Tom Moeller

Factory inventories rose 0.5% in February, down from the 1.3% surge during January. Despite the lesser rate of monthly gain, the three month growth in inventories jumped to 11.3% (AR) which was near its strongest since early 2005. [...]

U.S. Factory Inventory Rise Continued Firm

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401j.jpg" align="left" border="0" height="265" width="353">
While German unemployment fell more than expected in March
there has been no relief to German retailers or by association
consumers. The growth rate series in the chart is remarkable for its
tranquility. German real retail sales are simply flat after some
turbulence early in 2007 stemming from the VAT tax that shifted sales
into 2007 then sucked them out of 2008. Sales
are settling down into a very narrow growth band in late 2007 and 2008.
Even though Germany continues to post acceptable rates of growth, the
consumer has long been forecast as a force to join in to extend the
expansion but he simply has not. Indeed, real retail sales ex-auto
sales (see table, at the bottom) fell sharply in February. Sales by
this measure at the two-month mark in the new quarter are declining at
a 1.3% annual rate. Real ex auto sales would have to rise by 1.6% in
March to &#8216;elevate&#8217; the quarter&#8217;s sales pace to zero.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="9" scope="col">German Real and Nominal Retail Sales </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Nominal</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>3-MO</td>
<td>6-MO</td>
<td>12-MO</td>
<td>YrAGo</td>
<td>QTR, SAAR</td>
</tr>
<tr>
<td class="firstcol">Retaill Ex auto</td>
<td>-0.7%</td>
<td>1.6%</td>
<td>-0.6%</td>
<td>1.2%</td>
<td>-0.6%</td>
<td>-0.5%</td>
<td>-0.4%</td>
<td>3.4%</td>
</tr>
<tr>
<td class="firstcol">Motor Vehicle and Parts</td>
<td>#N/A</td>
<td>-3.8%</td>
<td>2.9%</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>-4.7%</td>
<td>#N/A</td>
</tr>
<tr>
<td class="firstcol">Food, Beverages &amp;
Tobacco</td>
<td>-2.2%</td>
<td>2.1%</td>
<td>-2.3%</td>
<td>-9.1%</td>
<td>-4.5%</td>
<td>-3.9%</td>
<td>-0.3%</td>
<td>-5.1%</td>
</tr>
<tr>
<td class="firstcol">Clothing footwear</td>
<td>2.5%</td>
<td>1.6%</td>
<td>0.8%</td>
<td>21.6%</td>
<td>4.4%</td>
<td>4.0%</td>
<td>3.6%</td>
<td>16.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Real</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">Retail Ex auto</td>
<td>-1.6%</td>
<td>0.9%</td>
<td>-0.1%</td>
<td>-3.2%</td>
<td>-5.0%</td>
<td>-3.2%</td>
<td>-0.9%</td>
<td>-1.3%</td>
</tr>
</tbody>
</table>
</body></html>

While German unemployment fell more than expected in March there has been no relief to German retailers or by association consumers. The growth rate series in the chart is remarkable for its tranquility. German real retail sales are [...]

European Economic Data Hits Blow Hot and Cold: This Time Cold: German Retail Sales

