Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060502a.jpg" width="353">
Chain store sales jumped another 0.7% last week and more than recouped the prior period&#39;s 0.2% decline, according to the International Council of Shopping Centers (ICSC)-UBS survey.
The late-month recovery lifted April chain store sales 1.6% above the March average which rose 0.7% from February. The April gain was the largest in over two years and during the first four months of 2006, chain store sales rose at a 14% annual rate.
During the last ten years there has been a 47% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The chain store sales leading indicator fell 0.6% during the latest week (-1.4% y/y) marking the third decline in the last four periods. In April, the leading indicator is down 0.7% from the March average which rose 0.3% from February.
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.
Cross-Country Personal Saving Rates from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/net/20060501/cover.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">04/29/06</th>
<th scope="col">04/22/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>477.7</td>
<td>474.6</td>
<td>4.3%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>


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Chain store sales jumped another 0.7% last week and more than recouped the prior period's 0.2% decline, according to the International Council of Shopping Centers (ICSC)-UBS survey. The late-month recovery lifted April chain store [...]

When Shoppers Shop ...

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060502a.jpg" width="353">
Chain store sales jumped another 0.7% last week and more than recouped the prior period&#39;s 0.2% decline, according to the International Council of Shopping Centers (ICSC)-UBS survey.
The late-month recovery lifted April chain store sales 1.6% above the March average which rose 0.7% from February. The April gain was the largest in over two years and during the first four months of 2006, chain store sales rose at a 14% annual rate.
During the last ten years there has been a 47% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The chain store sales leading indicator fell 0.6% during the latest week (-1.4% y/y) marking the third decline in the last four periods. In April, the leading indicator is down 0.7% from the March average which rose 0.3% from February.
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.
Cross-Country Personal Saving Rates from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/net/20060501/cover.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">04/29/06</th>
<th scope="col">04/22/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>477.7</td>
<td>474.6</td>
<td>4.3%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>
Gasoline Prices Stable Last Week, But ... 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 2, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060502c.jpg" width="353">
Retail gasoline prices rose less than one penny last week to $2.92 per gallon (30.6% y/y). The near-stability followed four consecutive weeks of increase which ranged between nine and thirteen cents per week.
Earlier signs of relief from the recent upward pressure on prices reversed a bit yesterday as the spot market price for regular unleaded rose a nickel. Nevertheless, the latest spot price at $2.17 per gallon was down from the high of $2.35 during mid-April.
The price of West Texas Intermediate crude oil also move up yesterday to $73.71 per barrel, twelve cents short of the record high.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060502b.jpg" width="353">
The jump in gasoline prices has been accompanied by a sharp slowdown in gasoline demand. Through the latest four weeks, demand versus the year ago level went negative by 0.5%, the first negative y/y comparison since last Autumn when gas prices were similarly elevated.
The latest Short-Term Energy and Summer Fuels Outlook from the U.S. Energy Information Administration can be found <a href="http://www.eia.doe.gov/emeu/steo/pub/contents.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/WEEKLY/@W4/@W403/@W40303/@W40303.HTM">US Weekly</a></th>
<th scope="col">05/01/06</th>
<th scope="col">04/24/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">U.S. Retail Gasoline, Regular per Gal.</td>
<td>$2.92</td>
<td>$2.91</td>
<td>30.6%</td>
<td>$2.27</td>
<td>$1.85</td>
<td>$1.56</td>
</tr>
</tbody>
</table>
Challenger Layoffs Lower Still 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 2, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060502d.jpg" width="353">
Announced job cuts fell another 8.1% last month on top of the 25.7% m/m decline during March, according to the Challenger, Grey &amp; Christmas survey. The decline was to the lowest level since last April.
During the last ten years there has been an 83% (inverse) correlation between the three month moving average level of announced job cuts and the three month change payroll employment.
Layoffs in the apparel industry dropped sharply (-52.2% y/y) as did job cuts in financial (-37.8 y/y, industrial goods (-5.5% y/y), pharmaceutical (-67.3% y/y) and retail (-82.6% y/y). Announced job cuts in electronics (-74.0% y/y) and automotive industries (139.2% y/y) rose m/m.
Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.
Challenger also reported a sharp m/m increase in announced hiring plans (81.7% y/y).

