Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091030h.jpg" align="right" border="0" height="265" width="353">Employment
compensation picked up slightly last quarter, but high unemployment
dragged down the y/y change to its lowest on record. (The series dates
back to 1980). The total employment cost index for private industry
workers rose 0.5% during 3Q following gains of 0.2% during the prior
two quarters. The latest rise about matched Consensus
expectations.Improved wage and salary growth provided most
of the "oomph" to last quarter's gain with a 0.5% rise. However, here
again, the y/y gain of 1.3% was a new record low. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091030i.jpg" align="right" border="0" height="265" width="353">
In the factory sector
wages rose just 1.2% y/y but in the education &amp; health care
sectors wages rose a still-modest 1.8%. In the goods producing sector
wage growth fell to just 1.2% and in education &amp; health
services they rose 1.8%.Total benefit costs in private sector
increased just 0.3% and the 1.0% y/y gain was a record low. What y/y
strength there was was led by a 2.3% gain in production, transportation
&amp; materials handling industries and a 1.6% rise in services
occupations. The cost of health benefits showed a stable 4.7% rise in
the latest 12 months.&nbsp;· The employment cost index figures are
available in Haver's USECON database.Financial
Intermediaries and Monetary Economics from the Federal
Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/staff_reports/sr398.pdf">here.</a>&nbsp;
<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/USECON/@EB/@EB08/@EB08.HTM">ECI
- Private Industry Workers</a> (%)</th>
<th scope="col">3Q '09</th>
<th scope="col">2Q '09</th>
<th scope="col">1Q '09</th>
<th scope="col">3Q 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">Compensation</td>
<td>0.5</td>
<td>0.2</td>
<td>0.2</td>
<td>1.3</td>
<td>2.8</td>
<td>3.1</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wages &amp;
Salaries</td>
<td>0.5</td>
<td>0.2</td>
<td>0.2</td>
<td>1.3</td>
<td>3.0</td>
<td>3.4</td>
<td>&nbsp;2.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Benefit Costs</td>
<td>0.3</td>
<td>0.2</td>
<td>0.2</td>
<td>1.0</td>
<td>2.6</td>
<td>2.4</td>
<td>2.9</td>
</tr>
</tbody>
</table>
</body></html>

Employment compensation picked up slightly last quarter, but high unemployment dragged down the y/y change to its lowest on record. (The series dates back to 1980). The total employment cost index for private industry workers rose [...]

U.S. Employment Cost Index Rose Slightly Q/Q But Reaches A New Low Y/Y

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091030f.jpg" width="353">
Consumer sentiment for all of October fell from September but the trend during the month improved. The University of Michigan indicated that its October reading of consumer sentiment of 70.6 was improved from the mid-month reading of 69.4 but both figures were down from a September figure of 73.5. Despite the latest decline, sentiment remained up by roughly one-quarter from the low last fall. Consensus expectations had been for a full-month figure of 70. During the last ten years, there has been a 69% correlation between the level of sentiment and the growth in real consumer spending during the next five months.
The October reading of expected economic conditions fell a sharp 6.7% m/m. It was shallower-than reported at mid-month but still erased much of September&#39;s gain. The latest decline was led by a 16.5% drop in expected business conditions during the next five years which reversed much of the improvement since July. Expected conditions during the next year fell just modestly and the index remained more-than-double the February low. Conversely, the expected change in personal finances improved slightly with the index rising nearly one-quarter from the low during 2008 with the higher stock market.
The reading of current economic conditions increased moderately. The readings of personal finances and of buying conditions for large household goods held steady m/m, but the latter was up by one-third from the November trough due to low prices.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091030g.jpg" width="353">
Expected price inflation during the next year amounted to 3.2%, up slightly from September but down from a high of 7.0% during May of last year. A low of 0.3% inflation was expected by 25% of respondents but 5.0% inflation was expected by another quarter. Inflation of 3.2% during the next 5-10 years was the mean expectation.
The opinion of government policy, which may eventually influence economic expectations, fell from September and remained near the lowest level since February. Thirty-two percent of respondents thought that a poor job was being done by government. A reduced 18% thought that a good job was being done, down from 30% in April.
The University of Michigan survey data is not seasonally adjusted. The reading is based on telephone interviews with about 500 households at month-end. These results are based on about 300 interviews. The summary indexes are in Haver&#39;s USECON database with details in the proprietary UMSCA database.
Optimism Amid Uncertainty from the Federal Reserve Bank of Dallas is available <a href="http://dallasfed.org/research/update-us/index.cfm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">October (Final)</th>
<th scope="col">Mid-October</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Oct 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">Consumer Sentiment</td>
<td>70.6</td>
<td>69.4</td>
<td>73.5</td>
<td>65.7</td>
<td>22.6%</td>
<td>63.8</td>
<td>85.6</td>
<td>87.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>73.7</td>
<td>72.1</td>
<td>73.4</td>
<td>66.6</td>
<td>26.2</td>
<td>73.7</td>
<td>101.2</td>
<td>105.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>68.6</td>
<td>67.6</td>
<td>73.5</td>
<td>65.0</td>
<td>20.4</td>
<td>57.3</td>
<td>75.6</td>
<td>75.9</td>
</tr>
</tbody>
</table>
</body>
</html>

Consumer sentiment for all of October fell from September but the trend during the month improved. The University of Michigan indicated that its October reading of consumer sentiment of 70.6 was improved from the mid-month reading of [...]