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401g.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401h.jpg" border="0" height="265" width="312">
The Bank of Japan's Tankan Survey released today shows growing
concerns among large manufacturers and non manufacturers, as can be
seen in the first and second charts. The excess of optimists over
pessimists among large manufacturers appraising current conditions
declined to 11% from 19% in December. A slightly smaller decline was
registered for non manufacturers--12% from 16%. In looking to the
second quarter, the excess of optimists over pessimists among large
manufacturers dropped to 7%. For non manufacturers, the excess of
optimists dropped to 13%. One of the factors influencing the
manufacturers, in particular, has been the steep rise in the yen over
the past nine months, can be seen in the third chart.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401i.jpg" align="right" border="0" height="265" width="312">
Among the most closely watched items in the Tankan survey are
the forecasts of capital spending.In the current survey, manufacturers
plan to increase capital spending in the current fiscal year ending
last month, March, 2008 by 9.5% and non manufacturers by 5.2%. For next
fiscal year ending March 2009, however, both large manufacturers and
non manufacturers are planning to cut capital spending, the
manufacturers by 3.3% and the non manufacturers by 0.6%, as can be seen
in the fourth and fifth charts.
Much more detail from the Tankan can be found in the Haver
Database, JAPAN. Data are available for medium and
small enterprises and for specific industries as well as sales and
profit expectations.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401j.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401k.jpg" border="0" height="265" width="312">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">JAPAN:&nbsp;
TANKAN SURVEY&nbsp;</th>
<th scope="col">Q2 08</th>
<th scope="col">Q1 08&nbsp;</th>
<th scope="col">Q4 07&nbsp;</th>
<th scope="col">Q3 07&nbsp;</th>
<th scope="col">Q2 07&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="9" class="firstcol">Actual
Business Conditions
(% balance)</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Large
Manufacturing Co. &nbsp;</td>
<td></td>
<td>11</td>
<td>19</td>
<td>23</td>
<td>23</td>
<td>22</td>
<td>23</td>
<td>18</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Large Non
manufacturing Co.&nbsp;</td>
<td></td>
<td>12</td>
<td>16</td>
<td>20</td>
<td>22</td>
<td>20</td>
<td>20</td>
<td>15</td>
</tr>
<tr class="even">
<td colspan="9" class="firstcol">Forecast
of Business
Conditions Next Quarter ( % balance)</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Large
Manufacturing Co. &nbsp;</td>
<td>7</td>
<td>15</td>
<td>19</td>
<td>22</td>
<td>20</td>
<td>21</td>
<td>21</td>
<td>16</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Large Non
manufacturing Co.&nbsp;</td>
<td>13</td>
<td>15</td>
<td>21</td>
<td>23</td>
<td>23</td>
<td>22</td>
<td>20</td>
<td>13</td>
</tr>
<tr class="even">
<td colspan="9">&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Capital
Spending % Change</td>
<td>&nbsp;Fiscal '07</td>
<td>Fiscal '08</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Large
Manufacturing Co.</td>
<td>9.5</td>
<td>-3.3</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Large Non
manufacturing Co.&nbsp;</td>
<td>5.2</td>
<td>-0.6</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
</body></html>

The Bank of Japan's Tankan Survey released today shows growing concerns among large manufacturers and non manufacturers, as can be seen in the first and second charts. The excess of optimists over pessimists among large manufacturers [...]

Japan: TANKAN Results Show Growing Concerns Among Business

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<div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401e.jpg" width="353">
The value of construction put in place slipped 0.3% during February and January was revised to less of a decline of 1.0%. The latest decline was the fifth consecutive monthly drop and the level was 8.5% below the March 2006 peak.
The value of nonresidential building activity ticked down 0.1% after a 1.0% January decline which was half that reported initially. Momentum here recently has diminished substantially. Three month growth in activity is -5.3%. Education facility building slipped 0.2% (+17.3% y/y) after a 2.4% January surge. Spending in the factory sector rose 2.7% (27.4% y/y) and made up a revised 1.6% decline in January. Office construction fell 2.2% (+6.4% y/y) and commercial construction rose 2.6% (2.1% y/y).
The value of residential building activity fell another 0.9%. Construction activity on new single family units collapsed an additional 5.7% (-33.6% y/y). Building activity on multi-family units also slipped 0.3% (-18.5% y/y) but spending on improvements surged 5.1% (8.8% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401f.jpg" width="353">
During the last twenty years there has been an 84% correlation between the q/q change in the value of residential building and its contribution to growth in real GDP.
Public construction spending rose a slight 0.4% for the second month. Construction on highways &amp; streets rose 0.9% (3.7% y/y) after a very much upwardly revised 0.5% January increase. The value of construction on highways &amp; streets is nearly one third of the value of total public construction spending. Building activity of educational facilities slipped 0.2% (+15.0% 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.</div>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E907/@E907.HTM">Construction</a></th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-0.3%</td>
<td>-1.0%</td>
<td>-3.5%</td>
<td>-2.7%</td>
<td>5.6%</td>
<td>10.7%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>-0.5%</td>
<td>-1.5%</td>
<td>-7.1%</td>
<td>-6.8%</td>
<td>4.7%</td>
<td>12.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>-0.9%</td>
<td>-1.9%</td>
<td>-18.8%</td>
<td>-18.1%</td>
<td>0.5%</td>
<td>13.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-0.1%</td>
<td>-1.0%</td>
<td>13.2%</td>
<td>18.0%</td>
<td>15.2%</td>
<td>7.8%</td>
</tr>
<tr>
<td class="firstcol">Public</td>
<td>0.4%</td>
<td>0.4%</td>
<td>8.2%</td>
<td>12.2%</td>
<td>9.2%</td>
<td>6.2%</td>
</tr>
</tbody>
</table>
</body>
</html>

The value of construction put in place slipped 0.3% during February and January was revised to less of a decline of 1.0%. The latest decline was the fifth consecutive monthly drop and the level was 8.5% below the March 2006 peak. The [...]