<table border="0" cellspacing="0" width="100%">
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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">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>59,688</td>
<td>64,975</td>
<td>3.2%</td>
<td>1,072,054</td>
<td>1,039,935</td>
<td>1,236,426</td>
</tr>
</tbody>
</table>
 UK Mortgage Lending Up but Consumer Credit Down  
by <a href="/comment/Curley.html">Louise Curley</a> May 2, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060502e.jpg" width="353">
The British Bankers&#39; Association released figures on mortgage and consumer credit lending today. Outstanding mortgages were up 0.12% from February and 3.54% above March 2005. Consumer credit outstanding, on the contrary, declined 1.82% from February and was 7.18% below March, 2005.
The year-to-year changes in outstanding mortgage and consumer credit have been declining since mid-2004. The deceleration in mortgages has been modest compared to that in consumer credit as can be seen in the first chart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060502f.jpg" width="353">
The decline in credit card debt is reflected in the decline over the past year or so in retail sales of household goods. The second chart shows the year-to-year change in retail sales of household goods and the net increase in consumer credit outstandings. Both series are seasonally unadjusted.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060502g.jpg" width="353">
Banks have been playing a smaller proportional role in mortgage lending as Other Specialist Lenders (Non-bank UK credit grantors and specialist mortgage lenders) have taken a larger share of the market. Banks&#39; share in the market has gone from 72.0% in 2000 to 59.4% in 2005, while that of Other Specialist Lenders has risen from 7.7% to 22.3%. The share of Building Societies has declined moderately from 20.0% to 17.9%. The share of other lenders has been insignificant. The year-to-year changes in outstanding mortgages at Banks and at Other Specialist lenders are shown in the third chart. While the yearly increases in Other Specialist Lenders have been declining they are still increasing at rates of almost 30% compared to about 5% for Banks.

<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/@U1/@U1.HTM">United Kingdom</a></th>
<th scope="col">Mar 06</th>
<th scope="col">Feb 06</th>
<th scope="col">Mar 05</th>
<th scope="col">M/M % </th>
<th scope="col">Y/Y %</th>
<th scope="col">2005</th>
<th scope="col">2004&nbsp;</th>
<th scope="col">2003&nbsp;&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">BBA Consumer Credit Outstanding (Bil. GBP)</td>
<td>31.2</td>
<td>31.8</td>
<td>33.6</td>
<td>-1.82</td>
<td>-7.18</td>
<td>33.4</td>
<td>34.0</td>
<td>28.7</td>
</tr>
<tr>
<td class="firstcol">BBA Mortgages Outstanding (Bil.GBP)</td>
<td>513.6</td>
<td>513.0</td>
<td>496.1</td>
<td>0.12</td>
<td>3.54</td>
<td>521.1</td>
<td>496.4</td>
<td>468.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp;Mortgage Lending by: %</td>
<td>2005</td>
<td>2004</td>
<td>2003</td>
<td>2002</td>
<td>2001</td>
<td> 2000 </td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Banks</td>
<td>59.4</td>
<td>61.8</td>
<td>65.9</td>
<td>69.1</td>
<td>41.0</td>
<td>72.0</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Building Societies</td>
<td>&nbsp;17.9</td>
<td>18.2&nbsp;</td>
<td>18.4</td>
<td>18.3&nbsp;</td>
<td>&nbsp;19.2</td>
<td>&nbsp;20.0</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Other Specialist Lenders</td>
<td>22.3</td>
<td>19.6</td>
<td>15.4</td>
<td>12.1</td>
<td>9.7</td>
<td>7.7</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Other Lenders</td>
<td>0.0</td>
<td>0.0</td>
<td>0.0</td>
<td>0.0</td>
<td>0.0</td>
<td>0.0</td>
<td>--</td>
<td>--</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/060501g.jpg" width="353">
China&#39;s balance of payment data for 2005 were released today and, to no one&#39;s surprise, the current account surplus was a record--$160.8 billion, $67.2 billion in the first half of the year and $93.5 in the second half. For the year as a whole, the surplus was $92.2 billion above last year&#39;s surplus of $68.7 billion. (Data for China&#39;s balance of payments are reported only on a semi annual basis.)<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060501i.jpg" width="353">
With its large current account surplus and a net inflow of capital, China has been piling up international reserves as can be seen in the first chart that compares the current account surplus with the increase in reserves. China is now the world&#39;s largest holder of international reserves having surpassed Japan in November 2004 as seen in the second chart.As of December, 2005, China&#39;s holdings of foreign reserves less gold amounted to $822 billion and the latest data for February, 2006, show a further rise to $856 billion.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060501h.jpg" width="353">
Data for China&#39;s trade through March 2006 was also released today. The widening gap between exports to and imports from the United States shows no sign of diminishing as can be seen in the third chart.
Data on China&#39;s trade and balance of payments may be found in the Haver CHINA and EMERGEPR data bases. The data on the balance of payments are identical in both data bases, but the data on trade are more detailed in the CHINA data base. 

