Tom Moeller

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 This winter's severely cold temperatures around the U.S.
 continued to strengthen natural gas prices. Last week's
 average of $6.39 per mmbtu nearly doubled last year's level and was the highest since
 January 2010. Yesterday, prices rose further to $7.58 per mmbtu.
 
 The per barrel cost of WTI crude oil improved
 slightly to $97.76 (1.6% y/y) last week but remained down sharply from the
 $108.67 high in early September. Yesterday, prices jumped to
 $100.06. Brent crude oil prices fell last week to $108.81 per barrel
 (-5.9% y/y) but yesterday improved to $109.78 per barrel.
 
 The price for a gallon of regular gasoline
 prices ticked up to $3.31 (-8.4% y/y) last week but remained down versus the $3.78 per gallon peak reached in
 February of last year. Haver Analytics constructs seasonal factors
 to account for seasonal volatility. The adjusted price held steady last week
 at $3.51 per gallon, down from $3.94 in February last
 year.
 
 The demand for all petroleum products
 increased 5.0% y/y last week. Gasoline demand fell 1.6%
 y/y. Residual fuel oil needs, used for heating, improved 4.6%
 y/y while distillate demand jumped 12.7% y/y. Inventories of
 crude oil and petroleum products fell 3.9% y/y.
 
 The energy price data are reported by the U.S.
 Department of Energy and can be found in Haver's WEEKLY database.
 The daily figures are in DAILY and the petroleum demand and
 inventory figures are in OILWKLY.
 
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	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >Weekly
 Energy Prices</th>
 <th scope="col" >02/10/14</th>
 <th scope="col" >02/03/14</th>
 <th scope="col" >01/27/14</th>
 <th scope="col" >Y/Y%</th>
 <th scope="col" >2013</th>
 <th scope="col" >2012</th>
 <th scope="col" >2011</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Retail
 Gasoline ($ per Gallon, Regular)</td>
 <td >3.31</td>
 <td >3.29</td>
 <td >3.30</td>
 <td >-8.4</td>
 <td >3.51</td>
 <td >3.62</td>
 <td >3.52</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Light Sweet
 Crude Oil, WTI ($ per bbl., WSJ)</td>
 <td >97.76</td>
 <td >97.29</td>
 <td >96.31</td>
 <td >1.6</td>
 <td >97.95</td>
 <td >94.20</td>
 <td >95.14</td>
 </tr>
 <tr>
 <td class="firstcol" >Natural Gas
 ($/mmbtu, LA)</td>
 <td >6.39</td>
 <td >5.30</td>
 <td >4.99</td>
 <td >91.7</td>
 <td >3.73</td>
 <td >2.75</td>
 <td >3.99</td>
 </tr>
 </tbody>
 </table>
 
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This winter's severely cold temperatures around the U.S. continued to strengthen natural gas prices. Last week's average of $6.39 per mmbtu nearly doubled last year's level and was the highest since January 2010. Yesterday, prices [...]

U.S. Natural Gas Prices Reach Highest Level Since 2010

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 The National Federation of Independent Business
 reported that its Small Business Optimism Index improved to 94.1
 during January from 93.9 in December. The latest
 figure remained down slightly from the May high of 94.4.
 For all of last year the sentiment index rose to 92.4, its highest
 level since 2007.
 
 An improved 15% of firms expected higher real sales in six
 months, the highest level of the economic recovery.
 The percentage of firms expecting the economy to improve, however,
 remained unchanged and near the center of the last three year's
 range. Suggesting that labor market conditions remained tight, 22 percent of firms had
 positions they were not able to fill, nearly the most since before the
 recession. A sharply increased 12% were planning to increase employment,
 the most of the economic recovery. A lessened 38% of firms found few or no qualified applicants for job
 openings, the least since May. Twenty four percent of firms were
 planning capital expenditures in the next 3-6 months, still near the most of
 the economic recovery.
 
 A steady 19% planned to raise average selling
 prices in the future but a slightly improved were raising them now. A
 diminished 11% planned to increase worker compensation, off its
 recent high of 14%.
 
 The most important problems faced by small
 business were taxes (a recovery high of 24%), government requirements
 (22%), poor sales (a recovery low of 14%), insurance cost &amp; availability
 (8%), quality of labor (8%), competition from large businesses (8%), cost of labor (4%),
 inflation (3%) and financial &amp; interest rates (2%).
 
 Roughly 24 million small businesses exist in the
 U.S. and they create 80% of all new jobs. The typical NFIB member
 employs 10 people and reports gross sales of about $500,000 a year.
 The NFIB figures can be found in Haver's SURVEYS database.
 
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	<colgroup><col><col><col><col><col><col><col><col></colgroup>
	
 <thead>
 <tr>
 <th class="firstcol" scope="col" >National
 Federation of Independent Business</th>
 <th scope="col" >Jan</th>
 <th scope="col" >Dec</th>
 <th scope="col" >Nov</th>
 <th scope="col" >Jan'13</th>
 <th scope="col" >2013</th>
 <th scope="col" >2012</th>
 <th scope="col" >2011</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Small Business
 Optimism Index (SA, 1986=100)</td>
 <td >94.1</td>
 <td >93.9</td>
 <td >92.5</td>
 <td >88.9</td>
 <td >92.4</td>
 <td >92.2</td>
 <td >91.4</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Firms
 Expecting Higher Real Sales In Six Months (Net %)</td>
 <td >15</td>
 <td >8</td>
 <td >3</td>
 <td >-1</td>
 <td >4</td>
 <td >2</td>
 <td >3</td>
 </tr>
 <tr>
 <td class="firstcol" >Firms
 Expecting Economy To Improve (Net %)</td>
 <td >-11</td>
 <td >-11</td>
 <td >-20</td>
 <td >-30</td>
 <td >-15</td>
 <td >-9</td>
 <td >-9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Firms Planning
 to Increase Employment (Net %)</td>
 <td >12</td>
 <td >8</td>
 <td >9</td>
 <td >3</td>
 <td >6</td>
 <td >4</td>
 <td >3</td>
 </tr>
 <tr>
 <td class="firstcol" >Firms With Few
 or No Qualified Applicants For Job Openings (Net %)</td>
 <td >38</td>
 <td >38</td>
 <td >44</td>
 <td >34</td>
 <td >39</td>
 <td >35</td>
 <td >32</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Firms
 Reporting That Credit Was Harder To Get (Net %)</td>
 <td >6</td>
 <td >7</td>
 <td >6</td>
 <td >7</td>
 <td >6</td>
 <td >8</td>
 <td >10</td>
 </tr>
 <tr>
 <td class="firstcol" >Firms Raising
 Avg. Selling Prices (Net %)</td>
 <td >2</td>
 <td >-1</td>
 <td >2</td>
 <td >2</td>
 <td >2</td>
 <td >4</td>
 <td >5</td>
 </tr>
 </tbody>
 </table>
 
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The National Federation of Independent Business reported that its Small Business Optimism Index improved to 94.1 during January from 93.9 in December. The latest figure remained down slightly from the May high of 94.4. For all of last [...]

U.S. Small Businesses Optimism Nudges Higher

Robert Brusca

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In December we identify nine key members of the European Monetary Union and find that industrial output is falling. The overall euro area measure is not yet available. 

