Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124a.jpg" width="353">
The October National Activity Index (CFNAI) from the Chicago Federal Reserve Bank improved last month after Hurricanes depressed economic activity during September. The index, however, remained in recession territory. The latest reading of -1.06 roughly equaled the averages of the first and second quarters of this year but improved from the third quarter average of -2.15.Since 1970 there has been a 75% correlation between the level of the index and the q/q change in real GDP.
The three-month moving average of the index held roughly steady at -2.09. The latest was near its lowest since the last recession, early in 1991.
An index level at or below -0.70 typically has indicated negative U.S. economic growth. A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth of roughly 3%. During the last twenty years there has been a 68% correlation between the level of the CFNAI and q/q growth in real GDP.
The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_november2008.pdf">here</a> and the historical data are available in Haver&#39;s SURVEYS database.
The production category made a positive contribution to the October index as it recovered from a depressed level the month earlier. Conversely the income, housing, consumption and employment categories had a negative influence on the total.
The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production &amp; income, the labor market, personal consumption &amp; housing, manufacturing &amp; trade sales, and inventories &amp; orders.
In a separate survey, the Chicago Fed indicated that its Midwest manufacturing index fell during September to its lowest level since 2003. The auto sector continued to lead the weakness but the steel, machinery and resource sector components also were weak.
The Joint Statement by Treasury, Federal Reserve, and the FDIC on Citigroup can be found <a href="http://www.federalreserve.gov/newsevents/press/bcreg/20081123a.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago Fed</a></th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">October &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-1.06</td>
<td>-3.11</td>
<td>-0.75</td>
<td>-0.41</td>
<td>-0.02</td>
<td>0.28</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Average</td>
<td>-2.09</td>
<td>-2.16</td>
<td>-0.59</td>
<td>--</td>
<td>--</td>
<td>&nbsp;--</td>
</tr>
</tbody>
</table>
</body>
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The October National Activity Index (CFNAI) from the Chicago Federal Reserve Bank improved last month after Hurricanes depressed economic activity during September. The index, however, remained in recession territory. The latest [...]

Chicago Fed Index Rose After Hurricanes

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124a.jpg" align="left" border="0" height="265" width="353">
The October National Activity Index (CFNAI) from the Chicago
Federal Reserve Bank improved last month after Hurricanes depressed
economic activity during September. The index, however, remained in
recession territory. The latest reading of -1.06 roughly equaled the
averages of the first and second quarters of this year but improved
from the third quarter average of -2.15.Since 1970 there has been a 75%
correlation between the level of the index and the q/q change in real
GDP.
The three-month moving average of the index held roughly
steady at -2.09. The latest was near its lowest since the last
recession, early in 1991.
An index level at or below -0.70 typically has indicated
negative U.S. economic growth. A zero value of the CFNAI indicates that
the economy is expanding at its historical trend rate of growth of
roughly 3%. During the last twenty years there has been a 68%
correlation between the level of the CFNAI and q/q growth in real GDP.
The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_november2008.pdf">here</a>
and the historical data are available in Haver's SURVEYS
database.
The production category made a positive contribution to the
October index as it recovered from a depressed level the month earlier.
Conversely the income, housing, consumption and employment categories
had a negative influence on the total.
The CFNAI is a weighted average of 85 indicators of economic
activity. The indicators reflect activity in the following categories:
production &amp; income, the labor market, personal consumption
&amp; housing, manufacturing &amp; trade sales, and inventories
&amp; orders.
In a separate survey, the Chicago Fed indicated that its
Midwest manufacturing index fell during September to its lowest level
since 2003. The auto sector continued to lead the weakness but the
steel, machinery and resource sector components also were weak.
The Joint Statement by Treasury, Federal Reserve,
and the FDIC on Citigroup can be found <a href="http://www.federalreserve.gov/newsevents/press/bcreg/20081123a.htm">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago
Fed</a></th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">October '07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-1.06</td>
<td>-3.11</td>
<td>-0.75</td>
<td>-0.41</td>
<td>-0.02</td>
<td>0.28</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Average</td>
<td>-2.09</td>
<td>-2.16</td>
<td>-0.59</td>
<td>--</td>
<td>--</td>
<td>&nbsp;--</td>
</tr>
</tbody>
</table>
U.S. Existing Home Sales Slide
Along Bottom, Prices Down 20% 
by <a href="/comment/Moeller.html">Tom
Moeller</a> November 24, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124b.jpg" align="left" border="0" height="265" width="353">
During October, U.S. existing home sales reversed
most of the prior month's rise and fell 3.1% to 4.980 million,
according to the National Association of Realtors. The 3.1% decline
followed a revised 4.7% September increase and it was slightly greater
than Consensus expectations for which were for a selling rate of 5.00M
homes. Total sales include sales of condos and co-ops.
The month-to-month volatility in home sales this year has been
near a roughly stable trend line at the 5.0 million unit level, down
11.8% from last year's average.
Median home prices fell 4.2% (NSA) during
October for the fourth consecutive monthly drop. That pulled the y/y
comparison to -11.3%. Prices have fallen 20.0% since their peak in June
2007.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124c.jpg" align="right" border="0" height="265" width="353">
Sales of existing single-family homes followed a similar
pattern as the total and fell 3.3% after a revised 5.3% rise during
September. Sales of existing homes are down by one-third from their
peak in mid-2005.
<blockquote>

By region, home sales in the Midwest led last month's
decline with a 6.0% drop and they were down nearly ten percent from
last year. In the South sales fell 2.2% m/m (-10.2% y/y). In the West
sales slipped 1.6%, however, they were up one-third from last October.
Sales in the Northeast fell 1.2% and they were off 17.7% from last
year's average.
</blockquote>