<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/JAPAN/@J5/@J5.HTM">China</a>&nbsp; (Bil. US $)</th>
<th scope="col">Mar 06</th>
<th scope="col">Feb 06</th>
<th scope="col">Mar 05</th>
<th scope="col">M/M % </th>
<th scope="col">Y/Y %</th>
<th scope="col">2005</th>
<th scope="col">2004&nbsp;</th>
<th scope="col">2003&nbsp;&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Trade in Goods</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports</td>
<td>77.9</td>
<td>70.1</td>
<td>61.0</td>
<td>11.1</td>
<td>29.7</td>
<td>762.0</td>
<td>593.3</td>
<td>438.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;Imports</td>
<td>63.2</td>
<td>66.4</td>
<td>52.3</td>
<td>-4.8</td>
<td>20.8</td>
<td>660.0</td>
<td>561.2</td>
<td>412.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Balance</td>
<td>14.7</td>
<td>3.7</td>
<td>8.6</td>
<td>11.0 dif</td>
<td>6.1 dif</td>
<td>102.0</td>
<td>32.1</td>
<td>25.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Balance with U. S.</td>
<td>12.6</td>
<td>10.5</td>
<td>9.2</td>
<td>2.1 dif </td>
<td>3.4 dif</td>
<td>114.2</td>
<td>80.3</td>
<td>58.6</td>
</tr>
<tr>
<td class="firstcol">Balance of Payments&nbsp;</td>
<td>H2 06</td>
<td>H1 05</td>
<td>H2 05</td>
<td>H/H dif </td>
<td>Y/Y dif</td>
<td>2005</td>
<td>2004&nbsp;</td>
<td>2003&nbsp;&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Current Account</td>
<td>160.8</td>
<td>67.3</td>
<td>68.6</td>
<td>93.5</td>
<td>92.2</td>
<td>160.8</td>
<td>68.6</td>
<td>45.9</td>
</tr>
<tr>
<td class="firstcol">Capital Account</td>
<td>&nbsp;4.1</td>
<td>2.2&nbsp;</td>
<td>-0.1&nbsp;</td>
<td>&nbsp;1.9</td>
<td>4.2&nbsp;</td>
<td>4.1&nbsp;</td>
<td>-0.1&nbsp;</td>
<td>-0.0&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Financial Account</td>
<td>58.9</td>
<td>36.1</td>
<td>110.7</td>
<td>22.7</td>
<td>51.9</td>
<td>58.9</td>
<td>110.7</td>
<td>52.8</td>
</tr>
<tr>
<td class="firstcol">Change in Reserves*</td>
<td>-207.0</td>
<td>-100.5</td>
<td>-206.4</td>
<td>-106.6</td>
<td>-0.6</td>
<td>-207.0</td>
<td>-206.4</td>
<td>117.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Errors &amp; Omissions</td>
<td>-16.77</td>
<td>-5.1</td>
<td>27.05</td>
<td>-11.9</td>
<td>-43.8</td>
<td>-16.77</td>
<td>27.05</td>
<td>18.42</td>
</tr>
</tbody>
</table>
</body>
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China's balance of payment data for 2005 were released today and, to no one's surprise, the current account surplus was a record--$160.8 billion, $67.2 billion in the first half of the year and $93.5 in the second half. For the year [...]