In December we find four output declines among these nine countries, only two declines in November and four declines in October. The gainers are consistently outnumbering the losers over various horizons. Over three months there are only three of nine net declines, over six months, again three of nine show declines, while year-over-year only two EMU members showed declines. And that's the same as it was in November.

On balance the euro area is showing that its members are improving, not just the euro zone aggregate. The clear exception is Ireland with industrial output lower at a 6.7% pace over 12 months and dropping at an accelerated pace of 17% over six months and still-ensnared by a negative 13% growth rate over three months. Finland shows declined over three months and a year-over-year decline of 3.4% with a modest 1.2% rate of increase over six months sandwiched in between. Finland's economy is waffling while Italy shows flat performance over three months, flat performance over 12 months and has output declining at a 13% annual rate over six months. Greece is finally showing some improvement but it's up only 0.7% year-over-year, growing at a 0.5% annual rate over three months and is still down by that 5% at an annual rate over six months. Conditions in the euro zone remain irregular.

Europeans not in the EMU single currency area are performing about same as the countries in EMU right now. The UK shows a single drop in industrial production in November. Sweden posts declines in December and October with a large gain sandwiched in between. Norway shows two straight months of declines but with December rising by 1.7%. Still, the non-EMU currency members demonstrate growth for the most part. Norway is the exception where output is declining at a 2.9% annual rate in the fourth quarter. Sweden's industrial output is increasing at the 0.8% annual rate in the quarter with the UK up at a solid 2.8% annual rate.

Among the monetary union members, three showed declines in output in the fourth quarter. They are led by Ireland falling at 8.1% annual rate followed by Spain at a 3.2% annual rate drop and Greece at a 3.1% annual rate drop. Several EMU members are quite strong in the quarter: the Netherlands posted 9.8% annual rate increase and Portugal posted an 8.7% annual rate increase. Italy's output advances at a 3.1% annual rate in the fourth quarter; Germany's is 2.9%. After that there are increases at a 1.9% annual rate in France and at a 1.2% annual rate in Finland.

The data are overwhelmingly positive; the trends are overwhelmingly improving. But the strength remains underwhelming. In France, for example, the Bank of France just cut its guidance for growth. The BoF now expects 0.2% growth in the first quarter, down from its previous estimate of 0.5%.

EMU trends still have pluses and minuses. The Latvian growth rate in the fourth quarter slowed. Portugal, however, is logging trade progress in posting solid export growth amid tempered import growth. Norway's inflation rate is creeping up. 

Halfway around the world, Japan's economy watchers index, which is a gauge of its services sector, backtracked to 54.7 in January from 55.7 in December. This is a diffusion gauge. Japan posted its largest current account deficit in December. Imports in Japan soared; they are augmented by the imports of energy products. Japan's long-held strategy of using a nuclear power has been going to a shutdown phase after its shocking experience with the tsunami and the nuclear reactors in Fukushima. Meanwhile, the People's Bank of China is promising all sorts of support to its beleaguered economy that continues to undershoot expectations.

The reading in the Markit survey of emerging markets shows some backtracking for the world's developing economies that are still having a hard time getting growth in gear. Their collective PMI reading fell to 51.4 from 51.6. These are diffusion indices, too, which still point to growth (with the breakeven mark at a level of 50), but clearly growth in the emerging economies is not doing too much better than `unchanged.'

The European industrial production report and other data released today are no reason for pessimism, but they are reasons for realism. While there are continuing problems with growth in Europe and scattered disturbances among global developing-economy markets, much of this has to do with changes in expectations. Some of it has to do with countries that had been walking on thin ice for a while and then finally fell through. There is an angle through which you can blame the Federal Reserve and its tapering operation. Tapering- especially its step up- came as a shock to some, especially from the impact on market rates. You can blame Fed communication strategies that continue to seem to promise more than the Fed actually intends to deliver. 

Since Fed policies are conditional - upon as yet unknown data - it is hard to know what the Fed's alleged guidance really means. While the Fed always makes it known that it is data-dependent, it also tries to push the snake-oil idea that there is guidance, too. For those who find these concepts murky or entangled, I'd say it's like advertising cigarettes. You advertise like crazy even with a big cancer disclaimer on the box. So what's the real message? Smoke them or not?

As an example, the unemployment rate has climbed down to the precipice of its consultation level, as it resides at 6.6% with consultation scheduled at 6.5%. As we have closed in on the 6.5% level, the Fed has been gesticulating wildly to get our attention to let us know that no policy action will be automatically forthcoming when 6.5% is breached. However, markets remain wary that the Fed had picked that 6.5% figure out and that once unemployment in the US is below that metric, policy itself will be on thin ice. Once below 6.5% the conditions necessary for the Fed to pull out or to reverse further stimulus will become more likely to be met or more easily met. So there is a perfectly reasonable and justifiable impact in markets for the expectations for interest rates to shift with ramifications for the flow of credit to the more risky markets based on `Fed guidance'. All this is in a world where many still are struggling.

The world remains a very interrelated place. The continuing problems and slow growth in Europe generate their repercussions as its weakness has some impact on its exchange rate which in turn transmits influences other markets. Stress tests and pending capital requirements of the European Central Bank continue to hang over the heads of the banks in Europe- and therefore overhang growth prospects. The ongoing pledge is to remain a backstop for European growth. Notwithstanding, markets are wary of what the ECB policy does next. 

We may be transitioning from the end-game of worrying about the slippage of growth or the onset of deflation to the policy gambit of how to keep balanced growth going once you turn the corner. Still, the differences between these two regimes are quite subtle and there's no telling how or when or what data will shift central bank concerns to the next stage or engage them in backsliding. Markets remain wary.


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In December we identify nine key members of the European Monetary Union and find that industrial output is falling. The overall euro area measure is not yet available. In December we find four output declines among these nine [...]

EMU Nations' IP Is On Upswing; Is It Really?