U.S. Construction Spending Slipped; Nonresidential Activity Slackened

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401d.jpg" width="353">
Chain store sales slipped another 0.2% last week, according to the International Council of Shopping Centers ICSC-UBS Chain Store survey. Together with the prior week&#39;s 0.4% slip, the two declines left sales in March essentially flat with the February average after 0.4% increase.
During the last ten years there has been a 45% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
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.
During the latest week the leading indicator of chain store sales from ICSC-UBS surged 0.7% and recovered after the prior week&#39;s 0.5% decline. 
Assessing Employment Growth in 2007 from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2008/el2008-09.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/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">03/29/08</th>
<th scope="col">03/22/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>487.5</td>
<td>488.3</td>
<td>0.5%</td>
<td>2.8%</td>
<td>3.3%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>


</html>

Chain store sales slipped another 0.2% last week, according to the International Council of Shopping Centers ICSC-UBS Chain Store survey. Together with the prior week's 0.4% slip, the two declines left sales in March essentially flat [...]

U.S. Chain Store Sales Slipped Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401a.jpg" width="353">
The Institute of Supply Management (ISM) reported that in March its Composite Index of Manufacturing Sector Activity ticked up to 48.6 from 48.3 in February. The rise exceeded Consensus expectations for a decline to 47.5. However, the index remained below the break even level for activity of 50 for the third month in the last four.
Last month&#39;s composite reading was down from 50.7 in January and 48.4 in December. The three month average level of 49.2 remained near its lowest since early 2003.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401b.jpg" width="353">
During the last twenty years there has been a 64% correlation between the level of the Composite Index and the three month growth in factory sector industrial production.
It is appropriate to correlate the ISM index level with factory sector growth because the ISM index is a diffusion index. It measures growth by being constructed using all of the absolute positive changes in activity added to one half of the no change in activity measures.
The employment index rose a sharp 3.2 points to 49.2 and made up all of the declines during the prior two months. During the last twenty years there has been a 67% correlation between the level of the ISM employment Index and the three month growth in factory sector employment. The supplier deliveries index also surged 3.5 points to its highest level since late 2006.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401c.jpg" width="353">
Three of the index&#39;s component series fell. The new orders index declined sharply to its lowest level since late in the recession year of 2001. Production also fell sharply to its lowest level since early 2003 and the inventory component slipped to its lowest level since last September.
The new export orders sub-series rose slightly by 0.5 points and recovered just a piece of a large 2.5 point February drop.
The prices paid index surged to its highest level since October 2005. During the last twenty years there has been a 77% correlation between the price index and the three month change in the PPI for intermediate goods.
The Economic Review 2008 from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/review/2008/er2008.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S2/@S201/@S201.HTM">ISM Mfg</a></th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">March &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Index</td>
<td>48.6</td>
<td>48.3</td>
<td>50.7</td>
<td>51.1</td>
<td>53.1</td>
<td>54.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>46.5</td>
<td>49.1</td>
<td>51.5</td>
<td>54.3</td>
<td>55.4</td>
<td>57.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Employment Index</td>
<td>49.2</td>
<td>46.0</td>
<td>49.2</td>
<td>50.5</td>
<td>51.7</td>
<td>53.6</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>83.5</td>
<td>75.5</td>
<td>65.5</td>
<td>64.6</td>
<td>65.0</td>
<td>66.4</td>
</tr>
</tbody>
</table>
</body>
</html>

The Institute of Supply Management (ISM) reported that in March its Composite Index of Manufacturing Sector Activity ticked up to 48.6 from 48.3 in February. The rise exceeded Consensus expectations for a decline to 47.5. However, the [...]