No Surprises in China's Balance of Payments and Trade Data

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060501e.jpg" width="353">
The March value of construction put in place increased another 0.9% on top of the 1.0% rise during February and for the second month, the gain was double the Consensus expectation for a 0.4% increase.
Residential building jumped 1.6% after an unrevised 1.3% February surge. Strength was most pronounced in the value of improvements which jumped 4.5% (-7.0% y/y) while new single family building rose 0.5% (13.5% y/y).
Nonresidential building fell 0.1%, the first decline since last October, and it was led by a 1.7% (+11.2% y/y) drop in office construction. Commercial building rose 0.6% (8.7% y/y) after a huge 3.3% February drop.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060501f.jpg" width="353">
Public construction spending rose 0.2% for the second month though construction activity on highways &amp; streets, nearly one third of the value of public construction spending, slipped 0.4% (4.9% y/y).
These more detailed categories represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for Automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.

<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/@E9/@E907/@E90701/@E90701.HTM">Construction Put-in-place</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.9%</td>
<td>1.0%</td>
<td>8.4%</td>
<td>9.2%</td>
<td>10.9%</td>
<td>5.4%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>1.1%</td>
<td>1.2%</td>
<td>8.9%</td>
<td>9.7%</td>
<td>13.6%</td>
<td>6.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>1.6%</td>
<td>1.3%</td>
<td>8.6%</td>
<td>11.5%</td>
<td>18.2%</td>
<td>12.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-0.1%</td>
<td>1.1%</td>
<td>9.6%</td>
<td>5.4%</td>
<td>3.9%</td>
<td>-5.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>0.2%</td>
<td>0.2%</td>
<td>6.6%</td>
<td>7.6%</td>
<td>2.5%</td>
<td>2.7%</td>
</tr>
</tbody>
</table>
</body>
</html>

The March value of construction put in place increased another 0.9% on top of the 1.0% rise during February and for the second month, the gain was double the Consensus expectation for a 0.4% increase. Residential building jumped 1.6% [...]

U.S. Construction Again Firm

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060501d.jpg" width="353">
The April Composite Index of activity in the factory sector reported by the Institute of Supply Management (ISM) surged to 57.3, well ahead of Consensus expectations for an unchanged reading at 55.0. The figure was the highest since last November and represented improvement from the 1Q average of 55.6.
During the last twenty years there has been a 68% correlation between the level of the Composite Index and the three month growth in factory sector industrial production.
A higher production index at 60.4 versus 57.2 averaged during 1Q led last month&#39;s rise. Moreover, the employment index rebounded to 55.8 versus 52.9 during 1Q. During the last twenty years there has been a 67% correlation between the level of the ISM employment Index and the three month growth in factory sector employment. The inventory index also rose to its highest level (51.3) in a year while the supplier deliveries index increased to its highest (57.7) since October.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060501c.jpg" width="353">
To the downside was the new orders index which fell to the lowest level (57.6) since August. New export orders were notably weak as the index dropped to the lowest level (53.4) since last June.
The price index showed further strength with a five point increase to its highest level since November. During the last twenty years there has been a 91% correlation between the price index and the three month change in the PPI for intermediate goods less food &amp; energy.
Are We Engineering Ourselves Out of Manufacturing Jobs? from the Federal Reserve Bank of Cleveland can be found <a href="http://www.clevelandfed.org/Research/Com2006/0101.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF02/@EF02.HTM">ISM Manufacturing Survey</a></th>
<th scope="col">April</th>
<th scope="col">Mar</th>
<th scope="col">April &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Index</td>
<td>57.3</td>
<td>55.2</td>
<td>53.8</td>
<td>55.5</td>
<td>60.5</td>
<td>53.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>57.6</td>
<td>58.4</td>
<td>54.7</td>
<td>57.4</td>
<td>63.5</td>
<td>57.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>71.5</td>
<td>66.5</td>
<td>71.0</td>
<td>66.4</td>
<td>79.8</td>
<td>59.6</td>
</tr>
</tbody>
</table>
</body>
</html>