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 Nonfarm payrolls grew 113,000 (1.7% y/y) during January following gains
 of 75,000 and 274,000 during the prior two months, initially reported as
 74,000 and 241,000. The rise disappointed expectations for a 185,000
 increase. Earlier figures were revised. The unemployment rate fell to
 6.6%, the lowest level since October 2008, versus expectation for 6.7. The
 total jobless rate, including workers who were marginally attached and
 part-time for economic reasons, declined to 12.7%, the lowest level since
 November 2008.
 From the establishment survey, the 113,000 monthly increase in
 jobs was one of the smallest since 2010. On the firm side, factory sector
 payrolls gained 21,000 (0.8% y/y) and construction jobs rose 48,000 (3.1%
 y/y), both bouncing back from modest December readings. Offsetting this
 strength was a weak 66,000 increase (2.1% y/y) in private service sector
 jobs. Notable was the 12,900 decline (+2.1% y/y) in retail employment,
 though that followed an outsized 62,700 December gain. Education &amp;
 health services jobs posted a 6,000 decline (+1.5% y/y), the second
 consecutive down month. Financial activities employment fell 2,000 (+0.8
 y/y). It has been unchanged during the last six months. Also falling were
 government sector payrolls. The 29,000 worker shortfall (-0.2% y/y)
 reflected declines in each sector of government. To the upside, leisure
 &amp; hospitality employment rose 24,000 (3.1% y/y), though its trend
 growth has been slowing since the middle of last year. Professional &amp;
 business services employment advanced a modest 36,000 (3.6% y/y) after a
 negligible 4,000 December rise while transportation &amp; warehousing jobs
 grew 9,900 (1.8% y/y).
 The overall breadth of job growth improved slightly last month to a
 modest 61.2% of industries. During the last three months, jobs rose in
 66.1% of businesses. In the factory sector, a reduced 54.3% of industries
 added workers last month but a firm 64.8% have done so over the last three
 months.
 The length of the average workweek remained down from its expansion
 high at 34.4 hours. That reflected a lessened factory sector reading of
 40.2 hours, off from the expansion high of 40.6 hours reached in November.
 The private service producing workweek held at 33.2 hours, down from the
 March high of 33.4 hours.
 Average hourly earnings gained 0.2% (1.9% y/y) after no change in
 December. Over the last year, factory sector earnings have been the
 strongest across sectors, posting 2.5% wage growth. Private services
 followed with a 1.8% gain while construction sector wages grew 1.4%.
 From the household sector jobs report, the unemployment rate's
 decline to 6.6% reflected a 638,000 (1.3% y/y) rise in employment and a
 523,00 increase (-0.2 y/y) in the labor force. The rise in the labor force
 lifted slightly participation slightly as a percent of the population to
 63.0%. The labor force participation rate remained, however, at the lowest
 level since 1978. Potential workers who were not in the labor force grew
 by 2.8% y/y. The adult employment-to-population rate remained at 61.0%,
 down from its 2000 high of 65.3%. For adult men, it held at 68.0% and for
 women it was steady at 54.6%. The average duration of unemployment fell to
 35.4 weeks, a twelve month low. The ranks of the long-term unemployed (52
 weeks or more) fell roughly one quarter y/y.&nbsp;
 Education continued to pay off. The unemployment rate for those with
 less than a high school diploma remained high at 9.6% last month but
 employment rose 1.1% y/y. For high school graduates, joblessness was 6.5%
 with jobs flat y/y. Those with some college saw an unemployment rate of
 6.0% with a slight dip in jobs and college graduates were jobless at a
 3.2% rate with employment up 3.5% y/y.&nbsp;&nbsp;
 The figures referenced above are available in Haver's USECON
 database. Additional detail can be found in the LABOR and in the EMPL
 databases. The expectation figures are from Action Economics and are in
 the AS1REPNA database.
 <table class="centered" border="0" cellSpacing="0" width="979">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="496">Employment: (M/M
 Chg., 000s)</th>
 <th scope="col" width="68">Jan</th>
 <th scope="col" width="68">Dec</th>
 <th scope="col" width="68">Nov</th>
 <th scope="col" width="68">Y/Y</th>
 <th scope="col" width="69">2013</th>
 <th scope="col" width="69">2012</th>
 <th scope="col" width="69">2011</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="496">Payroll Employment</td>
 <td align="center" width="68">113</td>
 <td align="center" width="68">75</td>
 <td align="center" width="68">274</td>
 <td align="center" width="68">1.7%</td>
 <td align="center" width="69">1.7%</td>
 <td align="center" width="69">1.7%</td>
 <td align="center" width="69">1.2%</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="496">&nbsp;Previous</td>
 <td align="center" width="68">--</td>
 <td align="center" width="68">74</td>
 <td align="center" width="68">241</td>
 <td align="center" width="68">--</td>
 <td align="center" width="69">1.6</td>
 <td align="center" width="69">1.7</td>
 <td align="center" width="69">1.2</td>
 </tr>
 <tr>
 <td class="firstcol" width="496">&nbsp;Manufacturing</td>
 <td align="center" width="68">21</td>
 <td align="center" width="68">8</td>
 <td align="center" width="68">35</td>
 <td align="center" width="68">0.8</td>
 <td align="center" width="69">0.7</td>
 <td align="center" width="69">1.7</td>
 <td align="center" width="69">1.7</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="496">&nbsp;Construction</td>
 <td align="center" width="68">48</td>
 <td align="center" width="68">-22</td>
 <td align="center" width="68">32</td>
 <td align="center" width="68">3.1</td>
 <td align="center" width="69">3.3</td>
 <td align="center" width="69">2.1</td>
 <td align="center" width="69">0.2</td>
 </tr>
 <tr>
 <td class="firstcol" width="496">&nbsp;Private Service Producing</td>
 <td align="center" width="68">66</td>
 <td align="center" width="68">102</td>
 <td align="center" width="68">204</td>
 <td align="center" width="68">2.1</td>
 <td align="center" width="69">2.2</td>
 <td align="center" width="69">2.2</td>
 <td align="center" width="69">1.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="496">&nbsp;Government</td>
 <td align="center" width="68">-29</td>
 <td align="center" width="68">-14</td>
 <td align="center" width="68">2</td>
 <td align="center" width="68">-0.2</td>
 <td align="center" width="69">-0.3</td>
 <td align="center" width="69">-0.8</td>
 <td align="center" width="69">-1.8</td>
 </tr>
 <tr>
 <td class="firstcol" width="496">Average Weekly Hours - Private
 Sector</td>
 <td align="center" width="68">34.4</td>
 <td align="center" width="68">34.4</td>
 <td align="center" width="68">34.5</td>
 <td align="center" width="68">34.4 
 (Jan'13)</td>
 <td align="center" width="69">34.5</td>
 <td align="center" width="69">34.4</td>
 <td align="center" width="69">34.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="496">Average Private Sector Hourly
 Earnings (%)</td>
 <td align="center" width="68">0.2</td>
 <td align="center" width="68">0.0</td>
 <td align="center" width="68">0.2</td>
 <td align="center" width="68">1.9</td>
 <td align="center" width="69">2.1</td>
 <td align="center" width="69">1.9</td>
 <td align="center" width="69">2.0</td>
 </tr>
 <tr>
 <td class="firstcol" width="496">Unemployment Rate (%)</td>
 <td align="center" width="68">6.6</td>
 <td align="center" width="68">6.7</td>
 <td align="center" width="68">7.0</td>
 <td align="center" width="68">7.9 
 (Jan'13)</td>
 <td align="center" width="69">7.4</td>
 <td align="center" width="69">8.1</td>
 <td align="center" width="69">8.9</td>
 </tr>
 </tbody>
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 U.S. Consumer Credit Growth Perks Up 
 by <a href="http://www.haver.com/comment/Moeller.html">Tom
 Moeller</a>&nbsp;&nbsp;February 7, 2014
 The Federal Reserve Board reported that consumer credit outstanding
 increased $18.8 billion (6.2% y/y) during December following a little
 revised $12.4 billion November gain. It was the largest monthly increase
 since February and left y/y growth at 6.2%, roughly equal to 2012.
 Expectations had been for a $12.9 billion increase according to the Action
 Economics survey. 
 Usage of non-revolving credit increased $13.8 billion (8.0% y/y) in
 December. Federal government loans increased 18.4% y/y. These constitute
 roughly one-third of total non-revolving credit. Finance company lending
 (28% of the total) edged up 0.5% y/y and commercial bank consumer loans
 (24% of the total) gained 6.8% y/y. Borrowing at credit unions (10% of the
 total) advanced 8.7% y/y and borrowing from savings institutions (1.0% of
 the total) increased 7.5% y/y.
 During the fourth quarter, student loan balances rose 8.3% y/y, down
 from nearly 15.0% growth in 2008. Motor vehicle loans outstanding
 increased 8.0% y/y, nearly a new high and up from the 7.5% rate of
 liquidation in 2009.
 Revolving credit outstanding gained $5.0 billion (1.9% y/y) in December.
 Commercial bank lending (73% of the total) declined 0.9% y/y while savings
 institution lending (8% of the total) jumped by 43.6% y/y. Finance company
 balances (8% of the total) declined 6.0% y/y while borrowing from credit
 unions (5% of the total) gained 10.5% y/y. Nonfinancial business accounts
 (3% of the total) continued to fall 19.5% y/y and securitized credit card
 balances (4% of the total) fell 1.9% y/y.
 These Federal Reserve Board figures are break-adjusted and calculated
 by Haver Analytics. There is a break in the credit outstanding data from
 November 2010 to December 2010 due to the Fed's benchmarking process.
 Benchmark estimates are based on the Census of Finance Companies (CFC) and
 the Survey of Finance Companies (SFC) conducted in 2010 and 2011,
 respectively. The consumer credit data are available in Haver's USECON
 database. The Action Economics figures are contained in the AS1REPNA
 database.
 &nbsp;
 <table class="centered" border="0" cellSpacing="0" width="979">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="494">Consumer Credit
 Outstanding (M/M Chg, SA)</th>
 <th scope="col" width="68">Dec</th>
 <th scope="col" width="68">Nov</th>
 <th scope="col" width="69">Oct</th>
 <th scope="col" width="69">Y/Y</th>
 <th scope="col" width="69">2013</th>
 <th scope="col" width="69">2012</th>
 <th scope="col" width="69">2011</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="494">Total</td>
 <td align="center" width="68">$18.8 bil.</td>
 <td align="center" width="68">$12.4 bil.</td>
 <td align="center" width="69">$17.8 bil.</td>
 <td align="center" width="69">6.2%</td>
 <td align="center" width="69">6.2%</td>
 <td align="center" width="69">6.1%</td>
 <td align="center" width="69">4.1%</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="494">&nbsp; &nbsp;Revolving</td>
 <td align="center" width="68">5.0</td>
 <td align="center" width="68">0.5</td>
 <td align="center" width="69">4.0</td>
 <td align="center" width="69">1.9</td>
 <td align="center" width="69">1.9</td>
 <td align="center" width="69">0.4</td>
 <td align="center" width="69">0.2</td>
 </tr>
 <tr>
 <td class="firstcol" width="494">&nbsp; &nbsp;Non-revolving</td>
 <td align="center" width="68">13.8</td>
 <td align="center" width="68">11.9</td>
 <td align="center" width="69">13.9</td>
 <td align="center" width="69">8.0</td>
 <td align="center" width="69">8.0</td>
 <td align="center" width="69">8.6</td>
 <td align="center" width="69">5.9</td>
 </tr>
 </tbody>
 </table>
 
