Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090806a.jpg" align="left" border="0" height="265" width="353">
Improvement in the U.S. labor market still is evident, but
lately it's been a halting trend. The latest figures from the Labor
Department indicate that initial claims for unemployment insurance fell
last week to 550,000 and more than reversed the prior week's unrevised
increase. For all of July, claims fell 9.4% from June, but since the
beginning of the month they moved sideways. The four-week moving
average of claims, which smoothes out some of the volatility in the
weekly numbers, slipped to 555,250 which was its lowest level since
late-January. A rise in weekly claims to 580,000 had been expected.
The Bureau of Labor Statistics will release the report on July
nonfarm payrolls tomorrow. During the last ten years, there has been an
86% correlation between the level of initial unemployment insurance
claims and the m/m change in payroll employment.
The Labor Department indicated that the largest increases in
initial claims for the week ending July 25 were in Ohio (+891, +3.6%
y/y), Oklahoma (+644, +121% y/y), Mississippi (+222, -5.2% y/y),
Louisiana (+154, +33.7% y/y), and Alaska (+129, +51.9% y/y), while the
largest decreases were in North Carolina (-9,809, +17.7% y/y), Michigan
(-9,085, +20.9% y/y), Florida (-8,714, +11.9% y/y), Georgia (-6,948,
+61.5% y/y), and Alabama (-3,822, +31.8% y/y).
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090806b.jpg" align="right" border="0" height="265" width="353">
A sideways movement in continuing claims for unemployment
insurance also became apparent last month. For the latest week, they
rose a modest 69,000 and that was enough to reverse the declines during
the prior two weeks. Continuing claims provide an indication of
workers' ability to find employment and the level of 6,310,000
claims is up sharply from the year-ago level. The four-week
average of continuing claims fell back to 6,378,750 and that was the
lowest since late-April. The series dates back to 1966.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090806c.jpg" align="right" border="0" height="265" width="353">
The insured rate of unemployment remained at 4.7% which was
the lowest level since mid-April. During the last ten years, there has
been a 93% correlation between the level of the insured unemployment
rate and the overall rate of unemployment published by the Bureau of
Labor Statistics.
The highest insured unemployment rates in the week ending July
18 were in Puerto Rico (8.0 percent), Michigan (6.7), Oregon (6.5),
Pennsylvania (6.5), Nevada (6.1), Wisconsin (5.7), Connecticut (5.5),
New Jersey (5.5), California (5.4), Rhode Island (5.3), and South
Carolina (5.3). The lowest rates were in South Dakota (1.4) and North
Dakota (1.5), Virginia (2.5), Wyoming (3.0), Texas (3.1), Maine (3.3),
Colorado (3.3), Maryland (3.7), Minnesota (3.8), Florida (4.3),
Mississippi (4.3), New York (4.4) and Georgia (4.4).
The unemployment insurance claims data is available in Haver's
WEEKLY database and the state data is in the REGIONW
database

<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">08/01/09</th>
<th scope="col">07/25/09</th>
<th scope="col">07/18/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Initial Claims</td>
<td>550</td>
<td>588</td>
<td>559</td>
<td>22.2%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>6,310</td>
<td>6,241</td>
<td>88.7%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
<tr class="odd">
<td class="firstcol">Insured Unemployment Rate (%)</td>
<td></td>
<td>4.7</td>
<td>4.7</td>
<td>2.5</td>
<td>2.5</td>
<td>1.9</td>
<td>1.9</td>
</tr>
</tbody>
</table>
</body></html>

Improvement in the U.S. labor market still is evident, but lately it's been a halting trend. The latest figures from the Labor Department indicate that initial claims for unemployment insurance fell last week to 550,000 and more than [...]