Michigan Consumer Sentiment Improves From Mid-Month

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091030e.jpg" align="left" border="0" height="265" width="353">
German retail sales fell for the second month in a row. For Q3
sales are now falling at a 4.3% annual rate. Real ex auto sales are
dropping in the quarter at a pace of -3.2%. All three month growth
rates for key retail categories are declining as are six month growth
rates. For most categories the decline in sales is at a steeper annual
rate over three months than for six months. With euro Area unemployment
at a 10 ½ year high and German firms cutting back on working hours,
consumption in Germany has pulled back. This an important issue since
the consumer confidence index has been one of the strongest sector
indices in the EMU. There is no telling how much the Europe recovery
could be set back by a pessimistic consumer.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th scope="col" colspan="8">German Real and Nominal Retail Sales</th>
<th scope="col">QTR</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"> Nominal</td>
<td> Sep-09</td>
<td> Aug-09</td>
<td> Jul-09</td>
<td> 3-MO</td>
<td> 6-MO</td>
<td> 12-MO</td>
<td> YrAgo</td>
<td> Saar</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail Ex auto</td>
<td> -0.5%</td>
<td> -1.2%</td>
<td>0.7%</td>
<td> -4.0%</td>
<td> -3.2%</td>
<td> -4.8%</td>
<td>3.1%</td>
<td> -4.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; MV and Parts</td>
<td> -0.5%</td>
<td> -1.8%</td>
<td>1.5%</td>
<td> -3.4%</td>
<td> -3.9%</td>
<td> -4.0%</td>
<td> -0.2%</td>
<td> -3.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Food Bev &amp;
Tobacco</td>
<td> -3.0%</td>
<td>3.1%</td>
<td> -0.7%</td>
<td> -2.8%</td>
<td> -1.6%</td>
<td> -3.8%</td>
<td>2.4%</td>
<td> -3.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Clothing footwear</td>
<td>2.4%</td>
<td> -7.0%</td>
<td>3.6%</td>
<td> -5.3%</td>
<td> -3.1%</td>
<td> -5.1%</td>
<td>1.4%</td>
<td> -5.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Car registrations
(units)</td>
<td>-2.7%</td>
<td> -9.5%</td>
<td>-5.8%</td>
<td> -52.7%</td>
<td>-7.9%</td>
<td>20.9%</td>
<td>-1.7%</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="9"> Real</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail Ex auto</td>
<td> -0.5%</td>
<td> -1.8%</td>
<td>1.5%</td>
<td> -3.4%</td>
<td> -3.9%</td>
<td> -4.0%</td>
<td> -0.2%</td>
<td> -3.2%</td>
</tr>
</tbody>
</table>
</body></html>

German retail sales fell for the second month in a row. For Q3 sales are now falling at a 4.3% annual rate. Real ex auto sales are dropping in the quarter at a pace of -3.2%. All three month growth rates for key retail categories are [...]

German Retail Sales Sink For Second Month In A Row

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091030a.jpg" align="right" border="0" height="265" width="353">
The weak job market continued last month to exact its toll on
labor income growth. Personal income slipped
marginally during September after two months of just 0.1% increase. The
August gain was revised down from 0.2% and the latest figure about
matched Consensus forecasts. These weak increases wholly reflect the
current recession. The good news, however, was that the worst
performance of early this year is over. On a three-month basis income
grew 0.2% during 3Q after a 0.4% 2Q gain. These figures compare to 2.6%
and 0.9% declines during 1Q and 4Q'08, respectively.
Job loss continued to account for recent weakness in income
growth, but here again the recent numbers are "less bad." Wages
&amp; salaries fell 0.2% last month and reversed a 0.2% August
increase. Year-to-year wages fell 5.2% after a 2.1% 2008 increase.
Downward momentum, however, has eased. During the last three months,
wages were roughly unchanged with the lessened rate of job loss
reported in the monthly reports on payroll employment. Wages in the
factory sector fell 0.2% following the 0.6% August drop. Yet, the
three-month change fell to -0.1% from -2.7% and -6.9% during 2Q and 1Q.
In the service sector wages slipped 0.1% last month but posted a modest
increase during 3Q after declines during the prior three quarters.
Offsetting this improvement has been a weaker government sector where
wages ticked up just 0.4% during the last three months after 1.1% and
1.6% increases during the prior twp three-month periods.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091030b.jpg" align="right" border="0" height="265" width="353">
Even the growth in unemployment insurance payments slowed
recently. A 2.7% September decline was part of a 3Q slowing to 0.9%
growth from gains between 20%29 and 65% during each of the prior four
quarters. Interest income continued to show the effects of lower rates
and fell for the third straight month while dividend income fell by
one-quarter versus last year as corporate profits evaporated.
Disposable personal income fell slightly
and reversed the August uptick. Adjusted for inflation, real disposable
income fell for the fourth straight month after having been lifted this
spring by tax cuts. The saving rate increased modestly m/m to 3.3% but
remained down from the May peak of 5.9%. The rate remained up slightly
from last year and double the 2007 level.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091030c.jpg" align="right" border="0" height="265" width="353">
Personal spending fell 0.5% after having
been lifted during August by the "cash for clunkers" program for new
motor vehicle purchases. Durables spending more-than reversed the
August rise with a 7.0% decline (-4.2% y/y). Spending on motor vehicles
fell 19.5% (-5.9% y/y) and reversed all of the August gain. Spending on
furniture rose a modest 0.4% (-4.7% y/y) and has risen slightly during
the last three months. Spending on nondurables rose 0.7% (-3.7% y/y) as
outlays on apparel rose for the third straight month (-1.7% y/y).
Outlays on services increased 0.2% (1.5% y/y) as spending on health
care continued quite strong and posted a 5.6% gain versus last year.
Spending in restaurants and on recreation remained negative.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091030d.jpg" align="left" border="0" height="265" width="353">
Prices increased 0.1% during September reflecting an easier
1.2% rise (-29.8% y/y) rise in gasoline costs and another rise is in
store for October. Nevertheless, the PCE chain price index
still was down by 0.5% versus last year. Less food-and-energy, "core"
prices were again soft and posted their fifth consecutive 0.1%
increase. Goods prices rose 0.2% (-1.7% y/y) after two months of
decline while prices for services gained a steady 1.0% y/y.
The personal income &amp; consumption figures are
available in Haver's USECON and USNA
databases.
Regulatory reform is the title of
yesterday's speech by Fed Governor Daniel K. Tarullo and it can be
found <a href="http://www.federalreserve.gov/newsevents/testimony/tarullo20091029a.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/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition
of Personal Income</a> (%)&nbsp;</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>-0.0</td>
<td>0.1</td>
<td>0.1</td>
<td>-2.8</td>
<td>2.9</td>
<td>5.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Disposable
Personal Income</td>
<td>-0.0</td>
<td>0.1</td>
<td>-0.1</td>
<td>0.5</td>
<td>3.9</td>
<td>4.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption
Expenditures</td>
<td>-0.5</td>
<td>1.4</td>
<td>0.2</td>
<td>-0.3</td>
<td>3.1</td>
<td>5.4</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>3.3</td>
<td>2.8</td>
<td>4.0</td>
<td>2.2 (Sept. '08)</td>
<td>2.6</td>
<td>1.7</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>0.1</td>
<td>0.3</td>
<td>0.0</td>
<td>-0.5</td>
<td>3.3</td>
<td>2.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food
&amp; energy</td>
<td>0.1</td>
<td>0.1</td>
<td>0.1</td>
<td>1.3</td>
<td>2.4</td>
<td>2.4</td>
</tr>
</tbody>
</table>
</body></html>

The weak job market continued last month to exact its toll on labor income growth. Personal income slipped marginally during September after two months of just 0.1% increase. The August gain was revised down from 0.2% and the latest [...]