 </div>
 </div>
</div>

<div id="footer" class="sprites">
 <ul>
 </ul>
</div>

</body>

</html>

The figures referenced above are available in Haver's USECON database. Additional detail can be found in the LABOR and in the EMPL databases. The expectation figures are from Action Economics and are in the AS1REPNA database.

U.S. Payroll Employment Growth Disappoints Again Though Jobless Rate Touches New Low

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 <a href="/comment/140207j_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140207j.png"></a>
 <a href="/comment/140207k_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140207k.png"></a>
 
 The Federal Reserve Board reported that consumer credit outstanding
 increased $18.8 billion (6.2% y/y) during December following a little
 revised $12.4 billion November gain. It was the largest monthly increase
 since February and left y/y growth at 6.2%, roughly equal to 2012.
 Expectations had been for a $12.9 billion increase according to the Action
 Economics survey.
 
 Usage of non-revolving credit increased $13.8 billion (8.0% y/y) in
 December. Federal government loans increased 18.4% y/y. These constitute
 roughly one-third of total non-revolving credit. Finance company lending
 (28% of the total) edged up 0.5% y/y and commercial bank consumer loans
 (24% of the total) gained 6.8% y/y. Borrowing at credit unions (10% of the
 total) advanced 8.7% y/y and borrowing from savings institutions (1.0% of
 the total) increased 7.5% y/y.
 
 During the fourth quarter, student loan balances rose 8.3% y/y, down
 from nearly 15.0% growth in 2008. Motor vehicle loans outstanding
 increased 8.0% y/y, nearly a new high and up from the 7.5% rate of
 liquidation in 2009.
 
 Revolving credit outstanding gained $5.0 billion (1.9% y/y) in December.
 Commercial bank lending (73% of the total) declined 0.9% y/y while savings
 institution lending (8% of the total) jumped by 43.6% y/y. Finance company
 balances (8% of the total) declined 6.0% y/y while borrowing from credit
 unions (5% of the total) gained 10.5% y/y. Nonfinancial business accounts
 (3% of the total) continued to fall 19.5% y/y and securitized credit card
 balances (4% of the total) fell 1.9% y/y.
 
 These Federal Reserve Board figures are break-adjusted and calculated
 by Haver Analytics. There is a break in the credit outstanding data from
 November 2010 to December 2010 due to the Fed's benchmarking process.
 Benchmark estimates are based on the Census of Finance Companies (CFC) and
 the Survey of Finance Companies (SFC) conducted in 2010 and 2011,
 respectively. The consumer credit data are available in Haver's USECON
 database. The Action Economics figures are contained in the AS1REPNA
 database.
 
 <table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >Consumer Credit
 Outstanding (M/M Chg, SA)</th>
 <th scope="col" >Dec</th>
 <th scope="col" >Nov</th>
 <th scope="col" >Oct</th>
 <th scope="col" >Y/Y</th>
 <th scope="col" >2013</th>
 <th scope="col" >2012</th>
 <th scope="col" >2011</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Total</td>
 <td >$18.8 bil.</td>
 <td >$12.4 bil.</td>
 <td >$17.8 bil.</td>
 <td >6.2%</td>
 <td >6.2%</td>
 <td >6.1%</td>
 <td >4.1%</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; &nbsp;Revolving</td>
 <td >5.0</td>
 <td >0.5</td>
 <td >4.0</td>
 <td >1.9</td>
 <td >1.9</td>
 <td >0.4</td>
 <td >0.2</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; &nbsp;Non-revolving</td>
 <td >13.8</td>
 <td >11.9</td>
 <td >13.9</td>
 <td >8.0</td>
 <td >8.0</td>
 <td >8.6</td>
 <td >5.9</td>
</tr>
 </tbody>
 </table>
 
</body></html>

The Federal Reserve Board reported that consumer credit outstanding increased $18.8 billion (6.2% y/y) during December following a little revised $12.4 billion November gain. It was the largest monthly increase since February and left [...]

U.S. Consumer Credit Growth Perks Up

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<body>
	 
 
 
 
 
 <a href="/comment/140207d_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140207d.png"></a>
 <a href="/comment/140207e_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140207e.png"></a>

 Nonfarm payrolls grew 113,000 (1.7% y/y) during January following gains
 of 75,000 and 274,000 during the prior two months, initially reported as
 74,000 and 241,000. The rise disappointed expectations for a 185,000
 increase. Earlier figures were revised. The unemployment rate fell to
 6.6%, the lowest level since October 2008, versus expectation for 6.7. The
 total jobless rate, including workers who were marginally attached and
 part-time for economic reasons, declined to 12.7%, the lowest level since
 November 2008.
 