U.S. Weekly Claims For Jobless Insurance Inch Lower While Continuing Claims Tick Higher

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090806a.jpg" align="left" border="0" height="265" width="353">
Improvement in the U.S. labor market still is evident, but
lately it's been a halting trend. The latest figures from the Labor
Department indicate that initial claims for unemployment insurance fell
last week to 550,000 and more than reversed the prior week's unrevised
increase. For all of July, claims fell 9.4% from June, but since the
beginning of the month they moved sideways. The four-week moving
average of claims, which smoothes out some of the volatility in the
weekly numbers, slipped to 555,250 which was its lowest level since
late-January. A rise in weekly claims to 580,000 had been expected.
The Bureau of Labor Statistics will release the report on July
nonfarm payrolls tomorrow. During the last ten years, there has been an
86% correlation between the level of initial unemployment insurance
claims and the m/m change in payroll employment.
The Labor Department indicated that the largest increases in
initial claims for the week ending July 25 were in Ohio (+891, +3.6%
y/y), Oklahoma (+644, +121% y/y), Mississippi (+222, -5.2% y/y),
Louisiana (+154, +33.7% y/y), and Alaska (+129, +51.9% y/y), while the
largest decreases were in North Carolina (-9,809, +17.7% y/y), Michigan
(-9,085, +20.9% y/y), Florida (-8,714, +11.9% y/y), Georgia (-6,948,
+61.5% y/y), and Alabama (-3,822, +31.8% y/y).
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090806b.jpg" align="right" border="0" height="265" width="353">
A sideways movement in continuing claims for unemployment
insurance also became apparent last month. For the latest week, they
rose a modest 69,000 and that was enough to reverse the declines during
the prior two weeks. Continuing claims provide an indication of
workers' ability to find employment and the level of 6,310,000
claims is up sharply from the year-ago level. The four-week
average of continuing claims fell back to 6,378,750 and that was the
lowest since late-April. The series dates back to 1966.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090806c.jpg" align="right" border="0" height="265" width="353">
The insured rate of unemployment remained at 4.7% which was
the lowest level since mid-April. During the last ten years, there has
been a 93% correlation between the level of the insured unemployment
rate and the overall rate of unemployment published by the Bureau of
Labor Statistics.
The highest insured unemployment rates in the week ending July
18 were in Puerto Rico (8.0 percent), Michigan (6.7), Oregon (6.5),
Pennsylvania (6.5), Nevada (6.1), Wisconsin (5.7), Connecticut (5.5),
New Jersey (5.5), California (5.4), Rhode Island (5.3), and South
Carolina (5.3). The lowest rates were in South Dakota (1.4) and North
Dakota (1.5), Virginia (2.5), Wyoming (3.0), Texas (3.1), Maine (3.3),
Colorado (3.3), Maryland (3.7), Minnesota (3.8), Florida (4.3),
Mississippi (4.3), New York (4.4) and Georgia (4.4).
The unemployment insurance claims data is available in Haver's
WEEKLY database and the state data is in the REGIONW
database

<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">08/01/09</th>
<th scope="col">07/25/09</th>
<th scope="col">07/18/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Initial Claims</td>
<td>550</td>
<td>588</td>
<td>559</td>
<td>22.2%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>6,310</td>
<td>6,241</td>
<td>88.7%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
<tr class="odd">
<td class="firstcol">Insured Unemployment Rate (%)</td>
<td></td>
<td>4.7</td>
<td>4.7</td>
<td>2.5</td>
<td>2.5</td>
<td>1.9</td>
<td>1.9</td>
</tr>
</tbody>
</table>
German Orders Surge Again 
by <a href="/comment/Brusca.html">Robert
Brusca</a> August 6, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090806d.jpg" align="left" border="0" height="265" width="353">
German new orders rose by 4.5% in June after rising by 4.4% in
May. Orders are up and at a 42% annual rate over three-months and STILL
they stand lower by 23.7% than they did one year ago. In the newly
completed second quarter, orders are up at a 26.8% annual rate. While
real sector sales in mining and MFG are up at a 3.4% pace in the
quarter. Germany is beginning to turn the corner, despite ongoing
weakness in retail sales. 
 

German domestic orders barely nudged higher rising by nearly
rounding error (0.2%) in June. Foreign orders spurted by 8.3% putting
in their second strong month in a row. Exports remain the lifeblood of
the German economy. The report that Hungary&#8217;s industrial output rose
for the second month in a row is good news for Germany, suggesting that
eastern European export markets are among those that are reviving. 
 

In June German real sector sales for consumer goods rose by
0.2% as consumer durables plunged by 3.7%. Capital goods real sales
rose by 1.2% after spurting by 9.2% in May. Intermediates goods sales
rose by 2.8%. German real sector sales were up across the abroad in the
quarter as well with the exception of consumer durables, where sales
fell in the quarter at a hefty -8.4% annual rate. 
 