U.S. Personal Income Slips Marginally And Spending Declines

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091030a.jpg" align="right" border="0" height="265" width="353">
The weak job market continued last month to exact its toll on
labor income growth. Personal income slipped
marginally during September after two months of just 0.1% increase. The
August gain was revised down from 0.2% and the latest figure about
matched Consensus forecasts. These weak increases wholly reflect the
current recession. The good news, however, was that the worst
performance of early this year is over. On a three-month basis income
grew 0.2% during 3Q after a 0.4% 2Q gain. These figures compare to 2.6%
and 0.9% declines during 1Q and 4Q'08, respectively.
Job loss continued to account for recent weakness in income
growth, but here again the recent numbers are "less bad." Wages
&amp; salaries fell 0.2% last month and reversed a 0.2% August
increase. Year-to-year wages fell 5.2% after a 2.1% 2008 increase.
Downward momentum, however, has eased. During the last three months,
wages were roughly unchanged with the lessened rate of job loss
reported in the monthly reports on payroll employment. Wages in the
factory sector fell 0.2% following the 0.6% August drop. Yet, the
three-month change fell to -0.1% from -2.7% and -6.9% during 2Q and 1Q.
In the service sector wages slipped 0.1% last month but posted a modest
increase during 3Q after declines during the prior three quarters.
Offsetting this improvement has been a weaker government sector where
wages ticked up just 0.4% during the last three months after 1.1% and
1.6% increases during the prior twp three-month periods.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091030b.jpg" align="right" border="0" height="265" width="353">
Even the growth in unemployment insurance payments slowed
recently. A 2.7% September decline was part of a 3Q slowing to 0.9%
growth from gains between 20%29 and 65% during each of the prior four
quarters. Interest income continued to show the effects of lower rates
and fell for the third straight month while dividend income fell by
one-quarter versus last year as corporate profits evaporated.
Disposable personal income fell slightly
and reversed the August uptick. Adjusted for inflation, real disposable
income fell for the fourth straight month after having been lifted this
spring by tax cuts. The saving rate increased modestly m/m to 3.3% but
remained down from the May peak of 5.9%. The rate remained up slightly
from last year and double the 2007 level.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091030c.jpg" align="right" border="0" height="265" width="353">
Personal spending fell 0.5% after having
been lifted during August by the "cash for clunkers" program for new
motor vehicle purchases. Durables spending more-than reversed the
August rise with a 7.0% decline (-4.2% y/y). Spending on motor vehicles
fell 19.5% (-5.9% y/y) and reversed all of the August gain. Spending on
furniture rose a modest 0.4% (-4.7% y/y) and has risen slightly during
the last three months. Spending on nondurables rose 0.7% (-3.7% y/y) as
outlays on apparel rose for the third straight month (-1.7% y/y).
Outlays on services increased 0.2% (1.5% y/y) as spending on health
care continued quite strong and posted a 5.6% gain versus last year.
Spending in restaurants and on recreation remained negative.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091030d.jpg" align="left" border="0" height="265" width="353">
Prices increased 0.1% during September reflecting an easier
1.2% rise (-29.8% y/y) rise in gasoline costs and another rise is in
store for October. Nevertheless, the PCE chain price index
still was down by 0.5% versus last year. Less food-and-energy, "core"
prices were again soft and posted their fifth consecutive 0.1%
increase. Goods prices rose 0.2% (-1.7% y/y) after two months of
decline while prices for services gained a steady 1.0% y/y.
The personal income &amp; consumption figures are
available in Haver's USECON and USNA
databases.
Regulatory reform is the title of
yesterday's speech by Fed Governor Daniel K. Tarullo and it can be
found <a href="http://www.federalreserve.gov/newsevents/testimony/tarullo20091029a.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/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition
of Personal Income</a> (%)&nbsp;</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>-0.0</td>
<td>0.1</td>
<td>0.1</td>
<td>-2.8</td>
<td>2.9</td>
<td>5.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Disposable
Personal Income</td>
<td>-0.0</td>
<td>0.1</td>
<td>-0.1</td>
<td>0.5</td>
<td>3.9</td>
<td>4.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption
Expenditures</td>
<td>-0.5</td>
<td>1.4</td>
<td>0.2</td>
<td>-0.3</td>
<td>3.1</td>
<td>5.4</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>3.3</td>
<td>2.8</td>
<td>4.0</td>
<td>2.2 (Sept. '08)</td>
<td>2.6</td>
<td>1.7</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>0.1</td>
<td>0.3</td>
<td>0.0</td>
<td>-0.5</td>
<td>3.3</td>
<td>2.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food
&amp; energy</td>
<td>0.1</td>
<td>0.1</td>
<td>0.1</td>
<td>1.3</td>
<td>2.4</td>
<td>2.4</td>
</tr>
</tbody>
</table>
German Retail Sales Sink For
Second Month In A Row 
by <a href="/comment/Brusca.html">Robert
Brusca</a> October 30, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091030e.jpg" align="left" border="0" height="265" width="353">
German retail sales fell for the second month in a row. For Q3
sales are now falling at a 4.3% annual rate. Real ex auto sales are
dropping in the quarter at a pace of -3.2%. All three month growth
rates for key retail categories are declining as are six month growth
rates. For most categories the decline in sales is at a steeper annual
rate over three months than for six months. With euro Area unemployment
at a 10 ½ year high and German firms cutting back on working hours,
consumption in Germany has pulled back. This an important issue since
the consumer confidence index has been one of the strongest sector
indices in the EMU. There is no telling how much the Europe recovery
could be set back by a pessimistic consumer.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th scope="col" colspan="8">German
Real and Nominal Retail Sales</th>
<th scope="col">QTR</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"> Nominal</td>
<td> Sep-09</td>
<td> Aug-09</td>
<td> Jul-09</td>
<td> 3-MO</td>
<td> 6-MO</td>
<td> 12-MO</td>
<td> YrAgo</td>
<td> Saar</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail Ex auto</td>
<td> -0.5%</td>
<td> -1.2%</td>
<td>0.7%</td>
<td> -4.0%</td>
<td> -3.2%</td>
<td> -4.8%</td>
<td>3.1%</td>
<td> -4.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; MV and Parts</td>
<td> -0.5%</td>
<td> -1.8%</td>
<td>1.5%</td>
<td> -3.4%</td>
<td> -3.9%</td>
<td> -4.0%</td>
<td> -0.2%</td>