 From the establishment survey, the 113,000 monthly increase in
 jobs was one of the smallest since 2010. On the firm side, factory sector
 payrolls gained 21,000 (0.8% y/y) and construction jobs rose 48,000 (3.1%
 y/y), both bouncing back from modest December readings. Offsetting this
 strength was a weak 66,000 increase (2.1% y/y) in private service sector
 jobs. Notable was the 12,900 decline (+2.1% y/y) in retail employment,
 though that followed an outsized 62,700 December gain. Education &amp;
 health services jobs posted a 6,000 decline (+1.5% y/y), the second
 consecutive down month. Financial activities employment fell 2,000 (+0.8
 y/y). It has been unchanged during the last six months. Also falling were
 government sector payrolls. The 29,000 worker shortfall (-0.2% y/y)
 reflected declines in each sector of government. To the upside, leisure
 &amp; hospitality employment rose 24,000 (3.1% y/y), though its trend
 growth has been slowing since the middle of last year. Professional &amp;
 business services employment advanced a modest 36,000 (3.6% y/y) after a
 negligible 4,000 December rise while transportation &amp; warehousing jobs
 grew 9,900 (1.8% y/y).
 
 The overall breadth of job growth improved slightly last month to a
 modest 61.2% of industries. During the last three months, jobs rose in
 66.1% of businesses. In the factory sector, a reduced 54.3% of industries
 added workers last month but a firm 64.8% have done so over the last three
 months.
 
 The length of the average workweek remained down from its expansion
 high at 34.4 hours. That reflected a lessened factory sector reading of
 40.2 hours, off from the expansion high of 40.6 hours reached in November.
 The private service producing workweek held at 33.2 hours, down from the
 March high of 33.4 hours.
 
 <a href="/comment/140207l_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140207l.png"></a>
 <a href="/comment/140207g_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140207g.png"></a>
 
 Average hourly earnings gained 0.2% (1.9% y/y) after no change in
 December. Over the last year, factory sector earnings have been the
 strongest across sectors, posting 2.5% wage growth. Private services
 followed with a 1.8% gain while construction sector wages grew 1.4%.
 
 From the household sector jobs report, the unemployment rate's
 decline to 6.6% reflected a 638,000 (1.3% y/y) rise in employment and a
 523,00 increase (-0.2 y/y) in the labor force. The rise in the labor force
 lifted slightly participation slightly as a percent of the population to
 63.0%. The labor force participation rate remained, however, at the lowest
 level since 1978. Potential workers who were not in the labor force grew
 by 2.8% y/y. The adult employment-to-population rate remained at 61.0%,
 down from its 2000 high of 65.3%. For adult men, it held at 68.0% and for
 women it was steady at 54.6%. The average duration of unemployment fell to
 35.4 weeks, a twelve month low. The ranks of the long-term unemployed (52
 weeks or more) fell roughly one quarter y/y.
 
 Education continued to pay off. The unemployment rate for those with
 less than a high school diploma remained high at 9.6% last month but
 employment rose 1.1% y/y. For high school graduates, joblessness was 6.5%
 with jobs flat y/y. Those with some college saw an unemployment rate of
 6.0% with a slight dip in jobs and college graduates were jobless at a
 3.2% rate with employment up 3.5% y/y.
 
 The figures referenced above are available in Haver's USECON
 database. Additional detail can be found in the LABOR and in the EMPL
 databases. The expectation figures are from Action Economics and are in
 the AS1REPNA database.
 
 <a href="/comment/140207h_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140207h.png"></a>
 <a href="/comment/140207i_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140207i.png"></a>
 
 <table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>
 
 <thead>
 <tr>
 <th class="firstcol" scope="col" >Employment: (M/M
 Chg., 000s)</th>
 <th scope="col" >Jan</th>
 <th scope="col" >Dec</th>
 <th scope="col" >Nov</th>
 <th scope="col" >Y/Y</th>
 <th scope="col" >2013</th>
 <th scope="col" >2012</th>
 <th scope="col" >2011</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Payroll Employment</td>
 <td >113</td>
 <td >75</td>
 <td >274</td>
 <td >1.7%</td>
 <td >1.7%</td>
 <td >1.7%</td>
 <td >1.2%</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Previous</td>
 <td >--</td>
 <td >74</td>
 <td >241</td>
 <td >--</td>
 <td >1.6</td>
 <td >1.7</td>
 <td >1.2</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Manufacturing</td>
 <td >21</td>
 <td >8</td>
 <td >35</td>
 <td >0.8</td>
 <td >0.7</td>
 <td >1.7</td>
 <td >1.7</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Construction</td>
 <td >48</td>
 <td >-22</td>
 <td >32</td>
 <td >3.1</td>
 <td >3.3</td>
 <td >2.1</td>
 <td >0.2</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Private Service Producing</td>
 <td >66</td>
 <td >102</td>
 <td >204</td>
 <td >2.1</td>
 <td >2.2</td>
 <td >2.2</td>
 <td >1.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Government</td>
 <td >-29</td>
 <td >-14</td>
 <td >2</td>
 <td >-0.2</td>
 <td >-0.3</td>
 <td >-0.8</td>
 <td >-1.8</td>
 </tr>
 <tr>
 <td class="firstcol" >Average Weekly Hours - Private
 Sector</td>
 <td >34.4</td>
 <td >34.4</td>
 <td >34.5</td>
 <td >34.4 
 (Jan'13)</td>
 <td >34.5</td>
 <td >34.4</td>
 <td >34.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Average Private Sector Hourly
 Earnings (%)</td>
 <td >0.2</td>
 <td >0.0</td>
 <td >0.2</td>
 <td >1.9</td>
 <td >2.1</td>
 <td >1.9</td>
 <td >2.0</td>
 </tr>
 <tr>
 <td class="firstcol" >Unemployment Rate (%)</td>
 <td >6.6</td>
 <td >6.7</td>
 <td >7.0</td>
 <td >7.9 
 (Jan'13)</td>
 <td >7.4</td>
 <td >8.1</td>
 <td >8.9</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

Nonfarm payrolls grew 113,000 (1.7% y/y) during January following gains of 75,000 and 274,000 during the prior two months, initially reported as 74,000 and 241,000. The rise disappointed expectations for a 185,000 increase. Earlier [...]

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<a href="/comment/140207c_big.png" name="modal"><img class="large" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140207c.png" align="left"></a>
Germany, already with the largest current account surplus in the world, has posted a barely smaller trade surplus in December compared to November. In December both exports and imports shrank, with exports falling a bit faster.

Year-over-year exports are weaker compared to their 12-month growth of one-year ago. On shorter horizons, from 12-months and in, exports have become erratically weaker. Import growth is weak over the last 12-months but is stronger than it had been 12-months ago. But the bottom line is that imports are still very weak and have barely accelerated over 12 months. On shorter horizons, import growth has been erratically weaker as well. Both 3-month and 6-month growth rates are below the 12-month rate of growth which itself is below 1%.