 
 
 


<table border="0" cellspacing="0" width="100%">
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">German
Orders and Sales By Sector and Origin
</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Real and SA</td>
<td colspan="3">% M/M</td>
<td colspan="5">% Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jun-09</td>
<td>May-09</td>
<td>Apr-09</td>
<td>3-MO</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>YrAgo</td>
<td>QTR-2-Date</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>4.5%</td>
<td>4.4%</td>
<td>0.1%</td>
<td>42.6%</td>
<td>19.4%</td>
<td>-23.7%</td>
<td>-8.0%</td>
<td>26.8%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>8.3%</td>
<td>4.9%</td>
<td>-0.9%</td>
<td>61.2%</td>
<td>27.0%</td>
<td>-24.2%</td>
<td>-11.4%</td>
<td>40.0%</td>
</tr>
<tr>
<td class="firstcol">Domestic</td>
<td>0.2%</td>
<td>4.1%</td>
<td>1.1%</td>
<td>23.8%</td>
<td>11.3%</td>
<td>-23.1%</td>
<td>-3.6%</td>
<td>13.5%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="9">Real
Sector Sales</td>
</tr>
<tr>
<td class="firstcol">MFG/Mining</td>
<td>1.4%</td>
<td>4.6%</td>
<td>-2.0%</td>
<td>16.6%</td>
<td>8.0%</td>
<td>-17.4%</td>
<td>0.9%</td>
<td>3.4%</td>
</tr>
<tr>
<td class="firstcol">Consumer</td>
<td>0.2%</td>
<td>-2.2%</td>
<td>4.0%</td>
<td>8.0%</td>
<td>3.9%</td>
<td>-6.8%</td>
<td>-3.9%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">Consumer Durables</td>
<td>-3.7%</td>
<td>6.1%</td>
<td>-1.2%</td>
<td>3.8%</td>
<td>1.9%</td>
<td>-21.8%</td>
<td>-1.6%</td>
<td>-8.4%</td>
</tr>
<tr>
<td class="firstcol">Consumer Nondurables</td>
<td>0.6%</td>
<td>-3.2%</td>
<td>4.6%</td>
<td>7.8%</td>
<td>3.8%</td>
<td>-4.1%</td>
<td>-4.2%</td>
<td>6.7%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>1.2%</td>
<td>9.2%</td>
<td>-7.3%</td>
<td>10.1%</td>
<td>4.9%</td>
<td>-22.3%</td>
<td>3.9%</td>
<td>1.2%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>2.8%</td>
<td>2.8%</td>
<td>1.5%</td>
<td>32.0%</td>
<td>14.9%</td>
<td>-18.2%</td>
<td>1.2%</td>
<td>9.7%</td>
</tr>
<tr>
<td class="firstcol">All MFG-Sales</td>
<td>1.5%</td>
<td>4.4%</td>
<td>-2.0%</td>
<td>16.6%</td>
<td>8.0%</td>
<td>-17.6%</td>
<td>0.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>
</body></html>

U.S. Weekly Claims For JoblessInsurance Inch Lower While Continuing Claims Tick Higher