ISM Factory Sector Index Ticked Higher But Still Was Below 50

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401a.jpg" align="left" border="0" height="265" width="353">
The Institute of Supply Management (ISM) reported that in
March its Composite Index of Manufacturing Sector Activity ticked up to
48.6 from 48.3 in February. The rise exceeded Consensus expectations
for a decline to 47.5. However, the index remained below the break even
level for activity of 50 for the third month in the last four.
Last month's composite reading was down from 50.7 in January
and 48.4 in December. The three month average level of 49.2 remained
near its lowest since early 2003.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401b.jpg" align="right" border="0" height="265" width="353">
During the last twenty years there has been a 64% correlation
between the level of the Composite Index and the three month growth in
factory sector industrial production.
It is appropriate to correlate the ISM index level
with factory sector growth because the ISM index
is a diffusion index. It measures growth by being constructed using all
of the absolute positive changes in activity added to one half of the
no change in activity measures.
The employment index rose a sharp 3.2 points to 49.2 and made
up all of the declines during the prior two months. During the last
twenty years there has been a 67% correlation between the level of the
ISM employment Index and the three month growth in factory sector
employment. The supplier deliveries index also surged 3.5 points to its
highest level since late 2006.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401c.jpg" align="left" border="0" height="265" width="353">
Three of the index's component series fell. The new orders
index declined sharply to its lowest level since late in the recession
year of 2001. Production also fell sharply to its lowest level since
early 2003 and the inventory component slipped to its lowest level
since last September.
The new export orders sub-series rose slightly by 0.5 points
and recovered just a piece of a large 2.5 point February drop.
The prices paid index surged to its highest level since
October 2005. During the last twenty years there has been a 77%
correlation between the price index and the three month change in the
PPI for intermediate goods.
The Economic Review 2008 from the Federal
Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/review/2008/er2008.pdf">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S2/@S201/@S201.HTM">ISM
Mfg</a></th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">March '07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Index</td>
<td>48.6</td>
<td>48.3</td>
<td>50.7</td>
<td>51.1</td>
<td>53.1</td>
<td>54.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>46.5</td>
<td>49.1</td>
<td>51.5</td>
<td>54.3</td>
<td>55.4</td>
<td>57.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Employment Index</td>
<td>49.2</td>
<td>46.0</td>
<td>49.2</td>
<td>50.5</td>
<td>51.7</td>
<td>53.6</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>83.5</td>
<td>75.5</td>
<td>65.5</td>
<td>64.6</td>
<td>65.0</td>
<td>66.4</td>
</tr>
</tbody>
</table>
U.S. Construction Spending
Slipped; Nonresidential Activity Slackened 
by <a href="/comment/Moeller.html">Tom
Moeller</a> April 1, 2008



<div align="left"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401e.jpg" align="left" border="0" height="265" width="353">

The value of construction put in place slipped 0.3% during
February and January was revised to less of a decline of 1.0%. The
latest decline was the fifth consecutive monthly drop and the level was
8.5% below the March 2006 peak.
The value of nonresidential building activity ticked down 0.1%
after a 1.0% January decline which was half that reported initially.
Momentum here recently has diminished substantially. Three month growth
in activity is -5.3%. Education facility building slipped 0.2% (+17.3%
y/y) after a 2.4% January surge. Spending in the factory sector rose
2.7% (27.4% y/y) and made up a revised 1.6% decline in January. Office
construction fell 2.2% (+6.4% y/y) and commercial construction rose
2.6% (2.1% y/y).
The value of residential building activity fell another 0.9%.
Construction activity on new single family units collapsed an
additional 5.7% (-33.6% y/y). Building activity on multi-family units
also slipped 0.3% (-18.5% y/y) but spending on improvements surged 5.1%
(8.8% y/y).<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401f.jpg" align="right" border="0" height="265" width="353">
During the last twenty years there has been an 84% correlation
between the q/q change in the value of residential building and its
contribution to growth in real GDP.
Public construction spending rose a slight 0.4% for the second
month. Construction on highways &amp; streets rose 0.9% (3.7% y/y)
after a very much upwardly revised 0.5% January increase. The value of
construction on highways &amp; streets is nearly one third of the
value of total public construction spending. Building activity of
educational facilities slipped 0.2% (+15.0% y/y).
These more detailed categories represent the Census Bureau&#8217;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.
</div>