Exports of capital goods, motor vehicles and consumer goods are weaker over 12-months than over the previous 12-months. Within the last year these categories have erratic patterns and only consumer goods exports show stability and possibly strength. Capital goods exports do grow on all horizons. Domestically the trends seem to be just the opposite for those three categories. Capital goods are erratic but seem to be reviving. Motor vehicle sales are steady and strong with growth on all horizons. But consumer goods imports are getting progressively weaker instead of gaining strength. This is not the import pattern we had hoped to see for German consumer goods.

Stronger German imports would help to reduce the huge German trade surplus and world-beating current account surplus. Stronger imports would benefit Germany's trade partners, particularly the floundering countries in the euro area. But this is not what Germany is doing. 

The ratio of German exports to imports continues to rise. It has drooped only slightly month-to-month. At 125% exports are now 25% larger than imports compared to being about 21% larger one year ago. However, the growth rate of real export orders is slowing. None of these are trends that we would like to see or would choose if we were able to choose what was best for the European Monetary Union and for Germany. 

Recent German reports on industrial output (today) and on orders (yesterday) weakened. While Germany is supposed to be the dependable backbone of European growth, Germany has kept its economy steadily growing by tapping demand outside the country to keep German production hopping. At the end of the day, very little of this is creating any trickledown demand for products made in the rest of the EMU. Germany remains one of the paradoxes of the European Monetary System.



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Germany, already with the largest current account surplus in the world, has posted a barely smaller trade surplus in December compared to November. In December both exports and imports shrank, with exports falling a bit faster. Year- [...]

German Trade Surplus: Big Stays Big

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<html><head>
</head>
<body>
	 
 
 
 
 
 <a href="/comment/140207a_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140207a.png"></a>
 <a href="/comment/140207b_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140207b.png"></a>
 
 Nonfarm payrolls grew 113,000 (1.7% y/y) during January following gains
 of 75,000 and 274,000 during the prior two months, initially reported as
 74,000 and 241,000. The rise disappointed expectations for a 185,000
 increase. The unemployment rate fell to 6.6%, versus expectations for
 6.7%, the lowest level since October 2008. The total jobless rate,
 including workers who were marginally attached and part-time for economic
 reasons, declined to 12.7%, the lowest level since November 2008.
 
 The figures referenced above are available in Haver's USECON
 database. Additional detail can be found in the LABOR and in the EMPL
 databases. The expectation figures are from Action Economics and are in
 the AS1REPNA database.
 
 <table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>
 
 <thead>
 <tr>
 <th class="firstcol" scope="col" >Employment: (M/M
 Chg., 000s)</th>
 <th scope="col" >Jan</th>
 <th scope="col" >Dec</th>
 <th scope="col" >Nov</th>
 <th scope="col" >Y/Y</th>
 <th scope="col" >2013</th>
 <th scope="col" >2012</th>
 <th scope="col" >2011</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Payroll Employment</td>
 <td >113</td>
 <td >75</td>
 <td >274</td>
 <td >1.7%</td>
 <td >1.7%</td>
 <td >1.7%</td>
 <td >1.2%</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Previous</td>
 <td >--</td>
 <td >74</td>
 <td >241</td>
 <td >--</td>
 <td >1.6</td>
 <td >1.7</td>
 <td >1.2</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Manufacturing</td>
 <td >21</td>
 <td >8</td>
 <td >35</td>
 <td >0.8</td>
 <td >0.7</td>
 <td >1.7</td>
 <td >1.7</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Construction</td>
 <td >48</td>
 <td >-22</td>
 <td >32</td>
 <td >3.1</td>
 <td >3.3</td>
 <td >2.1</td>
 <td >0.2</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Private Service Producing</td>
 <td >66</td>
 <td >102</td>
 <td >204</td>
 <td >2.1</td>
 <td >2.2</td>
 <td >2.2</td>
 <td >1.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Government</td>
 <td >-29</td>
 <td >-14</td>
 <td >2</td>
 <td >-0.2</td>
 <td >-0.3</td>
 <td >-0.8</td>
 <td >-1.8</td>
 </tr>
 <tr>
 <td class="firstcol" >Average Weekly Hours - Private
 Sector</td>
 <td >34.4</td>
 <td >34.4</td>
 <td >34.5</td>
 <td >34.4 
 (Jan'13)</td>
 <td >34.5</td>
 <td >34.4</td>
 <td >34.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Average Private Sector Hourly
 Earnings (%)</td>
 <td >0.3</td>
 <td >0.1</td>
 <td >0.2</td>
 <td >2.2</td>
 <td >2.0</td>
 <td >1.5</td>
 <td >2.0</td>
 </tr>
 <tr>
 <td class="firstcol" >Unemployment Rate (%)</td>
 <td >6.6</td>
 <td >6.7</td>
 <td >7.0</td>
 <td >7.9 
 (Jan'13)</td>
 <td >7.4</td>
 <td >8.1</td>
 <td >8.9</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

Nonfarm payrolls grew 113,000 (1.7% y/y) during January following gains of 75,000 and 274,000 during the prior two months, initially reported as 74,000 and 241,000. The rise disappointed expectations for a 185,000 increase. The [...]

U.S. Payroll Employment Growth Disappoints Again Though Jobless Rate At New Low

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Market-based inflation expectations have not yet reflected recent surge in oil prices

Global equity markets are fearing a major economic disruption from soaring oil prices

Is recent drop in sentiment signaling softer growth ahead?

With the Iran conflict, geopolitical risk has soared to alarming levels

Soaring AI-related investment in US underpinning strong contribution of business spending to overall growth

AI-related outperformance of IP in Advanced Asia ex Japan

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US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

Global freight costs are on the rise while supply chain pressures are contained

Accelerating positive economic surprises in the G10 are boosting the global economy

Considerably more monetary ease expected from US and UK as Japan tightens

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

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Sandy Batten

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This monthly report contains a wealth of information concerning the state of the consumer. The anticipation ahead of today’s report centered on how much the surge in energy prices since the escalation of the US-Iran conflict in early March would push up overall PCE inflation. Prices of energy goods and services jumped 11.6% m/m not annualized in March. This was the largest monthly increase since September 2005. As a result, the headline PCE price index increased 0.7% m/m (3.5% y/y versus 2.8% y/y in February), the largest monthly gain since July 2022 but in line with expectations of the Action Economics Forecast Survey.

The core index (that is, excluding food and energy prices) rose by a more modest 0.3% m/m in March, down from a 0.4% monthly increase in February and in line with expectations. However, the yearly rate rose further to 3.2% y/y in March from 3.0% in February, well above and moving away from the Fed’s 2% target. The FOMC left its fed funds rate target unchanged at yesterday’s meeting, but some committee members dissented, opposing the implied easing bias contained in the statement. Chair Powell, in his press conference, noted that a number of members have become more concerned over the inflation outlook and the possible need for a Fed response.

Nominal personal income posted a solid 0.6% m/m (3.7% y/y) increase in March following an upwardly revised unchanged reading in February (previously -0.1% m/m). The March increase was twice the 0.3% monthly gain expected by the Action Economics Forecast Survey. However, after adjusting for inflation, real personal income slipped 0.1% m/m in March on top of a 0.4% m/m decline in February.

