Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090601i.jpg" width="353">
There&#39;s no real upward momentum driving the recent gains in construction spending, but it seems that an interim stabilization of earlier declines occurred this Spring. How long it will last is the question. For the second consecutive month the value of construction put-in-place unexpectedly rose; during April by 0.8% after a little-revised 0.4% March uptick. The gains followed declines ranging from 2% to 4% during each of the prior four months. Consensus expectations had been for a 1.6% April drop.
Another strong gain in the value of nonresidential building activity paced the April surprise. The 1.8% rise followed a 2.6% March increase. Nevertheless, the y/y gain decelerated to 2.0% following double-digit growth during each of the prior three years. Much of April&#39;s upside surprise was due to a 2.4% increase in the lodging category. Regardless, spending in this area has turned negative y/y following gains ranging between 30% and 60% during each of the prior three years. Elsewhere, office construction continued lower (-17.8% y/y) as did building in the commercial (-25.4% y/y), educational (-4.8% y/y) and amusement &amp; recreation sectors (-18.0% y/y).
Residential building activity also bounced back by all of 0.7% during April. Nevertheless, it was still off by one-third over the last year and by two-thirds from the 2006 peak. Notably hard hit has been single-family construction activity which ticked up 0.7% after falling by three-quarters since 2006. Building activity on multi-family units fell 2.6% during April (-17.4% y/y) but spending on improvements rose 8.9% (-13.8% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090601j.jpg" width="353">
In contrast to the private sector gains, public construction dipped 0.6% during April; and the recession&#39;s effect on tax revenues lowered the year-to-year growth to 3.3% from its 2007 peak of 18.6%. The value of spending on transportation facilities fell 4.6% year-to-year while spending on highways &amp; streets inched up just 0.2% y/y. The value of construction on highways &amp; streets is roughly one-third of the value of total public construction spending.
During the last twenty years there has been an 84% correlation between the q/q change in the value of residential building and its contribution to growth in real GDP.
The more detailed categories of construction 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.
The construction put-in-place figures are available in Haver&#39;s USECON database.
Making affordable housing greener from the Federal Reserve Bank of Boston can be found <a href="http://www.bos.frb.org/commdev/c&amp;b/2009/spring/Connelly_Miller_New_Ecology.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/@E9/@E907/@E907.HTM">Construction</a> (%)</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.8</td>
<td>0.4</td>
<td>-10.7</td>
<td>-5.7</td>
<td>-2.7</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>1.4</td>
<td>0.2</td>
<td>-16.1</td>
<td>-9.8</td>
<td>-6.9</td>
<td>5.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>0.7</td>
<td>-3.6</td>
<td>-35.0</td>
<td>-27.7</td>
<td>-19.8</td>
<td>1.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonresidential</td>
<td>1.8</td>
<td>2.6</td>
<td>2.0</td>
<td>14.9</td>
<td>19.6</td>
<td>16.2</td>
</tr>
<tr>
<td class="firstcol">Public</td>
<td>-0.6</td>
<td>1.0</td>
<td>3.3</td>
<td>6.7</td>
<td>12.3</td>
<td>9.3</td>
</tr>
</tbody>
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There's no real upward momentum driving the recent gains in construction spending, but it seems that an interim stabilization of earlier declines occurred this Spring. How long it will last is the question. For the second consecutive [...]