The April Composite Index of activity in the factory sector reported by the Institute of Supply Management (ISM) surged to 57.3, well ahead of Consensus expectations for an unchanged reading at 55.0. The figure was the highest since [...]

ISM Activity & Pricing Indexes Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060501a.jpg" width="353">
Personal income increased 0.8% during March, double the Consensus expectation for a 0.4% rise and followed an unrevised 0.3% increase in February. The increase was the largest for any month since last September.
A 5.3% (16.4% y/y) spike in health insurance benefits due to prescription drug benefits under the Medicare health-care program boosted transfer payments by 3.3% (9.3% y/y).
Wage &amp; salary disbursements rose another 0.4% (5.0% y/y) lifted by a 0.5% (5.6% y/y) rise in private service sector wages. Factory wages rose 0.3% (2.4% y/y), the firmest gain since last October, while government sector wages grew 0.3% (3.3% y/y).
Disposable personal income jumped 0.8% (5.5% y/y) while personal taxes rose 0.8% (9.3% y/y). Adjusted for price inflation disposable income rose 0.5% (2.6% y/y) and real disposable income per capita jumped 0.4% (1.6% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060501b.jpg" width="353">
Personal consumption also was firm and increased 0.6% versus a Consensus expectation for a 0.4% rise. Adjusted for price inflation, spending rose 0.2% (3.4% y/y). Real spending on furniture &amp; household equipment increased 0.9% (13.0% y/y) and &quot;other&quot; durable goods spending rose 1.8% (8.5% y/y). Spending on clothing &amp; shoes fell for the second consecutive month and drooped 0.9% (+7.8% y/y) following several strong monthly gains between October and January. Spending on gasoline &amp; oil fell 2.9% (-0.2% y/y and real services spending rose 0.4% (3.0% y/y).
The PCE chain price index rose 0.4% lifted by a 3.5% (16.5% y/y) jump in gasoline &amp; oil prices. Prices for clothing &amp; shoes surged 1.2% (-1.8% y/y), furniture &amp; household equipment prices fell another 0.3% (-4.5% y/y) but motor vehicle &amp; parts prices rose 0.2% (0.8% y/y).
Incentives and Prices for Motor Vehicles: What has been happening in recent years? is a Working Paper from the Federal Reserve Board and is available <a href="http://www.federalreserve.gov/pubs/feds/2006/200609/200609pap.pdf">here</a>.
The personal savings rate was a negative 0.3%.
Last week&#39;s testimony, Outlook for the U.S. Economy, by Federal Reserve Bank Chairman Ben S. Bernanke can be found <a href="http://www.federalreserve.gov/BoardDocs/Testimony/2006/20060427/default.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.8%</td>
<td>0.3%</td>
<td>6.0%</td>
<td>5.5%</td>
<td>5.9%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.6%</td>
<td>0.2%</td>
<td>6.4%</td>
<td>6.5%</td>
<td>6.5%</td>
<td>4.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>-0.3%</td>
<td>-0.6%</td>
<td>0.4% (Mar &#39;05)</td>
<td>-0.4%</td>
<td>1.7%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.4%</td>
<td>0.1%</td>
<td>2.9%</td>
<td>2.8%</td>
<td>2.6%</td>
<td>1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.3%</td>
<td>0.1%</td>
<td>2.0%</td>
<td>2.0%</td>
<td>2.0%</td>
<td>1.3%</td>
</tr>
</tbody>
</table>


</html>

Personal income increased 0.8% during March, double the Consensus expectation for a 0.4% rise and followed an unrevised 0.3% increase in February. The increase was the largest for any month since last September. A 5.3% (16.4% y/y) [...]