The number of unsold homes (condos &amp; single-family) on
the market fell for the third straight month (-4.5% y/y). Nevertheless,
at the current sales rate there as a 10.2 months' supply on the market.
That was down from the April peak of 11.2 months. For single-family
homes the inventory ticked up m/m to a 9.6 months supply at the current
sales rate, down from an 11.0 months supply in June.
The House testimony offered by Fed GovernorRandall S. Kroszner
titled the Effects of the financial crisis on small business is
available <a href="http://www.federalreserve.gov/newsevents/testimony/kroszner20081120a.htm">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Existing
Home Sales (Thous)</th>
<th scope="col">October</th>
<th scope="col">y/y %</th>
<th scope="col">September</th>
<th scope="col">October '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">Total</td>
<td>4,980</td>
<td>-1.6</td>
<td>5,140</td>
<td>5,020</td>
<td>5,672</td>
<td>6,508</td>
<td>7,076</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>830</td>
<td>-9.8</td>
<td>840</td>
<td>910</td>
<td>1,008</td>
<td>1,090</td>
<td>1,168</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,100</td>
<td>-9.1</td>
<td>1,170</td>
<td>1,220</td>
<td>1,331</td>
<td>1,491</td>
<td>1,589</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>1,840</td>
<td>-10.2</td>
<td>1,900</td>
<td>2,050</td>
<td>2,240</td>
<td>2,576</td>
<td>2,704</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,210</td>
<td>37.5</td>
<td>1,230</td>
<td>880</td>
<td>1,093</td>
<td>1,353</td>
<td>1,617</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>4,430</td>
<td>0.0</td>
<td>4,580</td>
<td>4,430</td>
<td>4,958</td>
<td>5,703</td>
<td>6,181</td>
</tr>
<tr class="odd">
<td class="firstcol">Median Price, Total, $</td>
<td>183,300</td>
<td>-11.3</td>
<td>191,400</td>
<td>206,700</td>
<td>216,617</td>
<td>222,000</td>
<td>218,217</td>
</tr>
</tbody>
</table>
Comparing CurrentTrends with Those
in the Great Depression&nbsp; 
by <a href="/comment/Curley.html">Louise
Curley</a> November 24, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124g.jpg" align="right" border="0" height="265" width="312">
Haver Analytics has a number of series that may prove useful
in comparing and contrasting current conditions with those in the Great
Depression.Among them are the annual series of real and nominal gross
domestic product, its components and prices in USNA
that go back to 1929.


The first chart shows real GDP since 1929, plotted on a log
scale to show equal percentage changes. Real GDP declined 26.5% from
1929 to 1933.

Monthly data on the Consumer Price Index are available from
January 1921 and are shown in the second chart. Consumer prices
declined steadily from 51.9 (1967=100) in May 1929 to 39.4 in December
1933, a decline of 24.1%. These data are found in the Prices section of
 USECON.

Long term monthly data are also available for stock prices and
interest rates. The third chart show monthly average prices for the Dow
Jones Industrial Average and for the S&amp;P 500 Index. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124d.jpg" align="right" border="0" height="265" width="312">
The Dow
Jones declined 87.3% from 364.93 in September, 1929 to 46.19 in July,
1932. The S&amp;P 500 declined 84.8% from 31.30 in September 1929
to 4.77 in June, 1933.
The fourth chart shows the interest rate on the Treasury's
long term composite (over ten years) together with the interest rates
on Moody's AAA and BBB corporate bonds.The rate on the Treasury goes
back to January, 1925 and the rates on Moody's corporates go back to
January 1921. Both the stock market data and interest rates are found
in the Financial Section of USECON. 
 
 
 
 
 

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124e.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124f.jpg" border="0" height="265" width="312">

Germany&#8217;s IFO to Sixteen Year Low 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 24. 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124h.jpg" align="left" border="0" height="265" width="353">IFO: I
Fell, OUCH! 

Germany&#8217;s IFO index, a focal point for early economic signals
in Germany, fell to a 16 year low in November. Manufacturing has fallen
very hard and fast, as the chart above demonstrates. Going back to
January of 1991 the overall IFO sector index stands in the lower 4% of
its range &#8211; in simple terms, it rarely is weaker than this.
Manufacturing is in the bottom 10% of its range. Retailing is in the
bottom 9% of its range. These are extremely weak readings. The service
sector is in the bottom 18% of its range which extends back only to mid
2001. Wholesaling is in the bottom 27% of its range. Construction is
relatively better off standing in the bottom 39% of its range of values
since 1991. In terms of raw readings instead of relative IFO scores we
see a clustering of scores in the -30 region. Wholesaling is a bit
better at -21 and services, a more stable sector overall, registers a
-7.3 net reading. Still for that sector such a raw reading is still in
the bottom 18% of its range. 
 

A fast unravel: Compared to just a month
ago the indices have dropped sharply. The headlines and MFG indices
have shed nearly 10 points in one month. Only in Sept 2001 did the
German sector headline index drop by more. Clearly this downturn is
hitting with lightning speed and a savage punch in Europe where key
policymakers thought they would be spared. Think again. 
 

Headline level is very weak, too -The
headline for the IFO business climate index fell to 85.8 in November
from 90.2 October. This index only fell more sharply than this in Sept
of 2001 after the attack on the US World trade Towers. The current
situation index dropped to a level of 94.8 in November from 99.9 in
October. The expectations index at 81.4 fell to 77.6. The 77.6 reading
is a lifetime low. For current conditions it is a bottom third of the
range reading. For the climate index it&#8217;s a bottom 4% of range reading.
Not only is the index falling fast but it is scrapping very low levels. 
 

Germany: harbinger for Euro-weakness --
Clearly the situation in Germany is fluid and falling fast. For all of
the Euro Area new industrial orders were released today and that series
dropped by 3.9% month to month in September and by 5.2% Yr/Yr. The Q3
drop for EMU-wide orders is 7.4% at an annual rate. Among large
countries Germany&#8217;s -7.0% Yr/Yr drop is one of the largest among EMU
members; while engineering orders in the EU&#8217;s UK are off by 10.7% Yr/Yr. 
 