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090805h.jpg" width="353">
An easing rate of inventory decumulation is now playing a part in improving the level of factory sector output. During June, factory sector inventories fell 0.8%, the same as they did in May and that compares with 1.0%+ declines extending back to December. During the last three months the 10.5% annualized rate of inventory decumulation was down from 15.9% this past Winter. Much of that deceleration is due, however, to lower oil prices. Excluding oil, factory inventories fell at a 12.4% three-month rate that was just a slight moderation from earlier.
In fact, moderation in inventory decumulation rates is fairly spotty amongst various industries. Showing very modest accumulation were inventories of transportation equipment after declining at a three-month rate of 9.3% as recently as March. In addition, inventories of electrical equipment &amp; appliances have fallen at a slightly reduced 19.3% rate and machinery inventories fell at a somewhat reduced 14.8% rate. Conversely, steep production cuts lowered furniture inventories at a 28.6% rate which near its quickest. Inventories of primary metals also fell at a fairly stable 32.4% pace and computer inventory decumulation accelerated to a 15.1% rate during the last three months. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090805i.jpg" width="353">
The reason for the modest improvement in inventory destocking has been an improved shipment picture. Factory shipments actually rose 1.4% during June and that was the first monthly increase in nearly one year. Increases in the transportation area and in the machinery industries accounted for much of the gain. Most elsewhere the rates of decline in shipments moderated substantially.
Finally, new orders have improved. The 0.4% June increase was the fourth in the last five months. It reflected a sharp monthly rise both in primary metals (-46.5% y/y) and machinery (-26.0% y/y) orders as well as a slight increase in electrical equipment (-30.8% y/y) orders. Bookings of transportation equipment and furniture continued to fall.
The Manufacturers&#39; Shipments, Inventories and Orders (MSIO) data is available in Haver&#39;s USECON database.
The international dimension of productivity and demand shocks in the U.S. economy from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/papers/2009/wp09-09bk.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory Survey</a> (NAICS, %)</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>-0.8</td>
<td>-0.8</td>
<td>-8.5</td>
<td>2.1</td>
<td>3.7</td>
<td>8.2&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>-1.0</td>
<td>-0.9</td>
<td>-11.4</td>
<td>-0.6</td>
<td>2.7</td>
<td>7.9</td>
</tr>
<tr class="odd">
<td class="firstcol">New Orders</td>
<td>0.4</td>
<td>11.1</td>
<td>-24.1</td>
<td>0.1</td>
<td>1.9</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>2.3</td>
<td>0.9</td>
<td>-22.6</td>
<td>3.1</td>
<td>1.2</td>
<td>7.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>1.4</td>
<td>-0.8</td>
<td>-21.4</td>
<td>1.7</td>
<td>1.2</td>
<td>5.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>1.4</td>
<td>-0.0</td>
<td>-21.6</td>
<td>3.7</td>
<td>1.5</td>
<td>6.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Unfilled Orders</td>
<td>-0.9</td>
<td>-0.3</td>
<td>-9.5</td>
<td>3.5</td>
<td>17.1</td>
<td>15.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Transportation</td>
<td>-0.1</td>
<td>-0.7</td>
<td>-14.0</td>
<td>-1.0</td>
<td>8.2</td>
<td>16.0</td>
</tr>
</tbody>
</table>
</body>
</html>

An easing rate of inventory decumulation is now playing a part in improving the level of factory sector output. During June, factory sector inventories fell 0.8%, the same as they did in May and that compares with 1.0%+ declines [...]

U.S. Factory Inventory Decumulation Eases Somewhat

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090805g.jpg" width="353">
The outplacement firm of Challenger, Grey &amp; Christmas indicated that job cut announcements picked up last month. They rose to 97,373 versus the 74,373 jobs lost during June. Nevertheless, the figures remain well below this cycle&#39;s peak level of layoffs which occurred this past January when there were 241,749 cuts. Challenger also reported that announced hiring plans remained near the cycle low.
Announcement of job cuts in the chemical, energy, telecommunications, transportation and financial sectors remained strong. Shallower declines elsewhere were broad-based including the auto, consumer goods, computer, electronics, government, retail and services.
During the last ten years there has been a 67% (inverse) correlation between the three month moving average of announced job cuts and the three month change payroll employment. Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.
The Challenger figures are available in Haver&#39;s SURVEYS database.

<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/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>97,373</td>
<td>74,373</td>
<td>-9.0%</td>
<td>1,223,993</td>
<td>768,264</td>
<td>839,822</td>
</tr>
</tbody>
</table>
</body>
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The outplacement firm of Challenger, Grey & Christmas indicated that job cut announcements picked up last month. They rose to 97,373 versus the 74,373 jobs lost during June. Nevertheless, the figures remain well below this cycle's [...]