U.S. Income, Spending & Prices Firm in March

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060501a.jpg" width="353">
Personal income increased 0.8% during March, double the Consensus expectation for a 0.4% rise and followed an unrevised 0.3% increase in February. The increase was the largest for any month since last September.
A 5.3% (16.4% y/y) spike in health insurance benefits due to prescription drug benefits under the Medicare health-care program boosted transfer payments by 3.3% (9.3% y/y).
Wage &amp; salary disbursements rose another 0.4% (5.0% y/y) lifted by a 0.5% (5.6% y/y) rise in private service sector wages. Factory wages rose 0.3% (2.4% y/y), the firmest gain since last October, while government sector wages grew 0.3% (3.3% y/y).
Disposable personal income jumped 0.8% (5.5% y/y) while personal taxes rose 0.8% (9.3% y/y). Adjusted for price inflation disposable income rose 0.5% (2.6% y/y) and real disposable income per capita jumped 0.4% (1.6% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060501b.jpg" width="353">
Personal consumption also was firm and increased 0.6% versus a Consensus expectation for a 0.4% rise. Adjusted for price inflation, spending rose 0.2% (3.4% y/y). Real spending on furniture &amp; household equipment increased 0.9% (13.0% y/y) and &quot;other&quot; durable goods spending rose 1.8% (8.5% y/y). Spending on clothing &amp; shoes fell for the second consecutive month and drooped 0.9% (+7.8% y/y) following several strong monthly gains between October and January. Spending on gasoline &amp; oil fell 2.9% (-0.2% y/y and real services spending rose 0.4% (3.0% y/y).
The PCE chain price index rose 0.4% lifted by a 3.5% (16.5% y/y) jump in gasoline &amp; oil prices. Prices for clothing &amp; shoes surged 1.2% (-1.8% y/y), furniture &amp; household equipment prices fell another 0.3% (-4.5% y/y) but motor vehicle &amp; parts prices rose 0.2% (0.8% y/y).
Incentives and Prices for Motor Vehicles: What has been happening in recent years? is a Working Paper from the Federal Reserve Board and is available <a href="http://www.federalreserve.gov/pubs/feds/2006/200609/200609pap.pdf">here</a>.
The personal savings rate was a negative 0.3%.
Last week&#39;s testimony, Outlook for the U.S. Economy, by Federal Reserve Bank Chairman Ben S. Bernanke can be found <a href="http://www.federalreserve.gov/BoardDocs/Testimony/2006/20060427/default.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.8%</td>
<td>0.3%</td>
<td>6.0%</td>
<td>5.5%</td>
<td>5.9%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.6%</td>
<td>0.2%</td>
<td>6.4%</td>
<td>6.5%</td>
<td>6.5%</td>
<td>4.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>-0.3%</td>
<td>-0.6%</td>
<td>0.4% (Mar &#39;05)</td>
<td>-0.4%</td>
<td>1.7%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.4%</td>
<td>0.1%</td>
<td>2.9%</td>
<td>2.8%</td>
<td>2.6%</td>
<td>1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.3%</td>
<td>0.1%</td>
<td>2.0%</td>
<td>2.0%</td>
<td>2.0%</td>
<td>1.3%</td>
</tr>
</tbody>
</table>
ISM Activity & Pricing Indexes Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 1, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060501d.jpg" width="353">
The April Composite Index of activity in the factory sector reported by the Institute of Supply Management (ISM) surged to 57.3, well ahead of Consensus expectations for an unchanged reading at 55.0. The figure was the highest since last November and represented improvement from the 1Q average of 55.6.
During the last twenty years there has been a 68% correlation between the level of the Composite Index and the three month growth in factory sector industrial production.
A higher production index at 60.4 versus 57.2 averaged during 1Q led last month&#39;s rise. Moreover, the employment index rebounded to 55.8 versus 52.9 during 1Q. During the last twenty years there has been a 67% correlation between the level of the ISM employment Index and the three month growth in factory sector employment. The inventory index also rose to its highest level (51.3) in a year while the supplier deliveries index increased to its highest (57.7) since October.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060501c.jpg" width="353">
To the downside was the new orders index which fell to the lowest level (57.6) since August. New export orders were notably weak as the index dropped to the lowest level (53.4) since last June.
The price index showed further strength with a five point increase to its highest level since November. During the last twenty years there has been a 91% correlation between the price index and the three month change in the PPI for intermediate goods less food &amp; energy.
Are We Engineering Ourselves Out of Manufacturing Jobs? from the Federal Reserve Bank of Cleveland can be found <a href="http://www.clevelandfed.org/Research/Com2006/0101.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF02/@EF02.HTM">ISM Manufacturing Survey</a></th>
<th scope="col">April</th>
<th scope="col">Mar</th>
<th scope="col">April &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Index</td>
<td>57.3</td>
<td>55.2</td>
<td>53.8</td>
<td>55.5</td>
<td>60.5</td>
<td>53.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>57.6</td>
<td>58.4</td>
<td>54.7</td>
<td>57.4</td>
<td>63.5</td>
<td>57.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>71.5</td>
<td>66.5</td>
<td>71.0</td>
<td>66.4</td>
<td>79.8</td>
<td>59.6</td>
</tr>
</tbody>
</table>
U.S. Construction Again Firm 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 1, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060501e.jpg" width="353">
The March value of construction put in place increased another 0.9% on top of the 1.0% rise during February and for the second month, the gain was double the Consensus expectation for a 0.4% increase.
Residential building jumped 1.6% after an unrevised 1.3% February surge. Strength was most pronounced in the value of improvements which jumped 4.5% (-7.0% y/y) while new single family building rose 0.5% (13.5% y/y).
Nonresidential building fell 0.1%, the first decline since last October, and it was led by a 1.7% (+11.2% y/y) drop in office construction. Commercial building rose 0.6% (8.7% y/y) after a huge 3.3% February drop.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060501f.jpg" width="353">
Public construction spending rose 0.2% for the second month though construction activity on highways &amp; streets, nearly one third of the value of public construction spending, slipped 0.4% (4.9% y/y).
These more detailed categories represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for Automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.