Autos too - Europe is also having
difficulties in the auto sector as France&#8217;s Sarkozy and Germany&#8217;s
Merkel in a joint statement indicated their interest to support the
ailing sector. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col"> Summary
of IFO Sector Diffusion readings: CLIMATE</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">CLIMATE Sum</td>
<td>Current</td>
<td>Last Mo</td>
<td colspan="6">Since Jan 1991*</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>average</td>
<td>Median</td>
<td>Max</td>
<td>Min</td>
<td>range</td>
<td>% range</td>
</tr>
<tr>
<td class="firstcol">All Sectors</td>
<td>-29.0</td>
<td>-20.2</td>
<td>-7.7</td>
<td>-8.4</td>
<td>16.9</td>
<td>-30.9</td>
<td>47.8</td>
<td>4.0%</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>-29.6</td>
<td>-18.9</td>
<td>-0.2</td>
<td>1.6</td>
<td>27.0</td>
<td>-35.9</td>
<td>62.9</td>
<td>10.0%</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>-30.2</td>
<td>-27.7</td>
<td>-28.2</td>
<td>-30.3</td>
<td>1.3</td>
<td>-50.5</td>
<td>51.8</td>
<td>39.2%</td>
</tr>
<tr>
<td class="firstcol">Wholesale</td>
<td>-21.8</td>
<td>-15.1</td>
<td>-13.2</td>
<td>-15.7</td>
<td>23.6</td>
<td>-39.3</td>
<td>62.9</td>
<td>27.8%</td>
</tr>
<tr>
<td class="firstcol">Retail</td>
<td>-33.5</td>
<td>-25.1</td>
<td>-14.2</td>
<td>-14.5</td>
<td>28.7</td>
<td>-39.7</td>
<td>68.4</td>
<td>9.1%</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>-7.3</td>
<td>-4.3</td>
<td>11.0</td>
<td>9.5</td>
<td>28.5</td>
<td>-15.2</td>
<td>43.7</td>
<td>18.1%</td>
</tr>
</tbody>
</table>
</body></html>

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081121a.jpg" align="left" border="0" height="265" width="353">
The Markit/NTC readings on conditions in services and MFG in
the Euro Area show another chilling story. The indices are down to all
time lows that covers 11-Years for the Manufacturing PMI and 10-years
for services. 
 

The MFG index stands at a level of 36.16 well below the
neutral mark of 50. The services PMI stands at 43.32 a very low reading
for a less volatile sector. The services PMI is only slightly less
volatile than the MFG readings on m/mo levels basis. But the MFG PMI
has a range of variation that is 20% larger. Even so in terms of m/m
changes in the indices services is slightly more volatile. 
 

Compared to the US where the PMIs (ISM) measure MFG and Non
MFG, the MFG and Services sectors in Europe are far more closely
correlated. Their simple correlation is 0.89 compared to 0.78 for the
tow US measures. This suggest the US economy has room for more
independent activity in each sector possibly a better ability to avert
sector contagion, whereas in Europe when one sector does something, the
other is quick to follow. That is bad news when economic growth is
slipping. The US MFG sector is about 25% more volatile than its
European counterpart whereas the US Nonmanufacturing sector is about 4
percent less volatile than its European counterpart. Right now all PMIs
are sinking and are very weak. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="3" scope="col"> FLASH Readings:&nbsp; Market PMIs for the Euro Area 13</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td> Manufacturing</td>
<td> Services</td>
</tr>
<tr>
<td class="firstcol"> Nov-08</td>
<td> 36.16</td>
<td> 43.32</td>
</tr>
<tr>
<td class="firstcol"> Oct-08</td>
<td>41.10</td>
<td>45.76</td>
</tr>
<tr>
<td class="firstcol"> Sep-08</td>
<td>44.97</td>
<td>48.44</td>
</tr>
<tr>
<td class="firstcol"> Aug-08</td>
<td>47.55</td>
<td>48.46</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol"> Averages</td>
</tr>
<tr>
<td class="firstcol"> 3-Month</td>
<td>44.54</td>
<td>46.13</td>
</tr>
<tr>
<td class="firstcol"> 6-Month</td>
<td>46.79</td>
<td>47.39</td>
</tr>
<tr>
<td class="firstcol"> 12-Month</td>
<td>49.50</td>
<td>49.66</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol"> 125-Mo Range</td>
</tr>
<tr>
<td class="firstcol"> High</td>
<td>60.47</td>
<td>62.36</td>
</tr>
<tr>
<td class="firstcol"> Low</td>
<td>36.16</td>
<td>43.32</td>
</tr>
<tr>
<td class="firstcol"> % Range</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
</tbody>
</table>
</body></html>

The Markit/NTC readings on conditions in services and MFG in the Euro Area show another chilling story. The indices are down to all time lows that covers 11-Years for the Manufacturing PMI and 10-years for services. The MFG index [...]

Euro Area PMIs

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081121a.jpg" align="left" border="0" height="265" width="353">
The Markit/NTC readings on conditions in services and MFG in
the Euro Area show another chilling story. The indices are down to all
time lows that covers 11-Years for the Manufacturing PMI and 10-years
for services. 
 

The MFG index stands at a level of 36.16 well below the
neutral mark of 50. The services PMI stands at 43.32 a very low reading
for a less volatile sector. The services PMI is only slightly less
volatile than the MFG readings on m/mo levels basis. But the MFG PMI
has a range of variation that is 20% larger. Even so in terms of m/m
changes in the indices services is slightly more volatile. 
 

