The y/y increase during Q1 fell to 1.4% from 2.1% in Q4. It was below a 3.3% high in the first quarter of last year. Productivity fell as real value-added output dropped 0.3% last quarter (+2.2% y/y) after increasing 2.5% in Q4, and hours worked lengthened 0.6% (0.8% y/y) following a 0.8% gain.

Compensation per hour increased 4.8% last quarter following a 3.7% Q4 rise. Despite the strength of these last two increases, y/y growth decelerated to 2.7% from a 6.8% high one year earlier. Nevertheless, the productivity decline raised unit labor costs by 5.7% (1.3% y/y) in Q1 versus expectations for a 5.2% increase. It followed a 2.0% gain during Q4 and was the strongest quarterly increase in a year.

Factory sector productivity surged 4.5% (1.5% y/y) during Q1’25 following three consecutive increases of roughly 0.5%. This strength was accompanied by a 6.2% rise (2.2% y/y) in hourly compensation which came after two consecutive increases of approximately 4.1%. The strength in productivity lowered the rise in unit labor costs to 1.6% from 3.8% in Q4. The y/y gain fell to 0.7% from 2.0% in Q4 and stood below the 6.2% y/y increase in Q1’24.

The productivity and labor cost data are available in Haver’s **USECON** database. The Action Economics expectations figures are in the **AS1REPNA** database.

250508P2.jpg

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- Productivity declines with lower output.
- Compensation surge exacerbates labor market stress.
- Factory sector productivity surge lessens cost pressure.

U.S. Productivity Declines in Q1’25; Unit Labor Costs Surge

250508F0.jpg

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The National Association of Realtors' Fixed Rate Mortgage Housing Affordability Index (HAI) rose 0.6% (3.2% y/y) in March to 103.2 after rising 0.9% to 102.6 in February and rising 0.8% in January to 101.7. The level of home affordability has risen 14.8% from its low of 89.9 in October 2023. It remains 42.4% below the high of 179.2 in April 2020.

The rise in affordability in March occurred as the median price of an existing single-family home rose 1.8% (2.9% y/y) to $408,000 which was offset by a decline in mortgage rates to 6.73% from 6.92% in February. The price compared to the record $432,900 in June 2024. The decline in mortgage rates compared to a recent low of 6.26% in September of last year and a 7.70% high during October of 2023. It remained well above a December 2020 low of 2.73%. These changes lowered the principal & interest payment by 0.2% (+1.1% y/y) to $2,113 per month. That was well above the most recent low of $984 in February 2020. Monthly mortgage payments averaged a lessened 24.2% of income during March. They remained up from a low of 14.0% of income in April 2020.

The rise in housing costs in March was accompanied by improvement in median family income. It increased 0.4% (4.4% y/y) to a record $104,705 after rising 0.4% in February and 0.7% in January.

Housing affordability improved m/m across the country in March. The index edged 0.1% higher (2.8% y/y) to 134.5 in the Midwest. It remains the most affordable region of the country. In the South, the index 0.9% (5.4% y/y) to 106.6 and the affordability index in the Northeast increased 2.1% (-2.6% y/y) to 95.7. In the West, where homes are the least affordable, the index rose 0.8% (3.3% y/y) to 71.8 in March.

The Housing Affordability Index (HAI) equals 100 when a median-income borrower qualifies for an 80% mortgage on a median-priced existing single-family home. The HAI had exceeded 100 in each month since July 1990 and reached its all-time high of 213.3 in January 2013; since then, it fell below 100 for the first time in June 2022.

Data on Housing Affordability can be found in Haver’s **REALTOR** database. Median home sales prices are also available in **USECON**. Higher frequency interest rate data are found in **SURVEYS**, **WEEKLY**, and **DAILY**.

250508H0.jpg

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- Home prices rise but mortgage rates decline.
- Median income improves.
- Affordability increases across the country.

U.S. Housing Affordability Improves Slightly in March

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Initial claims for unemployment insurance were 228,000 seasonally adjusted in the week ended May 3, down from 241,000 in the previous week, which was unrevised. For the latest week, the Action Economics Forecast Survey had expected a smaller decline to 233,000.

In the week ended April 26, the total number of unemployment insurance beneficiaries – also known as “continuing claims” – was 1.879 million, down from 1.908 million in the April 19 week.

The insured unemployment rate, that is, the number of beneficiaries as a percentage of covered employment, returned to its longstanding rate of 1.2% in the April 26 week; this rate has held that amount since continuously since the week of January 6, 2024, except for the prior week’s 1.3%.

As we do highlight in every week’s discussion, economic conditions vary widely across individual states and territories. In the week ended April 19, the highest unemployment rates were in New Jersey and Rhode Island (both at 2.48%), California (2.26%), Washington (2.14%) and New York (1.85%). The lowest were in Florida (0.36%), South Dakota (0.37%), Alabama (0.41%), Virginia (0.45%) and Nebraska (0.47%). Rates in other notable states include Illinois (1.78%), Pennsylvania (1.53%) and Texas (1.14%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986. The expectations figure is from the Action Economics Forecast Survey in the **AS1REPNA** database.

250508C5.jpg

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- Continued claims for unemployment insurance decreased 29, 000 in the week ended April 26.
- Insured unemployment rate returns to longstanding 1.2%.
- Across the states, the insured unemployment rate ranges from 0.36% to 2.48%.

Economy in Brief: April 2005

Jump to:

Bad News -- but Not So Bad -- in Japan's "TANKAN" for March

Bad News -- but Not So Bad -- in Japan's "TANKAN" for March

U.S. Consumer Sentiment Faded Further

ISM Non-Manufacturing Index Higher Again

ISM Factory Index About Stable

U.S. Payroll Growth Slowed, Unemployment Fell

U.S. Payroll Growth Slowed, Unemployment Fell