<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/@E9/@E907/@E90701/@E90701.HTM">Construction Put-in-place</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.9%</td>
<td>1.0%</td>
<td>8.4%</td>
<td>9.2%</td>
<td>10.9%</td>
<td>5.4%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>1.1%</td>
<td>1.2%</td>
<td>8.9%</td>
<td>9.7%</td>
<td>13.6%</td>
<td>6.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>1.6%</td>
<td>1.3%</td>
<td>8.6%</td>
<td>11.5%</td>
<td>18.2%</td>
<td>12.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-0.1%</td>
<td>1.1%</td>
<td>9.6%</td>
<td>5.4%</td>
<td>3.9%</td>
<td>-5.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>0.2%</td>
<td>0.2%</td>
<td>6.6%</td>
<td>7.6%</td>
<td>2.5%</td>
<td>2.7%</td>
</tr>
</tbody>
</table>
 No Surprises in China's Balance of Payments and Trade Data  
by <a href="/comment/Curley.html">Louise Curley</a> May 1, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060501g.jpg" width="353">
China&#39;s balance of payment data for 2005 were released today and, to no one&#39;s surprise, the current account surplus was a record--$160.8 billion, $67.2 billion in the first half of the year and $93.5 in the second half. For the year as a whole, the surplus was $92.2 billion above last year&#39;s surplus of $68.7 billion. (Data for China&#39;s balance of payments are reported only on a semi annual basis.)<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060501i.jpg" width="353">
With its large current account surplus and a net inflow of capital, China has been piling up international reserves as can be seen in the first chart that compares the current account surplus with the increase in reserves. China is now the world&#39;s largest holder of international reserves having surpassed Japan in November 2004 as seen in the second chart.As of December, 2005, China&#39;s holdings of foreign reserves less gold amounted to $822 billion and the latest data for February, 2006, show a further rise to $856 billion.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060501h.jpg" width="353">
Data for China&#39;s trade through March 2006 was also released today. The widening gap between exports to and imports from the United States shows no sign of diminishing as can be seen in the third chart.
Data on China&#39;s trade and balance of payments may be found in the Haver CHINA and EMERGEPR data bases. The data on the balance of payments are identical in both data bases, but the data on trade are more detailed in the CHINA data base. 