Compared to the US where the PMIs (ISM) measure MFG and Non
MFG, the MFG and Services sectors in Europe are far more closely
correlated. Their simple correlation is 0.89 compared to 0.78 for the
tow US measures. This suggest the US economy has room for more
independent activity in each sector possibly a better ability to avert
sector contagion, whereas in Europe when one sector does something, the
other is quick to follow. That is bad news when economic growth is
slipping. The US MFG sector is about 25% more volatile than its
European counterpart whereas the US Nonmanufacturing sector is about 4
percent less volatile than its European counterpart. Right now all PMIs
are sinking and are very weak. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr> <th colspan="3" scope="col"> FLASH
Readings:&nbsp; Market PMIs for the Euro Area 13</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td> Manufacturing</td>
<td> Services</td>
</tr>
<tr>
<td class="firstcol"> Nov-08</td>
<td> 36.16</td>
<td> 43.32</td>
</tr>
<tr>
<td class="firstcol"> Oct-08</td>
<td>41.10</td>
<td>45.76</td>
</tr>
<tr>
<td class="firstcol"> Sep-08</td>
<td>44.97</td>
<td>48.44</td>
</tr>
<tr>
<td class="firstcol"> Aug-08</td>
<td>47.55</td>
<td>48.46</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol"> Averages</td>
</tr>
<tr>
<td class="firstcol"> 3-Month</td>
<td>44.54</td>
<td>46.13</td>
</tr>
<tr>
<td class="firstcol"> 6-Month</td>
<td>46.79</td>
<td>47.39</td>
</tr>
<tr>
<td class="firstcol"> 12-Month</td>
<td>49.50</td>
<td>49.66</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol"> 125-Mo Range</td>
</tr>
<tr>
<td class="firstcol"> High</td>
<td>60.47</td>
<td>62.36</td>
</tr>
<tr>
<td class="firstcol"> Low</td>
<td>36.16</td>
<td>43.32</td>
</tr>
<tr>
<td class="firstcol"> % Range</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
</tbody>
</table>
</body></html>

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081120g.jpg" width="353">
For France and Italy new industrial orders continue to sink. France is right now seeing the greater weakness. Foreign orders show consistent weakness across time horizons for both Italy and for France. For France the recent deterioration in foreign orders is a bit worse than for Italy. But one remaining difference between these two countries is that in Italy domestic orders have shown some resiliency. Over three six and twelve months Italian orders have mostly showed increases. Meanwhile for France total and foreign order are down by almost the same percentage amounts over three months, hinting at weakening domestic orders. Italy may just be a step behind however. While Italy&#146;s domestic orders have been resilient, in September they have dropped by a sharp 2.6%. Also Italy&#146;s overall sales trends are deteriorating very rapidly. Both Italy and France seem to be well on their way to a deepening weakness in manufacturing. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Italy Orders
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Saar exept m/m</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
</tr>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-1.5%</td>
<td>-0.9%</td>
<td>2.2%</td>
<td>-1.0%</td>
<td>-5.1%</td>
<td>-3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign</td>
<td>0.8%</td>
<td>-3.4%</td>
<td>-0.8%</td>
<td>-13.1%</td>
<td>-11.6%</td>
<td>-11.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic</td>
<td>-2.6%</td>
<td>0.3%</td>
<td>3.8%</td>
<td>5.7%</td>
<td>-1.4%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">Memo</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">Sales</td>
<td>1.7%</td>
<td>-3.1%</td>
<td>-2.6%</td>
<td>-15.1%</td>
<td>-1.6%</td>
<td>-0.6%</td>
</tr>
<tr class="even">
<td colspan="7">French Orders</td>
</tr>
<tr>
<td class="firstcol">Saar except m/m</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
</tr>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.7%</td>
<td>-7.6%</td>
<td>4.7%</td>
<td>-10.1%</td>
<td>-3.0%</td>
<td>-4.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign</td>
<td>2.2%</td>
<td>-8.3%</td>
<td>3.4%</td>
<td>-11.9%</td>
<td>-7.2%</td>
<td>-8.5%</td>
</tr>
</tbody>
</table>
</body>
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For France and Italy new industrial orders continue to sink. France is right now seeing the greater weakness. Foreign orders show consistent weakness across time horizons for both Italy and for France. For France the recent [...]

New Orders for Italy and France Sink

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081120e.jpg" width="353">
The Conference Board indicated that the October composite index of leading economic indicators fell by 0.8% after rising a downwardly revised 0.1% during September. The peak for the index was in July of last year and the six-month percent change fell to -4.7%, the largest rate of decline in nearly one year.
Six of the ten components of the leading index fell last month notably consumer expectations, vendor performance, stock prices and building permits.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081120f.jpg" width="353">
The breadth of one-month increase amongst the leaders&#39; 10 components fell back to 35% and over a six-month period the breadth of gain amongst the components picked slightly to 30%.
The leading index is based on actual reports for eight economic data series. The Conference Board initially estimates two series, orders for consumer goods and orders for capital goods.
The coincident indicators rose 0.2% following five consecutive months of decline. Three quarters of the index components rose m/m but over six months none rose. Over the last ten years there has been an 86% correlation between the y/y changes in the coincident indicators and real GDP.
The lagging index ticked up 0.1%, the smallest increase in four months. The ratio of coincident to lagging indicators (a measure of economic excess) also ticked up slightly but remained near its lowest level since 1982.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM">Business Cycle Indicators</a> (%)</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">July, 6 Month % (AR)</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">Leading</td>
<td>-0.8</td>
<td>0.1</td>
<td>-0.9</td>
<td>-4.7</td>
<td>-0.4%</td>
<td>1.3%</td>
<td>2.7%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.2</td>
<td>-0.7</td>
<td>-0.4</td>
<td>-2.4</td>
<td>1.7%</td>
<td>2.4%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.1</td>
<td>0.3</td>
<td>0.4</td>
<td>2.5</td>
<td>2.9%</td>
<td>3.1%</td>
<td>3.1%</td>
</tr>
</tbody>
</table>


</html>

The Conference Board indicated that the October composite index of leading economic indicators fell by 0.8% after rising a downwardly revised 0.1% during September. The peak for the index was in July of last year and the six-month [...]