<td> -3.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Food Bev &amp;
Tobacco</td>
<td> -3.0%</td>
<td>3.1%</td>
<td> -0.7%</td>
<td> -2.8%</td>
<td> -1.6%</td>
<td> -3.8%</td>
<td>2.4%</td>
<td> -3.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Clothing footwear</td>
<td>2.4%</td>
<td> -7.0%</td>
<td>3.6%</td>
<td> -5.3%</td>
<td> -3.1%</td>
<td> -5.1%</td>
<td>1.4%</td>
<td> -5.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Car registrations
(units)</td>
<td>-2.7%</td>
<td> -9.5%</td>
<td>-5.8%</td>
<td> -52.7%</td>
<td>-7.9%</td>
<td>20.9%</td>
<td>-1.7%</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="9">
Real</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail Ex auto</td>
<td> -0.5%</td>
<td> -1.8%</td>
<td>1.5%</td>
<td> -3.4%</td>
<td> -3.9%</td>
<td> -4.0%</td>
<td> -0.2%</td>
<td> -3.2%</td>
</tr>
</tbody>
</table>
Michigan Consumer Sentiment
Improves From Mid-Month 
by <a href="/comment/Moeller.html">Tom
Moeller</a> October 30, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091030f.jpg" align="left" border="0" height="265" width="353">
Consumer sentiment for all of October fell from September but
the trend during the month improved. The University of Michigan
indicated that its October reading of consumer sentiment of 70.6 was
improved from the mid-month reading of 69.4 but both figures were down
from a September figure of 73.5. Despite the latest decline, sentiment
remained up by roughly one-quarter from the low last fall. Consensus
expectations had been for a full-month figure of 70. During the last
ten years, there has been a 69% correlation between the level of
sentiment and the growth in real consumer spending during the next five
months.
The October reading of expected economic conditions fell a
sharp 6.7% m/m. It was shallower-than reported at mid-month but still
erased much of September's gain. The latest decline was led by a 16.5%
drop in expected business conditions during the next five years which
reversed much of the improvement since July. Expected conditions during
the next year fell just modestly and the index remained
more-than-double the February low. Conversely, the expected change in
personal finances improved slightly with the index rising nearly
one-quarter from the low during 2008 with the higher stock market.
The reading of current economic conditions increased
moderately. The readings of personal finances and of buying conditions
for large household goods held steady m/m, but the latter was up by
one-third from the November trough due to low prices.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091030g.jpg" align="right" border="0" height="265" width="353">
Expected price inflation during the next year amounted to
3.2%, up slightly from September but down from a high of 7.0% during
May of last year. A low of 0.3% inflation was expected by 25% of
respondents but 5.0% inflation was expected by another quarter.
Inflation of 3.2% during the next 5-10 years was the mean expectation.
The opinion of government policy, which may eventually
influence economic expectations, fell from September and remained near
the lowest level since February. Thirty-two percent of respondents
thought that a poor job was being done by government. A reduced 18%
thought that a good job was being done, down from 30% in April.
The University of Michigan survey data is not seasonally
adjusted. The reading is based on telephone interviews with about 500
households at month-end. These results are based on about 300
interviews. The summary indexes are in Haver's USECON database
with details in the proprietary UMSCA database.
Optimism Amid Uncertainty from the Federal
Reserve Bank of Dallas is available <a href="http://dallasfed.org/research/update-us/index.cfm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University
of Michigan</a></th>
<th scope="col">October (Final)</th>
<th scope="col">Mid-October</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Oct 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">Consumer Sentiment</td>
<td>70.6</td>
<td>69.4</td>
<td>73.5</td>
<td>65.7</td>
<td>22.6%</td>
<td>63.8</td>
<td>85.6</td>
<td>87.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>73.7</td>
<td>72.1</td>
<td>73.4</td>
<td>66.6</td>
<td>26.2</td>
<td>73.7</td>
<td>101.2</td>
<td>105.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>68.6</td>
<td>67.6</td>
<td>73.5</td>
<td>65.0</td>
<td>20.4</td>
<td>57.3</td>
<td>75.6</td>
<td>75.9</td>
</tr>
</tbody>
</table>
 U.S. Employment Cost Index Rose
Slightly Q/Q But Reaches A New Low Y/Y 
by <a href="/comment/Moeller.html">Tom
Moeller</a> October 30, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091030h.jpg" align="right" border="0" height="265" width="353">Employment
compensation picked up slightly last quarter, but high unemployment
dragged down the y/y change to its lowest on record. (The series dates
back to 1980). The total employment cost index for private industry
workers rose 0.5% during 3Q following gains of 0.2% during the prior
two quarters. The latest rise about matched Consensus
expectations.
Improved wage and salary growth provided most
of the "oomph" to last quarter's gain with a 0.5% rise. However, here
again, the y/y gain of 1.3% was a new record low. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091030i.jpg" align="right" border="0" height="265" width="353">
In the factory sector
wages rose just 1.2% y/y but in the education &amp; health care
sectors wages rose a still-modest 1.8%. In the goods producing sector
wage growth fell to just 1.2% and in education &amp; health
services they rose 1.8%.
Total benefit costs in private sector
increased just 0.3% and the 1.0% y/y gain was a record low. What y/y
strength there was was led by a 2.3% gain in production, transportation
&amp; materials handling industries and a 1.6% rise in services
occupations. The cost of health benefits showed a stable 4.7% rise in
the latest 12 months.&nbsp;· The employment cost index figures are
available in Haver's USECON database.
Financial
Intermediaries and Monetary Economics from the Federal
Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/staff_reports/sr398.pdf">here.</a>&nbsp;
<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/USECON/@EB/@EB08/@EB08.HTM">ECI
- Private Industry Workers</a> (%)</th>
<th scope="col">3Q '09</th>
<th scope="col">2Q '09</th>
<th scope="col">1Q '09</th>
<th scope="col">3Q 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">Compensation</td>
<td>0.5</td>
<td>0.2</td>
<td>0.2</td>
<td>1.3</td>
<td>2.8</td>
<td>3.1</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wages &amp;
Salaries</td>
<td>0.5</td>
<td>0.2</td>
<td>0.2</td>
<td>1.3</td>
<td>3.0</td>
<td>3.4</td>
<td>&nbsp;2.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Benefit Costs</td>
<td>0.3</td>
<td>0.2</td>
<td>0.2</td>
<td>1.0</td>
<td>2.6</td>
<td>2.4</td>
<td>2.9</td>
</tr>
</tbody>
</table>