<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/JAPAN/@J5/@J5.HTM">China</a>&nbsp; (Bil. US $)</th>
<th scope="col">Mar 06</th>
<th scope="col">Feb 06</th>
<th scope="col">Mar 05</th>
<th scope="col">M/M % </th>
<th scope="col">Y/Y %</th>
<th scope="col">2005</th>
<th scope="col">2004&nbsp;</th>
<th scope="col">2003&nbsp;&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Trade in Goods</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports</td>
<td>77.9</td>
<td>70.1</td>
<td>61.0</td>
<td>11.1</td>
<td>29.7</td>
<td>762.0</td>
<td>593.3</td>
<td>438.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;Imports</td>
<td>63.2</td>
<td>66.4</td>
<td>52.3</td>
<td>-4.8</td>
<td>20.8</td>
<td>660.0</td>
<td>561.2</td>
<td>412.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Balance</td>
<td>14.7</td>
<td>3.7</td>
<td>8.6</td>
<td>11.0 dif</td>
<td>6.1 dif</td>
<td>102.0</td>
<td>32.1</td>
<td>25.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Balance with U. S.</td>
<td>12.6</td>
<td>10.5</td>
<td>9.2</td>
<td>2.1 dif </td>
<td>3.4 dif</td>
<td>114.2</td>
<td>80.3</td>
<td>58.6</td>
</tr>
<tr>
<td class="firstcol">Balance of Payments&nbsp;</td>
<td>H2 06</td>
<td>H1 05</td>
<td>H2 05</td>
<td>H/H dif </td>
<td>Y/Y dif</td>
<td>2005</td>
<td>2004&nbsp;</td>
<td>2003&nbsp;&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Current Account</td>
<td>160.8</td>
<td>67.3</td>
<td>68.6</td>
<td>93.5</td>
<td>92.2</td>
<td>160.8</td>
<td>68.6</td>
<td>45.9</td>
</tr>
<tr>
<td class="firstcol">Capital Account</td>
<td>&nbsp;4.1</td>
<td>2.2&nbsp;</td>
<td>-0.1&nbsp;</td>
<td>&nbsp;1.9</td>
<td>4.2&nbsp;</td>
<td>4.1&nbsp;</td>
<td>-0.1&nbsp;</td>
<td>-0.0&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Financial Account</td>
<td>58.9</td>
<td>36.1</td>
<td>110.7</td>
<td>22.7</td>
<td>51.9</td>
<td>58.9</td>
<td>110.7</td>
<td>52.8</td>
</tr>
<tr>
<td class="firstcol">Change in Reserves*</td>
<td>-207.0</td>
<td>-100.5</td>
<td>-206.4</td>
<td>-106.6</td>
<td>-0.6</td>
<td>-207.0</td>
<td>-206.4</td>
<td>117.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Errors &amp; Omissions</td>
<td>-16.77</td>
<td>-5.1</td>
<td>27.05</td>
<td>-11.9</td>
<td>-43.8</td>
<td>-16.77</td>
<td>27.05</td>
<td>18.42</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.

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

FIBER: Industrial Commodity Price Movement Diverges in Latest Four Weeks

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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).

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

U.S. Wholesale Inventories & Sales Increase in March

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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.

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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

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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**.

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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

Carol Stone, CBE

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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.

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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: May 2006

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When Shoppers Shop ...

No Surprises in China's Balance of Payments and Trade Data

U.S. Construction Again Firm

ISM Activity & Pricing Indexes Up

U.S. Income, Spending & Prices Firm in March

U.S. Income, Spending & Prices Firm in March