U.S. Leading Indicators Fell Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081120c.jpg" width="353">
The latest report from the Philadelphia Federal Reserve Bank continued to paint a bleak picture of the U.S. economy. The bank reported that its November Index of General Business conditions in the manufacturing sector was even more negative at -39.3 than it was last month at -37.5. The latest was lowest level since the recession of 1990. A reading of -35 had been expected for this month.
During the last ten years there has been a 61% correlation between the level of the Philadelphia Fed Business Conditions Index and the three-month growth in factory sector industrial production. There has been a 43% correlation with q/q growth in real GDP.
The Philadelphia Fed constructs a diffusion index for total business activity and each of the sub-indexes. The business conditions index reflects a separate survey question.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081120d.jpg" width="353">
Amongst the sub-indexes, the new orders index again led this month&#39;s weakness with a reading of -31.4, the lowest level since the recession of 1990. The shipments index was unchanged m/m following its 21.4 point October decline.
The employment index fell another 7.2 points to the lowest level since the recession year of 2001. Thirty eight percent of respondents expected to reduce employment levels, the highest since 1981, while only 12.6% expected to raise them. During the last ten years there has been a 79% correlation between the index level and the m/m change in manufacturing sector payrolls.
The prices paid index fell to a record low with a 37.9 point drop month-to-month to 30.7. During the last ten years there has been a 67% correlation between the prices paid index and the three-month growth in the intermediate goods PPI. There has been an 82% correlation with the change in core intermediate goods prices.
The separate index of expected business conditions in six months also fell further to near its lowest level since 2001. The expectations index for new orders fell further into negative territory. The expectations index for employment fell to near its record low while the expected prices paid figure fell to its record low.
The latest Business Outlook Survey from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2008/bos1108.cfm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Philadelphia Fed (%)</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">November&nbsp; &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>-39.3</td>
<td>-37.5</td>
<td>7.5</td>
<td>5.1</td>
<td>8.1</td>
<td>11.5</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>-30.7</td>
<td>&nbsp;7.2</td>
<td>&nbsp;34.4</td>
<td>26.4</td>
<td>36.6</td>
<td>40.1</td>
</tr>
</tbody>
</table>
</body>
</html>

The latest report from the Philadelphia Federal Reserve Bank continued to paint a bleak picture of the U.S. economy. The bank reported that its November Index of General Business conditions in the manufacturing sector was even more [...]

Philadelphia Fed Index Lowest Since 1990

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081120a.jpg" width="353">
Rising unemployment caused initial claims for jobless insurance to rise further above 500,000. At 542,000 claims reached their highest level since 1992. But even that comparison, as bad as it is, understates the current degree of labor market weakness. The 1992 level above 500,00 was reached for only one week during the short-lived, early-1990&#39;s recession. Quickly claims fell back below 400,000. The higher level of claims now is especially troubling since it likely will be sustained for a longer period.
The higher level of claims now is especially disturbing for two reasons. One is that it likely will be sustained for a longer period than one week. The second is that changes to the unemployment insurance program have made it more difficult to be eligible for a claim. Even a lower level of claims now is comparable to a weaker labor market.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081120b.jpg" width="353">
Expectations had been for claims last week of 500,000. The four-week moving average of initial claims rose to this cycle&#39;s high of 506,500 (52.7% y/y).
The latest level of initial claims for unemployment insurance is for the week which covers the survey period for November nonfarm payrolls. Claims rose 63,000, or 13.2%, from the October period. During the last ten years there has been a 78% (inverse) correlation between the level of initial jobless insurance claims and the monthly change in nonfarm payrolls.
The largest increases in initial claims for the week ending Nov. 8 were in California (+15,532), North Carolina (+6,453), Tennessee (+5,067), New Jersey (+4,706), and New York (+3,680), while the largest decreases were in Kentucky (-1,562), Puerto Rico (-875), Delaware (-751), Maine (-349), and Rhode Island (-335).
Continuing claims for unemployment insurance during the week of November 8 rose by 109,000, about the same as during the prior week during which the level was upwardly revised. The four-week average of continuing claims rose to 3,867,000, this cycle&#39;s high and the highest since 1982. Continuing claims provide some indication of workers&#39; ability to find employment and they lag the initial claims figures by one week.
The insured rate of unemployment rose to a new cycle high of 3.0%. The Commerce Department indicated that the highest insured unemployment rates were in Puerto Rico (5.3 percent), Oregon (3.9), California (3.7), Nevada (3.7), Michigan (3.5), Alaska (3.4), Pennsylvania (3.4), South Carolina (3.4), New Jersey (3.3), Arkansas (3.2), and North Carolina (3.2).
The minutes to the latest FOMC meeting can be found <a href="http://www.federalreserve.gov/newsevents/press/monetary/20081119a.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">11/15/08</th>
<th scope="col">11/08/08</th>
<th scope="col">10/31/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>542</td>
<td>&nbsp;515</td>
<td>484</td>
<td>62.8%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>4,012</td>
<td>3,903</td>
<td>55.5%</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
</body>
</html>

Rising unemployment caused initial claims for jobless insurance to rise further above 500,000. At 542,000 claims reached their highest level since 1992. But even that comparison, as bad as it is, understates the current degree of [...]

U.S. Claims For Jobless Insurance Highest Since 1992

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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250513L4.jpg

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The Consumer Price Index rose 0.2% in April after easing 0.1% in March and rising 0.2% in February. A 0.3% rise had been expected in the Action Economics Forecast Survey. The y/y increase in the headline CPI dropped to 2.3% from 2.4% in March, the weakest y/y gain since February 2021. It stood below the 9.1% peak in June 2022. The CPI excluding food & energy rose 0.2% in April following increases of 0.1% in March and 0.2% in February. A 0.3% rise had been expected. The 2.8% y/y gain remained the weakest rise in core prices in four years and below the 6.6% peak in September 2022.

Energy prices rose 0.7% (-3.7% y/y) last month after falling 2.4% in March. Gasoline prices slipped 0.1% (-11.7% y/y) after falling 6.3% in March. Fuel oil prices weakened 1.3% (-9.6% y/y) after falling 4.2% in March. Natural gas prices jumped 3.7% (15.7% y/y) following a 3.6% gain, and electricity prices gained 0.8% (3.6% y/y) after rising 0.9% in March.

Food prices eased 0.1% (+2.8% y/y) in April after a 0.4% March increase as egg prices fell 12.7% (+49.3% y/y) following a 5.9% gain. Meat, poultry & fish prices held steady (+3.4% y/y) after a 0.6% rise, while dairy product prices slipped 0.2% (+1.6% y/y) after a 1.0% March strengthening. Cereal & bakery product costs weakened 0.5% (unchanged y/y) after a 0.1% easing while fruit & vegetable prices dropped 0.4% (-0.9% y/y), the fifth decline in six months. Nonalcoholic beverage prices rose 0.7% (3.2% y/y) in April after rising 0.6% in March.