</body></html>

U.S. Personal Income SlipsMarginally And Spending Declines

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091029f.jpg" align="right" border="0" height="265" width="353">The trend
toward improvement in the job market continued this month. The Labor
Department indicated that initial claims for unemployment insurance
held roughly steady w/w at 530,000. The figures are down moderately
from an average of 549,000 claims during September and are down sharply
from the peak reached in March of 674,000 claims. The four-week moving
average of claims fell to 526,250 while the latest weekly figure was
slightly higher than Consensus expectations for 521,000 claims.The
largest increases in initial claims during the week ending October 17
were in California (+5,774, +12.6% y/y), Puerto Rico (+685, +52.9%
y/y), Minnesota (+614, +38.8% y/y), Nevada (+366, 8.7% y/y ), and
Nebraska (+239, -1.6% y/y), while the largest decreases were in
Wisconsin (-5,681, +29.5%), New York (-4,711, +15.5% y/y), Pennsylvania
(-4,033, +28.2% y/y), Illinois (-3,870, +44.9% y/y), and Oregon
(-2,706, -16.6% y/y). Continuing claims for unemployment insurance
during the latest week fell 148,000 to their lowest level since
late-March. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091029g.jpg" align="right" border="0" height="265" width="353">
The decline reflects the improved job market but may also
be a function of the exhaustion of benefits. Continuing claims provide
an indication of workers' ability to find employment. The four-week
average of continuing claims fell modestly to 5,960,750 and have fallen
12.0% from their peak. This series dates back to
1966.Extended benefits for unemployment insurance
fell slightly for the first decline in seven weeks. The prior week's
level was revised up. Through early-October extended benefits averaged
551,381.The insured rate of unemployment slipped again to 4.4%, from
an unrevised 4.5%, and matched its lowest since late-March. The rate
reached a high of 5.2% during late-June. 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.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091029h.jpg" align="right" border="0" height="265" width="353">
The lowest insured unemployment
rates during the week ending October 9 were in North Dakota (1.1%),
South Dakota (1.1), Virginia (2.0), Wyoming (2.4), Maine (2.4), Texas
(2.6), Colorado (2.9), Minnesota (3.0), Maryland (3.1), Mississippi
(3.5), New York (3.5), Florida (3.7), and Georgia (3.8). The highest
insured unemployment rates were in Puerto Rico (6.3), Oregon (5.3),
Nevada (5.3), Pennsylvania (5.0), California (4.6), Michigan (4.6),
Wisconsin (4.8), North Carolina (4.5), South Carolina (4.5), and
Washington (4.3).The unemployment insurance claims data is available
in Haver's WEEKLY database and the state data is in
the REGIONW database.Birth date,
business cycles, and lifetime income from the U.S. Office of
Management and Budget is available <a href="http://www.whitehouse.gov/omb/blog/09/10/22/Birth-date-business-cycles-and-lifetime-income/">here</a>.&nbsp;
<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">10/23/09</th>
<th scope="col">10/16/09</th>
<th scope="col">10/09/09</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>530</td>
<td>531</td>
<td>520</td>
<td>9.3%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>5,797</td>
<td>5,945</td>
<td>53.6%</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>4.4</td>
<td>4.5</td>
<td>2.8 (10/2008)</td>
<td>2.5</td>
<td>1.9</td>
<td>1.9</td>
</tr>
</tbody>
</table>
</body></html>

The trend toward improvement in the job market continued this month. The Labor Department indicated that initial claims for unemployment insurance held roughly steady w/w at 530,000. The figures are down moderately from an average of [...]

U.S. Weekly Initial Claims For Unemployment Insurance Hold Steady

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091029e.jpg" align="left" border="0" height="265" width="353">
The EU Commission indices made their eight largest advance
Since October 1988 for the EU region as a whole. This boosted the
overall index for the EU to the 46th percentile of range much closer to
its midpoint but still 14% below its average level for the same period. 
 

Surprisingly in relative terms it is the consumer that is
boosting the region the most. Consumer confidence stands at the 50%
mark of its range. Construction lags the most of all sectors, standing
in the 17th percentile of its range followed by services that languish
in the 31st percentile of their range. Both retailing and the
industrial sector are in their respective 41st percentiles. 
 

As to countries, the large countries are clustered closely
together in their respective range readings. Spain is the weakest in
the 38th percentile of its range. Compared to the UK in the 47th range
percentile; among EMU members Italy is the relative strongest in its
42nd percentile leaving a small gap between the best reading and the
worst among large countries in the e-Zone. 
 

Still if we look at the rankings by queue the results are much
weaker. The range ranking positions the current reading between the
highest and lowest range values. The queue orders the various readings
by component or country depending on its application. It ranks them
presenting the result as a percentage (100 is highest). The queue
percentiles show that while the various indicators have come sharply up
from their lows and some although some are closing in on range
midpoints the ranked readings are still no where near normal. 
 

The overall EU reading that stands in the 46th percentile of
its range also stands in the 11th percentile of its queue &#8211; a terribly
low standing. The real message here is that yes there is a significant
recovery from the lows in gear but the current levels of the indices
are still well below normal. 
 

While the EU and EMU regions are making progress there is
still a very long way to go. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="12" scope="col">EU
Sectors and Country level Overall Sentiment</th>
</tr>
<tr>
<td class="firstcol">EU</td>
<td>Oct 
09</td>
<td>Sep 
09</td>
<td>Aug 
09</td>
<td>Jul 
09</td>
<td>Percen 
-tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
<td>By Queue 
Rank%</td>
</tr>
<tr class="odd">
<td class="firstcol">Overall
Index</td>
<td>86</td>
<td>82.6</td>
<td>81</td>
<td>75</td>
<td>46.0</td>
<td>222</td>
<td>116</td>
<td>60</td>
<td>56</td>
<td>99</td>
<td>11.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Industrial</td>
<td>-20</td>
<td>-24</td>
<td>-26</td>
<td>-30</td>
<td>41.3</td>
<td>225</td>
<td>7</td>
<td>-39</td>
<td>46</td>
<td>-8</td>
<td>10.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Confidence</td>
<td>-15</td>
<td>-17</td>
<td>-20</td>
<td>-21</td>
<td>50.0</td>
<td>188</td>
<td>2</td>
<td>-32</td>
<td>34</td>
<td>-11</td>
<td>25.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail Trade</td>
<td>-12</td>
<td>-11</td>
<td>-12</td>
<td>-14</td>
<td>41.9</td>
<td>215</td>
<td>6</td>
<td>-25</td>
<td>31</td>
<td>-6</td>
<td>14.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Construction</td>
<td>-34</td>
<td>-35</td>
<td>-36</td>
<td>-37</td>
<td>17.4</td>
<td>216</td>
<td>4</td>
<td>-42</td>
<td>46</td>
<td>-17</td>
<td>13.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>-11</td>
<td>-11</td>
<td>-11</td>
<td>-19</td>
<td>31.7</td>
<td>143</td>
<td>32</td>
<td>-31</td>
<td>63</td>
<td>13</td>
<td>7.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>%m/m</td>
<td>&nbsp;</td>
<td>Oct 
09</td>
<td colspan="2">Based on Level</td>
<td colspan="4">Level</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">EMU</td>
<td>4.1%</td>
<td>2.5%</td>
<td>6.3%</td>
<td>86.2</td>
<td>41.1</td>
<td>222</td>
<td>117</td>
<td>65</td>
<td>53</td>
<td>100</td>
<td>11.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>3.9%</td>
<td>1.7%</td>
<td>6.3%</td>
<td>90.8</td>
<td>38.0</td>
<td>201</td>
<td>121</td>
<td>72</td>
<td>49</td>
<td>100</td>
<td>19.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>3.4%</td>
<td>5.9%</td>
<td>2.3%</td>
<td>91.1</td>
<td>40.9</td>
<td>187</td>
<td>119</td>
<td>72</td>
<td>47</td>
<td>100</td>
<td>25.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>4.4%</td>
<td>-1.5%</td>
<td>4.5%</td>
<td>90.0</td>
<td>42.7</td>
<td>214</td>
<td>121</td>
<td>67</td>
<td>54</td>
<td>100</td>
<td>14.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>2.4%</td>
<td>-1.5%</td>
<td>3.7%</td>
<td>82.6</td>
<td>31.9</td>
<td>220</td>
<td>117</td>
<td>67</td>
<td>50</td>
<td>99</td>
<td>12.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Memo: UK</td>
<td>3.8%</td>
<td>0.0%</td>
<td>13.1%</td>
<td>86.7</td>
<td>47.1</td>
<td>219</td>
<td>121</td>
<td>56</td>
<td>65</td>
<td>99</td>
<td>12.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Since Oct 1988</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>251</td>
<td>-Count</td>
<td>Services:</td>
<td>154</td>
<td>-Count</td>
<td colspan="4">&nbsp;</td>
</tr>
<tr class="odd">
<td colspan="12" class="firstcol">Sentiment
is
an index, sector
readings are net balance diffusion measures</td>
</tr>
</thead>
</table>
</body></html>

