Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050301e.jpg" width="353">
Today&#39;s releases of data on production, sales, employment and survey results for Japan have failed to clear the cloudy outlook.
Industrial production for manufacturing increased 2% in January from December, but the Ministry of Economy, Trade and Industry (METI)&#39;s survey forecast a decline of 0.5% for Februaryand one of 1.0% for March. Although the forecasts (found in the Industrial Production Section of Haver&#39;s Japan data base) tend to overestimate the magnitudes of the changes, they do a good job in predicting the direction of the change, as can be seen in the first chart.
Retail sales were up 5.71% in January over December and 1.66% above January of a year ago. The magnitude of the January increase may merely be a bounce back from the depressed sales at the end of 2004, due, in part to the negative effect of unusual weather conditions--earthquakes and the tsunami--on sales in the latter part of 2004. The unemployment rate held steady at 4.5% in January and employment increased 0.74%. The Household Survey conducted by the Ministry of Internal Affairs and Communication shows a sharp rise of 11.52% in disposable income of worker households in January, but again this appears to be bounce back from the sharp decline in December. A similar, but more muted trend is shown in Living Expenditures of these households.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050301d.jpg" width="353">
The Shoko Chukin Small/Medium Firm Survey indicates that these firms were expecting some improvement in business conditions in February and March, but were forecasting a decline in sales, the first decline since December 2002.The mixed message of these data is shown in chart two.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Jan 05 M/M %</th>
<th scope="col">Dec&nbsp;04 M/M %</th>
<th scope="col">Nov 04 M/M %</th>
<th scope="col">Oct 04 M/M %</th>
<th scope="col">Y/Y %</th>
<th scope="col">&nbsp;2004&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2003</th>
<th scope="col">&nbsp; 2002&nbsp; &nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Industrial Production Mfg (2000=100)</td>
<td>2.10</td>
<td>-0.79</td>
<td>1.72</td>
<td>-1.29</td>
<td>1.09</td>
<td>100.1</td>
<td>95.1</td>
<td>92.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail Sales&nbsp; (2000=100)</td>
<td>5.71</td>
<td>-0.76</td>
<td>-0.46</td>
<td>0.33</td>
<td>2.23</td>
<td>91.7</td>
<td>92.5</td>
<td>94.1</td>
</tr>
<tr>
<td class="firstcol">Employment</td>
<td>0.74</td>
<td>0.27</td>
<td>-0.33</td>
<td>-0.24</td>
<td>0.65</td>
<td>6.3 mil</td>
<td>6.3</td>
<td>6.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>4.5</td>
<td>4.5</td>
<td>4.6</td>
<td>4.6</td>
<td>-0.5</td>
<td>4.7</td>
<td>5.2</td>
<td>5.4</td>
</tr>
<tr>
<td class="firstcol">Household Survey</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Disposable Income</td>
<td>11.52</td>
<td>-9.21</td>
<td>0.53</td>
<td>-1.45</td>
<td>0.73</td>
<td>94.6</td>
<td>93.3</td>
<td>95.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Living Expenditures</td>
<td>7.70</td>
<td>-2.40</td>
<td>0.42</td>
<td>0.21</td>
<td>2.55</td>
<td>97.1</td>
<td>95.6</td>
<td>97.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Small/Medium Firm Survey</td>
<td>Mar 05</td>
<td>Feb 05</td>
<td>Jan 05</td>
<td>Dec 04</td>
<td>&nbsp;2004&nbsp;&nbsp;</td>
<td>&nbsp;2003</td>
<td>&nbsp; 2002&nbsp; &nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Business Conditions Per cent Better-Worse</td>
<td>50.2</td>
<td>47.6</td>
<td>47.3</td>
<td>48.4</td>
<td>49.6</td>
<td>46.4</td>
<td>43.5</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Sales Y/Y %</td>
<td>-3.4</td>
<td>2.8</td>
<td>2.1</td>
<td>2.8</td>
<td>n.a.</td>
<td>n.a.</td>
<td>n.a.</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Industrial Production Forecast</td>
<td>-1.0</td>
<td>-0.5</td>
<td>2.8</td>
<td>-0.9</td>
<td>1.5%</td>
<td>1.6%</td>
<td>1.8%</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body>
</html>

Today's releases of data on production, sales, employment and survey results for Japan have failed to clear the cloudy outlook. Industrial production for manufacturing increased 2% in January from December, but the Ministry of [...]