Challenger Layoffs Pick Up Slightly Last Month But Remain Moderate

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090805e.jpg" width="353">
The recent sharp improvement in service sector activity stalled last month, but not by much. The Composite Index for the nonmanufacturing sector from the Institute for Supply Management (ISM) slipped to 46.4 from an unrevised reading of 47.0 during June. Though below the break-even level of 50, the latest figure still was near the highest level since September of last year. It fell short of Consensus expectations for a reading of 48.0. A level of the ISM index below 50 indicates declining activity. Since the series&#39; inception in 1997 there has been a 60% correlation between the level of the business activity index in the nonmanufacturing sector and the Q/Q change in real GDP for the services and the construction sectors.
ISM surveys more than 370 purchasing managers in more than 62 industries including law firms, hospitals, government and retailers. The nonmanufacturing survey dates back to July 1997.
The July decline in the overall index was broad-based amongst the component series. The employment index slipped to 41.5 but that still was near the highest level since October. Thirteen percent of firms reported higher employment levels while 26% reported lower levels. Since the series&#39; inception in 1997 there has been a 56% correlation between the level of the ISM nonmanufacturing employment index and the m/m change in payroll employment in the service-producing plus the construction industries.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090805f.jpg" width="353">
The overall business activity index for the service sector also fell to 46.1, but remained near its highest level since September. And slipping just slightly to 48.1 was the new orders series, though it remained well above last November&#39;s low of 35.6. Perhaps suggesting that the level of slack in the service sector has diminished, the supplier delivery index rose to the highest level since January.
The decline in service sector activity brought with it an easing of price pressure. The sharp 12.4 point m/m decline in the price index to 41.3 returned it to the lowest level since April. It was the sharpest one-month decline since last November. A much reduced 13% of firms reported higher prices while a significantly increased 28% reported lower prices. Since its inception ten years ago, there has been a 60% correlation between the price index and the q/q change in the GDP services chain price index.
Beginning with the January 2008 Nonmanufacturing <cite>Report On Business</cite>&reg;, the composite index is calculated as an indicator of the overall economic condition for the non-manufacturing sector. It is a composite index based on the diffusion indices of four of the indicators (business activity, new orders, employment and supplier deliveries) with equal weights. The latest report from the ISM can be found <a href="http://www.ism.ws/ISMReport/NonMfgROB.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"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">July &#39;08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Index</td>
<td>46.4</td>
<td>47.0</td>
<td>49.6</td>
<td>47.4</td>
<td>53.5</td>
<td>55.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Business Activity</td>
<td>46.1</td>
<td>49.8</td>
<td>50.1</td>
<td>47.4</td>
<td>56.0</td>
<td>58.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Employment</td>
<td>41.5</td>
<td>43.4</td>
<td>46.8</td>
<td>43.8</td>
<td>52.0</td>
<td>53.8</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>41.3</td>
<td>53.7</td>
<td>78.8</td>
<td>66.0</td>
<td>63.8</td>
<td>65.3</td>
</tr>
</tbody>
</table>


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The recent sharp improvement in service sector activity stalled last month, but not by much. The Composite Index for the nonmanufacturing sector from the Institute for Supply Management (ISM) slipped to 46.4 from an unrevised reading [...]

U.S. ISM Nonmanufacturing Index Backpedals Slightly And Prices Fall Sharply

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090805d.jpg" align="left" border="0">
Sales fall -Retail sales fell in the Zone
in June. While the growth rat of sales is not decaying further, retail
sales volumes have been dropping at a pace of -2.5% to -2.2% over the
past twelve months. The year-over-year pace for retail sales seems to
have finally stopped falling, based on the trend in the chart above. 
 

The Good and Ugly of it all - Europe has
not suffered the same sort of spurt in the rate of unemployment that we
have in the US. But its level of unemployment remains high and it has
become even more elevated than it was. Consumer confidence has been hit
and consumers, even though better supported in Europe than in the US by
government programs, have cut back spending. Various programs in Europe
to spur auto sales have been successful as the auto registration data
show. So even as retail sales volumes shrink there is a bright spot in
the retail sector even if it is one aided by government actions. It is
always good to see that when given an incentive the consumer can and
does respond &#8211; that is not always the case. 
 

Underlying trends are improving - The PMI
index from Markit on the service sector shows some improvement in the
service sector but not much. Services has improved to a reading of
44.82 in may then they slipped to 44.65 in June and in July they have
risen to 45.69. German showed a rather sharp rise in July along with
Italy while France has back-slipped in July along with Spain. The UK,
an EU member not an EMU member, has just posted its third reading in a
row above 50 for services and is the only large EU country showing
service sector expansion. 
 