The EU Commission indices made their eight largest advance Since October 1988 for the EU region as a whole. This boosted the overall index for the EU to the 46th percentile of range much closer to its midpoint but still 14% below its [...]

EU Indices Jump in October

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091029a.jpg" align="right" border="0" height="265" width="353">
The U.S. economy grew last quarter at hardly a barn-burning
rate, but at least it was positive for the first time in over a year.
Real GDP during 3Q'09 grew at an expected 3.5% annual rate after a 3.7%
decline since late-2007. The rise was fueled by upturns in domestic
demand and inventories but lessened by deterioration in the foreign
trade deficit. Consensus expectations are that economic growth will
continue in coming quarters at roughly a 3.0% rate which, by postwar
standards, would be subpar. 
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091029b.jpg" align="right" border="0" height="265" width="353">
Domestic final demand growth was positive for just the second
quarter since 1Q'08. The upturn owed to a 3.1% gain in consumer
spending (-0.3% y/y) that was led by a 22.8% rise in durables
consumption. The Cash for Clunkers sales incentive program by
auto-makers caused motor vehicle consumption to jump at a 56.4% annual
rate, though it still was up just 1.4% from one-year earlier.
Elsewhere, personal consumption of furniture grew at a 6.4% (-5.9% y/y)
rate following a like downturn during 2Q. Spending on clothing
&amp; shoes fell at a 1.5% (-5.1% y/y) rate while services spending
gained a modest 1.8% (0.4% y/y). 
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091029c.jpg" align="right" border="0" height="265" width="353">
In the fixed-investment side of the GDP accounts, residential
spending also grew for the first time since 1Q'06. The 23.3% rise
(-18.1% y/y) followed a 2Q decline of similar magnitude. During the
downturn, which spanned three years, residential investment fell by
more than one-half. Continuing to the downside at a 2.5% (-18.9% y/y)
rate was business investment. The decline was led by a 9.0% (-20.8%
y/y) drop in spending on structures though equipment spending rose a
modest 1.1% (-17.9% y/y). That increase was led by a gain in
transportation equipment spending (-47.2% y/y) and an upturn in
information processing equipment &amp; software (-6.4% y/y).
Government investment rose at a 2.3% rate (1.8% y/y) led by a gain in
defense spending (5.0% y/y). 
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091029d.jpg" align="right" border="0" height="265" width="353">
Inventory accumulation made a positive contribution to GDP
growth for just the second time in two years. The modest 0.9% addition
followed subtractions of 1.4 and 2.4 percentage points during the prior
two quarters.
For the first time in a year, deterioration in the foreign
trade deficit lowered GDP growth. The 0.5 percentage point subtraction
was due to a 16.3% (-14.9% y/y) rise in real imports which outpaced the
14.7% (-11.2% y/y) gain in exports.
The GDP price deflator rose a slim 0.8%. Though the PCE price
index gained 2.8% (-0.6% y/y), the rise in the overall domestic final
sales price index was held to just 1.6% (-1.0% y/y) as the fixed
investment price index fell sharply (-2.5% y/y).
<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/USECON/@E7/@E701/@E701.HTM">Chained
2005$, % AR</a></th>
<th scope="col">3Q '09</th>
<th scope="col">2Q '09</th>
<th scope="col">1Q '09</th>
<th scope="col">2Q 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">GDP</td>
<td>3.5</td>
<td>-0.7</td>
<td>-6.4</td>
<td>-2.3</td>
<td>0.4</td>
<td>2.1</td>
<td>2.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory
Effect</td>
<td>0.9</td>
<td>-1.4</td>
<td>-2.4</td>
<td>-1.2</td>
<td>-0.4</td>
<td>-0.4</td>
<td>0.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>2.6</td>
<td>0.7</td>
<td>-4.1</td>
<td>-1.5</td>
<td>0.8</td>
<td>2.5</td>
<td>2.6</td>
</tr>
<tr>
<td class="firstcol">Foreign Trade Effect</td>
<td>-0.5</td>
<td>1.7</td>
<td>2.6</td>
<td>0.9</td>
<td>-1.2</td>
<td>0.8</td>
<td>0.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>3.0</td>
<td>-0.9</td>
<td>-6.4</td>
<td>-2.4</td>
<td>-0.4</td>
<td>1.7</td>
<td>2.5</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>0.8</td>
<td>-0.0</td>
<td>1.9</td>
<td>0.7</td>
<td>2.1</td>
<td>2.9</td>
<td>3.3</td>
</tr>
</tbody>
</table>

</body></html>

The U.S. economy grew last quarter at hardly a barn-burning rate, but at least it was positive for the first time in over a year. Real GDP during 3Q'09 grew at an expected 3.5% annual rate after a 3.7% decline since late-2007. The [...]

Q3 GDP Posts First Gain After More-Than Year Long Recession

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

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

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Real GDP eased 0.3% SAAR (+2.1% y/y) during the first quarter of 2025 after increasing 2.4% in Q4’24 and 3.1% in Q3’24. A 0.4% increase had been expected in the Action Economics Forecast Survey. It was the first decline since Q1 2022.