Japanese Economic Outlook Still Cloudy--Much New Data Notwithstanding

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050301a.jpg" width="353">
Chain store sales jumped 1.5% last week according to the International Council of Shopping Centers (ICSC)-UBS survey.
The strong end to February pulled the month&#39;s average 1.0% ahead of January and last week&#39;s sales were 3.8% above four weeks earlier.
During the last ten years there has been a 59% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline, as published by the US Census Department.
The leading indicator of chain store sales from ICSC, down 0.6% (-0.2% y/y), fell for the second consecutive week. The indicator&#39;s February average nevertheless remained above January.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">02/26/05</th>
<th scope="col">02/19/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>452.5</td>
<td>445.6</td>
<td>3.3%</td>
<td>4.6%</td>
<td>2.9%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
</body>
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Chain store sales jumped 1.5% last week according to the International Council of Shopping Centers (ICSC)-UBS survey. The strong end to February pulled the month's average 1.0% ahead of January and last week's sales were 3.8% above [...]

Chain Store Sales Jumped Last Week

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050301c.jpg" width="353">
The total value of construction put in place rose another 0.7% in January. Revised figures indicate consistent gains throughout 2004. Consensus expectations had been for a 0.4% rise for January.
Private residential building activity rose 0.7% after an upwardly revised 1.2% rise in December. New single family building added 0.9% (11.8% y/y) to the 1.0% December gain.
Nonresidential building jumped 1.2% but the prior month&#39;s gain was lessened. The gain was led by large m/m increases in shopping centers (+40.5% y/y) and malls (+4.8% y/y).
Public construction rose 0.8%. Spending on residential projects rose 2.6% (17.3% y/y) and highways &amp; streets, nearly one third of the value of public construction spending, rose 4.4% (15.7% y/y).
These more detailed categories represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for Automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E907/@E90701/@E90701.HTM">Construction Put-in-place</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.7%</td>
<td>1.2%</td>
<td>10.6%</td>
<td>8.9%</td>
<td>5.1%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>0.6%</td>
<td>1.2%</td>
<td>11.3%</td>
<td>10.7%</td>
<td>6.0%</td>
<td>-0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>0.4%</td>
<td>1.5%</td>
<td>11.8%</td>
<td>13.8%</td>
<td>13.1%</td>
<td>8.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>1.2%</td>
<td>0.3%</td>
<td>10.1%</td>
<td>3.7%</td>
<td>-7.1%</td>
<td>-12.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>0.8%</td>
<td>1.5%</td>
<td>8.5%</td>
<td>3.4%</td>
<td>2.6%</td>
<td>7.0%</td>
</tr>
</tbody>
</table>
</body>
</html>

The total value of construction put in place rose another 0.7% in January. Revised figures indicate consistent gains throughout 2004. Consensus expectations had been for a 0.4% rise for January. Private residential building activity [...]

U.S. Construction Spending Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050301b.jpg" width="353">
The Composite Index of activity in the manufacturing sector reported by the Institute of Supply Management slipped again in February to 55.3. The index has fallen during six of the last seven months. Consensus expectation had been for an increase to 57.0.
During the last twenty years there has been a 69% correlation between the level of the Composite Index and the three month growth in factory sector industrial production.
The new orders component slipped modestly following the sharp January decline to 55.8. The separate index of export orders rose 0.5 points, but the prior month&#39;s gain was reversed. The production index reversed all of the prior month&#39;s 1.1 point gain and the inventories index cratered 4.2 points to 48.6, the lowest level since last May.
The employment index slipped 0.7 points to 57.4 after the 4.8 point rise in January. During the last twenty years there has been a 69% correlation between the level of the ISM Employment Index and the three month growth in factory sector employment.
The prices paid index fell for the fourth straight month, off 3.5 points to 65.6 and down twenty two points from the high last April.
Is there evidence of the new economy in the U.S. GDP data? from the Federal Reserve Bank of Chicago can be found <a href="http://www.chicagofed.org/publications/economicperspectives/ep_1qtr2005_part2_kouparitsas.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF02/@EF02.HTM">ISM Manufacturing Survey</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Feb &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Index</td>
<td>55.3</td>
<td>56.4</td>
<td>62.8</td>
<td>60.5</td>
<td>53.3</td>
<td>52.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>56.5</td>
<td>62.6</td>
<td>69.2</td>
<td>&nbsp;63.5</td>
<td>57.9</td>
<td>56.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>69.0</td>
<td>72.0</td>
<td>75.5</td>
<td>79.8</td>
<td>59.6</td>
<td>57.6</td>
</tr>
</tbody>
</table>
</body>
</html>

The Composite Index of activity in the manufacturing sector reported by the Institute of Supply Management slipped again in February to 55.3. The index has fallen during six of the last seven months. Consensus expectation had been for [...]