Goods prices less food and energy rose 0.1% both m/m and y/y in April after easing 0.1% in March. Prices of used cars and trucks fell 0.5% (+1.5% y/y) last month after falling 0.7% in March while new vehicle costs held steady (0.3% y/y) after edging up 0.1% in March. Apparel prices eased 0.2% (-0.7% y/y) following a 0.4% gain. Appliance prices increased 0.8% (-1.2% y/y) after a 0.1% easing. Home furnishings prices increased 0.2% (0.3% y/y) after holding steady in March. Recreation product costs rose 0.4% (-1.8% y/y) in April after falling 0.3%. Education & communication product costs rose 0.3% last month (-5.3% y/y) after rising 0.5% in March.

Services prices less energy moved up 0.3% (3.6% y/y) last month following a 0.1% March gain. Shelter prices rose 0.3% (4.0% y/y) last month after a 0.2% rise as owners’ equivalent rent of primary residences increased 0.4% (4.3% y/y), the same as in March. The cost of lodging away from home eased 0.1% (-1.4% y/y) after falling 3.5% in March. Rents of primary residences gained 0.3% (4.0% y/y) for the fifth consecutive month. Transportation service prices edged 0.1% higher (2.5% y/y) after falling 1.4% in March reflecting a 0.6% rise (6.4% y/y) in the cost of motor vehicle insurance. Public transportation costs declined 1.8% (-5.6% y/y) after falling 4.2% during March. The cost of medical services increased 0.5% (3.1% y/y), the same as in March, but the cost of recreation services fell 0.3% (3.6% y/y) after increasing 0.1% in March. Education & communication services prices fell 0.2% (+1.2% y/y) after rising 0.2%.

The Consumer Price figures can be found in Haver's **USECON** database. The expectations figure is contained in the **AS1REPNA** database.

250513N4.jpg

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- Annual total & core gains are the weakest in four-years.
- Energy costs move up but food prices slip.
- Core goods prices edge higher & service price gain picks up.

U.S. Consumer Price Index & Core Prices Rise Modestly in April

Winnie Tapasanun

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The NFIB Small Business Optimism Index fell to 95.8 in April, the lowest level since October, after a 3.3-point decline to 97.4 in March, according to the Small Business Economic Trends survey conducted by the National Federation of Independent Business. This was the second successive month that the index was below the 51-year average of 98. The index was down from its recent peak of 105.1 in December but up from 89.7 in April 2024 and a low of 88.5 in March 2024. Six of the 10 index components fell, three rose, and one was unchanged. The NFIB Small Business Uncertainty Index declined to 92 in April, the lowest level since December, after an eight-point drop to 96 in March. The index, while down from its record high of 110 in October, was well above a low of 65 in November 2023 and its historical average of 68.

The outlook for business conditions in the next six months remained positive for the sixth consecutive month in the latest survey. The net balance of respondents expecting the economy to improve decreased to 15% in April, the lowest level since October, on top of a 16-point plunge to 21% in March; however, having remained significantly above a record low of -61% in June 2022. Expected real sales dropped to a net -1% in April after an 11-point slide to 3% in March, posting the first negative reading and the lowest since October. The latest figure was up from its recent low of -18% in August. A net -8% of respondents reported higher nominal sales in the past three months, up from -11% in March and registering the highest reading since September 2023. The latest result, however, was below the most recent positive reading of 1% in May 2022 and a peak of 9% in June 2021.

Plans to make capital outlays slid to 18% in April, the lowest level since April 2020, following a two-point increase to 21% in March. These numbers were down from their recent high of 28% in November and a high of 31% in October 2021. Plans to expand the business registered at 9% in April and March, the lowest reading since October, following 12% in February; the latest figure was down from its most recent high of 20% in December but up from a low of 2% in March 2023. Meanwhile, expected credit conditions declined to -7% in April, the lowest reading since September, from -4% in March; these readings were above a low of -11% in November 2023.

On the labor front, forty-seven percent of respondents reported that qualified workers to fill job openings were hard to find in April, unchanged from 47% in March. These numbers were below their recent high of 56% in August, a high of 57% in September 2023, and a peak of 62% in September 2021. A net 13% planned to increase employment in April, slightly up from 12% in March; it was below a high of 26% in May 2022 and a peak of 32% in August 2021. Notably, 34% reported positions not able to be filled in April, down from 40% in March and the lowest reading since September; these figures remained below a high of 51% in May 2022.

Overall earnings trends had remained in negative territory since December 2019. The figure improved to -21% in April, still a poor reading, following a four-point drop to -28% in March. These readings were up from a low of -37% in August; nevertheless, having remained below a high of -18% in March 2023 and a high of -5% in June 2021.

On the pricing front, inflation pressures, while trending down, remained at an inflationary level. The net percent of firms raising their average selling prices slipped to 25% in April, the lowest reading since January, after a six-point decline to 26% in March. These numbers were virtually unchanged from 25% in April 2024 but well below a high of 66% in March 2022. The percentage planning to raise prices eased to a three-month-low 28% in April following a one-point increase to 30% in March; these figures were above 26% in April 2024 but below a high of 33% in March 2024 and a high of 52% in March 2022.

Wage inflation, while relatively high, eased somewhat in the April survey. A net 33% of respondents raised compensation during the last three months, down from 38% reported in the March survey and the same reading as in February and January. It was down from a high of 46% in February 2023 and a peak of 50% in January 2022. A net 17% of firms planned to raise worker compensation in the next three months, down from 19% reported in March and the lowest reading since March 2021; these numbers were below a high of 28% in November, a high of 30% in November 2023, and a high of 32% in October 2022.

The quality of labor was reported as the single most important problem facing small businesses, as reported by 19% of NFIB members in April, March, and February. Taxes were reported as the next most important problem, with 16% reported in April vs. 18% in March. Inflation continued to be a problem facing small businesses, as reported by 14% in April; the figure was down from 16% in March and a peak of 37% in July 2022. Other concerns (in April vs. March) included insurance cost/availability (10% vs. 8%), poor sales (9% vs. 9%), government requirements (9% vs. 8%), the cost of labor (8% vs. 11%), and competition from large businesses (7% vs. 6%).