U.S. Construction Spending Increases Modestly

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090601g.jpg" width="353">
The manufacturing sector showed a further sign of modest improvement after its sharp decline in overall activity. The May composite index for the factory sector from the Institute for Supply Management rose to 42.8 from 40.1 in April. Though the latest figure still indicates a lower level of activity, as does any below the break-even point of 50, the rate of decline appears to be easing. The worst of the decline was at yearend &#39;08 when the index reached 32.9. Consensus expectations were for a May reading of 42.3.
Improvement in the May components of the overall ISM index was limited, but encouraging. The new orders figure broached the break-even level of 50 for the first time since late 2007 with a rise to 51.1. The improvement came as only 19% (NSA) of survey participants reported lower orders ,versus a December high of 64%, while a still-low 27% reported higher orders. The export order index also improved to 48.0 versus the December reading of 35.5. During the last ten years there has been a 53% correlation between the index and the q/q change in real exports of goods in the GDP accounts.
The production component also improved to a level of 46.0, which was its highest level since August and up off the low of 26.3 in December. During the last ten years there has been an 84% correlation between the level of the production component of the composite index and the three-month growth in factory sector industrial production. It is appropriate to correlate the ISM index level with factory sector output growth because the ISM index is a diffusion index. It measures growth by using all of the positive changes in activity added to one half of the zero change in activity measures. Another glimmer of improvement was that the speed of supplier deliveries slowed for the second month.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090601h.jpg" width="353">
Elsewhere, improvement in the components was limited. The employment index was unchanged at a low reading of 34.3, though that was up from the February low. During the last ten years there has been an 89% correlation between the index level and the one-month change in manufacturing payrolls. Continued destocking played a role in that weakness as suggested by a low inventory index reading of 32.9 which was near the lowest level since 1982.
The separate index of prices paid rose sharply indicating that pricing power is rebuilding with improved activity levels. The reading of 43.5 was its highest since last September. During the last twenty years there has been a 79% correlation between the price index and the three-month change in the PPI for intermediate goods.
The ISM data is available in Haver&#39;s USECON database.
Positive Economic Signs Are Emerging; Recovery Will Take Time from the Federal Reserve Bank of St. Louis can be found <a href="http://www.stlouisfed.org/newsroom/pdf/StackhousePresentation05-2009.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/SURVEYS/@S2/@S201/@S201.HTM">ISM Mfg</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">May &#39;08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Index</td>
<td>42.8</td>
<td>40.1</td>
<td>49.3</td>
<td>45.5</td>
<td>51.1</td>
<td>53.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>51.1</td>
<td>47.2</td>
<td>48.6</td>
<td>42.1</td>
<td>54.3</td>
<td>55.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Employment Index</td>
<td>34.3</td>
<td>34.4</td>
<td>46.2</td>
<td>43.2</td>
<td>50.5</td>
<td>51.7</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>43.5</td>
<td>32.0</td>
<td>87.0</td>
<td>66.5</td>
<td>64.6</td>
<td>65.0</td>
</tr>
</tbody>
</table>
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The manufacturing sector showed a further sign of modest improvement after its sharp decline in overall activity. The May composite index for the factory sector from the Institute for Supply Management rose to 42.8 from 40.1 in April. [...]

ISM Index Suggests Downturn In Factory Sector Is Easing

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090601e.jpg" align="left" border="0" height="265" width="353">
This May, the Hometrack Housing Survey, which processes
information gathered by real estate agents in England and Wales,
suggests that the decline in the property market may be reaching
bottom. Three of the indicators that Hometrack monitors continued to
improved in May and one was unchanged. The average price of a house was
unchanged from April, the first break in the steady monthly declines
that began in October 2007. The price is now 155,600 pounds, 16,600
pounds below a year ago and 29,700 pounds below the peak of 176,300
reached in June, July and August of 2007. The last time one could buy a
house near the current price was September 2002 when the average price
was 154,500 pounds.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090601f.jpg" align="right" border="0" height="265" width="353">
The difference between the selling price and the asking price
has been narrowing since January and February of this year when the
sale price was 88.3% the asking price. The May percentage was 90.3%, up
from 89.6% in April. This percentage, however, is among the lower
percentages recorded over the nine-year history of the data. The
selling price was 97.7% of the selling price in January, 2002. The
first chart shows the average price of a house and sales price and a
percentage of the asking price since January 2001.
The average time it takes to sell a house has also been
falling since January of this year when it took 12.3 weeks to complete
a sale. In May it took 9.9 weeks. Again this is a relatively long time
when viewed over the past nine years. From 2001 through 2007, the
number of weeks it took to complete a sale varied from 2.8 in May and
June of 2002 to 8.3 in December, 2007.
Finally, the number of viewings per sale has been slowly
trending down since July 2008 when it reached 14.9. By May the number
of viewings was 12.2, down from 12.5 in April. The second chart shows
the average time taken to sell a house and the number of viewings per
sale.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">UK
Hometrack Housing Survey</th>
<th scope="col">May 09</th>
<th scope="col">Apr&nbsp; 09</th>
<th scope="col">May 08</th>
<th scope="col">M/M&nbsp; Chg</th>
<th scope="col">Y/Y Chg</th>
<th scope="col">2008&nbsp;</th>
<th scope="col">2007&nbsp;</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">House Price (000 GBP)&nbsp;</td>
<td>155.6</td>
<td>155.6</td>
<td>172.2</td>
<td>0.0</td>
<td>-16.6</td>
<td>168.7</td>
<td>174.4</td>
<td>165.7</td>
</tr>
<tr>
<td class="firstcol">Sale Price/ Asking Price (%)</td>
<td>90.3</td>
<td>89.6</td>
<td>92.3</td>
<td>0.7</td>
<td>-2.0</td>
<td>91.3</td>
<td>96.0</td>
<td>94.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Time Taken to Sell (No.
of Weeks)</td>
<td>9.9</td>
<td>10.4</td>
<td>9.8</td>
<td>-0.5</td>
<td>0.1</td>
<td>10.4</td>
<td>6.7</td>
<td>6.8</td>
</tr>
<tr>
<td class="firstcol">Average Number of Viewings per
Sale</td>
<td>12.2</td>
<td>12.5</td>
<td>14.0</td>
<td>-0.3</td>
<td>-1.8</td>
<td>13.7</td>
<td>11.0</td>
<td>10.9</td>
</tr>
</tbody>
</table>
</body></html>