Employee compensation continued to be a major driver of personal income in March. It rose 0.4% m/m (4.1% y/y) in March after a 0.2% monthly increase in February. In March, proprietors’ income jumped 2.8%. This outsized increase reflected payments to farmers from the federal government’s Farmer Bridge Assistance Program. Rental income rose a solid 0.7% m/m, the same gain as in February. Income from financial assets increased 0.4% m/m following a 0.9% m/m decline in February. Personal current transfer payments edged up 0.1% m/m versus a 0.3% m/m decline in February.

Nominal consumption expenditures jumped 0.9% m/m (5.7% y/y) in March following an upwardly revised 0.6% monthly gain in February (previously +0.5% m/m). Spending on goods rose 2.0% m/m (4.5% y/y) while spending on services increased 0.4% m/m (6.3% y/y). As for overall inflation, the surge in energy prices also accounted for a large portion of the March gain in nominal spending. After adjusting for overall inflation, real PCE rose a more modest 0.2% m/m following an upwardly revised 0.3% m/m increase in February (previously +0.1% m/m). Still, the solid gains in February and March provide a strong starting point for Q2. The March level is 1.5% at an annual rate above the Q1 average. For all of Q1, real PCE rose 1.6% q/q saar.

The personal income and consumption figures are available in Haver’s **USECON** database with detail in the **USNA** database. The Action Economics forecasts are in **AS1REPNA**.

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- The PCE price index jumped 0.7%, reflecting an 11.6% m/m surge in energy prices.
- The core index was up 0.3%, in line with expectations but still well above the Fed’s target.
- Personal income increased 0.6% m/m, led by a 0.4% m/m rise in compensation.
- Personal consumption jumped 0.9% m/m with a slight upward revision to February.
- However, much of the March gain in nominal consumption also reflected the jump in energy prices.
- Real consumption rose by a more modest 0.2% m/m.

Surging Energy Prices Push Up PCE Prices and Consumption in March

Michael J. Moran

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Real GDP grew at an annual rate of 2.0% in the first quarter of 2026, almost identical to the expected advance of 2.1%. The latest change was comfortably within the range of recent observations and close to the economy’s potential rate of growth. The year-over-year change totaled 2.7%, but that shift reflected what might be viewed as a special factor (robust growth in the second and third quarters that offset a trade-tariff-induced drop in 2025-Q1 GDP).

Business fixed investment was the star of the show in the first quarter, registering growth of 10.4%. Outlays for information processing equipment and software were especially strong, while outlays for industrial equipment and Research & Development contributed positively as well. Outlays for structures remained decidedly soft, dropping for the ninth consecutive quarter. Building of data centers have been vigorous, but softness in offices and manufacturing facilities has dwarfed the strength in this new area.

Federal spending surged 9.4% in Q1, but the rise reflected the reopening of most federal agencies after their closure during much of the fourth quarter. Excluding this noise, support from the federal government has been softening. Nondefense outlays peaked in the fourth quarter of 2024, and they were 6.9% shy of that total in the first quarter. Defense spending also peaked in 2024-Q4 and has eased 2.4% since then. Defense spending most likely will grow in coming quarters because of the efforts in the Middle East. Orders for defense goods have already started to rise.

Consumer spending rose 1.5% in the first quarter, a bit shy of the 2.1% pace over the four quarters of last year and less than half the rates in 2023 and 2024. Consumer spending showed signs of softening in late 2025 and January of this year, but activity picked up in February and March. Firm tax refunds might have provided a boost to household spending in the latest months. Some of the tax cuts from the One Big Beautiful Bill were applied retroactively to 2025, but withholding schedules were not adjusted last year. Thus, many households are receiving larger-than-normal tax refunds.

International trade acted as a drag on economic growth in Q1, with net exports subtracting 1.3 percentage points from the GDP increase. Exports did well in the first quarter with growth of 12.9%, but imports were even stronger with a jump of 21.4%. The real trade deficit of $1.1 trillion was noticeably smaller than the shortfall of $1.4 trillion in 2025-Q1 when importers were rushing to get goods into the US before the imposition of tariffs. Still, the trade shortfall was sizeable and its effect on growth noticeable.

The GDP data can be found in Haver’s **USECON** and **USNA** databases. **USNA** contains virtually all of the Bureau of Economic Analysis detail in the national accounts. The Action Economics consensus estimates can be found in **AS1REPNA**.

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- Robust business investment led the advance; moderate support from consumers.
- Government spending jumped with the reopening of most federal agencies.
- The trade sector remained volatile, making a sizeable negative contribution in Q1.

Q1 GDP: Weathering the Challenges; Trend-Like Growth

Andrew Cates

**Front-End Yields Reflect Policy Reassessment**
Against a backdrop of key central bank meetings either having just taken place or imminent, short-dated government bond yields have moved decisively higher across most major economies since the escalation of the Middle East conflict, with the sharpest increase seen in the UK. The rise in 2-year yields reflects a repricing of near-term monetary policy expectations, as markets respond to the inflationary implications of higher energy prices and the growing likelihood that central banks will delay easing cycles. Moves have been most pronounced in economies where inflation is expected to be more persistent—most notably the UK—while increases have been more modest in the US and particularly Japan, where policy normalisation remains gradual. In effect, the front end of the curve is signalling a shift away from the “rate cuts soon” narrative that prevailed earlier in the year toward a more cautious, higher-for-longer policy outlook.

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**US Recession Risks Remain Contained—For Now**
Despite the recent deterioration in the macro backdrop, real-time recession risk indicators for the US remain relatively subdued. This is notable given the combination of softer growth momentum, higher bond yields and heightened geopolitical risk. The nowcast—derived from a blend of high-frequency activity data and financial stress measures—has historically tended to move sharply when conditions turn, rather than drift higher gradually. That asymmetry is important in the current environment. While recession risks are not yet flashing red, past cycles suggest they can reprice abruptly, and arguably at present if energy-driven inflation were to feed much more forcefully into financial conditions or begin to weigh more materially on demand.

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**Consumer Confidence Diverges: Europe and UK Slide, US Stabilises**
Consumer confidence has weakened across the major economies, but the deterioration has been more pronounced in the euro area and the UK than in the US. While sentiment in the US has recently edged up, it remains at relatively subdued levels. By contrast, confidence in Europe and the UK has fallen more sharply, reflecting greater exposure to higher energy costs and a more direct squeeze on real household incomes. This divergence is consistent with broader macro trends, suggesting that demand in Europe may prove more sensitive to the current shock, with weaker sentiment feeding more quickly into consumption.

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**Euro area Credit Conditions Turn More Restrictive**
The latest ECB lending survey points to a clear tightening in credit conditions across the euro area, with banks raising lending standards for both firms and households while loan demand weakens. This combination—more restrictive supply alongside softer demand—is typically associated with a cooling in activity, particularly in interest-sensitive sectors. Recent evidence suggests that higher perceived risks, rising funding costs and geopolitical uncertainty are all weighing on banks’ willingness to lend, while weaker confidence and reduced investment appetite are dampening borrowing needs. The result is a tightening in financial conditions that is likely to amplify the broader slowdown already evident in survey data, reinforcing the more fragile growth dynamics now emerging across the region.