According to the Small Business Administration, there are 33 million small businesses in the United States, which employ 62 million workers. The NFIB surveys anywhere from 500 to 2000 respondents each month and the typical firm 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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- Apr. NFIB Small Business Optimism Index down 1.6 pts. to 95.8; the fourth straight m/m fall.
- Uncertainty Index down 4 pts. to 92, the lowest since Dec.
- Expectations for economy down 6 pts. to 15%, the lowest since Oct.
- Expected real sales down 4 pts. to -1%, the first negative reading since Oct.
- Net percent of firms raising avg. selling prices down 1 pt. to a 3-month-low 25%.
- Quality of labor (19%), taxes (16%), and inflation (14%) are the top three business concerns.

U.S. NFIB Small Business Optimism Falls to a Six-month Low in April Amid Continued Uncertainty

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Retail gasoline prices for all grades fell to an average $3.25 per gallon (-12.9% y/y) in the week ended May 12 after rising to $3.27 in the previous week, but	 remained above their low of $3.13 in the week of December 9. An earlier high was $3.79 in the week ending April 22, 2024. The all-time high of $5.11 occurred in the week ending June 13, 2022. The retail price for on-highway diesel fuel declined to $3.48 per gallon (-9.7% y/y) in the week of May 12 from $3.50 in the prior week. The latest diesel price stood well below a high of $4.63 in the week ending September 18, 2023 and a peak of $5.81 in the week ending June 20, 2022.

The price of West Texas Intermediate crude oil at $59.04 per barrel (-25.9% y/y) in the week ended May 9 compared to $59.64 per barrel in the prior week. Prices remained below a high of $91.45 in the week of September 29, 2023. The cost of crude oil peaked at $120.46 in the week of June 10, 2022. Yesterday, the price was $61.95 per barrel. The price of European Brent crude oil declined to $62.29 per barrel (-24.9% y/y) in the week of May 9 from $63.50 in the previous week. Prices remained well below a recent high of $95.61 in the week of September 29, 2023 and compared to a peak of $127.40 in the week of June 10, 2022. Yesterday the price was $65.28 per barrel.

Natural gas prices edged up to an average $3.19 per mmbtu (59.5% y/y) in the week ended May 9, after improving to $3.09/mmbtu in the prior week. Prices have been well below earlier highs for four weeks but were well above a low of $1.40/mmbtu in the week of March 15, 2024. Prices peaked at $9.56/mmbtu in the week of August 26, 2022. Yesterday’s price was $3.19/mmbtu.

Gasoline demand rose 3.5% y/y in the four weeks ending May 2 following a 3.2% y/y rise in the prior four weeks. Demand for all petroleum products eased 0.6% y/y in the four weeks ending May 2 after a 0.3% y/y rise in the previous four-week period. Crude oil input to refineries rose 0.4% y/y in the four weeks ending May 2 after a 0.1% y/y slip in the prior four weeks.

Gasoline inventories fell 1.0% y/y in the week ending May 2 after a 0.7% y/y fall in the week ending April 25. Residual fuel oil inventories fell 10.9% y/y in the week of May 2, after an 18.7% y/y fall in the prior week. Crude oil inventories rose 1.3% y/y in the week of May 2 after a 1.4% y/y rise in the previous week.

Measured in days’ supply, gasoline inventories fell w/w to 25.3 days in the week of May 2 from 25.5 days in the prior. The recent low was 22.9 days in the week of November 8. The supply of crude oil eased w/w to 27.6 days in the week of May 2 from 27.9 days in the prior week, and remained below a high of 31.9 days in the week of March 3, 2023.

These data are reported by the Energy Information Administration of the U.S. Department of Energy. The price and supply/demand data can be found in Haver’s **WEEKLY** & **USENERGY** database.

- Gasoline prices decline.
- Crude oil prices ease.
- Natural gas costs rise.

U.S. Energy Prices Are Mixed in Latest Week

Tian Yong Woon

This week, we focus on US-China trade developments in light of the economies’ joint 90-day tariff pause announcement. The extent of the interim tariff cuts has surpassed investors’ expectations. As such, the cuts have understandably boosted sentiment in Chinese equity markets (chart 1), though sentiment had already been buoyed by the increasingly conciliatory tone in US-China communications leading up to the announcement. The tariff cuts are a significant reprieve for both economies. The US is likely to see reduced price pressures on producers and consumers in the near term, while China stands to gain from a temporary easing of growth drags amid ongoing domestic challenges (chart 2).

Turning to the hard numbers, China’s April trade readings were relatively resilient, partly due to significant front-loading ahead of the prior US-imposed 145% tariffs taking effect (chart 3). As shown in chart 4, sharp declines in shipments to the US were more than offset by rising exports to Asian partners, including ASEAN, India, and Taiwan. Looking ahead, with the tariff pause beginning around mid-May, we may not see a full month’s data capturing trade responses to the earlier steep tariffs.

Next, we turn to how investors and analysts are responding. In the May survey, our Blue Chip panellists continued to mark down growth forecasts across several economies relative to end-2024 expectations (chart 5). At the same time, they raised US inflation forecasts and lowered China inflation forecasts (chart 6). However, these forecasts are likely to see favourable revisions in future surveys—barring new adverse developments—especially in light of this week’s positive news.

**Latest US-China trade developments**
Financial market sentiment has remained fairly buoyant despite the flare-up in US-China trade tensions in April. Recent messaging from both sides has moved away from the fiery rhetoric of previous months, adopting a more conciliatory tone aimed at de-escalating rather than intensifying frictions. Encouragingly, developments earlier this week reinforced this shift: the US and China issued a joint statement agreeing to a 90-day cooling-off period as they pursue trade talks following a relationship “reset.” During this time, the US will reportedly reduce its 145% tariffs on Chinese imports to 30% by May 14, while China will lower its 125% tariffs on US imports to 10%. Markets have understandably reacted positively, as seen in chart 1, with this move representing a significant rollback of mutual tariffs and bringing rates much closer to their pre–“Liberation Day” baseline. As a result, the growth-dampening effects from elevated tariffs are now considerably more muted—though it is worth noting that these measures remain temporary.