This May, the Hometrack Housing Survey, which processes information gathered by real estate agents in England and Wales, suggests that the decline in the property market may be reaching bottom. Three of the indicators that Hometrack [...]

Encouraging News From UK's Hometrack Housing Survey

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090601c.jpg" align="right" border="0" height="265" width="353">The UK MFG
PMI is up to a level of 45.37, the second highest reading in this group
of EU/EMU reporters (Greece is the highest). The UK index also is 10%
from its cycle high and 10% above its cycle low. The EMU measure is 17%
from its high and 7% up from its low.&nbsp; 
 The UK MFG measure is up an EU best gain of 10.4 points
over the past three months. France Germany and Spain have the next best
increases up by 8.5, 7.98 and 7.44 points respectively. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090601d.jpg" align="right" border="0" height="265" width="353">
Europe is
improving, but the UK seems to be making the strongest MFG rebound so
far. With the release of the US MFG PMI on Monday, the US index shows that
it continues to hold its lead on Europe, signaling that the US recovery
remains in the vanguard of the global expansion. It has about a
four-month head start on EMU but its lead in terms of the level of the
PMI index itself is small. The UK MFG rise has been ahead of the US
sector for the past few months but that sector does not carry the
global punch that the US does.&nbsp;

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col"> Markit MFG Indexes</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td>May-09</td>
<td> Apr-09</td>
<td> Mar-09</td>
<td> 3Mo</td>
<td> 6Mo</td>
<td> 12Mo</td>
<td> Percentile</td>
</tr>
<tr class="grey3">
<td class="firstcol"> Euro-Area</td>
<td> 40.68</td>
<td> 36.83</td>
<td> 33.93</td>
<td> 37.15</td>
<td> 35.55</td>
<td> 39.92</td>
<td> 29.5%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Germany</td>
<td>39.58</td>
<td>35.40</td>
<td>32.36</td>
<td>35.78</td>
<td>34.02</td>
<td>40.26</td>
<td> 27.7%</td>
</tr>
<tr class="grey3">
<td class="firstcol">France</td>
<td>43.32</td>
<td>40.10</td>
<td>36.51</td>
<td>39.98</td>
<td>37.93</td>
<td>40.87</td>
<td> 38.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Italy</td>
<td>41.11</td>
<td>37.21</td>
<td> 34.59</td>
<td>37.64</td>
<td>36.58</td>
<td>39.82</td>
<td> 28.5%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Spain</td>
<td>39.83</td>
<td>34.61</td>
<td>32.92</td>
<td>35.79</td>
<td>33.20</td>
<td>35.31</td>
<td> 39.5%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Austria</td>
<td>39.30</td>
<td>38.97</td>
<td> 33.68</td>
<td>37.32</td>
<td>35.78</td>
<td>40.53</td>
<td> 24.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Greece</td>
<td>46.08</td>
<td>40.88</td>
<td> 38.17</td>
<td>41.71</td>
<td>40.83</td>
<td>45.34</td>
<td> 46.3%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Ireland</td>
<td>39.35</td>
<td>36.10</td>
<td>35.12</td>
<td>36.86</td>
<td>36.76</td>
<td>39.50</td>
<td> 27.8%</td>
</tr>
<tr class="grey2">
<td colspan="8"> EU</td>
</tr>
<tr class="grey3">
<td class="firstcol">UK</td>
<td>45.37</td>
<td>43.07</td>
<td>39.51</td>
<td>42.65</td>
<td>39.17</td>
<td>40.44</td>
<td> 48.7%</td>
</tr>
<tr class="grey1">
<td colspan="8" class="firstcol">percentile is over range since March
2000</td>
</tr>
</tbody>
</table>
</body></html>

The UK MFG PMI is up to a level of 45.37, the second highest reading in this group of EU/EMU reporters (Greece is the highest). The UK index also is 10% from its cycle high and 10% above its cycle low. The EMU measure is 17% from its [...]