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E907/@E907.HTM">Construction</a></th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-0.3%</td>
<td>-1.0%</td>
<td>-3.5%</td>
<td>-2.7%</td>
<td>5.6%</td>
<td>10.7%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>-0.5%</td>
<td>-1.5%</td>
<td>-7.1%</td>
<td>-6.8%</td>
<td>4.7%</td>
<td>12.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>-0.9%</td>
<td>-1.9%</td>
<td>-18.8%</td>
<td>-18.1%</td>
<td>0.5%</td>
<td>13.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-0.1%</td>
<td>-1.0%</td>
<td>13.2%</td>
<td>18.0%</td>
<td>15.2%</td>
<td>7.8%</td>
</tr>
<tr>
<td class="firstcol">Public</td>
<td>0.4%</td>
<td>0.4%</td>
<td>8.2%</td>
<td>12.2%</td>
<td>9.2%</td>
<td>6.2%</td>
</tr>
</tbody>
</table>
U.S. Chain Store Sales Slipped
Again 
by <a href="/comment/Moeller.html">Tom
Moeller</a> April 1, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401d.jpg" align="left" border="0" height="265" width="353">
Chain store sales slipped another 0.2% last week, according to
the International Council of Shopping Centers ICSC-UBS Chain Store
survey. Together with the prior week's 0.4% slip, the two declines left
sales in March essentially flat with the February average after 0.4%
increase.

During the last ten years there has been a 45% correlation
between the y/y change in chain store sales and the change in nonauto
retail sales less gasoline.

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.