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The latest developments are indeed cause for optimism, as neither the US nor China stood to benefit from maintaining steep, mutually applied tariffs. For China, this short-term reprieve will help ease what would have been another significant growth headwind, compounding an already challenging set of domestic issues. Among these, China continues to struggle with persistently low inflation—likely stemming from weak demand and a long-standing problem of excess supply, both of which have contributed to downward pressure on prices. This is particularly evident in producer prices, which have been falling for years now, as shown in chart 2. These underlying drivers likely explain why our Blue Chip survey panellists continue to expect weak price pressures in China this year—a topic discussed in more detail later. Also, the sustained price decline not only highlights China's oversupply problem but has also provoked frustration among trading partners who had to absorb the effects.

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**First round effects of US tariffs on China**
Moving next to initial hard numbers reflecting the effects of the US' 145% tariffs before the announced pause, China’s April trade data were released last week. Exports rose a strong 8.1% y/y, as shown in chart 3—well above expectations. This eased initial concerns that the US-imposed tariffs would severely hit trade. While the April export print beat forecasts, it was driven by several underlying factors. A key contributor was significant front-loading by importers ahead of the tariff implementation in mid-April, which likely offset the drop in shipments that followed. As a result, though April’s data capture the early impact of the steep US tariffs, they also reflect a surge in pre-tariff activity, making the figures somewhat noisy. On the import side, shipments to China declined modestly, extending the recent trend of weak import growth. Although the drop was less severe than expected, continued weakness in imports may reflect subdued domestic demand—a concerning signal.

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A closer look at the April data (chart 4) shows that China’s stronger-than-expected export performance was largely driven by shipments to ASEAN economies, India, and Taiwan, where exports posted double-digit y/y growth. This surge reflects several dynamics. First, it underscores the deep integration of regional supply chains and the critical role of Chinese inputs in broader manufacturing processes. Second, it points to these economies’ capacity to absorb some of China’s excess capacity—diverted from the US, which has become a less viable destination due to steep tariffs. However, it remains uncertain whether these markets can sustainably absorb such redirected trade flows. Exports to the EU and Japan also grew in April, though at a more modest pace. Overall, the surge in shipments to regional and European partners more than offset the sharp 21% y/y drop in exports to the US.

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**May Blue Chip survey outlook**
Next, we turn to investor and analyst expectations for global growth amid the seemingly unrelenting stream of trade developments between the US and its trading partners. The latest Blue Chip survey results continue to paint a bleak picture for global growth, with panellists having sharply downgraded their forecasts in the May survey compared to those expressed in December last year, as shown in chart 5. However, given the recent and substantial de-escalation in US-China trade tensions—and barring any new growth-negative developments—panellists may soon be compelled to revise their outlooks upward. Notably, the May survey did not capture this week’s positive trade breakthrough, and a significant portion of the tariff burden has now been temporarily lifted from both economies.

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Lastly, we examine investor and analyst expectations for inflation in light of US-China trade developments prior to this week’s positive news. Understandably, our Blue Chip panellists had significantly revised upward their inflation outlook for the US, given the potentially inflationary effects of the previously announced tariffs. In contrast, the inflation outlook for China has become increasingly pessimistic, largely due to the structural factors discussed in earlier sections. However, with the latest de-escalation in US-China trade tensions, expectations for US inflation—and even those for some other economies—now stand to be revised downward. Whether expectations for Chinese inflation can be meaningfully adjusted upward remains uncertain. Looking further ahead, attention will also turn to US President Trump’s other 90-day pause, specifically concerning his “reciprocal” tariffs on economies other than China. The outcome of these trade discussions will be critical in determining the trajectory of future inflation expectations.

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Asia

Economic Letter from Asia: Tariff Pause

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The U.S. Treasury Department reported a U.S. government budget surplus of $258.4 billion during April, which compared to a surplus of $209.5 billion twelve months earlier. The Action Economics Forecast Survey expected a $264.0 billion surplus in April. During the first seven months of the current fiscal year, the government ran a budget deficit of $1.049 trillion versus a deficit of $855.2 billion it the first seven months of FY’24.

Overall revenues in the first seven months of FY’25 increased 4.9% y/y compared to a 10.3% y/y rise in the first seven months of last year. Individual income tax receipts rose 7.0% y/y compared to last year’s 11.4% y/y gain. The level of corporate tax receipts fell 9.2% y/y so far this year after a 27.5% y/y rise in the first seven months of FY’24. Social insurance revenues increased 3.5% y/y after a 6.6% y/y rise in the first seven months of FY’24, while excise taxes rose 20.0% y/y so far in FY’25 compared to a 14.0% gain in the first seven months of last fiscal year. Customs duties rose 34.4% y/y in the first seven months of FY’25 after a 7.4% y/y decline last fiscal year.

Federal government outlays grew 8.9% y/y so far in FY’25 versus a 5.8% y/y 	rise in the first seven months of FY’24. Defense spending rose 7.8% y/y versus a 7.0% y/y rise in the first seven months of last fiscal year. Social Security outlays rose 8.4% y/y in the first seven months of FY’25 versus an 8.7% increase in the first seven months of last fiscal year. Interest payments rose 12.6% y/y so far in FY’25 after a 41.4% rise in the first seven months of last fiscal year. Health program spending rose 7.1% y/y after rising 0.8% early in FY’24 while Medicare payments surged 18.4% y/y versus a 9.1% y/y rise last year. Income security outlays rose 8.0% y/y early this year compared to a 16.3% y/y decline in the first seven months of FY’24.

Haver's data on Federal Government receipts & outlays are contained in **USECON**. The expectations figure is in the **AS1REPNA** database.

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- Federal receipt growth slows in FY 2025.
- Outlay growth surges this fiscal year.

Economy in Brief: 2008

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