UK MFG Is On The Mend... So Is Europe And The US

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090601b.jpg" width="353">
The personal savings rate jumped last month to the highest level since early-1995. That rise may help explain earlier reports that confidence and sentiment are improving. Consumers are rebuilding their personal balance sheets, mending their old ways of easy spending. That is the message from the latest Commerce Department report showing that the personal savings rate jumped during April to 5.7% which was its highest level in over thirteen years.
Spending restraint was evidenced in a slight 0.1% decline in personal expenditures during April. It followed a revised 0.3% March decline which was slightly deeper than initially reported. Adjusted for inflation, April spending also fell a slight 0.1% producing a level of real spending that has been unchanged since January.
As might be expected, spending on the largest durable good, motor vehicles, took a large hit and fell 1.3% (-16.9% y/y). Real spending on furniture &amp; appliances also was cut back a slight 0.4% last month (-4.4% y/y) after the sharp 2.8% March drop. Real spending on apparel slipped just 0.1% (-6.5% y/y) after a 1.7% decline. The weakness extends to spending on services which rose all of 0.2% (1.1% y/y).
The sense of consumers&#39; caution stems from weaker income which remains under extreme pressure from the soft job market. Despite a 0.5% rise during April, personal income has been flat this year though the latest rise beat expectations for a 0.2% decline. Wages and salaries reflected higher unemployment and were unchanged (-0.8% y/y) following seven consecutive months of decline. In addition, the recent decline in interest rates took its toll on interest income which in April was off 5.5% y/y.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090601a.jpg" width="353">
In light of weak income growth, what additional factor has kicked up the savings rate other than spending restraint? Lower taxes. They are off by nearly one-quarter during the last twelve months. Disposable personal income jumped 1.1% during April and over the last year has risen 4.1%, well in excess of the gain in total personal income. Adjusted for inflation, real disposable income also rose 1.1% last month and over the last year is up 3.7%. So far this year, real disposable income is up at a 6.3% annual rate.
Finally, the PCE chain price index benefited from a 2.6% seasonally adjusted decline in gasoline prices (-37.4% y/y) and rose just 0.1%. A bit firmer were core prices which posted a 0.3% April rise to lift the YTD rate of increase to 2.5% (AR). The latest gain in the overall price deflator exceeded Consensus expectations for a 0.2% rise.
The personal income &amp; consumption figures are available in Haver&#39;s USECON and USNA databases.

<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> (%)&nbsp;</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.5</td>
<td>-0.2</td>
<td>0.7</td>
<td>3.8</td>
<td>6.1</td>
<td>7.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Disposable Personal Income</td>
<td>1.1</td>
<td>0.1</td>
<td>3.7</td>
<td>4.6</td>
<td>5.5</td>
<td>6.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption Expenditures</td>
<td>-0.1</td>
<td>-0.3</td>
<td>-1.5</td>
<td>3.6</td>
<td>5.5</td>
<td>5.9</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>5.7</td>
<td>4.5</td>
<td>0.0 (April &#39;08)</td>
<td>1.8</td>
<td>0.5</td>
<td>0.7</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>0.1</td>
<td>0.0</td>
<td>0.4</td>
<td>3.3</td>
<td>2.6</td>
<td>2.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.3</td>
<td>0.2</td>
<td>1.9</td>
<td>2.2</td>
<td>2.2</td>
<td>2.3</td>
</tr>
</tbody>
</table>
</body>
</html>

The personal savings rate jumped last month to the highest level since early-1995. That rise may help explain earlier reports that confidence and sentiment are improving. Consumers are rebuilding their personal balance sheets, mending [...]

U.S. Savings Rate Still Rising As Consumers Remain Cautious

U.S. Savings Rate Still Rising AsConsumers Remain Cautious

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%.

U.S. Initial Unemployment Insurance Claims Ease 13,000 in the May 3 Week