 Trends that matter are more favorable -
Since most of the jobs are in services and since jobs determine
spending we can be encouraged about prospects for retail sales progress
from these developments. Retail sales remain the back bone of GDP
growth. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="7" scope="col">Euro Area Retail Sales Volume </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">M/M</td>
<td colspan="3">Saar</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Jun-09</td>
<td>May-09</td>
<td>Apr-09</td>
<td>3-Mo</td>
<td>6-MO</td>
<td>12-Mo</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro Area Total</td>
<td>-0.2%</td>
<td>-0.2%</td>
<td>-0.2%</td>
<td>-2.2%</td>
<td>-2.5%</td>
<td>-2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food, Beverages, Tobacco</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>-0.2%</td>
<td>-1.8%</td>
<td>-2.1%</td>
<td>-2.1%</td>
</tr>
<tr class="even">
<td colspan="7">Registrations:</td>
</tr>
<tr class="odd">
<td class="firstcol">Motor Vehicle Registration</td>
<td>6.4%</td>
<td>2.3%</td>
<td>6.3%</td>
<td>79.6%</td>
<td>45.1%</td>
<td>10.6%</td>
</tr>
<tr class="even">
<td colspan="7" class="firstcol">Non-Food Country Detail:
Volume</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>-1.8%</td>
<td>-1.3%</td>
<td>1.4%</td>
<td>-6.9%</td>
<td>-5.5%</td>
<td>-1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">UK(EU)</td>
<td>1.2%</td>
<td>-1.0%</td>
<td>0.8%</td>
<td>4.0%</td>
<td>1.3%</td>
<td>2.8%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">The EA 13 countries are Austria,
Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,
the Netherlands, Portugal, Slovenia</td>
</tr>
</tbody>
</table>
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Sales fall -Retail sales fell in the Zone in June. While the growth rat of sales is not decaying further, retail sales volumes have been dropping at a pace of -2.5% to -2.2% over the past twelve months. The year-over-year pace for [...]

EMU Retail and Auto Sales: the Good and the Ugly

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090805a.jpg" align="left" border="0">
Deterioration in the U.S. labor market continued last month,
just not at the same rate as it had. The latest report from the payroll
processor ADP, in their National Employment Report, indicated that
private nonfarm payrolls fell 371,000 during July after a revised
463,000 June decline that was slightly shallower than reported
initially. The latest reading was the eighteenth consecutive monthly
decline, but the monthly change was the smallest since October of last
year and roughly half the worst this past March. The three-month
annualized rate of decline in payrolls also eased to 4.6% from its
March peak of 7.1%.
ADP compiled the estimate from its database of individual
companies' payroll information. Macroeconomic Advisers, LLC, the St.
Louis economic consulting firm, developed the methodology for
transforming the raw data into an economic indicator.



The U.S. Bureau of Labor Statistics will report July
payroll employment this Friday. For
comparison, June's 463,000 worker decline in ADP's measure of private
nonfarm payrolls was accompanied by 415,000 job losses in the BLS
measure of private sector payrolls.
According to ADP and Macro-Advisers, the correlation between the
monthly percentage change in the ADP estimate and that in the BLS data
is 0.90.

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090805b.jpg" align="right" border="0">
ADP reported that medium-sized payrolls remained in forefront
of July job loss. They fell another 159,000 (-5.8% y/y) followed by a
138,000 (-4.4% y/y) worker decline in small-sized payrolls. Large
payrolls fell by 74,000 (-5.7% y/y). In a switch from the prior
pattern, the steady decline in service producing industry employment
outpaced that in the goods sector. The 202,000 (-3.3% y/y) drop was the
sixteenth consecutive monthly decline and in percentage terms roughly
equaled the prior three months. These recent declines are, however,
roughly half the worst from December through March. Medium-sized
service payrolls fell 86,000 (-3.7% y/y) and small-sized payrolls
dropped 80,000 (-2.9% y/y). Large service producing payrolls dropped by
36,000 (-3.5% y/y).


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090805c.jpg" align="right" border="0">
In the goods producing sector there were 169,000 fewer jobs in
July (-13.1% y/y). Here, the three-month rate of change eased to a
still hefty -13.1% from -17.1% at its worst. Details show that
medium-sized payrolls fell 73,000 (-13.7% y/y) followed by a 58,000
(-12.5% y/y) shortfall in small-sized payrolls. Large payrolls fell
38,000 (-13.1% y/y). In the manufacturing sector alone, payrolls fell
99,000 (-12.8% y/y).