During the latest week the leading indicator of chain store
sales from ICSC-UBS surged 0.7% and recovered after the
prior week's 0.5% decline. 
Assessing Employment Growth in 2007 from
the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2008/el2008-09.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/surveyw/@S2/@S2.HTM">ICSC-UBS
(SA, 1977=100)</a></th>
<th scope="col">03/29/08</th>
<th scope="col">03/22/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain
Store Sales</td>
<td>487.5</td>
<td>488.3</td>
<td>0.5%</td>
<td>2.8%</td>
<td>3.3%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
&nbsp;Japan: TANKAN
ResultsShow Growing Concerns Among Business&nbsp; 
by <a href="/comment/Curley.html">Louise
Curley</a> April 1, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401g.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401h.jpg" border="0" height="265" width="312">
The Bank of Japan's Tankan Survey released today shows growing
concerns among large manufacturers and non manufacturers, as can be
seen in the first and second charts. The excess of optimists over
pessimists among large manufacturers appraising current conditions
declined to 11% from 19% in December. A slightly smaller decline was
registered for non manufacturers--12% from 16%. In looking to the
second quarter, the excess of optimists over pessimists among large
manufacturers dropped to 7%. For non manufacturers, the excess of
optimists dropped to 13%. One of the factors influencing the
manufacturers, in particular, has been the steep rise in the yen over
the past nine months, can be seen in the third chart.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401i.jpg" align="right" border="0" height="265" width="312">
Among the most closely watched items in the Tankan survey are
the forecasts of capital spending.In the current survey, manufacturers
plan to increase capital spending in the current fiscal year ending
last month, March, 2008 by 9.5% and non manufacturers by 5.2%. For next
fiscal year ending March 2009, however, both large manufacturers and
non manufacturers are planning to cut capital spending, the
manufacturers by 3.3% and the non manufacturers by 0.6%, as can be seen
in the fourth and fifth charts.
Much more detail from the Tankan can be found in the Haver
Database, JAPAN. Data are available for medium and
small enterprises and for specific industries as well as sales and
profit expectations.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401j.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401k.jpg" border="0" height="265" width="312">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">JAPAN:&nbsp;
TANKAN SURVEY&nbsp;</th>
<th scope="col">Q2 08</th>
<th scope="col">Q1 08&nbsp;</th>
<th scope="col">Q4 07&nbsp;</th>
<th scope="col">Q3 07&nbsp;</th>
<th scope="col">Q2 07&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="9" class="firstcol">Actual
Business Conditions
(% balance)</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Large
Manufacturing Co. &nbsp;</td>
<td></td>
<td>11</td>
<td>19</td>
<td>23</td>
<td>23</td>
<td>22</td>
<td>23</td>
<td>18</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Large Non
manufacturing Co.&nbsp;</td>
<td></td>
<td>12</td>
<td>16</td>
<td>20</td>
<td>22</td>
<td>20</td>
<td>20</td>
<td>15</td>
</tr>
<tr class="even">
<td colspan="9" class="firstcol">Forecast
of Business
Conditions Next Quarter ( % balance)</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Large
Manufacturing Co. &nbsp;</td>
<td>7</td>
<td>15</td>
<td>19</td>
<td>22</td>
<td>20</td>
<td>21</td>
<td>21</td>
<td>16</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Large Non
manufacturing Co.&nbsp;</td>
<td>13</td>
<td>15</td>
<td>21</td>
<td>23</td>
<td>23</td>
<td>22</td>
<td>20</td>
<td>13</td>
</tr>
<tr class="even">
<td colspan="9">&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Capital
Spending % Change</td>
<td>&nbsp;Fiscal '07</td>
<td>Fiscal '08</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Large
Manufacturing Co.</td>
<td>9.5</td>
<td>-3.3</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Large Non
manufacturing Co.&nbsp;</td>
<td>5.2</td>
<td>-0.6</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
European Economic Data Hits Blow
Hot and Cold: This Time Cold: German Retail Sales 
by <a href="/comment/Brusca.html">Robert
Brusca</a> April 1, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080401j.jpg" align="left" border="0" height="265" width="353">
While German unemployment fell more than expected in March
there has been no relief to German retailers or by association
consumers. The growth rate series in the chart is remarkable for its
tranquility. German real retail sales are simply flat after some
turbulence early in 2007 stemming from the VAT tax that shifted sales
into 2007 then sucked them out of 2008. Sales
are settling down into a very narrow growth band in late 2007 and 2008.
Even though Germany continues to post acceptable rates of growth, the
consumer has long been forecast as a force to join in to extend the
expansion but he simply has not. Indeed, real retail sales ex-auto
sales (see table, at the bottom) fell sharply in February. Sales by
this measure at the two-month mark in the new quarter are declining at
a 1.3% annual rate. Real ex auto sales would have to rise by 1.6% in
March to &#8216;elevate&#8217; the quarter&#8217;s sales pace to zero.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">German
Real and Nominal Retail Sales </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Nominal</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>3-MO</td>
<td>6-MO</td>
<td>12-MO</td>
<td>YrAGo</td>
<td>QTR, SAAR</td>
</tr>
<tr>
<td class="firstcol">Retaill Ex auto</td>
<td>-0.7%</td>
<td>1.6%</td>
<td>-0.6%</td>
<td>1.2%</td>
<td>-0.6%</td>
<td>-0.5%</td>
<td>-0.4%</td>
<td>3.4%</td>
</tr>
<tr>
<td class="firstcol">Motor Vehicle and Parts</td>
<td>#N/A</td>
<td>-3.8%</td>
<td>2.9%</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>-4.7%</td>
<td>#N/A</td>
</tr>
<tr>
<td class="firstcol">Food, Beverages &amp;
Tobacco</td>
<td>-2.2%</td>
<td>2.1%</td>
<td>-2.3%</td>
<td>-9.1%</td>
<td>-4.5%</td>
<td>-3.9%</td>
<td>-0.3%</td>
<td>-5.1%</td>
</tr>
<tr>
<td class="firstcol">Clothing footwear</td>
<td>2.5%</td>
<td>1.6%</td>
<td>0.8%</td>
<td>21.6%</td>
<td>4.4%</td>
<td>4.0%</td>
<td>3.6%</td>
<td>16.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Real</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">Retail Ex auto</td>
<td>-1.6%</td>
<td>0.9%</td>
<td>-0.1%</td>
<td>-3.2%</td>
<td>-5.0%</td>
<td>-3.2%</td>
<td>-0.9%</td>
<td>-1.3%</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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250509A1.jpg

250509C1.jpg

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

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

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

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

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

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

250509D1.jpg

250509B1.jpg

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

FIBER: Industrial Commodity Price Movement Diverges in Latest Four Weeks

250509L1.jpg

250509M1.jpg

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

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

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

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

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

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

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

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

250509N1.jpg

250509O1.jpg

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

U.S. Wholesale Inventories & Sales Increase in March

250508N2.jpg

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

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

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

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

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

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

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

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

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

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

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

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

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

U.S. Housing Affordability Improves Slightly in March

Carol Stone, CBE

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

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

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

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

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

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

Economy in Brief: April 2008

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U.S. Factory Inventory Rise Continued Firm

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U.S. Construction Spending Slipped; Nonresidential Activity Slackened

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ISM Factory Sector Index Ticked Higher But Still Was Below 50

ISM Factory Sector Index Ticked Higher But Still Was Below 50