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**An Intensifying AI Boom with Supply-Side Undercurrents**
Against the backdrop of surging AI-related investment, semiconductor prices are not just high—they are rising at an increasingly rapid pace. This chart shows a clear acceleration in both prices and export values, pointing to an intensifying boom in global chip demand. While this is in part a reflection of strong, structural demand, supply-side factors may also be playing a growing role. Although the Middle East is not a direct source of key chip-making minerals, it is central to the energy and petrochemical inputs that underpin semiconductor production. Ongoing geopolitical tensions are therefore likely feeding into higher costs and renewed frictions across supply chains. The combination of accelerating demand and tightening supply conditions suggests that semiconductor inflation could prove more persistent—and more globally consequential—than currently assumed.

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**Labour Markets Reflect the AI Acceleration**
Our final chart this week highlights the extent to which the current AI boom is now feeding through into labour markets. This high-frequency indicator—based on the share of job listings containing AI-related keywords—shows a sharp and sustained increase since the widespread adoption of generative AI tools in late 2022. What began as a more traditional build-out in machine learning roles has evolved into a broader and more intense wave of hiring tied to generative AI capabilities, with demand accelerating markedly across multiple economies. The scale and persistence of this trend point to a structural shift rather than a cyclical upswing, reinforcing the view that AI is becoming an increasingly important driver of investment, productivity expectations and, potentially, broader macroeconomic dynamics.

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Against a backdrop of persistent geopolitical tensions, firmer energy prices and a busy week of central bank meetings—including the Fed, ECB, BoE and BoJ—financial markets have remained notably resilient, even as the macro narrative has softened at the margin. The message from this week’s charts is one of growing tension beneath that surface calm. Front-end bond yields have moved higher, signalling a shift toward a more cautious, “higher-for-longer” policy outlook (chart 1). At the same time, real-time recession indicators for the United States suggest risks remain contained for now (chart 2). Consumer confidence data paint a more uneven picture, with sharper declines in the euro area and UK than in the US, highlighting regional vulnerabilities to the current energy shock (chart 3). The ECB’s latest bank lending survey reinforces this, pointing to tighter credit conditions and weaker demand—factors that are likely to weigh further on European growth (chart 4). By contrast, developments in the semiconductor sector underline a different dynamic: an intensifying global boom, with accelerating price pressures reflecting both strong AI-driven demand and emerging supply-side constraints linked indirectly to energy and logistics disruptions (chart 5). Finally, labour market data confirm that the AI surge is not merely a market narrative but a tangible structural shift, with hiring for AI-related roles accelerating across economies (chart 6). Taken together, these signals point to a more complex macro environment—one in which resilient markets coexist with softening growth, more persistent inflation risks and increasingly delicate policy trade-offs.

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Charts of the Week: Tension Beneath the Surface

Kathleen Stephansen, CBE

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Initial claims for unemployment insurance dropped by 26,000 to 189,000 in the week ending April 25, from 215,000 in the week ending April 18, revised from 214,000. The four-week average declined by 3,500 to 207,500 in the week ending April 25, from 211,000 the April 18 week, revised from 210,750. The Action Economics/Haver Analytics Survey looked for 214,000 claims to have been filed.

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—dropped by 23,000 to 1.785 million in the week ending April 18, from 1.808 million in the week ending April 11, revised from 1.821 million. The four-week moving average declined to 1.797 million in the latest week from 1.809 million in the April 11 week. The insured unemployment rate remained at 1.2% in the week of April 11. It has remained at that level since the week of November 29, 2025.

The insured unemployment rate varied greatly across individual states and territories. In the week ending April 11, the highest unemployment rates were in New Jersey (2.51%), Washington (2.25%), Massachusetts (2.21%), Rhode Island (2.10%), and California (2.06%). The lowest rates were in Florida (0.31%), Louisiana (0.32%), Arkansas, North Carolina and Mississippi (all 0.35%), Alabama (0.36%), South Dakota (0.41%) and Tennessee (0.43%). Rates in other notable states include New York (1.96%), Illinois (1.77%), Pennsylvania (1.40%), and Texas (1.04%). 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.

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- New claims dropped by 26,000 to 189,000.
- Continuing claims declined by 23,000 to 1.785 million.
- The insured unemployment rate remained at 1.2%.

U.S. Initial Unemployment Claims dropped in the Week of April 25

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Housing starts and permits data were released for both February and March today. Release of these data has been delayed by the federal government shutdown in October 2025. Total starts fell 3.0% m/m in February to 1.356 million units from a downwardly revised 1.398 million in January (previously 1.487 million) but then rebounded to 1.502 million (+10.8% m/m) in March. The March level was the highest since December 2024 and 10.8% higher than a year earlier. The Action Economics Forecast Survey expected a 5.9% decline in March from January to a level of 1.4 million units. The 7.2% q/q increase in starts in Q1 is the first quarterly increase since Q1 2025. Residential investment has been a drag on overall GDP growth over the past year. The sharp Q1 increase raises hope that residential investment could make a small contribution to Q1 GDP growth in tomorrow’s report.

Single-family starts rose 4.8% m/m in February and 9.7% m/m in March to be 8.9% higher than a year ago. Multi-family starts plunged 17.0% m/m in February following an 18.2% monthly surge in January. They rebounded in March, rising 13.2% m/m to be up 15.5% y/y. The strong performance of starts in March following weakness earlier this year most likely reflects some catch-up as building conditions improved in March after having been very challenging in January and February.

Across the four major geographic regions, starts in the Northeast increased 24.8% m/m in March but fell 21.2% m/m in February. They were up 18.9% y/y. In the Midwest, starts increased 12.2% m/m in Mach on top of a 20.9% monthly gain in February. The March figure was down 0.9% from a year ago. In the South, starts rose 9.1% m/m in March but fell 3.6% m/m in February. In March they were up 14.1% from a year ago. In the West, starts rose 7.2% m/m in March after monthly declines of 7.7% in January and 3.7% in February. Compared with a year ago, they were up 8.0%.

The performance of building permits in February and March mirrored that of starts. Total permits rose 11.0% m/m in February but fell 10.8% m/m in March to be down 7.4% from a year ago. Single-family permits rose 6.2% m/m in February and then fell 3.8% m/m in March. They were 7.9% lower than a year ago. Multi-family permits rebounded 19.2% m/m in February after an 11.1% m/m fall in January. In March, they plunged 21.5% m/m and were down 6.3% from a year earlier.

In March, permits fell in each of the four major regions. In the Northeast, permits plunged 29.0% m/m in March following a 5.9% monthly gain in February. In the Midwest, permits declined 3.1% m/m in February and another 2.3% m/m in March. In the South, permits slumped 7.7% m/m in March but this following a 11.8% monthly jump in February. The March decline was the third in the past four months. In the West, permits fell 14.2% m/m in March following a 21.8% monthly surge in February and a 13.8% m/m slump in January.

The housing starts and permits figures can be found in Haver’s **USECON** database. The expectations figure is contained in the **AS1REPNA** database.

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- Data for both February and March were included in today’s report to catch up from delays due to the federal government shutdown last October.
- Starts fell 3.0% m/m in February but rebounded 10.8% m/m in March.
- The 7.2% q/q increase in Q1 was the largest quarterly gain since the economy reopened after the pandemic shutdown in 2020.
- In contrast, permits jumped 11.0% m/m in February but fell 10.8% m/m in March and were up only 1.0% q/q in Q1.

Economy in Brief

Jump to:

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