The ADP National Employment Report data is maintained in
Haver's 
USECON database;
historical figures date back to December 2000. The figures in this
report cover only private sector jobs and exclude employment in the
public sector, which rose an average 11,083 during the last twelve
months.
<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/@EB/@EB25/@EB25.HTM">LAXEPA@USECON</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Nonfarm Private Payroll
Employment (m/m Chg., 000s)</td>
<td>-371</td>
<td>-463</td>
<td>-5.2%</td>
<td>-0.5%</td>
<td>1.2%</td>
<td>2.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Small
Payroll (1-49)</td>
<td>-138</td>
<td>-169</td>
<td>-4.4</td>
<td>-0.0</td>
<td>1.6</td>
<td>2.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Medium
Payroll (50-499)</td>
<td>-159</td>
<td>-203</td>
<td>-5.8</td>
<td>-0.5</td>
<td>1.2</td>
<td>1.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Large
Payroll (&gt;500)</td>
<td>-74</td>
<td>-91</td>
<td>-5.7</td>
<td>-1.6</td>
<td>-0.1</td>
<td>0.4</td>
</tr>
</tbody>
</table>
</body></html>

Deterioration in the U.S. labor market continued last month, just not at the same rate as it had. The latest report from the payroll processor ADP, in their National Employment Report, indicated that private nonfarm payrolls fell [...]

ADP Report: Rate Of Job Loss Smallest Since October

Sharply rising share of AI-related jobs

Inflationary impact of surge in oil prices larger in Europe than in the US

Futures market thinks the price of oil will recede significantly over the next six months

Recent pickup in US defense orders could help support overall growth ahead

Cost of transporting crude oil has soared to series high

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

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

Is recent drop in sentiment signaling softer growth ahead?

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

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

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

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Winnie Tapasanun

260501A9.jpg

260501B9.jpg

The ISM U.S. manufacturing PMI held at a lower-than-expected 52.7 in April and March following a 0.2-point easing to 52.4 in February, data from the Institute for Supply Management showed. The April reading, above the 50 expansion-contraction dividing line, indicated the U.S. manufacturing sector expanded for the fourth successive month. A reading of 53.0 for April had been expected in the Action Economics Forecast Survey. The April manufacturing PMI, while above a contraction-level 48.8 in April 2025 and a low of 47.0 in October 2024, remained below a peak of 63.8 in March 2021.

The production index slipped to 53.4 in April from 55.1 in March, indicating production expanded for the sixth consecutive month but at the slowest pace since December. The index was above its recent low of 44.8 in April 2025 but below a peak of 66.5 in March 2021. In April, 28.3% (NSA) of respondents reported higher production while 13.0% reported lower production. The new orders index rebounded to 54.1 in April from 53.5 in March, signaling new orders grew for the fourth straight month following four successive months of contraction. The index remained well above a low of 41.8 in January 2023. In April, an increased 31.6% (NSA) of respondents reported higher new orders while 15.2% reported declines. The inventories index increased to 49.0 in April from 47.1 in March, marking the 12th straight month of contraction. The index was below its recent high of 52.7 in March 2025 but above a low of 43.8 in October 2024. Meanwhile, the supplier deliveries index rose to 60.6 in April from 58.9 in March, indicating slower delivery performance for the fifth consecutive month after faster deliveries in November. In April, 22.6% (NSA) of respondents reported slower delivery speeds while only 1.5% reported faster speeds.

On the labor front, the employment index slid to 46.4 in April from 48.7 in March, showing employment contracted for the 31st straight month and at the lowest level since December following a brief expansion in September 2023. The index was above its recent low of 44.1 in November 2025 but below a high of 49.7 in January 2025 and a high of 56.5 in March 2022. In April, 17.5% (NSA) of respondents reported higher employment while 20.2% reported less hiring.

On the pricing front, the prices paid index jumped to 84.6 (NSA) in April from 78.3 in March, indicating raw materials prices rose for the 19th consecutive month and at the fastest pace since April 2022. The index remained well above a low of 39.4 in December 2022 but below a high of 87.1 in March 2022 and a peak of 92.1 in June 2021. In April, an increased 70.3% (NSA) of respondents reported higher prices while only 1.2% reported price declines.

In other ISM series not included in the composite index, the new export orders index fell to 47.9 in April from 49.9 in March, indicating new export orders contracted for the second successive month after expanding in February and January. The index was up from a low of 40.1 in May 2025 but down from its recent high of 52.4 in January 2025 and a high of 57.1 in February 2022. The imports index decreased to 50.3 in April from 52.6 in March, suggesting imports expanded at the weakest pace in three months. The index was below its recent high of 54.9 in February but above a low of 39.9 in May 2025. The order backlog index declined to 51.4 (NSA) in April from 54.4 in March, showing backlog levels grew at the slowest pace in four months. The index was well above a low of 37.5 in May 2023 but far below a peak of 70.6 in May 2021.