ISM Factory Index Slipped Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050301b.jpg" width="353">
The Composite Index of activity in the manufacturing sector reported by the Institute of Supply Management slipped again in February to 55.3. The index has fallen during six of the last seven months. Consensus expectation had been for an increase to 57.0.
During the last twenty years there has been a 69% correlation between the level of the Composite Index and the three month growth in factory sector industrial production.
The new orders component slipped modestly following the sharp January decline to 55.8. The separate index of export orders rose 0.5 points, but the prior month&#39;s gain was reversed. The production index reversed all of the prior month&#39;s 1.1 point gain and the inventories index cratered 4.2 points to 48.6, the lowest level since last May.
The employment index slipped 0.7 points to 57.4 after the 4.8 point rise in January. During the last twenty years there has been a 69% correlation between the level of the ISM Employment Index and the three month growth in factory sector employment.
The prices paid index fell for the fourth straight month, off 3.5 points to 65.6 and down twenty two points from the high last April.
Is there evidence of the new economy in the U.S. GDP data? from the Federal Reserve Bank of Chicago can be found <a href="http://www.chicagofed.org/publications/economicperspectives/ep_1qtr2005_part2_kouparitsas.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF02/@EF02.HTM">ISM Manufacturing Survey</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Feb &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Index</td>
<td>55.3</td>
<td>56.4</td>
<td>62.8</td>
<td>60.5</td>
<td>53.3</td>
<td>52.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>56.5</td>
<td>62.6</td>
<td>69.2</td>
<td>&nbsp;63.5</td>
<td>57.9</td>
<td>56.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>69.0</td>
<td>72.0</td>
<td>75.5</td>
<td>79.8</td>
<td>59.6</td>
<td>57.6</td>
</tr>
</tbody>
</table>
U.S. Construction Spending Up  
by <a href="/comment/Moeller.html">Tom Moeller</a> March 1, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050301c.jpg" width="353">
The total value of construction put in place rose another 0.7% in January. Revised figures indicate consistent gains throughout 2004. Consensus expectations had been for a 0.4% rise for January.
Private residential building activity rose 0.7% after an upwardly revised 1.2% rise in December. New single family building added 0.9% (11.8% y/y) to the 1.0% December gain.
Nonresidential building jumped 1.2% but the prior month&#39;s gain was lessened. The gain was led by large m/m increases in shopping centers (+40.5% y/y) and malls (+4.8% y/y).
Public construction rose 0.8%. Spending on residential projects rose 2.6% (17.3% y/y) and highways &amp; streets, nearly one third of the value of public construction spending, rose 4.4% (15.7% y/y).
These more detailed categories represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for Automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E907/@E90701/@E90701.HTM">Construction Put-in-place</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.7%</td>
<td>1.2%</td>
<td>10.6%</td>
<td>8.9%</td>
<td>5.1%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>0.6%</td>
<td>1.2%</td>
<td>11.3%</td>
<td>10.7%</td>
<td>6.0%</td>
<td>-0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>0.4%</td>
<td>1.5%</td>
<td>11.8%</td>
<td>13.8%</td>
<td>13.1%</td>
<td>8.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>1.2%</td>
<td>0.3%</td>
<td>10.1%</td>
<td>3.7%</td>
<td>-7.1%</td>
<td>-12.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>0.8%</td>
<td>1.5%</td>
<td>8.5%</td>
<td>3.4%</td>
<td>2.6%</td>
<td>7.0%</td>
</tr>
</tbody>
</table>
Chain Store Sales Jumped Last Week 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 1, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050301a.jpg" width="353">
Chain store sales jumped 1.5% last week according to the International Council of Shopping Centers (ICSC)-UBS survey.
The strong end to February pulled the month&#39;s average 1.0% ahead of January and last week&#39;s sales were 3.8% above four weeks earlier.
During the last ten years there has been a 59% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline, as published by the US Census Department.
The leading indicator of chain store sales from ICSC, down 0.6% (-0.2% y/y), fell for the second consecutive week. The indicator&#39;s February average nevertheless remained above January.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">02/26/05</th>
<th scope="col">02/19/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>452.5</td>
<td>445.6</td>
<td>3.3%</td>
<td>4.6%</td>
<td>2.9%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
</body>
</html>

Even with expected tariff-induced increases in inflation, BCFF forecasters look for a more aggressive round of monetary easing

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

Only modest evidence of AI-related surge in US productivity growth

Previous Trump tariffs fading. A boost from new tariffs ahead?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

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

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

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

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

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

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

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

FIBER: Industrial Commodity Price Movement Diverges in Latest Four Weeks

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

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

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

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

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

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

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

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

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

U.S. Wholesale Inventories & Sales Increase in March

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

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

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

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

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

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

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

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

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

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

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

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

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

U.S. Housing Affordability Improves Slightly in March

Carol Stone, CBE

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

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

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

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

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

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

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

Economy in Brief: March 2005

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Japanese Economic Outlook Still Cloudy--Much New Data Notwithstanding

Chain Store Sales Jumped Last Week

U.S. Construction Spending Up

ISM Factory Index Slipped Again

ISM Factory Index Slipped Again