Foreign trade subtracted 4.83 percentage points from growth last quarter as imports surged 41.3% (13.4% y/y) ahead of tariffs, which began to come into effect in the first quarter. The rise followed a 1.9% decline in Q4’24. Exports rose 1.8% (3.0% y/y) after easing 0.2% in Q4. Inventories added 2.25 percentage points to growth after subtracting 0.84 percentage point from Q4 growth.

Real final sales to domestic purchasers grew 2.3% (2.9% y/y) in Q1 after rising 3.0% in Q4. Personal consumption expenditures rose 1.8% (3.1% y/y) following a 4.0% gain. Durable goods spending fell 3.4% (+5.3% y/y) after surging 12.4% in Q4. Motor vehicle purchases declined 11.1% (+5.5% y/y) after strengthening 19.7% in Q4. Spending on home furnishings & appliances gained 1.5% (6.1% y/y) following a 5.4% rise. Recreational goods & vehicle outlays rose 2.5% (7.0% y/y) last quarter after a 13.9% Q4 increase.

Nondurable goods outlays rose 2.7% (3.0% y/y) following 3.1% growth in Q4. Apparel spending increased 6.7% (2.5% y/y) following a 5.0% rise. Food & beverage buying gained 2.5% (2.3% y/y) after a 1.8% increase. Gasoline & fuel oil purchases increased 4.6% (3.4% y/y) after falling 2.0% in Q4.

Spending on services increased 2.4% last quarter (2.7% y/y) after a 3.0% gain. Outlays on housing & utilities increased 3.4% (1.8% y/y) after rising 1.1% in Q4. Health care expenditures rose 4.0% (4.8% y/y) following a 4.7% strengthening. Transportation outlays increased 5.3% (4.6% y/y) after a 3.7% rise while recreation spending rose 4.7% (2.8% y/y) following a 4.5% rise. Restaurant & hotel expenditures declined 2.1% (+0.5% y/y) following a 2.8% rise. Financial services expenditures rose 1.9% (2.0% y/y) after a 3.1% Q4 increase.

Business fixed investment increased 9.8% (3.6% y/y) following a 3.0% decline in Q4. Expenditures on structures rose 0.4% (-0.4% y/y) after a 2.9% increase. Expenditures on producers’ durable equipment jumped 22.5% (8.0% y/y) after falling 8.7%.  Outlays on information processing equipment soared 69.3% (18.9% y/y) following a 7.3% decline. Industrial equipment investment fell 1.4% (-0.3% y/y) after easing 0.9%. Intellectual property product spending rose 4.1% (1.8% y/y) following a 0.5% decline. 

Residential structures investment increased 1.3% (-0.1% y/y) in Q1 after a 5.5% Q4 rise.

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Government spending fell 1.5% (+2.4% y/y) after a 3.1% Q4 rise. Federal government expenditures declined 5.1% (+2.9% y/y) after rising 4.0% in Q4. National defense expenditures declined 8.0% (+4.0% y/y) after increasing 4.8% in Q4. State & local government spending rose 0.8% (2.1% y/y) following a 2.5% rise.

The GDP price index rose 3.7% (2.6% y/y) after increasing 2.3% in Q4. It was the largest increase since Q4’22. A 2.4% increase had been expected. The PCE chain price index increased 3.6% (2.5% y/y) following a 2.4% rise. The PCE price index excluding food and energy rose 3.5% (2.8% y/y) after increasing 2.6% in Q4. The business fixed investment price index rose 0.4% (1.8% y/y) after 1.5% rise. The residential price index strengthened 3.9% (3.2% y/y) after a 1.9% rise while the government price index increased 4.7% (2.8% y/y) following a 2.1% rise.

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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- Decline in GDP is first in three years.
- Foreign trade subtracts substantially ahead of tariffs.
- Domestic final demand growth weakens.
- Price index strengthens with higher core PCE prices.

U.S. GDP Unexpectedly Declines in Q1’25; Prices Strengthen

Michael J. Moran

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High-side readings on the price indexes for personal consumption expenditures in January and February caused some concern about emerging price pressure, especially with some policies of the Trump administration possibly adding to the upward force. However, March brought notable relief, with the headline price index falling slightly (-0.04%). A marked decline in energy prices was helpful (-2.7%), but core prices also were subdued, increasing less than 0.1%.  Year-over-year changes were still above the Fed’s target of 2%, but only barely so for the headline measure (2.3%). The core index backed away from the reading of 3.0% in February, but the latest reading of 2.7% was in line with observations in the past year, and still uncomfortably above target.

Consumers roused from a winter slumber in March, with nominal outlays increasing 0.7%. With inflation restrained, real outlays also posted a gain of 0.7%. Spending on durable gods stood out, with real outlays advancing 3.2%. Real outlays for both nondurable goods and services rose 0.4%, a solid pace. Signs of life were certainly welcome after an average decline of 0.1% in January and February. The March rebound left growth of 1.8% (annual rate) in the first quarter.

The brisk increase in spending in March was supported by a solid gain in personal income (0.5% in both nominal and real terms). Growth in wage income was firm at 0.5%, while proprietors’ income was robust with a gain of 1.8% (not annualized!). The farm sector led the advance in proprietors’ income, but the nonfarm sector also was strong (0.6%).

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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- Price pressure eases.
- Spending rebounds after two soft months.

Personal Income, Consumption, and Prices in March

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The Pending Home Sales Index, a forward-looking home sales measure based on contract signings, from the National Association of Realtors rose 6.1% to 76.5 (-0.6% y/y) during March after rising a little-revised 2.1% in February. These changes followed a 4.6% January decline.

The rise in March sales occurred as the rate on a 30-year mortgage eased to an average 6.65% from 6.84% in February. This rate was well above a low of 2.68% averaged in December 2020.

Pending home sales were up in most regions of the country. Sales in the Midwest rose 4.9% (1.4% y/y) last month after rising 1.8% in February. Sales in the South increased 9.8% (-0.4% y/y) following a 5.8% February rise. Sales in the West improved 4.8% (-2.0% y/y) after falling 3.0% in February. Sales in the Northeast were off 0.5% (-3.0% y/y) in March after falling 0.9% in February.

The pending home sales index measures sales at the time the contract for the purchase of an existing home is signed, similar to the Census Bureau's new home sales data. In contrast, the National Association of Realtors' existing home sales data are recorded when the sale is closed, which is usually a couple of months after the sales contract has been signed. In developing the pending home sales index, the NAR found that the level of monthly sales contract activity leads the level of closed existing home sales by about two months.

The series dates back to 2001 and are available in Haver's **PREALTOR** database. Weekly mortgage interest rates from the Mortgage Bankers Association can be found in the **WEEKLY** database.

- Sales rise to highest level in four months.
- Strength is evident throughout most of country.