The ISM figures are based on responses from over 400 purchasing and supply executives from 18 industries, which are weighted according to each industry’s contribution to GDP. These data are diffusion indexes where a reading above 50 indicates expansion; below 50 indicates contraction. The ISM Manufacturing PMI is a composite index based on the diffusion indexes of five of the indexes (seasonally adjusted) with equal weights: New Orders, Production, Employment, Supplier Deliveries, and Inventories. The figures from the Institute for Supply Management can be found in Haver’s **USECON** database; further detail is found in the **SURVEYS** database. The expectations number is available in Haver’s **AS1REPNA** database.

260501C9.jpg

260501D9.jpg

- ISM Mfg. PMI at 52.7 in Apr. and Mar.; fourth consecutive month of expansion.
- Production (53.4) expands for the sixth straight mth.; new orders (54.1) for the fourth successive mth.
- Employment (46.4) contracts for the 31st straight mth.; at a four-month low.
- Prices Index (84.6) highest since Apr. ’22; prices rising for the 19th consecutive mth.
- Exports (47.9) contract; imports (50.3) still grow but at a three-month low.

U.S. ISM Manufacturing PMI Steady in April; New Orders and Production Growing; Employment Contracting

260501E.jpg

GDP growth in Europe in the first quarter of 2026 continued to be weak. First-quarter annualized growth at 0.6% followed a fourth-quarter annualized growth rate at 0.8%. Year-over-year growth in the monetary union logged a 0.8% annual rate; that represents a slowdown from earlier quarters where the growth rates were generally above 1% and more on the order of 1.5% at an annual rate.

**Early GDP reporters in EMU**
Among the 8 early reporters of GDP in the first quarter, in the table, only three posted growth pickups compared to the previous quarter. Those were Belgium, with a growth rate in the first quarter annualized at 0.8%, up from 0.2% in Q4 2025; Germany, where the growth rate picked up to 1.3% in the first quarter from 1.0% in Q4; and Ireland, with a dubious acceleration of growth to a -7.8% annualized rate, improving from -14.5% annualized in Q4.

**Big country, small country**
The table also looks at growth divided into the four largest economies in the monetary union versus the rest of the monetary union. There we see a growth rate of 1% for the four largest economies, a slowdown from 1.3% in the fourth quarter. For the rest of the monetary union, the growth rate held at 0.5% in the first quarter, the same rate logged in the fourth quarter.

**Median growth**
The median growth rate among these reporters was 0.6%, the same as for the weighted growth rate in the EMU, while the median in the fourth quarter was 1.5% compared to a weighted growth rate for the monetary union at 0.8%.

**Ranking the growth rates vs. their own histories**
The ranking data on the far-right column rank growth in the first quarter on its year-over-year growth pace. On a historic profile, we see only three monetary union reporters with growth in the first quarter at a rate that exceeds median on data back to the 1990s. Those economies are Italy with a 52.2 percentile ranking, Spain with a 53.3 percentile ranking, and Portugal with a 65.2 percentile ranking. For the monetary union as a whole, the growth rate rank is 28.3%, placing it at a ranking between its lower 1/4 and lower 1/3. The median for the monetary union among these early reporting countries is a 32.6 percentile growth rate, and these compared to the United States where the growth rate has a 60.2 percentile standing.

Other data sources report that growth in the services sector has been extremely weak, while there actually has been some resilience in manufacturing. That is somewhat surprising given the Middle East War that affects the world trade and global supply chains. New disruptions because of war in the Middle East are a new fact of life. However, war itself sometimes is a stimulant to some forms of growth. These sector trends will be for us to watch, but for right now growth rates are not impressive and they're certainly not gaining momentum.

260501.jpg

Europe

GDP Remains Weak in EMU

Andrew Cates

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

260430Z1.jpg

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

260430Z2.jpg

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

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

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

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

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

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Charts of the Week: Tension Beneath the Surface

Michael J. Moran

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

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

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

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

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

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

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

Q1 GDP: Weathering the Challenges; Trend-Like Growth

Sandy Batten

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

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

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

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

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

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

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

Economy in Brief

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