U.S. Pending Home Sales Surge in March

Sandy Batten

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The employment cost index (ECI) for civilian workers, arguably the most accurate measure of labor compensation in the United States, rose 0.9% q/q (3.6% y/y) in Q1, the same quarterly increase as in last year’s Q4, according to the Bureau of Labor Statistics. The quarterly gains have fluctuated between 0.8% and 1.0% for the past six quarters. The Action Economics Forecast Survey had expected a 0.9% q/q increase and a 3.5% y/y gain.

Wages and salaries for civilian workers rose 0.8% q/q (3.5% y/y) in Q1, down from 1.0% q/q in Q4. This tied the Q3 2024 quarterly rise as the smallest increase since Q2 2021. It was also the smallest y/y increase since Q2 2021. Benefits increased by an outsized 1.2% q/q (3.9% y/y) in Q1 versus 0.8% q/q in Q4. This is the largest quarterly gain since Q2 2022. In general, employment cost gains remain above the pace observed prior to the pandemic but are slowing gradually.

Private industry workers’ compensation rose 0.8% q/q (3.4% y/y) in Q1, down from 0.9% q/q (3.6% y/y) in Q4. Wages and salaries for private industry workers increased 0.8% q/q (3.4% y/y) in Q1 versus 0.8% q/q (3.7% y/y) in Q4. The quarterly gain in Q1 tied that in Q3 2024 as the smallest increase since Q4 2020. Benefits for private industry workers jumped 1.2% q/q (3.6% y/y). the largest quarterly gain since Q2 2022. The acceleration in benefits in Q1 was primarily in service-producing industries.

Compensation in private goods-producing industries increased 1.0% q/q (3.2% y/y) in Q1, the largest quarterly gain in five quarters, versus a 0.7% q/q increase in Q4. Compensation in construction jumped 1.3% q/q, its largest quarterly increase since Q2 2022, up from a 0.6% q/q gain in Q4. Manufacturing compensation growth slowed to 0.7% q/q, its slowest quarterly advance since Q4 2020, from 0.8% q/q in Q4. Compensation in private service-producing industries increased 0.8% q/q (3.5% y/y), down slightly from a 0.9% q/q gain in Q4. Compensation in education and health services jumped 1.3% q/q, its largest quarterly gain since Q3 2023. In contrast, compensation in other services edged up 0.1% q/q in Q1, its smallest quarterly advance since before the pandemic.

The employment cost index measures the change in the cost of labor, free from the influence of employment shifts across occupations and industries. It is provided by the Bureau of Labor Statistics and is available in Haver’s **USECON** database. Consensus estimates from the Action Economics Forecast Survey are in Haver’s **AS1REPNA** database.

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- Compensation grew 0.9 q/q in Q1, the same pace as in Q4.
- Wage growth slowed to 0.8% q/q while benefits surged 1.2% q/q, their largest quarterly increase since Q2 2022.

Employment Cost Growth Steady in Q1 2025

Kathleen Stephansen, CBE

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The ADP National Employment Report indicated that nonfarm private sector payrolls rose 62,000 (1.4% y/y) during April after increasing 147,000 (1.4% y/y) during March, revised from 155,000. A 124,000 April rise in ADP employment had been expected in the Action Economics Forecast Survey.

Growth in median annual pay for "job stayers" eased to 4.5% y/y during April, from 4.6% y/y in March and from 4.7% y/y in the prior two months. Manufacturing sector pay grew 4.6% y/y during April, down from 4.8% y/y in March. Construction sector pay was unchanged at 4.7% y/y. Natural resource & mining sector pay grew 4.4% y/y. Financial sector pay rose 5.1% y/y, while education & health services pay rose 4.7% y/y. Leisure & hospitality pay also increased 4.7% y/y. Professional & business service sector pay increased 4.3% y/y as did trade, transportation & utilities pay. Information pay rose 4.1% y/y. Median annual pay for “job changers” rose 6.9% y/y after 6.7% y/y in March.

Small business hiring (less than 50 employees) rose 11,000 (0.6% y/y) after rising 18,000 (0.6% y/y) in March, revised down from 52,000. Employment at medium-sized firms (50-499,000 employees) rose 40,000 (1.1% y/y) after rising 43,000 (1.1% y/y). Large business hiring (500+ employees) rose 12,000 (3.4% y/y) in April, after rising 61,000 (3.6% y/y) in March, revised from 59,000.

Goods-producing employment rose 26,000 (1.3% y/y) in April, after rising 16,000 (1.3% y/y) during March, revised from 24,000. Manufacturing jobs rose 4,000 (-0.2% y/y) after rising 17,000 (-0.3% y/y) in March. The number of construction sector jobs rose 16,000 (3.4% y/y) in April, following a 2,000 (3.6% y/y) March increase, revised from 6,000. Natural resources & mining jobs rose 6,000 (2.8% y/y) in April after falling 3,000 (+1.9% y/y) in March.

The number of service-producing jobs rose 34,000 (1.4% y/y) during April, following a rise of 131,000 (1.4% y/y) in March. Professional & business services employment fell 2,000 (0.6% y/y) after rising 46,000 (0.7% y/y) in the prior month, revised from 57,000. Employment in the financial industry rose 20,000 (2.1% y/y) in April, after rising 38,000 (2.0% y/y) in March. Leisure and hospitality employment increased 27,000 (3.0% y/y), following a 23,000 (2.9% y/y) March increase, revised from 17,000. The number of education & health care jobs fell 23,000 (1.6% y/y) in April, following a 15,000 (1.8% y/y) rise in March, revised from 12,000. Information sector employment fell 8,000 (-0.1% y/y) after a rise of 3,000 (0.2% y/y) in March. The number of jobs in trade, transportation & utilities rose 21,000 (0.4% y/y) in April, after falling 4,000 (+0.4% y/y) in March, revised from a 6,000 fall. Employment in “other” services rose fell 1,000 (+3.2% y/y) following a 10,000 (3.4% y/y) rise in March, revised from 11,000.

By region, employment in the Northeast increased 10,000 (1.9% y/y) in April, following an increase of 95,000 (2.0% y/y) in March, revised from 89,000. Employment in the Midwest rose 42,000 (1.5% y/y) after a gain of 84,000 (1.4% y/y) in March, revised from 81,000. In the South, employment rose 3,000 (1.3% y/y) during April, after rising 10,000 (1.4% y/y) in March, revised from 27,000. In the West, employment rose 9,000 (0.6% y/y) after declining 43,000 (+0.6% y/y), revised from a 41,000 decline in March.

The ADP National Employment Report and Pay Insights data can be found in Haver's **USECON** database. Historical figures date back to January 2010 for private employment. Pay data date back to October 2020. The expectation figure is available in Haver's **AS1REPNA** database.

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- Employment increase is modest in both services & factory sectors.
- Wage growth for “job stayers” moderates.
- Small and medium-sized business employment slows.

Economy in Brief: October 2009

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